No hidden agenda, says Masa

Malaysia Shipowners' Association says it has no hidden agenda in protecting the Cabotage Policy and the myth that the policy is a creation of Masa should stop

The Malaysia Shipowners' Association (Masa) expresses its regret over unfounded accusations and misinformation being reported by shippers' bodies in Sabah alleging that the association has hidden agenda in protecting the Cabotage Policy and blaming the policy for the high cost of goods in Sabah.

We have no hidden agenda in protecting the Cabotage Policy and the myth that the policy is a creation of Masa should stop. The Cabotage Policy was introduced by the Ministry of Transport in 1981 as part of a policy instrument to foster the development of the national shipping industry which was identified as a critical sector and also to protect the domestic trade from domination by foreign shipping lines.

We want shippers to support the government's aspiration to make Malaysia a maritime nation and they should have nationalistic values.

We urge the Federation of Sabah Manufacturers (FSM) to be rational and not make anecdotal comments and sensationalise the issues but be more evidence-based so that policy planners and the public are not confused or misled.

Local shipping companies and entrepreneurs are encouraged by the government, with the offer of tax incentive in view of the highly capital intensive nature of the industry, to invest in the development of the domestic shipping industry, which has grown into what it is today because of the Cabotage Policy.

There are more than 200 shipping companies with over 4,500 ships which have taken advantage of the opportunities because of the Cabotage Policy. Many of the container shipping companies serving the domestic trade had invested heavily in recent years to serve the rising demand of the trade.

Masa, as the national body of the shipping industry, is duty-bound to protect its member shipping lines since these companies have invested heavily. Our right to protect our members is an open secret and we only feel it is not right for rules of game to change mid-stream after decades of hard work and investment of billions of ringgit. We can assure that we have no hidden agenda whatsoever in this regard.

Masa is neither a shipping company nor a cartel but merely an association representing shipowners interests, just as the FSM, which is a body representing the interests of manufacturers and plays no role in fixing prices of goods sold by its members.

In fact, the shipping lines compete among themselves and their rates/charges differ from one to another and shippers are free to choose which line they prefer.

Reports by the FSM quoting a study on the high cost of shipping in Sabah as being sanctioned by the Malaysia Investment Development Authority (Mida) is totally inaccurate.

Masa is aware of the "Study to Address the Problems of High Cost of Logistics Expenses in Sabah", but this was commissioned by the Sabah State Ministry Industrial Development & Research.

While we are also aware that the report may have been submitted to federal ministries and relevant agencies, including Mida, we are not aware that Mida or any government agencies have concurred with the findings of the study.

We hope a copy of the study will be extended to Masa for our views against findings based on baseless accusations.

There is a great deal of misinformation over what constitutes ocean shipping costs, total transportation or logistics costs and shelf prices of goods.

While we have pointed out that ocean shipping costs make up about 46 per cent of the total transportation costs which involves eight other intermediaries (which account for the 54 per cent of the total transportation costs), this does not mean that the shelf prices of goods are burdened with 46 per cent shipping costs.

According to a survey carried by Masa, the shipping cost in a five-packet standard instant noodles is only 0.02 sen (per five packet), but sells in Kota Kinabalu higher by 0.40 sen than the average price in Peninsular Malaysia. Similarly too, the shipping cost is only 0.05 sen in the shelf prices of per kilo of sugar and flour sold in Kota Kinabalu, which is higher by 10 sen and 31 sen, respectively, compared to in Peninsular Malaysia.

It is obvious that there are other components of the total transportation costs which need to be looked into and addressed than merely attributing the whole thing on shipowners. Who is gaining? Definitely not the shipowners.

Why and how Masa or the Cabotage Policy could only be blamed for this?

We do not want to point fingers, but it is obvious there are other than shipping costs which make the shelf prices of goods in Sabah higher and we are willing to work together with shippers, including the FSM, to identify where these additional costs come from.

Masa has been open on this matter. I think the time has come for all the intermediaries, and also the shippers to do so and come out clean on the components of the cost structures of each party, as we shipowners have done in our earnestness to be transparent and open.

Source: Business Times

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On 19/07/2010 Business Times reported:

Malaysia willing to look into Cabotage Policy

The federal government is willing to look into the problems faced by the business community in Sabah, particularly the Cabotage Policy.

