“Work Boat Malaysia // Growing from strength to strength” by NAZERY KHALID

Shipbuilding in Malaysia

The shipbuilding industry is a crucial industry that provides the backbone for the development of merchant shipping in Malaysia. It is one of the core sectors in the marine transportation sector in the country and provides a platform on which skills in various activities such as naval architecture, engineering, metallurgy, machining, corrosion control, welding and fabrication are developed. The shipbuilding industry also has extensive linkages with many other industries such as steel, glass, logistics, storage, bulk-breaking of goods, and services such as port services, financing, insurance and consultancy.

The shipbuilding industry in Malaysia has been accorded a strategic industry status by the government. This is not surprising given its importance in generating tremendous economic multiplier effects and potential to contribute to the nation’s growth. To boost the industry’s development, the Malaysian government, in the Third Industrial Master Plan (IMP3) 2006-2020, an industrial development blueprint, has outlined several strategic thrusts for the industry, namely:

– enhancing domestic capabilities in the building of smaller vessels, ship repairing and maintenance activities;
– intensifying the upgrading of skills and engineering capabilities;
– strengthening the infrastructure and supporting facilities;
– strengthening the institutional supports;
– expanding activities in the fabrication of offshore structures.

The importance accorded to the shipbuilding industry stands testimony to the government’s intent to spur the growth of the shipyards and increase their competitiveness towards enhancing Malaysia’s stature as a shipbuilding nation of international significance.

The shipyards scenario

There are around 70 shipyards in Malaysia, and they are mainly engaged in the following activities:

– construction of ocean-going vessels, tug boats, patrol vessels, supply vessels, fishing vessels, tugs, landing craft, passenger ferries and boats, small tankers and leisure craft;
– construction of offshore structures for the oil and gas industries;
– ship repairing, maintenance, upgrading, overhauling and refurbishing of vessels;
– conversion of ships;
– heavy engineering; and
– fabrication of offshore structures, steel structures and cranes.

Most yards in Malaysia do not have the means of building big ocean-going vessels due to their limited capacity and technical know-how. They tend to build small to mid-sized vessels for shallow water use. These include fishing boats, passenger boats, tugs, barges, feeder vessels, small tankers, maintenance vessels, support vessels, drilling vessels, diving support vessels, anchor handling tug supply vessels, towing tugs, accommodation barges, cement barges, dumb barges, and various boats made of steel, aluminum, inflatable materials, fiberglass and wood.

The state of Sarawak in Borneo has the most number of shipyards in Malaysia, albeit mostly small consisting of small yards. The coast of Sibu and Miri in Sarawak boast over 40 yards of various sizes and they can build a variety of boats including passenger boats, tugs, OSVs, landing crafts, fishing boats, barges and coasters up to 5,000DWT.

In Peninsular Malaysia the number of shipyards is small, but they are bigger compared with their Sarawakian counterparts. Yards in Peninsular Malaysia also tend to focus on the offshore jobs and repair and in constructing bigger vessels.

On the east coast of Peninsular Malaysia, especially in the state of Terengganu, shipbuilding can be divided into traditional boat making (wood-based) and modern boats. The latter category includes tugs and barges for the oil and gas industry; patrol boats for the state governments; and luxury boats.

Malaysian Marine Heavy Engineering, which is a wholly-owned subsidiary of MISC, the national shipping line, is the nation’s biggest shipyard. Focusing on servicing the oil and gas sector and related industries, it can accommodate the drydocking of vessels of up to 450,000DWT and has a shiplift system capable of handling ships up to 50,000DWT.It is also capable of designing, fabricating, installing and commissioning such as FPSO and FSO vessels.

Boustead Naval Shipyard is the nation’s largest naval shipyard which is contracted by the Royal Malaysian Navy (RMN) to build patrol vessels.

Other reputable Malaysian yards such as Coastal Contracts, Kencana Petroleum and Boustead Naval Shipyard are capable of providing high-end products and services for the oil and gas sector and building high-tech vessels such as patrol vessels and offshore supply vessels. However, local orders for larger and more sophisticated vessels are still placed with foreign shipyards which have the capacity and are technically more adept at building such vessels.

