KOTA KINABALU: The Cabotage problem is far from resolved because no action has yet been taken to address the issues arising from the policy that are affecting the industry and prices of goods in Sabah.
The Federation of Sabah Industries (FSI) has expressed its deep regrets over the Sabah Industry Quarterly (SIQ) magazine of the January to March 2015 issue with the cover story ‘Cabotage Problem Solved’.
It claims that the statement is confusing and misleading, and the magazine is unprofessional to have published the story as such because it does not reflect the actual situation on the ground.
FSI president Datuk Seri Panglima Wong Khen Thau said the cover story, claiming that the Cabotage problem had been resolved, was an insult to his and the industry players’ intelligence.
He pointed out that it was ridiculous for the magazine to conclude that the Cabotage policy issue had been resolved with a simplistic publication.
Wong reiterated that FSI was not against the Cabotage policy per se as it was a good policy established some 30 years ago to protect the shipping industry to enable them to grow.
“But we are challenging the effect of Cabotage policy on the industries and the prices of goods in Sabah,” he said in a press conference here.
While he was pleased to see that leaders from both political divide had raised their concerns on the Cabotage policy and how it affected the prices of goods in the last State Legislative Assembly sitting, Wong was disappointed that the leaders had neglected to discuss how the policy affected the growth of the industry.
He said there were two prongs to the effects of the Cabotage policy, namely on the industry and prices of goods.
The effect of Cabotage is one of the real culprits that impede the growth of the industry in Sabah as it creates unofficial cartel on prices; restricts foreign shipments from overseas coming into Sabah as it cannot carry goods from the ports of Sabah to Peninsular Malaysia or Sarawak; reduces the capacity for exports from Sabah industries and hence create unbalanced load from Sabah; creates inefficiency of shipping services and causes delays especially with the use of old vessels; hinders the development of ports when there is less demand for ships to berth; and prevents more shipping companies to operate.
FSI reported that 137,000 of 198,000 containers returned empty from Sabah to Peninsular Malaysia last year, while the remaining 61,000 containers were loaded.
According to Wong, shipping companies charged double for the return journey of empty containers but these companies have never given discount or refund for loaded ones, which reflected the lack of benchmarking of freight rates.
He said FSI had done a study on freight rates and found that the charges from Guangzhou, China to Port Klang for a 20-foot container was around USD400, while that to Sabah was USD800.
For a 40-foot container, the rate from Guangzhou to Port Klang and Sabah are USD800 and USD1,200 respectively.
Over the years, Wong said, the industries had proposed solutions to the government through various channels and forums but the recommendations were either not approved or ignored.
Apart from the rejection on the proposal of freight equalization scheme to subsidize cost of moving cargoes or to equalize price between Peninsular Malaysia and Sabah, no action was taken on the industry’s suggestion to subsidize Sabah exports as well as the formation of a logistics council to monitor shipping and logistics costs despite pledges by the government.
Wong continued to say that the Minister of Transport, Dato’ Seri Liow Tiong Lai, had agreed to make Sabah a port hub, but nothing had been realized so far.
“When we checked with the ministry, they say the State Government must take the initiative, meaning that the Ministry of Infrastructure Development has to put in an official request to the Federal Government to place (the proposal) under the 11th Malaysia Plan after which the Ministry of Transport will endorse and support it.
“The ball is thrown back to Sabah again,” he pointed out.
Wong lamented that the cost of doing business had increased drastically this year, with the revision of electricity and water tariffs and the implementation of the Goods and Services Tax (GST).
He also said that Deputy Chief Minister cum Minister of Infrastructure Development, Tan Sri Joseph Pairin Kitingan, had accepted FSI’s recommendation to review the water tariff by the end of this year.
Pairin had also raised the possibility of giving rebates to the industry, he said.
By the time the rebates were given, Wong said, some of the industry players might have ceased to operate.
In addition, Wong said, FSI had asked for a two-tier GST, meaning that six per cent of GST was imposed on businesses in peninsula and three to four per cent in Sabah.
He said the Performance Management Delivery Unit (Pemandu) personnel had done a research on the prices of goods in Sabah and concluded that there was not much difference in prices between Sabah and West Malaysia, and that some goods were even cheaper here compared to Kuala Lumpur.
“I have been in Sabah for more than 60 years, and these people (Pemandu) came in to do a research for two weeks and said the goods here are cheaper!”
Wong said the Sabah industry was one of the halatuju or agendas of our State, yet the contribution of the manufacturing and oil and gas sectors to the State’s Gross Domestic Product (GSP) had dropped from 28 per cent in the past to eight per cent today, whereas the tourism, agriculture and service sectors’ contribution to GDP had increased over the years.
To prove his point, Wong asked if there were any tycoons produced in Sabah in the past two decades, or whether smaller local companies had grown in size, with the rare exception of one or two organizations like Hap Seng.
He said the government must seriously look into how to reduce the cost of doing business in Sabah to make the local industries competitive as well as to create a conducive environment for them to export.
“We are not against the government, we still support the government. We hope the government will look into how to support us.
“We are voters as well. It is only right they look into how to help us, how to lower the cost of doing business here. We hope the government will listen to the industry. We are not politicians, we are fighting for the survival of the industry.”
Wong added that there used to be nine shipping companies that came to Sabah, now four companies have folded despite enjoying tax exemption, protection under the Cabotage policy with the recent granting of the block exemption order (BEO) by the Malaysia Competitions Commission (MyCC) to reinforce this competitive-averse behaviour, and guaranteed Sabah’s sizeable market of RM800 million per year based on 2012 figure.
He pointed out that there could only be four possibilities that caused the shipping companies to cease operation – bad management, money is invested elsewhere, high maintenance cost of old vessels and outsourcing to other companies.
Wong said the federation did not expect the Cabotage policy to be abolished, but the government should give something in return, this was where the realignment of the Cabotage policy came in.
Under the realignment strategy, FSI proposed a dual-gateway structure bridging the eastern and western spheres together, to designate Sepanggar Bay Container Terminal (SBCT) as a second load centre and a gateway to Brunei, Indonesia, Malaysia and Philippines – East Asean Growth Area (BIMP-EAGA), and to liberalize SBCT’s outgoing route to capture the burgeoning BIMP-EAGA market.
FSI reckoned that harping on the Cabotage policy would not bring any solution, especially when top leaders have differing stance on the policy that were not necessarily in line with the interest of Sabah.
The vision of Sabah as the transshipment hub for the Asean region by 2030 should now take centre stage. The industry expressed confidence that Sabah was poised for hub status, but Sabah’s top leaders must be one with the industry and rakyat and continue to pursue the vision with the Federal Government.
Wong pointed out that Port Klang first started with a humble beginning and has now grown to become the seventh busiest port.
“The government can do a lot of things if they want to. If the Federal Government can spend millions or billions to invest in something else, why not spend in Sabah since our State is a fixed deposit?”