"We will see whether we can review this (Cabotage Policy) so that you can export directly from Sabah ... it makes sense, but let me see whether there are other implications," Prime Minister Datuk Seri Najib Razak said in his speech during a luncheon with Sabah Chinese community leaders in Kota Kinabalu yesterday.

The business community in Sabah, including the Federation of Sabah Manufacturers, had called for the policy to be liberalised or scrapped as it did not benefit the domestic shipping lines.

Under the Cabotage Policy implemented on January 1 1980, domestic trading between two domestic ports can only use the services of local shipping lines in order to reduce prices of consumer goods.

Last Friday, Deputy Minister of Transport Datuk Abdul Rahim Bakri said the increase in prices of consumer goods was due to several factors including excessive profiteering by certain groups, and inefficient loading and unloading services at ports.

Exorbitant marine insurance fee, land transport cost and economy of scale were the other reasons, Abdul Rahim said.

He said the National Shipping Policy, which gave priority to domestic shipping services, was actually to protect the nation in the long run.

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", he said.

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.

Seeking a solution to Cabotage Policy row

For years, shippers in Sabah and Sarawak and local shipowners have been at odds with each other over a 29-year-old national policy that allows only Malaysian flagships to carry cargo between domestic ports.

Each time it's the same: Exporters and importers in Sabah and Sarawak, led notably by the Federation of Sabah Manufacturers (FSM), want the controversial Cabotage Policy to be removed, blaming it for the higher prices of goods in the two states on Borneo island compared with the peninsula. Shipowners say it's untrue.

Well, the issue is back this year, with FSM president Datuk Wong Khen Tau firing the latest salvo by reportedly saying that partial liberalisation of the Cabotage Policy in June last year had failed to benefit domestic shipping lines and continues to contribute to the high cost of goods in Sabah and called for Prime Minister Datuk Seri Najib Razak to abolish the policy.

Under the relaxation of the policy, foreign vessels are now allowed to carry containerised transshipment cargo from abroad, between five ports in the country - Sepangar Bay, Bintulu, Klang, Kuching and Tanjung Pelepas.

And though shipowners have experienced such protests before, this time politicians are sharing shippers' criticism of the Cabotage Policy. Shipowners now find themselves in a political fight for survival of the legislation.

Thus far, a host of high-profile politicians and influential voices from the state have appeared to side with Khen Tau's statement about the Cabotage Policy. Among them are Sabah State Industrial Development Minister Datuk Raymond Tan, Sabah Progressive Party treasurer-general Datuk Wong Yit Ming, United Pasokmomogun Kadazandusun Murut Organisation secretary-general Datuk Wilfred Madius Tangau and Sabah Housing and Real Estate Developers Association president Datuk Susan Wong.

They believe that Sabah and Sarawak would notch up in the competitiveness rankings should the policy be abolished, as the exclusionary nature of the policy is blamed for high freight rates, which have led to high prices of goods in Sabah and Sarawak. They said the policy is also to blame for the lack of traffic from foreign liners in Sabah and Sarawak ports.

On its part, the Malaysian Shipowners Association (Masa) has issued three press statements defending the policy's role and saying shippers' accusations are "totally inaccurate" and "baseless".

Who's right, you ask? It is tempting to think that transportation costs are the primary culprit for the different living costs between Sabah and Sarawak and Peninsular Malaysia. And certainly there is an argument to be made that given that it's been 29 years since the Cabotage Policy was introduced in 1981, local shipowners should be much better prepared for eventual full liberalisation of the Cabotage Policy and to compete with their foreign counterparts.

Still, if that is so, we would expect reduced freight rates, in part due to reduced demand precipitated by the recent global economic crisis to be reflected on the consumer goods in Sabah and Sarawak prices. But that doesn't appear to be the case.

Masa executive secretary Captain Imtiaz Hussein said the fact that consumer goods like Sabah Tea bags (loose) of 100 grammes are priced at RM2.59 in Kota Kinabalu and RM2.20 in Kuala Lumpur suggests that there is profiteering or manipulation by certain traders in Sabah, who then hide behind the presumed high shipping cost caused by the Cabotage Policy.

Indeed, association chairman Nordin Mat Yusoff said there is no assurance that shipping cost would decline with the removal of the Cabotage Policy.

"In fact, there is even a bigger threat that shippers and the government will face as they will have no recourse to remedy if shipping rates are high or increase when the trade is open to foreign shipping lines," he said in a July 23 2010 statement.

