KOTA KINABALU: The cabotage policy is not the reason for higher freight and prices in Sabah, said Malaysia External Trade and Development Corporation (Matrade) chairman Tan Sri Dr Halim Mohammad.
He said independent studies conducted by the Maritime Institute of Malaysia (MIMA) and World Bank showed no reduction in prices of goods in Sabah and Sarawak after removal of the policy.
“Cabotage is not the culprit for the prices of goods in Sabah.”
He said the price differentials was caused by other economic and infrastructural limitations.
Halim referenced a study on “The Influence of Cabotage Policy on Price Disparity between Peninsular Malaysia and Sabah” published in 2018 which stated that weak distribution channels, high handling charges and inefficient inland transportation and other interrelated factors had caused prices in Sabah to be higher than West Malaysia.
The study stated that the higher prices in Sabah were mainly due to the inefficiency of port operations, underdeveloped infrastructures which limit access to many parts of the state and trade imbalance between Sabah and West Malaysia which resulted in less cargo when ships were to return to West Malaysia after delivering cargo to Sabah.
In fact, Halim said the cabotage policy was instrumental to the development of shipping and trade, as well as presented excellent opportunities for fleet and job growth in Sabah.
Halim said this during a webinar on ‘The Malaysian Cabotage Policy: Addressing the Concern of Sabahans’ organized by Wisdom Foundation here on Monday.
The webinar, moderated by Wisdom Foundation executive chairman Datuk Seri Panglima Wilfred Madius Tangau, featured Halim as key speaker, Sabah Skills and Technology Centre (SSTC) chairman Datuk Seri Panglima Wong Khen Thau, former minister of international trade and industry Datuk Darell Leiking and Malaysia Shipowners’ Association (MASA) exco member James Ong as panelists.
Halim said the cabotage policy, first enforced in June 1980, limits operation of domestic shipping to ships operated by citizens of the same country.
The main objectives of cabotage policy, among others, are to increase the country’s ownership of ships and grow local participation in shipping; reduce the country’s dependence on foreign vessels; reduce the outflow of foreign exchange in the form of freight payments; and provide a platform for local shipping companies to achieve scale to competitively service international trade.
Between 1994 and 2005, he said the government has implemented phased liberalization of cabotage policy for transshipped containers between Penang, Port Klang, Johore Port and Tanjong Pelepas.
In 2009, he said the government further liberalized transshipped containers between the major ports in East and West Malaysia.
In June 2017, he said the cabotage policy for cargo shipments between East and West Malaysia was abolished, however the policy was maintained for shipments between ports in East Malaysia.
In November 2020, he said the cabotage policy was reimposed for submarine cable laying and repair vessels.
Halim said the cabotage policy offered an excellent opportunity for Sabahans to spur economic growth.
“Sabah’s coastline is 3,753 kilometres long with many ports along its coast.
“The cabotage policy will help to nurture more Sabahans to venture and expand in shipping business locally, Brunei-Indonesia-Malaysia-Philippines East Asean Growth Area (BIMP-EAGA) and international trade, especially oil and gas support vessels, coastal shipping, deep sea fishing, maritime tourism and transport, and maritime training centres.”
He said the policy presented opportunity for more Sabahan officers, marine engineers and seamen to secure high paying jobs on a growing Malaysian and world merchant fleet.