Workboat building in Malaysia

There has been a steady increase in the demand among international buyers for a variety of workboats built by Malaysian yards. This can be largely attributed to their quality and competitive pricing.

While many yards are still operating with a labour-intensive, low-tech approach, some yards have certainly come a long way from their days of ‘building small vessels for the local market’. More of them are building for foreign clients, and some big names at that, and are capable of delivering vessels of good finishing, performance and quality at very competitive prices.

While many of them primarily serve the domestic market, a growing number is capable of producing workboats of enough quality and competitively priced vessels to cater to foreign buyers, mainly within the ASEAN region. While still lacking the finesse and sophistication of established international yards, the workboats produced in the smaller local yards may be small and simple yet sturdy and reliable. They are now capable of churning out custom-built vessels which are bigger, more sophisticated, much better finished and naturally more costly.

Malaysian yards can give other regional yards a good run for their money on account of competitive pricing and ability to deliver rugged, durable and easy-to-fix workboats.

Malaysian-made vessels are now sought after by clients not only in the ASEAN region but also as far away as the Arabian Gulf, West Africa, Australia, the Pacific Islands, South America and even North America. The success of yards such as Nautica Nova and MLC can be attributed to their commitment in delivering quality products and servicing market niche. Other up and coming yards with ambition to expand their markets to serve foreign clientele should take note of this approach which has served leading local yards so well.

There are efforts to develop the shipbuilding industry in Malaysia in a systematic manner, but these are seen at the state instead of the national level. In Sarawak, the state government has designated an area in Tanjung Manis to be developed into a shipbuilding and ship repairing cluster. This is a step in the right direction for the state as it is expected that the shipbuilding cluster would enhance Sarawak’s prowess in workboat building and repairing.

Tanjung Manis offers natural deep water that can facilitate the construction of large ships of over 20,000 metres. The area has attracted several shipyards around the area to relocate, thanks to the infrastructures and incentives provide and offered by the Sarawak government.

In recent years, there has been a spate of activities at local yards to cater to the booming exploration and production activities in Malaysian deepwaters. With demand for hydrocarbon energy at high levels and with the discovery of prolific offshore sites in the waters off the states of Sabah and Sarawak, there has been a high demand for OSV of various categories. This has been a boon to Malaysian yards capable of building multi-purpose tugs, DP vessels, AHTS, multi-purpose support vessels, self propelled barges, offshore utility vessels and platform supply vessels.

Growing capacity, improving technology

Of late, several Malaysian yards have expanded their capacity to meet growing demand for Malaysian made workboats. This underlines the room for growth in the industry, despite the adverse effects of the downturn. There are also examples of Malaysian shipyards venturing abroad and have done well to expand their operations away from home.

For example, MLC Shipbuilding has expanded its shipyard in Shanghai that specialises in building OSVs. Some Malaysian yards have also bid for projects abroad, and this underlines their growing capability, capacity and confidence to tackle more ambitious jobs and compete internationally. For example, Nautica Nova, which builds all types of vessels and provides maintenance and ship repairing services to government vessels, counts Royal Cambodian Navy and Bangladesh Coast Guard as its clients.

Although it is well established that many local yards are still labour-intensive and have low utilisation of technologies, there are several yards that employ high-tech operations. Some use modern methods in shipbuilding such as plasma steel cutting in a sheltered workshop that enables vessels to be assembled on slipways instead of having to build the ship from hull or keel upwards. This saves time, cost and enhances productivity and efficiency.

Some yards have introduced innovative approaches and solutions to improve their performance, products and services. For example, TAS has introduced Ship Construct, a cutting-edge software solutions for vessel design and vessel construction. It has a full line of marine CAD/CAM software to assist its engineers and technicians in the design and construction of vessels to large ships.

More and more, local yards are adding a bit of variety to the kind of vessels that they build and the range of services they offer. For example, MMHE, which was known as a builder of offshore platforms, delivered the first locally-made FPSO to MISC in 2007 to be deployed in Kikeh offshore field off the coast of Sarawak. The vessel features the largest external turret ever built for an FPSO, which underscores MMHE”s technical prowess as Malaysia’s top shipyard.