"And if shippers in Sabah and the FSM are expecting an overnight solution to this low shipping connectivity by simply calling for the Cabotage Policy to be removed then this is simply a case of misinformation," he added.

"Why do you think the freight rate structure for shipments to ports in Sabah and Sarawak is where it is today?" asked Shipping Association of Malaysia chairman Ooi Lean Hin.

"The reasons for this are simply the infrastructure of the ports there (except for Bintulu Port) which deters big, mainline container vessels from calling, the size of the market and the imbalance in trade. Containers arrive in Sabah and Sarawak full, but many return to the peninsula empty," he said.

Ooi pointed out that using the freight rate for a 40-foot container from Port Klang to Miri, which is three times (RM3,150) that of the container from Port Klang to Hong Kong (RM1,020) as example, is bad because shipowners have been selling their vessel space below cost due to intense competition.

It's worth noting that it is common for countries to support the development of local industry through a protectionist policy. Masa had revealed that the Cabotage Policy is applied by more than 50 countries worldwide, including the US, India, China, Japan, the Philippines, Indonesia and Australia.

So, how does the federal government handle this delicate situation? The wrong choice in favour of one group can prove detrimental to the country as shippers and shipping lines are important stakeholders in the maritime industry.

A first step towards resolving this conflict is probably for FSM, Masa and federal agencies like the Ministry of International Trade and Industry, the Transport Ministry and the Sabah State Industrial Development Minister to sit down and find a solution. Masa has started the ball rolling by extending an invitation to shippers in its latest media statement. At the same time, a study can be conducted by an independent third party or the government to ascertain whether the Cabotage Policy no longer serves its purpose to protect the local shipping industry and that its removal can really reduce the cost of goods in Sabah and Sarawak.

Source: Business Times

Shipowners refute Sabah manufacturers' claims

THE Malaysian Shipowners' Association (Masa) has once again refuted claims that the cabotage policy and shipping charges are the cause for the high cost of living in Sabah. It was responding to the Federation of Sabah Manufacturers' (FSM) complaints this time.

In a statement yesterday, Masa chairman Nordin Mat Yusoff said there was a distinct difference in what constituted ocean shipping cost and what is within the control of shipowners.

"The ocean shipping cost makes up less than half of the total landed transportation charges paid by shippers in Sabah. The remaining 50 per cent includes charges such as land transportation and storage," he said.

Nordin said that the ocean shipping charges had dropped by more than half a decade ago and that the rates were market-driven. He rejected claims by FSM that Masa was a cartel.

"There is simply no cartel in the trade because shipping lines serving the route do not collectively agree on ocean freight rates and shippers are free to choose the shipping line," Nordin said.

Source: Business Times

Sabah re-ignites cabotage policy row

The Federation of Sabah Manufacturers (FSM) wants Sabah to be made the hub port for the Far East, much like what Dubai is to the Middle East.

However, the FSM sees the National Cabotage Policy (NCP) as an impediment since this designates Port Klang as the National Load Centre at the expense of Sabah and the nation.

“Sabah has all the necessary ingredients to be the hub port for the Far East,” said FSM president Wong Khen Thau in pitching for the state.

“It is the centre of this region, within five to six hours flight to all major Asian capital cities."

Sabah is also central to the large populations of India, Indonesia and China besides being in the right location vis-à-vis Tokyo, Seoul and Sydney.”

Wong was lamenting the failure of the partial liberalisation of the NCP since May last year.

The failure has been attributed to the limited scope of the liberalisation, which only allows direct carriage of containerised trans-shipment cargo to Sabah and Sarawak by foreign vessels without the need for a domestic shipping licence.

Wong noted that Deputy International Trade and Industry Minister Jacob Dungau Sagan's admission in recent days that the liberalisation has had little impact is a good reason for doing away with the NCP.

Wong, taking up the cudgels again, pointed out that 70 percent of Malaysia's imports come from China, Japan, Korea and other countries that are in close proximity to Sabah.

This, he argued, gives Sabah an advantage over Port Klang as the natural hub for the country.

“Sabah can also present a better alternative and challenge to Singapore than Port Klang or Tanjung Pelepas in Johor,” he claimed.

He also said the state could make the quantum leap in per capita income if the hub port is located in Sabah.

The FSM has estimated a minimum US$15,000 in per capita income for Sabah by 2020, a huge improvement from the current US$3,000-4,000.

'Pump in funds'

FSM is calling for the federal government to pump in the necessary funds to build up the state's infrastructure in addition to dismantling the NCP.

