Economy

Industry groups voiced concerns but economists stressed the importance of port developmental investments

MALAYSIA is set to implement a phased 30% increase in port tariffs for container handling and storage, marking the first adjustment since 2015.

Transport Minister Anthony Loke announced that the hike, proposed to be rolled out in three stages over three years, aims to reflect current operational realities and support infrastructure upgrades, following a decade of tariff stagnation.

While the plan is still under review and pending final approval, industry groups, namely the Federation of Malaysian Manufacturers (FMM) have voiced concerns over its potential cost contribution.
Economists and analysts however contended that the ongoing port investments must continue to ensure the country’s sea ports would remain efficient and resilient.

Embracing Automation to Remain Competitive

Bank Muamalat Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid said such tariff adjustments are part and parcel of doing business globally, and Malaysian exporters will need to be increasingly resilient and strategic in adapting to shifting cost dynamics.

Afzanizam highlights that port capacity expansion is critical to boost efficiency and trade competitiveness as international trade remains reliant on sea transport (Source: Media Mulia)

“Exporters would need to constantly anticipate possible cost adjustments including a hike in port tariffs,” he told The Malaysian Reserve (TMR).

He also noted that while businesses are already contending with other policy-driven cost changes, Malaysian businesses are normally cautious about passing prices to consumers.

“The timing may not be immediate as businesses would also be mindful when changing their price tag,” said Mohd Afzanizam, adding that some businesses might choose to absorb the additional logistics costs.

From a long-term perspective, Mohd Afzanizam stressed the importance of port infrastructure investment, especially as international trade remains reliant on sea transport, which accounted for over half of Malaysia’s export and import transport volume in 2024.

He highlighted that port capacity expansion is critical to boost efficiency and trade competitiveness.

“Investing in larger capacity would facilitate international trade as it caters for bigger volume with reduced time,” he said.

Mohd Afzanizam also acknowledged that stagnant or overly subsidised port tariffs could discourage private sector investment in port modernisation, leading to risks of Malaysia falling behind regional competitors.

While the direct impact of port tariff hikes is yet to be fully assessed, Malaysia must continue strengthening its supply chain capabilities.

“We must also embrace automation and ensure port policies are economically sustainable to safeguard its trade resilience in an increasingly competitive region,” he added.

Phased Approach to Ensure Global Competitiveness

Malaysia’s trading growth has been growing steadily after the pandemic.
In the first quarter of 2025 (1Q25), Malaysia’s economy grew by 4.4% year-on-year (YoY), a slight dip from 5% in 4Q24, driven by robust domestic demand and a sharp rise in exports, notably to the US.

In March 2025 alone, exports to the US surged by 50.8% YoY, hitting a record RM22.66 billion.

Jaziri Alkaf stresses that without transparent and regular reviews, Malaysia risks falling behind its regional peers who are aggressively upgrading port capabilities (Source: parlimen.gov.my)

Former senator Jaziri Alkaf Abdillah Suffian has voiced concern over the potential impact on Malaysia’s logistics competitiveness as a poorly calibrated increases could derail export-driven growth.
He cautioned that tariff hikes need to be implemented with a structured and strategic framework.

The Ministry of Transport (MOT) announced that it intends to introduce a structured and transparent mechanism for revising port tariffs, in particular a gradual increment instead of a blanket hike.

Jaziri Alkaf added, as Malaysia’s ports expand to meet increasing trade demand, a stagnant or overly subsidised tariffs may undercut funding needed for modernisation.
“Current tariff levels may not fully reflect the real costs of maintaining and upgrading port infrastructure.”

He further added that without transparent and regular reviews, Malaysia risks falling behind its regional peers like Singapore and Thailand, both of which are aggressively upgrading port capabilities.

A gradual, phased approach to tariff adjustments, he argued, would help maintain investor confidence while ensuring Malaysian ports remain globally competitive.

Jaziri Alkaf highlighted that port tariffs should be treated as strategic instruments aligned with national trade and industrial policies.

These adjustments, must support long-term economic goals, including export expansion, foreign direct investment attraction and regional supply chain integration.

In the post-pandemic recovery landscape, Malaysia’s ability to maintain efficient, modern and well-funded port infrastructure will be crucial.

Port Klang Expansion Pushes Ahead

Port Klang is undergoing major infrastructure expansion and digitalisation to meet rising cargo demands, but long-standing tariff stagnation may threaten the sustainability of these efforts.