Some local yards have diversified their activities by ventured beyond shipbuilding and ship repairing to be involved in owning and operating vessels. Amid the boom in the demand for OSV, several yards have taken it to themselves to capitalize on the good times in the segment and charter out OSV that they themselves built. Testimony to this opportunistic tendency by several local shipbuilders, several yards have been reported to venture into rig fabrication for the oil and gas industry to take advantage of the current purple patch in the offshore oil and gas sector.

There have been instances of established international shipbuilders setting up operations in Malaysia in recent years. This is a testimony to the attraction of the incentives provided by the government to attract investment in the industry and the potential that Malaysia has to emerge as a shipbuilding center in the region.

Aker, whose yard in Bergen, Norway is the largest in Europe, has a presence in Malaysian in the form of Aker Solutions (M), an international oil and gas engineering services company which opened a hi-tech manufacturing centre at the Port Klang Free Trade Zone.

Vantech Dockyard, in partnership with Daewoo Shipbuilding and Marine Engineering and Handong Shipbuilding, will build Malaysia’s first fully automated shipyard in Tanjung Agas Oil and Gas Maritime Industrial Park in the Iskandar Development Region in the state of Johor. The yard, expected to come on stream in 2013, will handle LNG tankers weighing over 100,000 DWT and will also have the facilities to repair 100 ships a year. These developments are poised to bring and generate significant amount of FDI and contracts.

Another foreign company which has invested in Malaysian shipbuilding industry is Nordic Maritime, a Singapore-based shipowner and ship management company providing a complete range of offshore marine services.  It has entered into a shipbuilding contract with a NGV Tech to build four units of accommodation/construction barges. These barges can accommodate up to 300 workers and are equipped with DP II features and can be deployed far out at sea.

Malaysia is also slowly but surely carving a niche for itself in naval shipbuilding. The leading naval shipyard, Boustead Naval Ship Yard based in Lumut, Perak has delivered high quality patrol vessels for RMN, and are set to deliver more such vessels. In addition, RMN has also commissioned UK firm BAE Systems to build two Jebat-class frigates. BAE Systems, through its naval shipyard in Glasgow, Scotland, will collaborate with Malaysia’s Labuan Shipyard and Engineering as the lead local facility on the project.

Such development augurs well for the creation of substantial employment opportunities in the Malaysian shipbuilding industry and facilitates technology transfer. RMN’s purchase of the frigates will significantly contribute to the development of local shipbuilding capabilities and provide a boost for the Malaysian defence industry. Already, several local firms have benefited from RMN’s modernisation exercise and from the previous frigate purchase by acquiring experience in naval shipbuilding. In addition, RMN will also implement several modernisation programmes including investments in new information and communication technologies, radar and surveillance equipment. The entry into service of RMN’s Scorpene submarines will also require operational backing and expertise in various areas that will generate business opportunities for local shipyards and enhance their capabilities to handle sophisticated naval assets.

Towards realising Malaysia’s workboat building potential

To be sure, Malaysian yards face many challenges to truly realise their potential on workboat building. They include lack of capital, low productivity due to labour-intensive and low-tech approach, lack of economies of scale due to small domestic market, and high cost of imported materials. In addition, competition is growing from regional shipyards which enjoy larger economies of scale and can deliver the kinds of vessels that Malaysian yards are known for at very competitive costs and in good time.

Despite these, the future of Malaysian shipbuilding industry is indeed bright, given that the demand for their products and services are growing, along with their capacity, quality and competitiveness. Malaysian yards involved in certain niche segments such as offshore oil and gas workboats and structures, passenger crafts and leisure boats have the brightest prospect. As they improve their capacity and productivity, and upgrade the skills of their manpower, they will be able to generate more business from home and abroad.

With the government keen to see the local yards growing by way of providing incentives and promoting them, there is every reason to be bullish about the prospect of Malaysian shipbuilding industry attaining greater heights in the years ahead. Given the strong drive of the government to enhance the growth of Malaysian shipyards, they are sure to further make a name for themselves as builders of workboats of high quality at competitive prices.

information from: http://www.bairdmaritime.com/ & FOCUS ON MALAYSIA – August 2010 WORK BOAT WORLD (Page 48 & Page 49 )