Cabotage policy will cause prices to rise, says business group

A return to a ‘cabotage’ policy would lead to an increase in prices, says a businessman.

PETALING JAYA: Putrajaya has been urged to drop the idea of reintroducing the cabotage policy, out of concerns that it would lead to an increase in the price of goods in Sabah and Sarawak.

The policy, introduced in 1980, allowed only Malaysia-registered vessels to load and unload cargo in Malaysian ports, effectively ensuring Port Klang becomes the container hub of the country.

The previous administration loosened this in 2017, and in doing so, allowed foreign vessels to go directly to ports in Sabah and Sarawak without having to go through Port Klang first and incurring more costs.

For years, many politicians from the two states have been calling for the policy to be scrapped, blaming it for the higher prices of goods there.

Speaking to FMT, Federation of Sabah Industries honorary life president Wong Khen Thau said the cabotage policy doesn’t just affect the price of goods but industries as well.

“In the past, industries in Sabah did not produce more goods because of the difficulty of having to export goods through Port Klang. When the policy was liberalised, we can see more international ships coming into Sabah directly,” he said.

He said he was concerned over reports that the government was revisiting the issue amid calls from local shipping companies for its reinstatement.

Previously, Transport Minister Loke Siew Fook said Putrajaya will revisit the cabotage policy liberalisation following a thorough study by his ministry.

Wong says the government should understand that local shipping companies have enjoyed protection through the policy for over 30 years. “Enough is enough, it is time for the shipping companies to grow and become competitive, the cabotage policy is unfair to Sabah.”

He said Sarawak had a strong lobby for the policy’s reinstatement, as there were many Sarawakian shipping companies.

Without the cabotage policy, Wong said prices of goods would be fairer for the people and businesses and that its return would be a step backward.

Wong, who is also Sabah chairman of the Malaysian International Chamber of Commerce and Industry, said that local shipping companies charged more for freight sent to the state, as they imposed various surcharges.

In fact, he said, shipping from Hong Kong to Kota Kinabalu using international lines was cheaper than shipping from Peninsula Malaysia to Kota Kinabalu through local shipping companies.

Universiti Tun Abdul Razak economist Barjoyai Bardai said it was inevitable that prices of goods in Sabah and Sarawak would increase if the policy was reintroduced. “I believe that this policy is no longer needed. The government should do a cost-benefit analysis and make the results public.”

Barjoyai said he believed such an analysis will show the benefits to be short-term and only for a few companies. “By now the local shipping companies should be able to stand on their own two feet.”