Press Articles

Business Times - Express Growth

Mar 20, 2007

( Kang Siew Li )
 

IT ACCOUNTS for only a fraction of the total cargo traffic, yet it generates significant value in terms of worldwide employment and revenue.

The express delivery service, often overshadowed by its larger and more visible counterparts in the cargo industry, is fast replacing traditional modes of mail and cargo deliveries as businesses realise that just-in-time deliveries cut costs and improve quality.

Timely arrival of products also allows businesses to plan better.

In Malaysia, the express delivery industry has plenty of room for growth since it is still in its infancy, said Association of Malaysian Express Carriers president Teong Teck Lean.

He describes the express delivery industry as a "sunrise sector" of the country's economy.

This industry is expected to grow faster than its counterparts in other cargo sectors — air and ocean — between now and 2010.

The International Air Transport Association (Iata) has estimated that the global air cargo will grow at an average of 5.3 per cent for the 2006-2010 period, while ocean freight is expected to increase by 7.2 per cent.

But Teong said the local express delivery industry will grow at an average of 10 per cent per year, and is expected to continue to expand rapidly as the country becomes more developed.

Local courier firm City-Link Express (M) Sdn Bhd, for one, expects its 2007 revenue to grow by 10 per cent, while GD Express Carrier Bhd (GDEX) sees its revenue growing in the range of 20-30 per cent.

Revenue growth of global express firms such as DHL Express, meanwhile, is expected to outpace the industry average. Its Malaysian operation has been registering a growth of 15-20 per cent in revenue in the last few years.

Teong said the growth of the express delivery industry moves hand in hand with the country's economic progress.

"When a country becomes more prosperous, its citizens have higher expectations and expect quality. They demand faster and timely delivery of their goods, and will turn to express delivery services," he told Business Times.

"(Thus) when the industry is fully matured, it can be lucrative. Take Federal Express (FedEx) and United Parcel Service (UPS), for example. People could not see these companies' values until after 20 years when their business fully matured," he added.

Recognising the lucrativeness and potential of this industry, Malaysia Airlines' air freight unit, Malaysia Airlines Cargo Sdn Bhd, is working on introducing an express delivery product this year.

There are currently 114 licensed express delivery players in Malaysia. The market is led by the four major foreign players — FedEx, UPS, DHL Worldwide Express and TNT, which combined capture a 60 per cent share of Malaysia's RM1 billion express delivery business, with the rest coming from local courier players.

"The top 10 players already have a 95 per cent control of the market. The other smaller players only offer despatch services," Teong pointed out.

Teong believes that the three important factors going for foreign express players are their brand, size and quality of service.

"As such, domestic players have a lot of catching up to do. We have to improve on our branding, technology and size in order to win over the support of the customers," he said.

City-Link is the first and oldest licensed local courier company in Malaysia. Other major local players include Pos Malaysia Bhd, Nationwide Express Bhd, GDEX, ABX Express (M) Sdn Bhd and Skynet Worldwide (M) Sdn Bhd.

Teong said for the time being, it is still difficult for domestic players to compete with their foreign counterparts on international deliveries because the latter have better transportation equipment, richer management experiences and far-reaching delivery networks.

However, he did not discount the possibility that Malaysia's local express delivery providers may one day enjoy worldwide recognition on par with their foreign counterparts.

"Anything is possible. The big four (largest) global players, FedEx, UPS, DHL and TNT, also started from zero. However, they were lucky because they started in a market where the economy is big enough to generate money for them to expand overseas," he said.

Nonetheless, Teong hopes that the Malaysian Government will offer some kind of preferential treatment, such as tax reduction or exemption, to encourage more local courier firms to expand internationally.

"Through expansion, our brand will be in every city in the world and this is another way of selling Malaysia."

"It will also help a lot of Malaysian companies to do more business with other countries without setting up a branch there as we can provide them an integrated logistics solution," he added.