“There would be a need to develop industries and promote revenue-oriented sectors such as tourism, education and aquaculture for Sabah to make a leap in its economic standing. A lot of money would be required from the federal government to increase such economic activities.”

The FSM sees Sabah bargaining for state-of-the-art industrial and other infrastructure as a better alternative to pressing for a bigger oil royalty, adding, “we have enough gas reserves which can feed the industries”.

For starters, said Wong, the federal government should set up petrochemical industries in the state while considering an upward review of the oil royalty, which has been frozen at 5 percent since the late 1970s.

Infrastructure improvements envisaged by the FSM include building up rail transport services and improving roads linking Kota Kinabalu to main regional towns along the east coast like Sandakan, Lahad Datu and Tawau. This will mean upgrading 9,825km of gravel roads to add to the 6,000km of sealed roads.

There is also a need to focus on courier services, sea transport services, shipping and forwarding agencies, cargo handling, stevedoring services and port services, bunkering services, water and power.

State Industrial Development Minister Raymond Tan is hopeful that the NCP will be done away with in the near future, but prefers to use the term “further liberalisation”.

“The state government is requesting the federal government to fully liberalise the Cabotage Policy. At the same time, we are undertaking a study on the high cost of logistics services in Sabah,” he said.

The liberalisation of the NCP, he said, is among the 'Strategic Changes Initiative' study being undertaken by his ministry.

“We need a freight equalisation scheme through affirmative action - read subsidies - to settle the high shipping cost in Sabah,” added Tan.

Sabah's moves are likely to invite flak from shippers based in Peninsular Malaysia who are dependent on carriage to Sabah and Sarawak.

In the past, these shippers have resisted any plan to do away with the NCP. This has led to the charge that the federal transport ministry is in the pockets of the shippers.

The higher cost of living in Sabah and Sarawak, compared to the peninsula, is also attributed to the NCP.

Source: Malaysiakini

No impact yet of cabotage policy change on cargo shipment business

The Ministry of International Trade and Industry has yet to see the impact of the partial liberalisation of the Cabotage Policy on the cargo shipment business in Sabah and Sarawak.

Its Deputy Minister, Datuk Jacob Dungau Sagan, said the government needed more time to evaluate the impact as the partial liberalisation was only introduced last May.

"The ministry is monitoring interests among foreign shipping companies to go directly to the designated ports in the two states.

"The growth in volume of exports will also be monitored to assess the impact of the policy change," he told a media briefing after officiating at a seminar on "Trade Liberalisation and Government Assistance" here on Monday.

Sagan said the Cabotage Policy change was among the measures taken by the government to reduce freight costs of goods coming to and from the two states.

He said the partial liberalisation allowed foreign vessels to carry containerised transhipment cargo directly to Sabah and Sarawak without a need for a domestic shipping licence.

"It involves the cargo movements between the ports of Sepanggar in Sabah, Bintulu and Kuching (Sarawak) with the ports of Klang and Tanjung Pelepas and vice versa," he said.

Meanwhile, Sagan said he wanted more importers and exporters in the two states to join the Malaysian National Shippers Council, which had been vocal in calling for the review of the policy.

He said currently there were 25 organisations in the council with only one from Sabah and none from Sarawak.

"We want more shipping companies, or through their business associations, to join the council so that their voices can be heard to provide inputs to the government in formulating policies," he said.

Source: StarBiz

East M’sian ports more open now

The International Trade and Industry Ministry has partially liberalised the policy governing the entry of international ships into ports in east Malaysia.

It has allowed ocean liners from Japan to deliver goods directly from Japanese ports to Sarawak and Sabah.

Deputy Minister Datuk Jacob Dungau Sagan said the decision was made by the Cabinet two months earlier.

“Before this, foreign container ships were not allowed to call at ports in Sarawak and Sabah directly. They had to go to ports in Peninsular Malaysia, like Port Klang, to unload their cargoes onto Malaysian ships that will then forward these foreign goods to Sarawak and Sabah.

“Now, this partial liberalisation will see big ships from Japan commuting directly to east Malaysia without stopping at any transit port,” he told a press conference yesterday.

“The Government felt that it is important to slowly liberalise this shipping policy so that companies in Sarawak and Sabah need not incur additional costs in importing and exporting goods.”

