The Swinging Cabotage Policy in Malaysia
The principles behind the Cabotage Policy are basically to ensure that a nation should have adequate shipping capacity especially for the movements of goods and passengers within its own boundary.
Such principle is strait forward enough though its application in the 21st Century seems to attract so many parties whose interests and views differ greatly. The main reason for the confusion is because the power that who looks at the issue too simplistically thus in the end no parties are happy with the conclusion.
We must admit the needs of the national logistics sector are very diverse thus a single decision made across the board will be unable to please any of the parties involved since their interests tend to be based on very different premises.
In the case of the cabotage policy with regard to the shipping service between Peninsular Malaysia and Sarawak and Sabah, whatever decision MOT may make has already created two opposing parties from the region. Hence, it is no surprise that the issue is still hotly debated.
And each party has offered its views on the pros and cons of the matter. The fact remains that the reality of the scenario is there is simply isn’t enough volume for the so-called back haul out of East Malaysia to the Peninsular to attract the number of shipping operators so that competition is still meaningful. Without the back-haul volume, it means the movements from the Peninsular will have to pay the extra cost.
In such a scenario, many shippers in East Malaysia have compared the costs of shipping from Port Klang to the major Chinese Ports which are much lower, thus concluding that the local operators increase the rate because of monopoly. Such conclusion is misleading since numerous other factors are involved in the determination of any freight charges. There is no doubt that the increase in the sizes of the containerships is mainly influenced by the fact that with size the unit cost of each box continues to drop and its survival is guaranteed only by the expected volume along that route.
As a matter of fact, Singapore is located much nearer to the East Coast of the African Continent and yet the shipping cost ex-Singapore in comparison with those of the Chinese ports had been found to be greater by a margin of 15%. Hence, distance is not the sole factor in costing.
Coming back to our local issue in East Malaysia, as noted both sides seem to have their points but the fact remains that there must be a solution to ensure East Malaysia continues to progress through the positive development of logistics connectivity.
There is no doubt that as a maritime nation, we should maintain a viable fleet of local ships to ensure that our local trade can be sustained. And to sustain a two-way shipping scenario, we need a balance flow of volume. This scenario has already affected the shipping industry in the two most important shipping routes: The Far East-EU route and the Trans-Pacific Route where trade imbalances have caused the lines to spend as much as 21% of their revenue to haul the MT boxes.
Looking at the whole scenario, East Malaysia has 60% of the total land-mass and yet her agriculture produces are rather low. The issue is: can East Malaysia be encouraged to produce agricultural produces that can sell at the major urban centres at the Peninsular? It may be a case that with added transport/logistics costs, it is untenable. In which case should the State Governments and the Federal Government look into the possibility of subsidizing the initial cost of the exercise?
We know that there is always the fear of some party abusing the system where government subsidies come into play; but if the procedures are made openly based on actual volume flow which can be verified by numerous parties in the supply chain, then it is worth trying.
This approach offers both opportunities for the East Malaysians to open up their land utilization and helps to enhance our agricultural produces which can be the driving forces of our export. It is a fact that internal transportation links within East Malaysia is a challenge and this has added to the higher cost of everything over there.
Looking at the whole scenario, it would appear that even with the suspension of the Cabotage Policy, the cost of goods in East Malaysia has not come down notwithstanding all the growing positive figures quoted in some of the reports. The issue at the moment is: Can MOT standby and let fate decide on the future of those local shipping operators? Or enforce the Cabotage Policy with conditions that permit their survival while finding a more practical national solution which can also help to develop East Malaysia’s agricultural production?
It is time that MOT do a town hall discussion with all interested parties so that their interests are considered.
