SAPP reiterates support to abolish cabotage
Kota Kinabalu (Feb 26, 2009):
Sabah Progressive Party (SAPP) urge the State Government not
to allow the Federal Government to use the Cabotage Policy to marginalize
the potential of Kota Kinabalu Sepanggar Container Port to become the
leading port hub in this region.
Datuk Wong Yit Ming, who is the SAPP Treasurer-General, said that the continued existence of the Cabotage Policy will dampen the success
of the Sabah Development Corridor or any other development schemes in
"The high freight charges will inevitably escalate the costs of
goods produced in the State, making any exported goods not economically
competitive." he added.
"As such, Sabah Progressive Party (SAPP) supports the call by the
Federation of Sabah Manufacturer (FSM) to abolish the Cabotage Policy and
to develop Sabah Ports to become the leading port hub in this region.
"As mentioned by the President of FSM, Datuk Wong Khen Tau, Sabah is
located in the centre of South East Asia which is geographically nearer to
developed regions such as Hong Kong, Guangzhou, Taipei, Seoul, Tokyo and
others. By developing Kota Kinabalu Sepanggar Port as the regional hub, it
is not only putting Sabah as the centre of transhipment in BIMP-EAGA
region, but also helping the Sabah Manufacturers to be more accessible to
the international market and more competitive with lower freight charges.
"Sabah is already the poorest state in Malaysia, despite being very rich
in natural resources with large reserve of oil and gas, timber, palm oil
and others. Therefore, SAPP strongly urge the State Government to be
serious and sincere to demand the Federal Government to abolish the
Cabotage Policy immediately and develop the Kota Kinabalu Sepanggar
Container Port to become the leading port in this region." said Wong.
Scrap the Cabotage Policy, says SAPP
2009-02-27 (Daily Express) Kota Kinabalu: Sabah Progressive Party
(SAPP) said it supported the call by the Federation of Sabah
Manufacturers (FSM) to the Federal Government to scrap the Cabotage
Policy and develop the Sepanggar Container Port here to become the
leading port in the region.
Its Treasurer-General, Datuk Wong Yit Ming, said the policy would
only curb the potential of the Sepanggar Container Port, adding it
will also hamper the success of the Sabah Development Corridor and
other development schemes in Sabah.
"The high freight charges will inevitably escalate the cost of goods
produced in the State, making any exported goods not economically
competitive," he said in a statement, Thursday.
He said given the State's location in the centre of South East Asia,
near developed regions such as Hong Kong, China, Taiwan, Koreas and
Japan, among others, the development of the port will not only place
Sabah as the centre of transhipment in the BIMP-Eaga (Brunei,
Indonesia, Malaysia, Philippines-East Asian Growth Area) region but
also help manufacturers in the State gain access to the
international market and be more competitive with lower freight
"Sabah is already the poorest state in Malaysia despite being rich
in natural resources with oil and gas reserves, timber, oil palm and
Therefore, SAPP strongly urges the State Government to be serious
and sincere to demand the Federal Government abolish the Cabotage
Policy immediately," said Wong.
On Wednesday, FSM President Datuk Wong Khen Tau said Sabah is
unlikely to achieve its ambition to become a leading port hub in
this region despite its great potential to take over the role of
Port Kelang and even Singapore port if the cabotage policy for East
Malaysian states continues to exist.
The abolition of the policy could address the trade imbalance
between Sabah and the peninsula, reduce shipping cost which in turn
would reduce the prices of consumer goods and strategic items such
as construction materials, machinery, equipment and food, among
"We are not totally against the Cabotage Policy because in other
countries there are also such policies ... we are just hoping the
Cabotage Policy between the peninsula and Sabah and Sarawak will be
lifted and abolished," he said.
The policy which is meant to reserve the domestic shipping sector
for vessels owned and operated by national companies has resulted in
the creation of a huge shipping cartel, said Wong, adding there are
less than 15 shipping companies still depending on the policy for
Policy has adverse direct and wide impact on Sabahans, says Wong
Cabotage must go: FSM
2009-02-26 (Daily Express)
Kota Kinabalu: Sabah is unlikely to achieve its ambition to become a
leading port hub in this region, despite its great potential to take
over the role of Port Kelang and even Singapore port, if the cabotage
policy for East Malaysian states continues to exist.