Sagan said his ministry had proposed the move three months ago because it had found that many local shippers who forwarded foreign goods from west Malaysian ports to Sarawak and Sabah had charged exorbitant fees. These fees eventually translated into higher costs for consumers in east Malaysia because the overhead costs were included in the market price.

Source: StarBiz

Malaysian Domestic Shipping Licence

GOVERNING LAW

The law that governs domestic shipping is the Merchant Shipping Ordinance 1952, and its 1977 and 1984 Amendments. In 1994, certain amendments were made to the Ordinance which subsequently were included in the Merchant Shipping Act (Amendment) 1994.

TYPE OF LICENSES ISSUED BY THE
DOMESTIC SHIPPING LICENSING BOARD

1. Since its establishment, the Board has been issuing the following licenses:-
(i) Unconditional license;
(ii) Conditional license; and
(iii) Temporary license.

These licenses are valid for a specific duration, granted at the discretion of the Board up to a maximum of two years. Malaysian registered ships less than ten years will be given a two-year license by the Board subject to the applicant fulfilling all the relevant conditions. Temporary licenses are generally issued to foreign flagged ships for a maximum validity period of 6 months.

2. Conditions to be met by applicant are as follows:
(i) For an individual, or sole-proprietor, he or she must be a Malaysian citizen.
(ii) For an organization/corporation:-
(a) the corporation is incorporated in Malaysia;
(b) the majority of the directors of the corporation are Malaysian citizens;
(c) the majority of the shareholding including the voting share of the corporation is held by Malaysian citizens
free from any trust or obligation in favor of non-Malaysians;
(d) it should have Bumiputra participation of not less than 30% in terms of equity, directors and employees; and
(e) at least 75% of the crew complement of the ship to be licensed must be Malaysian citizens.

FOR FOREIGN REGISTERED SHIP

1.The Domestic Shipping Licensing Board also considers application for license from foreign registered ships in cases when Malaysian registered ships are unable or not available to carry particular cargoes. In this instance, application for license may be submitted by submitting evidence that all possible efforts have been taken to engage locally registered vessel to meet the transportation requirement. Examples of evidence may include advertisements in leading local newspapers and contract documents such as "charter party" or "fixture note" etc.

2. In addition to the above, applicant must write to the Malaysian Shipowners Association (MASA) to obtain its endorsement with regards to availability or non. availability of appropriate Malaysian-flagged vessel(s).

EXEMPTION

The following vessels are exempted from having a license:
(i) ships less than fifteen (15) NRT;
(ii) ships licensed under Section 475;
(iii) for the states of Sabah and Sarawak, ships licensed under Merchant Shipping Ordinance 1960 of these states; and (iv) ships owned or under the employment of the Government of Malaysia, State Governments or
Port Authorities in Malaysia.

LICENSE FEE

Fee is charged for every license approved by the Board as follows:
(i) Malaysian registered ships: RM50 per year or part thereof for ships of fifteen to fifty nett tonnes and ten cent for each additional ton after fifty net registry tones.
(ii) Foreign registered ships: RM200 per year or part thereof for ships of fifteen to fifty nett tonnes and forty cent for each additional ton after fifty nett registered tonnes.

Source: DSL Portal

The Cabotage Policy

The Malaysian Government has implemented a policy which reserves the transportation of goods in the domestic trades to ship flying the Malaysian Flag. This policy was necessary because only a small number of Malaysian registered ships were playing the coastal routes. The policy which reserves the domestic trade to its own flagged vessels is known as Cabotage Policy. It was implemented in Malaysia on 1 January 1980. To implement the policy, the Merchant Shipping Act 1952 (MSO 1952) was amended.

With the amendment to the Merchant Shipping Act 1952, the Government provide for the appointment of a Domestic Shipping Licensing Board (DSLB) to regulate and control the licensing of ship engaged in domestic shipping between any port in Malaysia. The purpose is to encourage local participation in domestic by encouraging local registration of ships and local incorporation of companies participating in domestic shipping.

The rationale of the cabotage policy can be seen as part and parcel of the government's policy objectives of;

i.		Making Malaysia a maritime nation;
ii.		Reducing the country's dependence on foreign ships by increasing the level of participation in Malaysia international and coastal shipping business;
iii.		Engaging in shipping commitments through bilateral, regional and other trade agreements;
iv.		Training and development of Malaysians in technical, professional and commercial aspects of shipping business, especially in regard to the Malaysianization of floating staff and support to higher educational institutions.

