Revitalising Affected Sectors

National Economic Recovery Plan
Chapter 7


Freight Forwarding

Freight forwarders act on behalf of exporters and importers in arranging services such loading and unloading of goods, obtaining payment on behalf of customers, booking of space, and customs clearance for air cargo, sea cargo, land transportation, rail freight, custom agency services, mutimodalism, door-to-door pick-up and delivery services.

Their role through the development of multimodal transport operations is important to increase efficiency in exports and imports of goods, which is a critical component in the quest of improving our total export competitiveness. Their earnings consist of commissions paid for their services and are reflected under the ëOther Servicesí item in the Balance on Services Account.

Currently the freight forwarding industry faces the problems of a fragmented structure, inefficiency of related services, high operating costs, and low volume. This is because in carrying out their operations, freight forwarders not only depend on other related services but also use substantial foreign exchange in the procurement of services, bookings for cargo space and deciding on shipping lines, airlines or railways to be used.

There are many freight forwarding companies in the country with four member-affiliated associations. This fragmented industry has two tiers ie. freight forwarders and custom brokers or agents and is operating in a very competitive environment. However, their contribution and growth potential are limited due to the low level of profesionalism, a non-uniform tariff structure and high staff turnover.

Operational efficiency of the freight forwarder also depends on other services, such as good freight container facilities and haulage system, inland clearance depots (ICD), inland ports, airports and ports. The industry also depends on the participation of all the parties in the transport and logistics chain as well as the information technologies such as electronic data interchange (EDI) used at Port Klang and Penang. The response time of the EDI system at Port Klang is very slow and it takes approximately between 12 hours to 1 1/2 days for a transaction to be completed.

The operational costs of freight forwarders will be increased significantly when MAS raises existing ëadd-onsí and cargo rental space rate at Penang Airport as well as the introduction of proposed rates at KLIA. These additional costs will be passed down to the end users such as exporters, importers and potential investors.

In order to increase Malaysia export competitiveness, both the freight forwarders and their related services providers would have to be more efficient and cost effective. For this purpose, the following recommendations are made:

  1. Review and amend the Customs Act, 1967 and its regulations to meet the commercial requirements of the forwarding industry.

  2. Restructure the freight forwarding industry to enhance organisational efficiency via mergers.

  3. Regulate and control the operations of the freight forwarders using a more stringent set of performance criteria.

  4. Have a uniform tariff structure in freight forwarding industry.

  5. Promote professionalism in the industry through integrated training and qualification requirements.

  6. Encourage freight forwarders to develop multimodalism with the aim of providing efficient door-to-door services.

  7. The Government should introduce incentive schemes to encourage freight forwarders to intensively promote shipping arrangements in exporting CIF and importing FOB.

  8. Encourage freight forwarders to maximise the utilisation of national carriers for both sea and air transports.

  9. Intensify the utilisation of local hub centres namely Port Klang, Sultan Abdul Aziz Shah Airport and Kuala Lumpur International Airport.

  10. Promote the usage of the various free commercial zones in the country for value-added and transhipment activities, especially for industries under licensed manufacturing warehouse and free industrial zones.

  11. To improve and upgrade information technology especially electronic data interchange (EDI) and other infrastructure support components such as inland ports, inland clearance depots and other freight container facilities.

  12. A container leasing company should be formed to lease containers for use by exporters since there is shortage of empty containers available.

  13. Enhance efforts to combat corruption and eradicate bureaucratic red tapes by relevant Government agencies and among freight forwarders.

  14. Implementation and Coordination Unit of the Prime Ministerís Department should conduct a study of the whole process of handling and transporting containers from premises/factories to ships at port and vice versa.

  15. The Ministry of Transport should review the cargo add-on rates charged by MAS and space rental charged by Malaysia Airport Berhad.

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