Earlier this year I wrote an article arguing that Myanmar will play a pivotal and key strategic role in China\u2019s One Belt One Road strategy, and that Singapore would be the net loser of such an initiative. Since the publication there have been a number of commentators charting the development of the inland routes and little attention paid to the impact on the maritime lanes.<\/p>\n
With Singapore having built a solid and strong reputation around being a leading marine \/ maritime hub, any changes in the logistics patterns creates vulnerability for the island state. Despite some claiming that China has engaged with Singapore on a diplomatic level, one needs only look at the substance of these discussions it becomes clear that the intent is for Singapore to retain its financial and banking leadership with other countries seen as more suitable to supporting the maritime network. One has to remember that one of the key drivers in the One Road One Belt plan is to secure energy and trade security by building a network that bypasses the Malacca Straits. In a sense, what was once a strategic location advantage for Singapore is now a disadvantage. This article will look at the land routes and back up infrastructure to support the changes in maritime thinking.<\/p>\n
Supply chain consideration<\/strong><\/p>\n When looking at the sail \/ rail mix in the region, we can see that a number of interesting developments have taken place. This is of particular importance when one considers that the region\u2019s economic growth pathway will come from the likes of China, India, Myanmar, Vietnam, Laos and Cambodia. For example, Myanmar\u2019s economy is expected to grow around the 8% mark in the coming year, and according to reports out of the ADB and others, China will account for 40% of trade.<\/p>\n China has invested significant funds in developing Chongqing, and has not been secretive about making this city the logistics hub for Asia and replacing the likes of Singapore. The city is now seen as a leader in high end manufacturing, particularly with regards to robotics, lower labour costs and access to a market of 300m consumers. Companies such as Volkswagen and GM have relocated operations to the area.<\/p>\n Furthermore, in order to facilitate and secure this trade, China has granted highly concessionary terms to finance construction and infrastructure projects. These projects include the railway project Yuxin that connects China to Germany via Kazakhstan, Russia and Poland. In 2015, this rail corridor successfully completed 257 freight trips.<\/p>\n There has also been the launching of a direct rail and sea freight service between China and Pakistan. According to the Xinhua<\/em> news agency, this corridor will cut costs by up to 50%. The first cargo train carried a 500 ton load from Kunming.<\/p>\n Closer to home as far as Singapore goes, we have seen the signing of the BCIM (Bangladesh \/ China \/ India \/ Myanmar) economic co-operation agreement. The outcome of this agreement is to create a link between Kolkata – Dhaka \u2013 Mandalay \u2013 Kunming with a focus on building a transport, energy and telecom corridor. There are however some practical issues that need to be resolved, including rail gauge and the creation of special economic zones to facilitate transshipment. Furthermore we can see the various transport corridors connecting the West to the East reproduced in the map below, that highlights the risk to Singapore\u2019s hub status as China looks to secure trade and energy routes without the need to use the Malacca Straits.<\/p>\n Other examples that demonstrate that the nature of logistics within the supply chain has changed, include what is unfolding in cities such as Baku. This is about to totally change the logistics balance that has dominated the East-West trade for the past 40 years. It will allow manufacturers in once isolated, low cost producer areas, to consider costs associated with using rail or vessels. An ADB study has shown that rail is considerably cheaper than ship. However the study does have drawbacks in that the modelling was based on double stack trains and does not take account of rail gauge issues as well as cross border bureaucracy \u2013 issues mentioned earlier, and to some extent, resolved by the BCIM cooperation agreement.<\/p>\n Additionally, rail carriers travel at up to triple the speed of a vessel, and the potential financial savings from this new transport mix will translate into savings along the supply chain. One need consider the amount of time\/money tied up in L\/Cs and value of goods whist in transit on lengthy sea voyage journeys. Shippers may well respond by pushing and or developing super ports \/ breakbulk hubs to improve transit times and reduce the cost per mile per shipped container, but these concerns have been taken into the strategy with key ports and canals under consideration. All these elements will help reduce the LC exposure period as well as improve shipping times.<\/p>\n If there was any doubt as to the veracity of these initiatives and impacts, one need only look at Dubai. The city was off the main shipping routes and yet now has 75% of large container vessels diverting to its port to take advantage of the quicker and cheaper transport routes allowed under a transhipment \/ breakbulk facility. This has been enabled by construction of large deepwater ports, rail infrastructure and land facilities.<\/p>\n Conclusion<\/strong><\/p>\n With the shipping and rail complementing each other as evidenced by the transport map above, Singapore is at risk of losing its maritime hub status as the new alternative transport modes become attractive in terms of speed and cost. This will also place at risk OSV operators who have relied on Singapore to provide the one stop shop to support offshore oil and gas logistics. Some companies in the sector have seen this and have moved offices to the likes of Malaysia and Thailand to better take advantage of the new paradigm brought about by China\u2019s new Silk Road. Controversial as it may seem, it is my opinion that Singapore, once the \u2018Switzerland of the East\u2019 will lose this mantle in the not too distant future.<\/p>\n","protected":false},"excerpt":{"rendered":" Earlier this year I wrote an article arguing that Myanmar will play a pivotal and key strategic role in China\u2019s One Belt One Road strategy, and that Singapore would be the net loser of such an initiative. Since the publication there have been a number of commentators charting the development of the inland routes and …<\/p>\n","protected":false},"author":14,"featured_media":37030,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_ml_titleColor":"#000000","_ml_titleFont":"Roboto","_ml_titleFontSize":1.136,"_ml_titleFontWeight":"400","_ml_titleLineHeight":1.3,"_ml_metaColor":"#708090","_ml_metaFont":"Montserrat","_ml_metaFontSize":0.6785,"_ml_metaFontWeight":"400","_ml_metaLineHeight":0.92,"_ml_bodyColor":"#a9a9a9","_ml_bodyFont":"Open Sans","_ml_bodyFontSize":0.85,"_ml_bodyFontWeight":"400","_ml_bodyLineHeight":1.2,"_ml_wooPriceColor":"#666","_ml_wooPriceFont":"Open Sans","_ml_wooPriceFontSize":0.9,"_ml_wooPriceFontWeight":"400","_ml_wooPriceLineHeight":1.27,"_ml_headingColor":"#000","_ml_headingFont":"Merriweather","_ml_headingFontSize":2.02,"_ml_headingFontWeight":"700","_ml_headingLineHeight":1.47,"_mlglobal_userfontcolors":{"headingColorUser":[],"titleColorUser":[],"metaColorUser":[],"bodyColorUser":[],"wooPriceColorUser":[]},"_uag_custom_page_level_css":"","footnotes":""},"categories":[80,77,68,64],"tags":[],"yoast_head":"\n