Domestic Shipping as defined under the Merchant Shipping Ordinance 1952 means the shipment of goods or passenger:

a.		from any port or place in Malaysia to another port or place in Malaysia, or
b.		from any port or place in Malaysia to any place in then exclusive economic zone or vice versa,

and includes the towing and pushing in the cabotage trade, a license, per vessel, is required by a

Malaysia citizen or company. The DLSB issues three types of license, namely:

· unconditional

· conditional; and

· temporary

Unconditional license is granted to a Malaysian entity in respect of a Malaysia flagged vessel on the condition that it:

a.		is qualified to own a Malaysian flagged vessel according to the law stipulated for owning a Malaysian ship;
b.		has 30% bumiputra participation in terms of equity, directorship and office staff; and
c.		employs 75% Malaysian citizen as ratings on the vessels

In order to own a Malaysian ship the person(s) must be a Malaysian citizen(s) or corporation, which satisfy the following requirements:

i.		the corporation is incorporated in Malaysia;
ii.		the principal office of the corporation is in Malaysia;
iii.		the management of the corporation is carried out mainly in Malaysia;
iv.		the majority, or if the percentage is determined by the Minister, then the percentage so determined, of the shareholding, including the voting share, of the corporation is held by Malaysian citizen free from any trust or obligation in favor of non-Malaysian; and
v.		the majority, or if the percentage is determined by the Minister, then the percentage so determined, of the directors of the corporation are Malaysian citizen. Source: Portsworld.com

KL under pressure again over cabotage policy

Manufacturers, traders and shippers in Sabah are bringing renewed pressure to bear on the federal government to further liberalise the National Cabotage Policy (NCP).

The policy keeps out foreign vessels from the movement of goods between Port Klang, the designated national load centre, and ports in Malaysian Borneo.

Federation of Sabah Manufacturers (FSM) president Wong Khen Thau warned that the federal government must complete the liberalisation of the policy without any further delay and not continue to indulge in cosmetics.

"The opening up of the policy is an issue that Sabah has been pursuing all this while," stressed Wong on the sidelines of the weekend opening of Wisma FSM at the Kota Kinabalu Industrial Park (KKIP) in Sepanggar Bay.

"If the policy is further opened up, then I think it (liberalisation) will be complete," he added.

Wong was commenting on the renewed public debate on the pros and cons of the NCP but he has so far refused to get into the polemics.

The Transport Ministry, not so long ago, announced some "piece-meal measures" aimed at easing the policy and deflecting increasing public criticism of the federal government over the higher cost of living in Sabah and Sarawak compared with Peninsular Malaysia.

The NCP is being blamed for the price difference in consumer perishables, among others. At the same time, salaries in Malaysian Borneo are very much lower than that in Peninsular Malaysia.

If the NCP has heated up again in recent days as a political hot potato, it is with good reasons too. One result of the policy is that job-seekers shun the numerous jobs available locally and still make for greener pastures in Brunei, Peninsular Malaysia and Singapore.

Association says no to liberalisation

Executive secretary of the Malaysian Shippers Association (Masa), Imtiaz Hussein, poured fuel on the fire in recent days when he launched a pre-emptive strike against further liberalisation by issuing a media statement on the issue.

Basically, it was a feeble attempt to deny that Masa members are behind the comparatively higher cost of living in Malaysian Borneo.

Briefly, he claimed that members of Masa are charging reasonable prices; the prices imposed by Masa are not the only cause - there are other parties that are causing the higher cost of goods in Sabah and Sarawak.

"It is important to point out the flawed arguments of shippers who blame high shipping costs and want the federal government to relax the National Cabotage Policy," said Imtiaz, who vowed that Masa would strongly oppose any further liberalisation of the NCP.

Masa's aggressive defence of the NCP in Sabah and Sarawak has sent the hackles up among people from all walks of life in Sabah and Sarawak and caused them to see red on the issue.

Trading community spokesperson John Lo, among those vociferous on the issue, begs to differ with Masa and has been picking at what he sees as the flaws in the association's arguments.

He points out that Masa has not mentioned collusion practices by its members on price-fixing; whether there is free and fair competition among its members for the South China Sea routes between Peninsular Malaysia and Sabah/Sarawak; and that Masa has not revealed facts and figures which the public can use to benchmark their prices vis-à-vis other similar routes.

"In this logistics supply chain, ocean freight charges (paid to the shipping line) for imports into Kota Kinabalu, for example, from Port Klang constitute about 40 percent, it is claimed," said Lo.

