PETALING JAYA: When Facebook and Google decided to open data centres in Indonesia and Singapore, with submarine cables running from the US to the two countries, there was a hue and cry about how Malaysia had lost out.
A number of political leaders and tech giants joined the fray, laying the blame for Malaysia’s absence from the project on the revocation of a cabotage exemption. They claimed Malaysia had missed out on billions in lost hi-tech investments.
The decision on the revocation was made by transport minister Wee Ka Siong in November but has received renewed attention of late.
FMT looks at what the cabotage policy is all about, its history, and why so many people have taken an interest in this maritime policy.
What is Cabotage?
Cabotage refers to the right to operate vessels in a particular territory. The term applies to a whole host of things, like boats, planes and submarines for example.
Cabotage laws are largely meant to protect domestic industries from foreign competition, ensure the safety of a country’s borders, and regulate activities in a country’s waters.
A “cabotage exemption” refers to certain activities that foreign vessels are allowed to continue doing, free from certain restrictions.
What happened in Malaysia?
In April 2019, then transport minister Loke Siew Fook announced that foreign vessels carrying out undersea cable repairs and maintenance work would be free from some of the usual cabotage requirements and fees, to speed up the approval process and get work started as quickly as possible
He said the exemption was requested by telecom players like TIME dotcom Bhd and Telekom Malaysia Bhd, and supported by the communications and multimedia ministry.
The objective was to reduce the time taken to repair cables in Malaysia’s seas, where response time was among the worst in the region.
When the exemption was made, the lead time before work could commence in Malaysian waters was 27 days, compared to 20 in the Philippines, 19 in Singapore and 12 in Vietnam: the reason was that Malaysia only had one vessel capable of doing this job and companies were avoiding Malaysian waters when laying undersea cables, even if it was inconvenient.
While firms still needed to apply for domestic shipping licences, the waiver of the other procedures meant that the lead time before work could commence would be cut to around 14 days as foreign ships nearby could be called in to help.
Why was it revoked?
In November, when Wee announced the revocation of the exemption, he said it would help reduce Malaysia’s dependence on foreign vessels, and promote the participation of the local shipping industry.
It was also supposed to improve technical skills among local workers and help protect Malaysia’s sovereignty by keeping its waters safe.
During a heated debate in Parliament, when he came under fire from fellow MPs, he said there were plenty of countries with strict cabotage policies, including open-market champions like the US.
The revocation does not mean international vessels are barred from performing undersea repair work. If the Malaysia Shipowners’ Association decides that no local company can perform the necessary job or ships are too far away, foreign vessels will be allowed to perform the task after obtaining a domestic shipping licence.
Those opposing the move said it would upset big tech companies who would choose to set up infrastructure elsewhere, robbing the country of billions in investments. It was also said that local capacity to perform the repairs had not improved much since the exemption was first instituted, which would result in repair times being slow once again.
Why the uproar then?
Last month, it was revealed that Malaysia had been left out of a mega-infrastructure project helmed by tech titans Facebook and Google to build undersea cables between Singapore, Indonesia and the United States, in a bid to increase internet speeds and boost connectivity.
Malaysia Digital Economy Corporation chairman Rais Hussin also said in a statement that industry sources indicated that three cables slated to land in Malaysia were now under review, as well as RM12-RM15 billion in data centre investments, which he pointed to as evidence the revocation had hurt investments.
While neither Facebook or Google has said the revocation influenced their decision, this has not stopped people from speculating. Perceptions weren’t helped by the two tech companies, along with Amazon Web Services and Microsoft, sending a letter to Prime Minister Muhyiddin Yassin this week urging him to reinstate the exemption.
The loss of billions in potential investment dollars has spooked a number of politicians.
DAP secretary-general Lim Guan Eng, Umno deputy president Mohamad Hasan and others have all come out to slam Wee and his reinstatement of cabotage restrictions over the last few weeks, arguing that Malaysia could not afford to lose out on foreign investments given the country’s financial situation.
Science, technology and innovation minister Khairy Jamaluddin said on Twitter that numerous cabinet members had been instructed to deliberate the revocation’s impact on digital investments and the local shipping industry, and report back at the end of the month.
Whether anything changes after the meeting is anyone’s guess. Either way, it is likely to continue sparking debate as overseas investments remain a hot topic among politicians and the public alike.