According to Subramaniam, the lack of regular port charge revisions could jeopardise funding for critical upgrades and compromise competitiveness (Source: PKA)

According to Port Klang Authority (PKA) GM Captain K Subramaniam, the lack of regular port charge revisions could jeopardise funding for critical upgrades and compromise competitiveness. With operations already at 80% capacity, the port is bracing for significant growth.

Expansion projects include the Westports 2 development, which will see 4.8km of new berths constructed over the next two decades, and upgrades to berths, storage yards and warehouses at Northport and Southport.

These efforts aim to raise Port Klang’s handling capacity from 20 million twenty-foot equivalent units (TEUs) to 33 million TEUs by 2040.

“Port Klang’s infrastructure has undergone significant enhancements, positioning it as a leading maritime and logistics hub in South-East Asia.

“But given increasing demand, we are now undertaking a major round of capacity expansion to meet future cargo volumes,” he told TMR.

Key to this transformation is the integration of multi-modal transport. The East Coast Rail Link (ECRL), expected to be operational by 2028, will connect Port Klang with the East Coast states, shifting freight movement from road to rail and easing congestion.

Meanwhile, digitalisation initiatives such as the Malaysian Maritime Single Window (MMSW) system are streamlining ship clearance processes, having already processed over 10,000 vessel transactions.

Yet, Subramaniam acknowledged that financial sustainability remains a concern.

Port charges in Port Klang, particularly container handling fees and storage charges, have not seen significant revisions in over a decade.

He said this is limiting the ability of terminal operators to invest in maintenance, modernisation and environmental, social and governance-related improvements.

A gradual approach to tariff adjustments would maintain investor confidence while ensuring Malaysian ports remain globally competitive (TMRpics)

“Port charges in Port Klang are among the lowest in the region. The delay in tariff revisions may significantly impact the terminal operator’s and the port authority’s ability to carry out maintenance at required standards, invest in automation and improve service quality,” he said.

Subramaniam also stressed that under privatisation agreements, terminal operators are responsible for funding port infrastructure without government assistance, relying solely on revenue from port charges.

With rising operational costs due to fuel, labour, technology and environmental compliance, the pressure to align tariffs with actual costs is mounting.

“If port tariffs remain stagnant, we risk falling behind other regional ports that are actively modernising and expanding,” he warned. –TMR

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by HIDAYATH HISHAM

MALAYSIA will address four main concerns raised by the United States in ongoing negotiations to lift the 24% reciprocal tariff on its exports.

Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz (picture) said the discussions are focused on trade imbalance, non-tariff barriers, technology safeguards, and investment alignment.

“Washington’s demands, I think there are four areas. Number one is to talk about the trade imbalance,” he told reporters after a special parliamentary session on the US tariffs today.

Tengku Zafrul said the US currently records a US$25 billion trade deficit with Malaysia, which it views unfavourably.

He added that the second area involves non-tariff barriers, as detailed in the US Trade Representative’s National Trade Estimate Report.

“Today in Parliament we discussed, for example, the issue of halal. It’s not about the halal certification but the process itself — why it’s taking longer than other certifications, for example — and that is a non-tariff barrier,” he said.

The minister said the third concern centres on safeguarding technology, particularly ensuring that restricted items like semiconductor chips are not redirected through Malaysia.

“That’s why they have this exportership on chips, for example. So when it comes to Malaysia and Singapore, they want to make sure that countries like Malaysia, Singapore and Indonesia do not allow those chips to be shipped to or smuggled to other nations,” he said.

The fourth issue relates to how Malaysia’s investment flows align with US interests.

“In this case, we are investing a lot. Today, the Prime Minister mentioned that even the government-linked investment companies alone to date have invested close to US$45 billion into the bond and equity markets in the United States,” he said.

Tengku Zafrul said the government’s primary objective is not merely to reduce the tariff, but to remove it entirely.

“We’re not just looking to reduce it — our goal is to bring it down to zero,” he said.

The minister added that this position will guide Malaysia’s stance in the upcoming negotiations.

“If possible, we do not want any tariffs imposed on our country. In the negotiations that are about to begin, we will continue pursuing that objective — at the very least to reduce it, but ideally to ensure there are no tariffs at all,” Tengku Zafrul said.

Commenting on Malaysia’s strong trade figures in March 2025, Tengku Zafrul cautioned that the numbers likely reflect short-term movements rather than long-term growth.

