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NEWS UPDATES Asean Affairs    3 June 2012

Increase in Intra-Asean trade buffers region

31May, 2012

The economic slowdown in Europe and US has not affected the shipping industry in Southeast Asia due to vibrant trade within the region that comprised 27 per cent of total Asean trade last year, analysts from Frost and Sullivan said.

"People are questioning the impact of the slower growth of the economy in the US and Europe. Apparently it hasn’t had any impact on us, because trading among the countries in Asean is increasing. We are expecting an intra-trading increase from 27 per cent to 29 per cent this year,” Frost and Sullivan vice president for transportation and logistics in the Asia-Pacific region Gopal R said.

According to Gopal, there was an aggressive expansion plan for major Asean ports to build their capacity, which reflected the healthy condition of the industry in the region.

For example, the port of Singapore, with a current capacity of 29.9 million 20-foot equivalent units (TEU), will be expanded to 55 million TEU in 2018, while Port Klang in Malaysia is going to be expanded to 10 million TEU 2013 from the current 8 million TEU, and Tanjung Priok will be expanded to 11 million TEU in 2017 from its current 5.9 million TEU.

According to Indonesian Shipowners Association (INSA) chairperson Carmelita Hartoto, the overall shipping industry in the country and the region was still strong and many shipping companies booked profits last year.

Among the shipping firms that have been hardest hit by lower demand from the US and Europe are Berlian Laju Tanker, which announced a covenant breach in its debt payments this year; Arpeni Pratama Ocean Line, which has undertaken a debt restructuring program; and Humpuss Intermoda Transport, which may soon file for bankruptcy.

Shipping companies that focus on the domestic market and the Asean market generally have a positive outlook this year because the freight demand is high.
Indonesian Deputy Transportation minister Bambang Susantono said that Southeast Asia remained an important hub for cargo flow given its strategic location and the strong growth in the region.

"Due to the economic crisis in Europe and US, along with the shift of economic power from west to east, Southeast Asia will remain the most interesting region for the next 20 years. This situation means new opportunities are open for new markets, for example Indonesia,” Bambang said.

Gopal said that Asean had a few trading obstacles, such as a lack of border management capabilities, lack of trade facilitation and a low competency level in infrastructure.

"As for Indonesia, the priorities in port development to support the inter-trade with Asean members are, among other things, the improvement of port infrastructure, quality road networks between ports and strict and transparent policy in customs processes,” he said.

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