Prime Minister Datuk Seri Najib Tun Razak announced that the exemption of the cabotage policy for Sabah and Sarawak as well as Labuan would start from June 1.

The 30-year-old policy limits the shipment of goods from the peninsula to Sabah and Sarawak to only Malaysian-flagged ships.

Najib said the changes were being made following calls from leaders of both states.

Prime Minister Datuk Seri Najib Razak on walkabout around Sandakan, May 7, 2017. (Pix Facebook/Najib Razak)

However, the policy would still be applicable to cargo shipping operations within Sabah, Sarawak and Labuan, Najib said this when launching the Expressi NegaraKu patriotism program at the Sandakan municipal field on Sunday.

The cabotage policy was introduced in the 1980s as a way to promote Port Klang as the nation’s main transshipment hub as it would require goods from outside the country to go through the port before being shipped to Sabah.

On February, Transport Minister Datuk Seri Liow Tiong Lai said his ministry was agreeable to reviewing the cabotage policy.

HOW CABOTAGE MAKES GOOD EXPENSIVE IN SABAH AND SARAWAK

United States has 8 time zones, but the price of goods are standardized from coast to coast. A double cheeseburger in New York will cost the same in Los Angeles.

Sabah and Malaya are within less than 1-hour time zone, yet the goods having huge price differences – about 20 to 30 percent more than in peninsula.

For example, the price of national dailies – Utusan Malaysia, Berita Harian, The Star, New Strait Times is about 50sen to RM1 more in Kuching or Kota Kinabalu than in Kuala Lumpur.

In fact, some consumer packages printed the West Malaysia and East Malaysia prices on goods they sold.

Zainal Ajamain

The cost of transporting container from Hong Kong to Port Kelang is about RM200. The same container when shipped out of Port Klang to Kota Kinabalu is costing RM2,436 – cost thousand time over.

Shipowners often giving unreasonable excuses for the huge markup – such as not enough container going to Kota Kinabalu or out of Kota Kinabalu. It is a lame excuse said Zainnal Ajamain.

If Federal Government abolished the cabotage and allow ships from Hong Kong to stop over in Kota Kinabalu before proceeding to Port Klang or elsewhere.

The price of transporting the container can drop from whopping RM2,436 to less than RM615. The huge saving will help reduce the price of goods sold in Sabah and Sarawak substantially according to Zainnal.

It also encourages foreign and local investors to invest in Sabah and Sarawak as the cost of transportation can be reduced substantially without the cabotage policy.

“Shipping one 40ft container from Sabah to Europe cost approximately US700 and is more expensive than exporting from Port Klang or Ports in China or Vietnam to Europe,” said Sharon Tsang, President of Sabah Furniture Association, report Daily Express on May 13, 2010.

“The cost of shipping 40ft container from Sabah to Port Klang is RM1,000 (US$300) this is one of the reasons foreign buyers view products manufactured in Sabah as very expensive.”

Sabah Chief Minister Musa Aman, PM Najib Razak and Liow Tiong Lai (left) during Ekspresi NegaraKu at Sandakan, May 7, 2017.

WILL GOODS CHEAPER AFTER CABOTAGE?

However, Transport Minister Datuk Seri Liow Tiong Lai said “a World Bank study on national port strategy found that cabotage and shipping costs are not the main reasons for the higher price of goods in Sabah”.

“According to the study, the high costs are a result of weak distribution channels, high handling charges, and inefficient inland transportation,” Liow said.

In terms of transport connections, he acknowledged, however, that Sabah should tap its strategic position within the Brunei, Indonesia, Malaysia and the Philippines East Asean Growth Area.

“Sea routes as those from South America and Australia to China, particularly favours Sabah’s geostrategic location.

“Sabah needs to unlock its potential to emerge as a substantial player in the maritime and logistics sector,” he added.

Pix: Facebook/MASA

WHO BENEFITS FROM CABOTAGE POLICY?

The National Cabotage Policy was introduced on January 1, 2008, with an amendment of the Merchant Shipping Act 1952 to encourage more Malaysian registered ships plying the coastal routes.

However, after more than three decades the number of ships in the merchant fleet plying Malaysian coastal routes is still insignificant, said Zainnal Ajamain.

“Therefore it is not about protecting the shipping industry”.

“An Annual fee from the shipping registry is insignificant, freight forwarders and shipping agents are just working for the ship owners,” he said.

Zainnal also said the number of jobs created directly and indirectly by cabotage industry is too insignificant.

He believed, the National Cabotage Policy is about using the law through the Federal Ministry of Transport to the benefit of few ship owners at the expense of Malaysian in Sabah and Sarawak.

They are the sole beneficiaries of cabotage policy argued Zainnal Ajamain (pdf).