“That is because we believe that companies are exporting quickly and also stocking up — unloading a lot of the goods required before the tariff comes into effect,” he said.

Tengku Zafrul said the spike was not expected to continue into the next quarter, despite being a record high.

“So I don’t think that the number you see in March — it was a record figure — I don’t think that is sustainable going forward,” he said.

In a special parliamentary sitting today, Prime Minister Datuk Seri Anwar Ibrahim announced measures including a RM1 billion in financial guarantees to support local SMEs against the impact of US tariffs.

In April 2025, the Trump administration imposed a 24% “reciprocal” tariff on Malaysian imports to the United States, as part of a broader “Liberation Day” trade policy that also included a universal 10 per cent tariff on most imports from other countries.

This is currently on a 90-day pause, with the universal rate being imposed.

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THE Federation of Malaysian Manufacturers (FMM) has urged the government to reinforce supply chain safeguards and expand export support mechanisms, following Prime Minister Datuk Seri Anwar Ibrahim’s announcement of strategic responses to US-imposed tariffs during a special parliamentary session today.

While welcoming the government’s proactive stance, FMM stressed that the initiatives must be matched with practical execution and private sector involvement to shield Malaysian exporters from global trade disruptions.

“To maximise the impact of this funding, it must be accompanied by more effective and responsive instruments,” FMM President Tan Sri Datuk Soh Thian Lai (picture) said in a statement today, referring to the RM50 million allocated to MATRADE for penetrating emerging markets such as the GCC, BRICS, South Africa, and Latin America.

FMM reiterated the need to enhance the Market Development Grant (MDG) by increasing funding caps, waiving MATRADE collaboration fees, and broadening eligible activities to include digital marketing, product certification, and market research. Empowering industry associations to lead targeted trade missions was also identified as key.

On regional integration, FMM championed the proposed ASEAN Supply Chain Coordination Council (ASCCC) under Malaysia’s ASEAN Chairmanship, envisioning it as a dedicated platform to improve policy alignment and crisis response across ASEAN’s supply chain network.

“The ASCCC will operate at an operational and technical level to drive tangible outcomes,” Soh noted.

Domestically, FMM expressed support for the Ministry of Investment, Trade and Industry’s planned National Supply Chain Council (NSCC), calling for close government-industry collaboration. It also pushed for the immediate implementation of the Government Procurement (GP) Act and urged Government-Linked Companies (GLCs) to increase sourcing from local manufacturers.

“A credible, transparent and inclusive GP system, anchored by a ‘Buy Made in Malaysia’ first mandate, is vital,” Soh said.

Soh further called for strict enforcement against fraudulent certificates of origin to protect Malaysia’s trade reputation.

“The Government must take firm action to enforce the provisions under the Customs Act,” Soh noted, highlighting the risks of transshipment abuse.

 “FMM will continue to advocate for practical and targeted policy support to help businesses overcome short-term shocks and strengthen Malaysia’s position as a resilient and globally competitive manufacturing and export hub,” he concluded. — TMR

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THE Airfreight Forwarders Association of Malaysia (AFAM) ‘strongly condemns’ alleged attempts by China-based brokers rerouting shipments through Malaysia and promoting such services aggressively on social media platforms.

In a statement released today, AFAM said it noted with concern recent media reports alleging that goods originating from China were being imported into Malaysia, relabeled as Malaysian products, and subsequently exported to the US to circumvent US-imposed tariffs.

It noted reports that the practice was being facilitated by China-based brokers, though the statement did not name any parties that may have been involved.

“These actions, if true, are highly unethical and risk seriously undermining Malaysia’s international trade reputation. They may also jeopardise Malaysia’s standing as a trusted and responsible trade partner in the global supply chain.

“AFAM strongly condemns such practices. We have taken immediate action by writing to the Ministry of Investment, Trade and Industry (MITI) to urge a firm response,” it said.

In its communication, AFAM said it has recommended that all chambers of commerce and agencies involved in issuing certificates of origin exercise the highest level of scrutiny and due diligence.

AFAM has also issued an advisory to all its members, importers and exporters to warn against participation in any activity that may be construed as misrepresentation of origin or an attempt to evade international trade tariffs, which may be deemed illegal.

“AFAM fully supports the Government of Malaysia in managing the US tariff issue through consultative and diplomatic channels with the US Government. We reiterate our commitment to upholding the integrity of Malaysia’s trade practices and maintaining our country’s respected position in global commerce,” it said. –TMR

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