Express praised for Cabotage role
Published on: Monday, May 03, 2021
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Kota Kinabalu: Repealing the exemption of the Cabotage policy for Sabah has been put on hold by the Federal Cabinet and MICCI Sabah Chairman Datuk Seri Panglima Wong Khen Thau (pic) credited Daily Express for highlighting the issue on behalf of industry players.At the April 26 (Monday) meeting with the Ministry of Transport, Sarawak, with its ship owners, supported the move. The Ministry’s rationale was the importance of national security.
“However, we told the Ministry of Transport that we are not Sarawak. We are Sabahans who know what’s best for us as we are responsible to make our own destiny as Sabahans,” Wong said.
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Sarawak maintained its own Cabotage in the interest of its ship owners to prevent ships from Sabah carrying goods from Sarawak in the past even though the Cabotage was partially liberalised before former Prime Minister Datuk Seri Najib Razak announced the policy exemption on May 7, 2017.
Currently, no Sabah-based shipping companies own any container-carrying ship after Chong Fui Shipping sold off its last freighter, despite ship owners enjoying tax exemption for their business operations.
Our report on April 25
According to Wong, most of the invited attendees from Sabah were against the move to wholly impose back the Cabotage Policy, and the Minister concerned was expected to respect the views expressed by most of the Sabahan attendees.
Wong revealed that it costs around RM7,500 to ship a 40-foot container to Sepangar Bay Container Port (SBCP) with some RM5,000 for freight. A 20-foot container costs RM5,200 with RM3,000 for freight, besides other charges such as bunkers surcharge and bunkers recovery surcharge, while international shipping lines have a single fixed pricing with no other variable charges.
Wong suggested that the Cabotage Policy is reversed whereby shipments from China, Japan, Korea, Taiwan, Hong Kong, Indochina and the Philippines land at SBCP first before Malaysian vessels carry them to Peninsular Malaysia.
Only then people in Peninsular Malaysia will have a taste of what Cabotage Policy will cost them when exploited by local shippers to levy their monopolistic extra charges.
In the past, Wong made calls to rotate the national load centre status conferred on Port Klang way back in 1993 via a directive from the Minister of Transport to SBCP to let it succeed as a transhipment hub with a marked improvement of the number of containers handled.
Being the national load centre has enabled Port Klang to catapult to a higher-ranking position in a list of world’s busiest ports. Port Klang has now outlived the necessity of having to rely on the Ministry of Transport directive as through the years they have achieved their niche market that will enable them to retain their top 10th position or so in the world ranking against the top port of Singapore.
The concept of a national load centre is the answer to the growth of Sabah’s economy, especially the manufacturing sectors, for both downstream and standalone projects.
Our report on April 26
Reliance on tourism and shipment of crude and raw materials will not provide a broader base for the State economy and therefore lacking in a solid platform for economic survivability.
Implemented on Jan. 1, 1980, Malaysia’s Cabotage Policy governs maritime transport between Peninsular Malaysia and East Malaysia. The main objective of the policy was to safeguard and promote the domestic shipping industry and for Port Klang to be the container hub port in Malaysia.
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Under the policy, both foreign and Malaysian ships can discharge cargo at any port, but the parties must engage Malaysian-registered vessels to transport goods to Sabah and Sarawak.
The policy defines “domestic shipping” to mean the use of a ship (a) to provide services, other than fishing, in the Federation waters or the exclusive economic zone; or (b) for the shipment of goods or the carriage of passengers (i) from any port or place in Malaysia to another port within Malaysia; or (ii) from any port or place in Malaysia to any port within its or place in the exclusive economic zone or vice versa.
The main objectives of the Cabotage Policy are:
- To increase Malaysia’s ownership of ships and grow local participation in shipping.
- To reduce Malaysia’s dependence on foreign vessels.
To reduce the outflow of foreign exchange in the form of freight payments.
- To provide a platform for local shipping companies to achieve scale to competitively service international trade.
- To retain skilled maritime workers.
- To preserve and protect maritime knowledge of national ocean territory.
- To protect National Maritime Security.
The Territorial Sea Act 2012 is also cited to preserve and protect maritime knowledge of national ocean territory and to protect National Maritime Security of the Federation of Malaysia as a matter of national interest where vast oil and gas deposits are located to be extracted in future under Petronas.
But unlike Indonesia which implemented its Cabotage in 2011, Malaysia’s Cabotage Policy did not see any increase in the number of Malaysian-owned ships. In fact, the opposite happened as the numbers fell.
UiTM Sabah political economist-lecturer Firdausi Suffian said the Cabotage Policy was irrelevant in the globalised economy.
“All protectionist tools are bad for the economy as they distort competition,” he said. However, the Sarawak and Sabah Ship-owners Association (SSSA) is of the view that the Malaysian shipping industry suffers from the exemption of the Cabotage Policy.
It is fine for Sarawak but not for Sabah because currently no Sabah company owns any freighter to ship goods.
On May 7, 2017 the then Prime Minister (Najib) proposed that Sabah, Sarawak and Labuan be exempted from the Cabotage Policy effective June 1, 2017. Under the proposal, foreign ships can transport cargo domestically.
Ship owner and Halim Mazmin Group shipping businessman who was also appointed as Malaysia External Trade Development Corporation (Matrade) Chairman, Tan Sri Dr Halim Mohammad, told a recent Wisdom Foundation webinar forum:
“The Cabotage Policy in Indonesia stipulates that all vessels operating in Indonesian waters must fly the Indonesian flag, be manned by Indonesian crew, use Indonesian flagged vessels i.e. 51 per cent Indonesian owned, and any foreign owner is required to relinquish majority ownership of the asset to an Indonesian counterpart.”
According to Indonesian President Joko Widodo, the territorial seas of Indonesia are larger than its territorial land mass and are crucial in linking the country with vital logistical transportation.
Indonesia’s Maritime Law still allows foreign companies to participate in local trade, provided they do so in the form of joint ventures with Indonesian partner/s.
Indonesia’s Maritime Law allows up to 49 per cent overseas investment in shipping ventures. After January 2011, foreign vessels which still operate in Indonesia can be imposed both administrative and criminal sanctions, with the implementation of the Cabotage principle will be fully entered into force on Jan 1, 2011.
In a stark contrast to Indonesia’s success, Malaysian shippers argued that more than 30 years of Cabotage (since 1980) was not enough to grow the Malaysian fleet.
“Our world fleet ranking has dropped substantially without Cabotage. The Indonesian merchant fleet expanded by 140 per cent when their government introduced Cabotage (since 2011).”
“The results show that Indonesia achieved a staggering 140 per cent increase in their merchant fleet tonnage from 2014 until 2019 – while the Malaysian fleet regressed over the same period,” Dr Halim stressed, revealing that Malaysia’s participation in world trade containerships is also negligible.
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