Focus View
Hasty call to abolish cabotage policy
FocusM team | 12 May 2017 00:30
THE DECISION to abolish the cabotage policy for East Malaysia from June 1 has drawn controversy. 

The fact that not everyone is happy with the decision shows there should have been a detailed study before doing away with the policy introduced decades ago. While the Sarawak government is happy as it will supposedly bring down the prices of imported goods, East Malaysian shipping and freight forwarding companies say they will be badly hit.

Both could be right. But we don’t know whether the pros outweigh the cons, or by how much. State government officials guess that prices of imported goods are 30% higher due to the policy while local shippers say thousands of jobs could be lost.

The federal government introduced the policy in the 1980s to protect and promote Port Klang in Selangor. Imported goods must pass through Port Klang before they can be shipped to Sabah and Sarawak. With the policy gone from next month, foreign vessels can ship goods directly to East Malaysia.

However, Transport Minister Datuk Seri Liow Tiong Lai has said a World Bank study found that cabotage and shipping costs were not the main reasons for Sabah’s higher price of goods. Well, if that were the case, why abolish the cabotage policy?

The government must look into this. The fate of local shipping companies that primarily focus on transporting goods intra Malaysian ports must be determined if foreign vessels can go directly to the states concerned. On estimate is that nearly 50% of the 3,000 locals in the shipping industry will be retrenched. 

Interestingly, it was reported that there are foreign ships from China and the Middle East sending cargo directly to Sarawak and Sabah. Critics also say the higher prices of imported goods in the two states were due to the lower ringgit and increasing costs, not the cabotage policy. Abolishing the policy could have little effect in bringing down prices.  

So, if prices will not come down in East Malaysia and foreign vessels will not call there, abolishing the cabotage policy serves no purpose. 

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