A West Malaysian
acquaintance of mine called me up this morning. He said, “Justin!
I'm still in KL but I called up one of my friends who is in the
shipping line and asked him whether he knows anything about the
Cabotage Policy and he said he has no idea what it is!” Before I
proceed further, allow me to give a shoutout to this West Malaysian
acquaintance of mine who will remain nameless in this writing to
protect his privacy. This man is in semi-retirement. He has been
visiting Sabah frequently for the past 30 years and has decided to
make Sandakan his retirement abode. He embedded himself among the
Orang Sungai in some remote area in Sandakan and took it upon himself
to learn their way of living, to research on their history and
culture because he said most of the Orang Sungai he encountered did
not know their own history and he wants to help improve their
socio-economy! Kudos to you sir!
My acquaintance told me that something must be done
about the high cost of living in Sabah and Sarawak. His zeal and
conviction for the poor natives of Sabah moved me. So I went plunging
in into the subject. I must admit that I do not have an in depth
knowledge of this National Cabotage Policy (NCP). It is a dry subject
and I am more of a history buff than a business policy kind of guy.
The first time I heard about NCP, I thought it was
odd that the government had to have a policy on a vegetable and
specifically a cabbage? What did they have against cabbage? Was there
a cabbage epidemic? Encyclopedia.com explained the origin of the word
as such:
“cabotage, the French name for the coasting trade. Many people believe that it is derived from cabo, Spanish for cape, as coasting ships generally sailed from cape to cape, but a more likely derivation is the French word cabot, a small vessel.”
NCP is a form of monopoly. It was introduced by the
government on 1 January 1980 to protect the national maritime
industry. Its purpose was, foremost, to make Malaysia into a maritime
nation and not to be dependent on foreign shipping companies. To
facilitate that end, Malaysian ship owners must be protected from
open competition by more established foreign shipping companies. The
policy stipulate that the transportation of goods from one point to
another point within Malaysia could only be done by Malaysian owned
or Malaysian registered shipping companies.
West Malaysians have not been affected by the
negative aspect of this policy for the past three decades as we in
Sabah and Sarawak had. Therefore, it is understandable how some West
Malaysians could be in the dark about this.
For years now, political and business leaders in
Sabah, namely from the Federation of
Sabah Manufacturer (FSM) have been appealing for a review of the
NCP. The Federal Minister of Transport, Datuk Seri Kong Cho Ha's
dismissal of Sabahan's concern over the NCP in March 2012, incurred
the wrath of political leaders including Barisan Nasional (BN)
leaders from Sabah. On the ground, most Sabahans that I had the
chance to speak to on the matter viewed his comment as brusque and
bordering to chauvinistic. Read what he was reported to have said
here Borneo
Post.
To be fair, Datuk Seri Kong, was not lying. Foreign
ships are allowed to go direct to Sabah port now. He has his
predecessor, Datuk Seri Ong Tee Keat to thank for this. However, I
find the former's choice of words in the said report rather amusing,
an oxymoron. Somehow I do not think “very liberal practice” go
well with the NCP in a sentence. NCP itself is a monopoly, there is
nothing very liberal about a monopoly. At least former Transport
Minister Datuk Seri Ong Tee Keat was forthcoming about it in his
interview with The Daily
Express on 12 April 2012, he said;
“I am referring to it as so-called partial liberalisation because there is no such terminology of partial liberalisation. Either you have it or you don't”
Datuk Seri Ong Tee Keat was responsible for this
so-called liberalisation, part of his road map to the
eventual liberalisation of our country's aviation and maritime
sectors. Unfortunately, he could not follow through with his plan
when he had to step down in June 2010 due to MCA leadership tussle.
What Datuk Seri Kong failed to mention though, was
that foreign vessels are only allowed to go direct to Sabah (or
Sarawak) with unopened containers. Most foreign traders would
repackage their goods together with goods from other companies to
ensure enough load for shipping to Sabah *1.
He was right to say that there was an element of business decision in
the matter but it is no comforting words for the people of Sabah and
Sarawak.
