By Cate Hull
Writing in this week’s BrinkNews.com, Shen Yiming, head of China client services for Asia for March, sounded an alarm for Singapore in light of China’s Maritime Silk Road initiative (MSR).
Yiming wrote that China’s global logistics plan “poses more challenges and threats than opportunities for Singapore.”
He said China’s Belt and Road Initiative (BRI) aims to enhance inland transportation, mostly by train, from China to mid-Asia and Europe, as well as enlarge the scale of pipeline networks. This will divert a significant amount of seaborne trading volume, originally transported via the Strait of Malacca, indirectly hurting the interests of Singapore.
One geo-economic rationale relates to China’s Malacca dilemma. The term refers to China’s over-reliance on energy imports transiting the Strait of Malacca. Over 80 percent of Chinese maritime oil imports and 30 percent of natural gas imports must pass through the Strait of Malacca. To buttress its energy security, China is determined to circumvent this route by developing more reliable alternative land and maritime routes for energy imports along the Belt and Road.
For example, China is again seeking influence in Malaysia as it spreads its economic clout through Southeast Asia. It is investing $7.2 billion in a redevelopment project that will see Malacca become a new deep-sea port.
The MSR initiative allows China to explore alternatives for its seaborne trade stop, currently located in Singapore. With the MSR initiative, Singapore is in a vulnerable position where it risks getting sidelined, after enjoying decades of being a key node in many of the regional sea routes. The alternative ports that may emerge from the MSR initiative include:
• Tanjung Priok Port, Indonesia
• Malacca, Port Klang, Malaysia
• Gwadar Port, Pakistan
• Hambantota Port, Sri Lanka
• Darwin Port, Australia
Some analysts believe that Port Klang in Malaysia may overtake Singapore as the largest port in the region. Singapore has long enjoyed the benefit of its geographic advantage due to the Strait of Malacca. Using its port and terminal facilities, Singapore has become the most important container transshipment hub in Asia-Pacific since the ‘90s.
In the maritime industry, Singapore is tremendously successful, continually ranked the number one maritime capital city in the Asia-Pacific region, surpassing even Hong Kong for the past decade. Singapore leads as the shipping hub for port terminal operations, bunkering, offshore building, ship brokering, ship financing, forward freight agreement trading, marine insurance, and maritime lawsuit jurisdiction.
As a sovereign country, Singapore’s position remains unbiased, and it may possess more diplomatic flexibility than Hong Kong. Also, as many of the countries involved in BRI are relatively less developed and may be weaker in terms of governance—whether in terms of transparency or in possessing a credible legal and judiciary system—Singapore maintains an advantage on these counts, wrote Yiming.
According to Menon’s Leading Maritime Capitals of the World report published in 2017, Singapore again clinched the top position. Singapore was also ranked first in 2015 and 2012. Singapore’s continued dominance is due in part to its continued innovation and its strong maritime services environment, which includes legal, insurance, and shipbroking.
Singapore’s maritime ecosystem comprises over 5,000 companies employing more than 170,000 people and contributing about seven percent to the republic’s GDP. Home to more than 140 of the world’s top shipping groups, a rich diversity of maritime products and services can be found in Singapore. It is the ideal Asian gateway for global leaders in shipping finance, shipbroking, risk management and maritime insurance. Singapore is also fast becoming Asia’s hub for maritime law and arbitration.
Industry leaders predict Singapore will remain the most important shipping capital in the region but acknowledge that Shanghai and Malacca are closing the gap. Seven of the world’s largest ports are in China.
Cate Hull is the CEO of FreightExchange, a freight and logistics company based in Sydney.