"In any business environment where cost reduction is a constant worry, a cost component of 40 percent is already a very significant item and should be examined in the minutest details."

Lo added that it was not for Masa to decide whether other components in the cost scenario were high or low.

Cartel overrules people's need

Shipping industry watcher Loong Chai, who has examined the cost structure closely, points out that except for freight charges which are determined by the ship owners, all other cost components are controlled by the government.

"The port charges, for example, in Sabah have not changed since it was introduced in the 1970s. So, how is it that port charges takes a major portion of the cost?" asked Loong.

"The forwarders fees as well as for haulage is less than RM500 per container. So, how can this portion be the cause of the higher logistics cost?" he asked.

Their places continue to be taken by illegal immigrants flooding in from the Philippines, Indonesia, Timor Leste, Pakistan and Bangladesh, among others.

Whether Masa accepts or otherwise, it cannot be denied that their cost per 20 foot container is not less than RM2,000 and this cannot be only 40 per cent of the total cost, continued Loong.

Loong is well armed with other figures on the carrying capacity of ships on the South China Sea run, their cruising time between ports in Malaysian Borneo and their fuel usage.

He thinks such figures serves little purpose whatsoever in the debate over the NCP.

"After 30 years of making appeal after appeal, it is obvious that the needs of the shipping cartel are much stronger than that of the people of Sabah and Sarawak," said Loong.

"There is no point arguing with the ship owners because the NCP gives them complete monopoly in domestic shipping. There is no point in appealing to the government as well because it will make endless studies with no clear solution."

The NCP has caused a lot of people in Sabah and Sarawak much frustration and numerous lost opportunities in business and trade, added Loong.

Having injected a note of pessimism and hopelessness into the debate, Loong thinks that "not all is lost".

He refers to a little known debate taking place in local circles on restructuring Sabah's trade pattern away from Peninsular Malaysia to beat Masa at its own game.

The 'Muara School of Thought'

Statistics tell the story. Sabah, for example imports 58 percent of its requirements from Peninsular Malaysia while sending only 13.2 percent of its exports there and 17 percent, for example, to China.

The suggestion being seriously considered is that Sabah import more goods from China, Hong Kong and Taiwan via the international container port of call in Muara, Brunei.

Muara, the only port in Borneo that is not affected by the NCP, is just a hop, step and jump away from Menumbuk, Labuan, Kota Kinabalu and other places along the west coast of Sabah.

The 'Muara School of Thought' is expected to take off, as Bruneiseeks to diversify its economy, even as the pressure continues for the lifting of the NCP.

Lo is among those who concede that the total cost scenario should be looked at once again "to expose the flaws in the Masa arguments and the findings made public".

Source: Malaysiakini

Cabotage: Some shipping industry players support open policy

While the local shipowners deem the recently-announced partial relaxation of the cabotage policy as untimely, some quarters of the local maritime industry think otherwise.

The Government had partially liberalise the cabotage policy for containerised transhipment cargo for the sectors between the Port of Sepangar, Bintulu, Kuching with Port Klang and the Port of Tanjung Pelepas and vice versa effective June 3.

The liberalisation will allow foreign vessels to carry containerised transhipment cargo within the above sectors without a need for a domestic shipping licence.

According to a prominent industry player, the liberalisation was inevitable in the long run, especially if Malaysia wanted to be more competitive.

“It opens up opportunity for importers and exporters in Sabah and Sarawak as well as the industries to enjoy a lower freight cost due to competition in the shipping transportation sector, which can be translated into cheaper price of consumer goods and industrial needs.

“Additionally, the move will allow the two east Malaysian states to lure international shipping lines to the country,” he said, adding that it would also benefit the ports in Sabah and Sarawak as well as to the economic development corridors there.

When international shipping lines can go directly to Sabah and Sarawak, they can take suitable cargo for the Far East and the US markets as opposed to coming to Singapore or Port Klang before they go to the Far East or China.

An industry observer said the Federation of Sabah Manufacturers also recently reiterated the need to abolish the policy, saying that the move could also pave the way for the Kota Kinabalu Sepangar container port to become a hub for the Brunei, Indonesia, Malaysia and the Philippines-East Asean Growth Area (BIMP-EAGA) region.

“It must be noted that even after the policy is relaxed and international shipping lines travel to east Malaysia, they will at most call one or two ports in Sabah or Sarawak.