Datuk Seri Kong was also right to say that 'almost'
all of the countries in the world practices Cabotage but again, he
neglected to mention that some of these countries have actually
relaxed their grip on the monopoly and how about the geographical
differences between these countries and Malaysia. Well, that is
unless he only considers the Peninsula Malaysia as Malaysia.
It was reported in the Daily Express dated 14 April
2012 that the President of the Kota Kinabalu Forwarding Agents
Association (KKFAA), Johnson Dai, revealed that it costs RM3,179 to
send a 20-footer container from Kota Kinabalu to Port Klang but
RM4,122 to ship similar container from Port Klang to Kota Kinabalu.
In his talk at the Public Lecture on Cabotage Policy at Sabah Trade
Centre on 12 April 2012, Dai also revealed the disparity of the
Emergency Bunker Surcharge (EBC) imposed by our shipowners with that
of foreign shipowners.
The EBC on a 20-footer and 40-footer containers from
Port Klang to Kota Kinabalu are USD330 and USD600.97 respectively. In
comparison, to ship similar containers from Guangzhou, China to Kota
Kinabalu, the EBC are USD200 for a 20-footer and USD400 for a
40-footer!
Another speaker, the Chairman of Malaysian Plastic
Manufacturers Association, Sabah Branch, Datuk Alan Ang, concurred
that the NCP does have an effect on Sabah's export. He revealed that
the cost of shipping a 20-footer container from Kota Kinabalu to
Auckland would cost RM5,033 but only RM4,197 from Penang to Auckland
for a similar container. My geography knowledge is not that sharp but
I could have sworn that Sabah is nearer to New Zealand than Penang.
To prove it, I used this online apt to determine the distances
www.searates.com.
Penang to Auckland Kota Kinabalu to Auckland
Distance : 5,206 nautical miles Distance : 4,455
nautical miles
Vessel Speed : 14 knots Vessel Speed : 14 knots
Time : 15 days 12 hours Time : 13 days 6 hour
On 17 April 2012, the Chairman of the Labuan Chamber
of Commerce (LCC), Datuk Francis Tee Chee Hok, also came out and
voiced out the plight of Labuan people and business community caused
by the NCP. In Labuan's case, although they have a port of their own,
they could not get direct supplies from Port Klang. This is because
for the most part, their orders do not have the volume to fill up the
space in a 20-footer container. Labuan only has a population of
83,500 (2005). As a
result, Labuan has to source goods from mainland Sabah. Datuk Francis
said that the situation is undermining Labuan's status as a free
port. Goods sold in Labuan should be cheaper than those in Sabah but
this is not the case.
I could agree with the Malaysian Ship Owners
Association (MASA) argument that our national shipping companies
could not be blame solely for the high price of goods in Sabah,
Sarawak and Labuan. I think it is plausible that the higher prices of
goods in East Malaysia could be caused partly by profiteering
activities by some rogue elements within our business community in
East Malaysia and inefficient delivery system.
I also agree that Malaysia has to have a strong and
viable maritime industry, one that is able to go head to head, toe to
toe, against any heavyweight foreign shipping companies out there.
However, it seems to me that East Malaysians are doing all the heavy
lifting towards the upkeep of our maritime industry! NCP is not
solely to blame for the higher cost of living here but it certainly
is part of the problem.
Not only is the NCP contributing to the high cost of
living in East Malaysia, it is also ridiculously illogical in
logistical sense. Case in point, let's say I am importing some goods
from China and let's say that I could not have my container shipped
directly to Kota Kinabalu because it is an opened container, it then
has to be shipped to Port Klang first before it is shipped to me in
Kota Kinabalu.
