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  Business Times 31 Oct 07
How Singapore can meet the North-West Passage challenge
Businesses here should sit up and pay attention to the global shift of balance in shipping routes - lifelines to Singapore's strategic importance as an international maritime hub
By Han Kian Kwang

THE world around us is changing. And it is happening more rapidly than we think. The impending opening of the Northwest and Northern Passage as a result of melting polar ice caps in the Arctic is a result of ongoing climate change - an issue that has been developing for decades, yet often ignored by most businesses and organisations until recent years.

Minister Mentor Lee Kuan Yew, in his recent opening keynote speech at the Inaugural Singapore Maritime Lecture, addressed the developments of the melting polar ice caps in relation to shipping routes as a cause for attention.

Beyond climate change, businesses in Singapore should sit up now and pay attention to the global shift of balance in shipping routes - lifelines to Singapore's strategic importance as an international maritime hub.

Even though the effects may take decades to materialise, MNCs and businesses here must begin to think about how best to re-establish Singapore as a key global maritime hub in the context of climate change and the new global dynamics in shipping.

With the opening of the Northern Passage, shipping routes between Europe and East Asia may potentially be cut by half. This will almost certainly attract many businesses to take the Arctic route instead of going via the Malacca Straits and Singapore in the future.

As geopolitical and potential energy source pressures increase in the coming years, the opening of the alternative Arctic passage may become an increasingly urgent issue. Singapore, as a key player in South-east Asia, will be affected as dynamics in shipping lanes shift to adapt to global changes.

Besides the long-term changes, trade between India/China and the world is already increasing at phenomenal levels. How prepared is Singapore's maritime services industry to cope with such trends? Are we doing enough with our regional countries to remain competitive amongst aspiring global coastal states?

Even if we remain the preferred port of call in Asia in coming years, will our facilities be prepared to handle increasing shipping traffic, or will we fail to benefit from these opportunities when they come knocking?

MM Lee's speech mentioned adding maritime support services such as financing, insurance and legal services to change Singapore into a 'complete maritime cluster'. Singapore has the expertise and reputation to provide an efficient and secure port of call and a full suite of value-added services such as repackaging, redistributing and testing.

By leveraging on the well-established Singapore brand, we can position Singapore as the beating heart of a mega-maritime distribution complex in South-east Asia.

Beyond value-added services, there is an opportunity to transform our maritime hardware and infrastructure by setting up advanced facilities to drive technological advancements in logistics, such as automation and goods tracing/tracking.

Such developments would yield benefits like economies of scale, increased speed and cost efficiency for Singapore's port and logistics services, and will reinforce our relevance and position as an indispensable port of call connecting Asia to the rest of the world.

With modernisation, issues like supply chain authentication, certification, accuracy, transaction costs, employee/product safety and security will receive a large, welcome boost.

Singapore must now focus its energies on how to prepare itself and its immediate partners to face challenges the new developments will bring.

The globalised world today is too dynamic for one country to tackle arising issues alone. What Singapore can do is to initiate a coordinated effort for change in South-east Asia. We have to modernise our maritime infrastructure as a country, and as a region, to address the impending paradigm shift in global shipping dynamics in the next few decades.

Take the food & agricultural industry as an example. Singapore can leverage on its neighbouring countries' exports in this industry by helping to establish the region as a cluster of food/agriculture import/export or redistribution centre that services the Pan Asian region and the rest of the world. Singapore exported 79,000 tonnes of food in 2006 compared to 1.1 million tonnes of imports in the same year.

Singapore can work closer with industries in neighbouring countries such as Indonesia, Malaysia, Thailand, Vietnam and the Philippines to import their food products into Singapore, and re-export them after repackaging, security and safety checks are performed.

Companies like Singapore Food Industries are already doing this in Singapore, but a larger, government-backed effort, involving various MNCs, will set in motion an exercise that will reinvigorate Singapore's port status for the future. Such a move can help businesses from neighbouring nations reach the larger, global market and boost trade ties between Asean and the world.

Why Singapore? Food chain security, authentication and certification are becoming more important. Singapore offers a trusted platform with the necessary legal, financial and IT infrastructure. A new 'transactional paradigm' with a regional perspective will yield further reasons for consolidation across the region.

These reasons are not just about size or economies of scale, but about the information costs of transactions from multiple markets. A consolidated distribution hub can manage and streamline the number of transactions, therefore easing cost pressure on information management. With the efficiency of Singapore's ports and logistics infrastructure, these distribution centres can be consolidated in Singapore in a mega distribution hub instead.

This hub can be automated in order to meet the throughput and stringent safety standards for the global market.

Realising this vision will require a new level of business trust and cooperation across the region. However, as the constituents of these networks come together, begin to share resources for joint initiatives, and collaboratively plan process improvements that enhance the deliverables to designated markets, traditional business models will be replaced by new, highly automated, multi-channel, Internet-enabled models when the network coalesces into a value chain constellation of suppliers, manufacturers, producers, distributors and key customers. In this new environment, collaboration and technology convergence will be the keys to success.

Ultimately, it is about creating new and extended maritime capabilities and capacities in strategic sectors that would make Singapore and the region useful and relevant to the world around us in the face of overwhelming and irresistible change.

The solution could take the form of a modern, environment-friendly mega-redistribution complex utilising the latest innovations in logistics such as those enabling automation and sophisticated integrated tracking and tracing systems. These are some of the features that would transform Singapore's port system to add more value, be more efficient and environment-friendly.

Businesses and Singapore must act now to take the lead in South-east Asia by transforming our logistics infrastructure towards a more sophisticated maritime hub and, in so doing, advance our capabilities to position Singapore as the definitive port of call and redistribution hub connecting the world's trade route in the next century.

The writer is regional director (business development), Dematic SEA Pte Ltd

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