“However, ports like Sepangar, Bintulu or even Kuching can vie to become a hub port for the BIMP-EAGA region and be a getaway for shipment of cargoes to the Far East,” he said.

In general, he said, there was still a lot of cargo in Bangladesh, Myanmar and India, which local Malaysian shipping lines can target.

Source: StarBiz

Cabotage: Shipowners plea to defer liberalisation

Malaysian shipowners are appealing to the Government to defer its unexpected decision on the relaxation of the national cabotage shipping policy.

The local shipowners, represented by the Malaysian Shipowners’ Association (MASA), said the decision to partially liberalise the cabotage policy and allow foreign shipping lines in the domestic trade should be held back at least until the economy, now in technical recession, recovered.

“It is bad enough that the national cabotage policy was relaxed to allow foreigners in the transhipment trade between Port Klang and Tanjung Pelepas in Peninsular Malaysia and that of Kota Kinabalu, Kuching and Bintulu to compete in a limited market but it will be worse if the policy is relaxed immediately when the shipping market is in the doldrums,” said MASA chairman Nordin Mat Yusoff.

Under the cabotage shipping policy, implemented since 1980, domestic trade between any two ports in the country can only be served by Malaysian-owned shipping companies with Malaysian-flagged ships.

The partial relaxation of the cabotage policy took effect on June 3.

Nordin said most of the Malaysian operators in the domestic trade faced severe financial and operational problems as well as low freight rate and excess capacity in the market as a result of the collapse of the freight market.

MASA, representing more than 85% of the shipowners in the country, felt let down by the Government, as it had a duty of care for Malaysian shipowners and to protect national interests since cabotage was even recognised by the World Trade Organisation as an instrument of national policy.

MASA said the Government must also give the market players sufficient notice of its intention to relax the cabotage policy and not change such a key national policy overnight in the mid-stream and placing local operators under dire straits and severe consequences.

Adequate notice would at least prepare local players in the trade to take up position by reviewing their operational strategies or strengthen and build up capacity to compete “instead of unceremoniously pulling the rug under our feet,” said Nordin.

Several MASA members, especially those who have just ordered new ships to be deployed in the domestic trade, could face severe financial losses, the association pointed out.

“While we are perplexed with the dramatic manner the policy is being relaxed, we are also disturbed to note that there is lack of details in the Government’s decision, particularly in the need for continuous monitoring and feedback mechanism on how the relaxation of the cabotage policy works,” said Nordin.

He felt that the Transport Ministry should hold a dialogue with the Customs and port terminal operators at the specified ports to ensure that there would be no abuse or deviation following the relaxation of the policy.

Nordin also called on the Government to invite MASA to help monitor and assess the achievement and if the targets were not met the Government should reinstate the policy. He urged the Government to address current problems faced by the local shipping industry following the economic meltdown by introducing remedial measures in the economic stimulus package.

“Such measures should also include subsidy on port charges for domestic operators, financial assistance to help overcome cashflow problems and assistance to overcome loan repayment problems,” he said.

Source: StarBiz

French shipping giant CMA CGM keen to strengthen presence in Malaysia

Malaysia’s liberalisation of 27 local services sub-sectors, including the transport sub-sector, prompted French shipping giant, CMA CGM to mull over plans to strengthen its foothold in the country.

Transport Minister Datuk Seri Ong Tee Keat had during a visit to the headquarters of the world’s third largest container shipping company in the French city last Thursday shared the Malaysian Government’s policy to liberalise the transport sub-sector, including the opening of 30% restriction in foreign ownership.

CMA CGM has had a presence in Port Klang since 1994 and is one of the largest customers of Port Klang. It has since June 1 also served the port of Tanjung Pelepas.

In welcoming the move, the company’s president Jacques R. Saade said “such liberalisation will change the strategy (of the company) in Asia.”

The shipping giant also welcomed Ong’s announcement of gradual liberalisation of cabotage of key sectors such as from Peninsular Malaysia to three major ports in east Malaysia, namely Sepangar, Kuching and Bintulu. (See also page 7)

Saade said the company would seriously explore the opportunities available from such a move. He also said the company would expand its dry port bonded warehouses, which include the Port Klang Free Zone.

Later, Ong visited the Port of Marseille, one of the oldest and busiest sea ports in France.

Marseille Port also raised its interest to establish an in-house university specialising in shipping and maritime as part of its education and training project.

Ong took the opportunity to test-drive its state-of-the-art port simulator.