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Tuesday, May 9, 2017

Holistic solutions needed not piecemeal liberalization on Cabotage

KOTA KINABALU - “If the declared intention is to look after the well-being of Sabahans and Sarawakians, then the Federal government ought to be very clear in their policies and objectives.   Contrary to the hue and cry, probably also caused by their own misunderstanding, the announcement by PM Najib over the weekend is nothing more than a further liberalization of the cabotage policy and not abolishment of the same” said Datuk Dr. Jeffrey Kitingan, STAR President and Bingkor Assemblyman in response to the purported abolishment of the cabotage policy.

The cabotage policy is often misunderstood.  Even the news reports of the purported abolishment quoting that foreign ships cannot call at Sabah ports in not correct as there was a partial liberalization in 2009 allowing such shipping.

Based on the Ministry of Transport’s subsequent press statement, the further liberalization is only for shipping between Malayan ports and ports in Sabah, Sarawak and Labuan and vice-versa.  It also covers ports within Sabah for Sabah cargo and ports within Sarawak for Sarawak cargo.   Shipping between Sabah and Sarawak appears to be still subject to the cabotage policy and foreign vessels are not allowed to carry such cargo.

Many things in Sabah and Sarawak related to shipping and cabotage are wrong and needs wholesome and holistic approaches in solving.   Piecemeal liberalization will just not solve the many ills.

If shipping between Malayan ports and Sabah and Sarawak as well as ports within Sabah and ports within Sarawak are exempted from the cabotage policy, why is still cargo between Sabah and Sarawak not exempted?

Sabah, Kota Kinabalu Sepanggar Port in particular, enjoys the privilege of being at a strategic location.  With the growing importance of the BIMP-EAGA regional trade and to expedite regional development, Kota Kinabalu should be designated as a national load/shipping hub.  It can cater as a transhipment hub for the region as well, serving, Brunei, Southern Phillipines, Sulawesi and Kalimantan.

The earlier proposal by the Federation of Sabah Industries to turn Kota Kinabalu Port into the “Dubai of the Far East” certainly merits implementation.    Similarly, another port in Sarawak, to be decided by the Sarawak government, ought to be designated as another national load/shipping hub given the volume of oil and gas exported by Sarawak.

Sabah is currently the 5th largest contributor to the national GDP and produces some 65% of Malaysia’s crude oil production valued at more than RM35 billion.   It is also the world’s third biggest producer of crude palm oil (CPO) valued at more than RM20 billion and contributing some 35% of Malaysia’s total CPO output.

Yet, the manufacturing sector only contribute less than 8% of Sabah’s GDP.   Obviously, there is very little processing of the crude oil and CPO.   As a result, huge tankers can be seen berthed in Sabah port terminals to carry the crude oil and CPO.

With respect, there ought to be a more emphatic push to increase manufacturing activities in Sabah.   The federal government ought to consider incentives and policies including special tax incentives to assist the manufacturing sector increase their production.   In turn, it will generate the much-needed containerized cargo for shipping which will then attract shipping companies to call at Sabah ports.

Other possible solutions could include a freight equalization program like that implemented for Tasmania, Australia.  This could reduce the price of goods in Sabah.

Uplifting the Sabah manufacturing sector and increasing its GDP contribution will also mean increasing the national GDP and enhancing national economic growth.

Everyone wins.  An overall abolishment of the cabotage policy together with other solutions, including tax incentives for Sabahans and Sabah manufacturing sector will not only benefit Sabahans and detrimental to national interests.  On the contrary, a progressive Sabah will enhance national growth.

As can be seen, given that it is election season, the announcement by PM Najib, though a good initial baby-step, appears to be more an election gimmick to suppress the growing Sabah opposition and please the dissatisfaction of Sabahans.

Therefore, the federal and Sabah leaders should not be too hasty in claiming credit for the further liberalization of the cabotage policy.   As it stands without other measures, its impact will take years before Sabahans get to see the tangible benefits.

If the federal and Sabah governments still wish to retain the archaic cabotage policy, even in its liberalized form, it should only be applicable to Malayan ports and not to Sabah and Sarawak entirely.   This can be implemented through the “1-Federation, 2-Systems” administration, one policy for Malaya and a separate policy for Sabah and Sarawak.

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