KUALA LUMPUR, Sept 29 — Malaysia dropped 15 places to 41 out of 160 in the World Bank’s Logistics Performance Index (LPI) for 2018 compared to 24 in 2014 and 32 in 2016 when it was the second-best performing Asean nation after Singapore.

In the LPI for 2018, Singapore is now ranked seventh, followed by Thailand at 32 and Vietnam at 39.

According to the report, timeliness is Malaysia’s biggest challenge, which is becoming increasingly important due to consumer willingness to pay premium prices for faster delivery.

It said the transport and storage sector accounted for 3.8 per cent of the GDP and its gross value added was estimated at RM57.2 billion with 667,600 employees representing 4.4 per cent of the employment population in 2019.

Due to Covid-19, transportation costs have increased as companies face new challenges and protocols entering different continents and countries with varied security regulations in response to the pandemic.

“Transport-related costs for cross-border trade averaged at 60 per cent across Asean, but it is almost 80 per cent in Malaysia.

“Covid-19 has led to soaring growth in freight transport within cities in Asean countries, which was 20 per cent up in 2020 and likely to continue growing as patterns of production, distribution and consumption have changed permanently,” a report by the benchmarking tool said.

LPI is scored from 1 (lowest) to 5 (highest) and uses the weighted average of the country’s score when meeting six criteria.

They are: efficiency (ease of clearance at borders and simplicity and predictability of clearance processes by border control agencies, including customs); quality of trade and transport-related infrastructure; ease of arranging competitively priced shipments; competence and quality of logistics services (such as transport operators and customs broker); having the ability to track and trace consignments; and timeliness of shipments arriving within the scheduled or expected delivery time.

The survey suggests that efficiency of the clearance process (with a score of 2.9) is the most challenging area for Malaysia. Its infrastructure, however, scored relatively high among Asean countries (with a score of 3.2), ranking second to Singapore.

Malaysia also scored relatively well in international shipments and almost as high as the top performer of the same income group. Malaysia’s LPI overall score and sub-indicators against the top performer in its income group (China) and the top performer at the global level (Germany) in 2018.

The Organisation for Economic Co-operation and Development (OECD) recently made several recommendations to improve facilities in Malaysia, including reducing authorities’ power in setting freight prices, lifting foreign equity and addressing the Bumiputera quota.

Malaysia’s freight forwarding industry players had asked the government to intervene to help bring down overseas logistics rates which have jumped almost tenfold compared to pre-Covid-19 times.

The government said it planned to increase the Bumiputera stake in freight forwarding companies to 51 per cent under the 12th Malaysia Plan, but this was met with scepticism as many see such a move as benefiting only a few.

Industry players also asked for the ban on foreign ships carrying cargo via Malaysian domestic routes (cabotage) to be lifted, saying this would lead to a 20 to 25 per cent drop in shipping prices.

In 2019, Malaysia’s transport and storage services employed 667,600 people, representing around 4.4 per cent of the employed population.

Transport and storage services’ gross value added (GVA) was estimated at RM57.2 billion in 2019, accounting for 3.8 per cent of total GDP. The GVA of the land transport and water transport sub-sectors was RM14.5 billion and RM6.7 billion while support activities for transportation and postal and courier services GVA was RM9.3 billion and RM2.7 billion.

Transportation and storage services recorded a gross output value of RM120.7 billion in 2017 compared to RM109.2 billion in 2015, with an annual growth rate of 5.1 per cent.

Meanwhile, warehousing and support activities were the largest contributors of gross output value, followed by land transport, air transport, water transport.

The World Bank’s LPI is an interactive benchmarking tool created to help countries identify the challenges and opportunities they face in their performance on trade logistics and what they can do to improve their performance.

The LPI 2018 allows for comparisons across 160 countries.