Abolishing cabotage will not solve higher costs in east Malaysia, say BN reps

KUALA LUMPUR, Aug 3 — Pakatan Rakyat’s (PR) promise to abolish the national cabotage policy would not entirely solve the problem of higher prices in east Malaysia and could put local shipping firms out of business, Barisan Nasional (BN) lawmakers warned today.

Transport Minister Datuk Seri Kong Cho Ha labelled PR’s latest electoral pledge as “another political ploy” tailored as a vote-winning strategy ahead of national polls, pointing out that the national cabotage policy has been again misunderstood.

Kong said foreign vessels are not forced to berth only at Port Klang. — File pic

“Cabotage does not prevent any foreign ships from going to any port in Malaysia. Their own business decision,” he told The Malaysian Insider this afternoon via Blackberry Messenger, refuting claims by the opposition that foreign vessels are forced to berth only at Port Klang.

“Just like British Airways don’t fly to Sandakan. Does not mean we don’t allow BA to fly direct to Sandakan,” he pointed out.

PKR promised yesterday to abolish the cabotage policy which requires goods to be shipped domestically with only local vessels, in a bid to make cars and other products cheaper in Sabah and Sarawak.

PKR de facto leader Datuk Seri Anwar Ibrahim had said the policy should be revoked completely as it makes “no economic sense”.

Politicians and folk in Sabah and Sarawak have long been railing against the cabotage policy, arguing that it should be done away with to help normalise the economic divide between east Malaysia and the peninsula.

The 1980s policy requires all domestic transshipment of goods to be done using Malaysian vessels, which has contributed much to rising shipment costs and subsequently the higher cost of goods in east Malaysia.

But Kong, who is also the MCA secretary-general, insisted today that freight costs were not the only contributing factor to the higher prices of goods in Sabah and Sarawak.

“Study n research shows that price of goods are determined by multiple factors. Even shipping. Freight is only part of cost. Others like port services. Handling charges. Forwarders charges,” he pointed out.

Agreeing, Sabah BN secretary Datuk Abdul Rahman Dahlan pointed out that internal transportation costs in the east Malaysian state were also a major contributing factor to cost of goods.

“From the ports to Sabah’s interior... the lack of roads, the difficult terrain, those are some of the things that add some cost to the final price of goods.

“And finally, of course, there is the volume. Sabah consumes less volume so therefore, it is only natural that the ‘per unit’ cost of a product goes up much higher,” he explained.

The Kota Belud MP said the 1980s policy was introduced to help protect the domestic shipping industry by ensuring that domestic trade between Malaysian ports can only be served by Malaysian-flag-bearing vessels.

Opening the market to international vessels, he said, would only kill off local shipping firms.

“We are a very small nation with a small maritime industry, in terms of vessel ownership. If you open domestic shipping to international firms, the big companies like the Korean shipping firms or those from Japan or Singapore would flood the market and kill off our local companies.

“They would not be able to withstand the competition and our Malaysian companies would go bankrupt. And don’t forget... these foreign firms would then hold the monopoly and they would increase freight rates in the future, anyway,” he said.

Abdul Rahman added that should a catastrophe like war rock the Southeast Asian region, these foreign vessels would shy away from Malaysian waters.

Abdul Rahman said internal transportation costs were also a major contributing factor to cost of goods.

“If there is no cabotage policy to protect domestic ships, then we would not be able to force Malaysian-flagged vessels to transport goods like rice and other essentials to east Malaysia,” he said.

He added that “every country in the world” has some form of cabotage policy.

In the United States, said Abdul Rahman, the policy imposes even more stricter rules apart from ensuring that only domestic ships serve trade between local ports.

“They go even further... not only must their ships be registered locally, their crew members must also be local and the ship itself must be built in the country... this is to protect the local shipbuilding industry,” he said.

Abdul Rahman said the notion that removing cabotage would immediately reduce prices of goods in east Malaysia was too simplistic.

He pointed out that in the last five years when freight charges were dropped because of the world economy, the prices of goods in Sabah did not follow suit.

“I thought (Opposition Leader Datuk Seri) Anwar Ibrahim would be smarter than that... he has failed to understand what the economy is all about. This plan will not equalise prices between east Malaysia and the peninsula.

“There are so many other contributing factors even if freight rates go down... middlemen may increase their rates, for example,” he said.

Instead, Abdul Rahman suggested better incentives for companies to entice them into setting up their factories in east Malaysia.

“We could offer generous incentives to set up production lines in Sabah… this could solve other problems like employment issues, migration to the peninsula. Ultimately, it could also help improve demand for products,” he said.

Umno’s Sukau assemblyman Datuk Dr Zaki Gusmiah, a former Sabah Ports Authority chairman, told The Malaysian Insider that the cabotage policy was introduced for the sake of national interest.

“Naturally, PR will take the advantage of this situation. But we must understand that this would ultimately affect the national economy.

“Put it this way, if ships no longer berth in Port Klang, bit by bit it would also affect the economy,” he said.