The Federation of Sabah Manufacturers (FSM) believes Sabah ports
actually have more potential than Port Kelang, and even the Singapore
port, as a hub not only for Malaysia but also countries within this
Its President, Datuk Wong Khen Tau, said this is among the reasons the
federation is supportive and proposing the abolition of the cabotage
policy for Sabah and Sarawak, as well as the designation of Kota
Kinabalu Sepangar Container Port as a port hub or regional port.
He said the other main benefit expected from the abolition of the
cabotage policy in Sabah is the reduction of the trade imbalance between
Sabah and the peninsula resulting from the cargoes generated from
manufacturing growth as manufacturing will be more competitive due to
the elimination of the shipping barriers.
Sabah can also position itself as the port hub to cater to the
Brunei-Indonesia-Malaysia-Philippines East Asian Growth Area (BIMP-EAGA)
market, which has a population of 60 million, he said, adding doing so
can also reduce unemployment and uplift the status of Sabah as the
poorest state in the country.
He said a reduction of shipping cost will reduce the prices of consumer
goods and strategic items (construction materials, machinery, tools and
equipment, foods, etc). "We are not totally against the cabotage policy
because in other countries there are also such policies…we are just
hoping for the cabotage policy between the peninsula and Sabah and
Sarawak be lifted or abolished," he said.
Wong was speaking to reporters in a press conference held at the
Federation's office at Wisma HCS, Jalan Kolam, Luyang, here, Wednesday
afternoon, after he chaired a meeting with committee members. The
cabotage policy, which is meant to reserve the domestic shipping sector
for vessels owned and operated by national companies, has resulted in
the creation of a huge shipping cartel.
There are less than 15 shipping companies still depending on this policy
for their survival, said Wong.
He said the process of shipping goods from Sabah ports to ports in the
peninsula or Bintulu Port by feeder vessels owned by local shipping
companies is currently highly inefficient and ineffective.
"MIDA has identified that the shipping problem is the most chronic
problem that is hampering the growth of industrialisation in Sabah. The
State manufacturing sector's contribution to the Gross Domestic Product
(GDP) has been stagnant at approximately 11 per cent for the last 10
years compared to the national level of 28 per cent," he said.
He said the manufacturing sector of developed areas in the peninsula
such as Kuala Lumpur, Selangor, Penang and Melaka, contribute more than
30 per cent to their State GDP.
"As a result, Sabah has the highest level of unemployment in Malaysia,
and is the poorest state in terms of per capita GDP despite having
abundant natural resources - large reserves of oil and gas, being the
largest producer of rubber, palm oil, cocoa and was the largest producer
of timber," he said.
A decision by the Transport Ministry on the cabotage policy is crucial
for Sabah, said Wong, adding it has a direct and wide impact on the
livelihood of 2.8 million Sabahans.
Sabahans have been adversely affected by the cabotage policy since the
establishment of Port Kelang as the national load centre in 1984, he
said, adding the costs of goods are higher due to higher shipping costs.
"Local products are not competitive in the international market due to
exorbitant shipping cost and longer delivery time compared to
competitors from the Asean region. Consumers in Sabah are paying more on
essential imported goods, which are mostly produced in the peninsula,"
Wong said the cabotage policy has adverse impacts on Sabah, which
include highly unreliable services provided by the operators of feeder
vessels. He said although fixed schedules are provided, feeder vessels
plying between Sabah ports and ports are always between one and three
days late and frequently make last minute cancellations.
"With the sailing time of three to four days from Sabah to ports, the
actual time taken is actually seven days," he said.
He said the problem is further aggravated by the fact that most mother
vessels in the ports do not accept booking connection from shippers in
Sabah before containers' arrival at ports due to the unreliable schedule
of feeder vessels. Extra costs are also incurred at hub ports for
temporary storage, extra shipping document fees and other charges, he
added, saying the cabotage policy has thus made it more costly, lengthy
and complicated for exporters in Sabah to export.
Container availability is also another problem, he said, citing an
example on Jan 2, this year when shipping companies in Kota Kinabalu
informed exporters that containers for export shipment would not be
available on Feb 13.
