Logistics: the challenge to fill northbound freight

According to the latest statistics, the trade deficit in Malta widened by 45.9 per cent year-on-year to €558 million in February 2016 – the highest trade gap on record.

This statistic is no doubt of great concern to economists who view it in terms of value-added and employment.

But for shipping and freight companies it aggravates one of their most pressing problems: containers and trucks that come here nearly full – but leave more or less empty.

Jimmy Cutajar, the managing director of Global Freight Solutions, understands the limitations: “Malta’s exports mostly consists of electrical machinery, mechanical appliances, fish and crustaceans, pharmaceutical products and printed material,” he said.

“The island does not offer natural resources to tap into, thus it is very hard to counter the deficit through this channel. This can only imply that we have to work harder and explore other manufacturing niches not tapped before.

“It is easier said than done since most of the world’s production of goods has moved to the Far East. We have recent success stories such as in the pharmaceutical industry, however this is not enough.” However, he warned that Malta could not just roll over and accept defeat – and said there were many avenues that could still be pursued.

“Malta has to continue its hard work by diminishing bureaucracy to support investors who think outside the box,” he said, adding that governments needed to entice investors by abolishing lengthy bureaucratic procedures – and supporting development.

"Malta has to continue its hard work by diminishing bureaucracy and support investors"

His suggestions were all ones that have roots in Malta and which could be nurtured: food manufacturing, further sustained through R&D of aquaculture; and the manufacturing of specialised engineered products within the maritime, oil and gas industry.

The government has already stated its intention to set up free trade zones (FTZ) in the hope of creating a new logistics sector.

Kevin Filletti, the sales manager of Attrans Ltd, believes that the opportunities for Malta – thanks to its strategic position in the Med and EU membership – are immense.

“The logistics sector could be one of the island’s main industries and will definitely be able to create new job opportunities. We could attract various commodities as the FTZ eliminates bureaucratic requirements such as customs tariffs and quotas.

“We could use our sea connectivity from the Far East to warehouse goods in Malta under FTZ and then despatch by sea, road or air to mainland EU or North Africa.

“A typical activity carried out in an FTZ area is the Onward Supply Relief (OSR). This is a VAT exemption on importing goods to Malta from a non-EU Country. Once despatch is done, duty is paid in Malta and cargo can travel freely in the EU under free circulation.

“Considering the imbalance of trade between importation and exportation, FTZ would help trailer operators like us decrease our costs on north-bound routes as it would close the gap between import/export,” he enthused.

One of the keys to the future is adaptation and diversification, and this is just as true for the Maltese economy as a whole as it is for the freight forwarding sector.

Michael Quattromani, Global Freight Solutions’s operations director, sincerely believes that the freight forwarding industry in Malta is poised for growth in the coming years – but that they need to move with the times.

“Many freight forwarding companies have already begun adapting their strategies to focus on more innovative business models that will help them succeed in a changing environment. They are adopting new growth strategies, redesigning their networks and improving their cost structures to meet the new challenges,” he said, adding that the freight forwarding industry as a whole was still in the early stages of development.

“Fragmentation and intense competition highlight a market in which competitors offer similar and limited services. We all know that customers demand more, hence companies in Malta are focusing on their core competencies, such as marketing, research and development and manufacturing, while outsourcing secondary competencies such as transportation and logistics that can consolidate resources more effectively.

“Additionally, price is becoming more and more important when selecting freight forwarding, service providers. In this way, local players will be able to compete with foreign competitors, drive down costs and increase profitability,” he said.

"One of the keys to the future is adaptation and diversification, and this is just as true for the Maltese economy as a whole as it is for the freight forwarding sector"

Competition does not frighten Anthony Schembri, the managing director at Agritrans Logistics Ltd, which he considers to be natural – and inevitable.

“Competition is quite healthy for every sector within the market because without competition there would not be any growth. It is the pressure that leads to the development of guidelines to be proactive and offer the best service for existing and also future clients,” he said.

However, there is one aspect of competition which is having an impact on local manufacturing and subsequently freight companies: imports from Sicily.

“Of course, there is an unfair playing field in competition within Sicily due to the fact there are unauthorised people operating without any of the required licences. Unfortunately, the authorities know about such illegal operations and still no action has been taken,” Mr Schembri said.

“To make matters worse, companies like us are affected by the expensive maritime fees due to excessive bureaucracy within the system. All of these factors are jeopardising our daily operations.”

Source: Times of Malta