Cluster approach will pay off for yards to beat rivals in China and Russia. Those involved in ship repair in the world's established locations would do well to address the growing threat to their businesses from China and the former Soviet Union before it is too late. Such is the view of Mr. Lim Soon Heng, president and chief executive officer of Bintai Kinden Corp Ltd, the Singaporean venture which is trying to foster new repair activities in Malaysia.
Mr. Lim, formerly part of the Keppel management team, is shy of publicising his potential partners, but this is in sharp contrast to his outspoken critique of the ostrich-like mentality all too often afflicting the industry's main players. He believes that one viable response to the incursion from developing markets is cultivation of the "silicon valley" shipyard park, or "ShiPark'" concept.
According to Mr. Lim: "The impact on 'low tech' and labour intensive industries such as shiprepair from China and the former USSR must be seriously addressed. "Shipyards in China and Eastern Europe are eroding market shares of incumbent shipyards in Europe, Japan and even South Korea. European and Japanese shipyards have a reputation for quality and reliability, but this in itself will not see them through another decade."
Other threats to the industry, according to Mr. Lim, include antiquated facilities, an ageing workforce, and an inability to compete for young professionals and trades people. "Aggravating these, are the many options open to shareholders," adds Mr. Lim, not least of which is "their being seduced to convert prime land on which shipyards sit into commercial or upmarket waterfront residential property or business parks, as these generate better returns."
Managers need to take the bold and visionary option "or become irrelevant", says Mr. Lim. The ShiPark concept is a proposal for neighbouring yards to join forces and develop the ability to tap into a pool of subcontracting resources. He has no doubt as to where the first ShiPark should be located. "European shipyards need not migrate to China," he says. "Malaysia is an excellent country for this purpose. Its labour is not as cheap as China, but is considerably cheaper than is the case in Europe. "Besides, Malaysia has location, language and standard of living [important for expatriates and shipowners] going for it," he points out.