"The shipping companies get away with such inefficiencies since they
have the blanket monopoly of the local market under the pretext of
cabotage," he said. Wong said higher shipping costs result in not
competitive exports, higher prices of consumer goods and higher costs of
raw materials for manufacturing.
He said as of Jan 3, this year, shipping freight from Kota Kinabalu to
Southampton, United Kingdom, is US$1,400 (about RM5,180) per 40 footer
container whereas shipping cost from Port Kelang to Southampton is only
US$750/40 (about RM2,775) per 40 footer container.
"Such a difference is significant considering the total profit margin
per container is only US$2,000 (abour RM7,400)," he said.
Wong said furniture manufacturers in Kota Kinabalu had informed that
they have been advised by their overseas buyers to relocate their
factory to either Peninsular Malaysia, Vietnam or Indonesia due to the
huge difference in freight cost and shorter shipping time.
The huge difference in freight cost is always blamed on the imbalance of
trade between Sabah and the peninsula, he elaborated, saying the
eastbound trade from the peninsula to Sabah/Sarawak, generally, has
higher load factor as much as 90 per cent (for certain operators) but on
the backhaul westbound trade to the peninsula, the load factor may drop
as low as 20-30 per cent.
"There is no control mechanism on pricing, and prices are arbitrarily
decided by the shipping cartel since it is a protected market," he said.
He said as a result, most general goods that are produced in the
peninsula and marketed in Sabah are normally labelled with two prices,
for example, a baby milk powder is priced as follows - West Malaysia at
RM24.80, while in East Malaysia it is RM26.90, a difference of 8 per
Wong said the shipping cost of importing raw materials for manufacturing
is also exorbitantly high, putting the manufacturers in Sabah at a
disadvantage against the manufacturers in Peninsular Malaysia and the
The Federation also claimed that the cabotage policy has created a giant
shipping cartel and that Malaysia lacks the regulation to regulate
indiscriminate price fixing.
Wong said Malaysia does not have a competition act, nor is there any
government body overseeing or administering competition rules or
regulations, which is known as Anti-Trust Law in the United States,
including the monitoring of abuses in the market or restrictive business
"Thus, consumers are at the mercy of the giant shipping cartel," he
A typical example is the drastic increase in Emergency Bunker Surcharge
(EBS), thrice in 2008 from RM320 per 20-footer container to RM853 in
June, and then to RM1,253 in September the same year.
"Fortunately, due to strong protest by shippers, the hike announced in
September last year was not implemented. The Government should act as
the balancing authority of various interest groups and should not favour
the cartel and put the future of the 2.8 million Malaysians in Sabah at
stake," he said.
The Federation also argued that the strategy of creating one port hub
has not worked in the peninsula.
Wong said the cabotage policy and the strategy to centralise cargoes in
one regional port does not work even in the peninsula where the 11
states are well connected by good road networks, let alone in Sabah
which is 2,000 kilometres away from the peninsula and separated by the
South China Sea.
"This is evident by the fact that after the establishment of Port Kelang
as the load centre in 1984, four other load centres such as Johor,
Penang, Kemaman and Kuantan were established.
"The latest load centre established in Bintulu, Sarawak and thus Sabah
should not be forced to transship shipment to the hub ports in the
peninsula knowing that this strategy does not even work in the
peninsula," he said.
Wong said the cargo volume in Sabah is too small to have significant
impact on the national shipping industry.
"The fear that has been created is that once cabotage is lifted, the
local shipping companies will be wiped out of the market, and thus will
jeopardise the shipping industry," he said.
He said the fact is out of the nation's 15 million containers
throughputs in 2007, only 400,000 or so were from Sabah ports, a meagre
4 per cent of the nation's shipping volume which is too marginal to have
a significant impact on the nation's shipping industry.
"Malaysia's biggest shipping company is amongst the Top 20 largest
shipping companies in the world with annual cargo turnover of three to
four million containers yearly, and derives most of its income from
international operations," he said.
Moreover, it would be illogical to assume that the local players would
totally be wiped out of the local market since they have been around for
the last 24 years, he said.
"It is simply not justified for 2.8 million Sabahans to be penalised for
the inefficiencies of less than 10 local shipping companies, and
continuously subsidise the operation of these few shipping companies,"