Guangzhou to Kota Kinabalu
Distance : 1,128 nautical mile
Vessel Speed : 14 knots
Time : 3 days 9 hours
Guangzhou to Port Klang
Distance : 1,668
nautical mile
Vessel Speed : 14 knots
Time : 4 days 23 hours
Port Klang to Kota Kinabalu
Distance : 991 nautical
miles
Vessel Speed : 14 knots
Time : 2 days 23 hours
With the current policy,
the goods that I have imported from China would have to travel 2,659
nautical miles before reaching me in 7 Days and 22 hours! I am no
shipper but I can hazard a guess that upon reaching Port Klang, the
goods would be unloaded and reloaded unto a Malaysian owned ship. I
am sure that entails service fee and I wonder what other fees would
be incurred for my container to be handled in Port Klang. So how much
should I sell these goods to recover my transportation costs and earn
a decent profit margin at the same time? And that is assuming that I
financed the whole importation in cash! What if I had to take an
Overdraft to finance it? I must take into consideration the daily
interest that is being levied on me by my financier. I would have
been able to put the goods that I have imported, on the shelves for
sale within a week if I was allowed to ship the goods directly from
Guangzhou to Kota Kinabalu but that is not the case. Therefore now, I
have incurred about 8 days of interest on my Overdraft as oppose to
only about 4 days of interest had I been allowed to ship direct.
And what if the goods
are perishable........?
While no one is
questioning the NCP as a conventional tool applied by many countries
towards the building of their maritime industry, the practicality of
its application in East Malaysia is sometimes doubtful. Due to the
location of the Borneon Island, circumstances has cast the NCP quite
akin to a tool of oppression against East Malaysian. It is like we
are back to being colonized. Working hard under the yoke of our
colonial masters to fill up their coffers. In the old days, our
ancestors were even required to pay taxes just to cross a river to
trade. Presently, whenever East Malaysians need to trade be it
importing or exporting, we must first stop by Port Klang, even when
it is totally out of the way and help fatten its treasury. It is not
like there is not already income tax imposed on our business
activities. Is Kuala Lumpur our new colonial master?
NCP has inevitably
became part of the problem that made doing business in East Malaysia
challenging. Goods are generally 20% more than what it cost in West
Malaysia. For example, the Straits time is sold at RM1.20 in West
Malaysia but RM1.80 in East Malaysia, 50% more! Same number of pages,
same news and no bonus gossip pages. Sabah and Sarawak are rich in
resources but we could not do anything with it because we have all
these roadblocks placed in front of us, making the viability of any
venture questionable. Our competitiveness is suppressed. We cannot
even compete with businesses in West Malaysia, much less compete
globally.
An excerpt from United
Nation Economic and Social Commission for Asia and the Pacific
Country Report of Malaysia in year 2000,
“Efficient, fast and cheap transport contributed directly to MNCs fragmented production. As such transport is considered as a unique service, which facilitates the international exchange of products. Thus it cannot be denied that liberalization of trade in services can bring down the real cost of trade. Liberalization of maritime sector has the potential to reduce the transport cost and by opening up the market to players with the best comparative advantage. But this also implies that we might be swamped by giant players, the mega-players with all their economies of scale. The Malaysian maritime transport related operators still do not have the capacity, skill and technological capabilities to compete in the so-called level playing field. Liberalization therefore may not allow for a free-for-all situation”
The following is what
the Deputy Minister of Transport, Datuk Abdul Rahim Bakri, was
reported to have said when asked about NCP:
“If the government allows foreign shipping lines to dominate or control the country's transportation system, our local shipping companies will go bankrupt and eventually the nation will have to depend on foreigners forever",Abdul Rahim said many shipping companies that had received incentives under the National Shipping Policy were those from Sabah and Sarawak such as Johan Shipping, Hubline, Shin Yang and Chong Fui Shipping. - Bernama”
East Malaysians are not
against our Malaysian shipping fraternity. Their success is of
paramount concern but equally paramount, if not more, is East
Malaysians god given right to pursue wealth and happiness in which
present time, is impeded for the past 30 years! If the government
could not even accede to such a basic human right, then East
Malaysians would be compelled to think that there is something
sinister
behind its refusal to heed to our outcry.
I will end this post by
inviting our esteemed Datuk Seri Kong Cho Ha, the Federal Minister of
Transport, to have an open and four eyes dialogue with our business
communities, in particular with FSM and with our respective state
governments in Sabah and Sarawak. Explain to us how we have
misunderstood the NCP.
*1
http://www.nst.com.my/opinion/columnist/shipping-costs-rile-sabah-1.65190
