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Malaysia Shipbuilding Industry

Despite its stature as a maritime nation, it has been a matter of concern for the government and stakeholders in the local shipping industry that the level of national merchant shipping tonnage leaves much to be desired. In the Third Industrial Master Plan 2006-2020 (IMP3), the shipbuilding industry in Malaysia is identified as a strategic industry by the Malaysian government. However, local shipyards in general, have limited shipbuilding and ship repairing capabilities, mostly specialising in low-value and small vessels.

The Malaysian shipbuilding / ship repairing [SBSR] industry consists of enterprises involved in manufacturing (namely shipbuilding, production of vessels and marine equipment) and service (i.e. designing, repairing, maintaining, converting and upgrading of vessels and marine equipment). It generates economic multiplier effects and targeted to create RM6.35 bil. in GNI and 55,000 jobs by 2020. Most yards specialize in building small-medium size vessels i.e. ferries, barges, tugs, OSV, yachts, fishing vessels, patrol crafts, yachts. The larger yards can build/service bigger ships (i.e. bulkers, tankers), fabricate/ service offshore structures, and do upgrading and conversion.

Most local shipyards do not have the capacity to undertake the construction, repair and maintenance of large and technically challenging vessels. Due to the limitation of local yards to build and service bigger vessels, many local shipowners order ships from shipyards abroad and prefer their vessels to be repaired and maintained there. Many regional yards are capable of offering products and services at highly competitive costs, hence posing a threat to Malaysian shipyards. This creates a cycle from which players in the marine industry have found difficult to escape.

There were around 100 yards and 40 companies supporting the SBSR industry in Malaysia. Around 80 yards in Sabah & Sarawak contribute 65% of total local newbuilding. Only half of vessels required by local shipowners annually are built locally and most large offshore structures owned by local companies / used in local waters are imported. Many yards rely on foreign labor in technical areas and foreign designs (for big and sophisticated vessels and offshore structures). Many shipowners prefer to build vessels in foreign yards where costs are generally cheaper and delivery faster compared to Malaysia. Local marine equipment still does not reach global markets. Some yards build on speculation and are saddled with overcapacity in certain types of vessels, most notably in OSV sector owing to downturn in the oil industry. In 2013 Malaysia contributed 1% of world newbuilding orderbook and was ranked 26th in list of nations with largest merchant fleet (1,454 vessels of >100 GT and total tonnage of 6.993 mil. GT) Several shipping companies laid up vessels without contracts while several commissioned specialized OSV to bid for contracts.

As part of Boustead's drive to develop the nations shipbuilding industry in support of the Governments Economic Transformation Programme, one of the mandates was to enhance local capabilities in ship design. Towards this end, the compnay maintained a focus on designing and construction of offshore support vessels (OSV) due to strong demand by oil majors and production sharing contractors operating in Malaysia. In line with this, the company successfully completed the concept design for an OSV, and began tests with partners to ensure the seaworthiness of the vessel in order to move to the construction phase.

By 2015 the industry faced headwinds arising from low demand for new ships / offshore structures amid the global recession and downturn in the shipping and oil markets. Yards were suffering from low orderbook as companies delayed fleet expansion, national oil company Petronas scales back capex / offshore projects. Malaysia practices a liberal Cabotage Policy that does not require local shipowners to use ships built at local yards to serve domestic shipping. Exports have been adversely affected as countries like Indonesia tightens Cabotage Poliy. The emphasis is on MRO as owners order fewer newbuildings / offshore structures and prolong the life of existing assets.



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