The Federal Government has approved RM1.1 billion under the 11th Malaysian Plan to upgrade the port and is also in the midst of further liberalising the much-debated Cabotage Policy.
Transport Minister Datuk Seri Liow Tiong Lai said the move is aimed at leveraging the port's strategic location along the shipping route of the East Asian sea trade and centre of the BIMP-Eaga region.
He also noted that Sepanggar is a favoured port of call for exporters from South America and Australia sending their goods to China.
"These initiatives will significantly address the issue of trade imbalance that may result in reducing the cost of ocean freight.
"This will eventually lead to not only lowering the cost of doing business and the cost of living in Sabah, but also enhance the State's economic competitiveness in the long-run," he said, when opening the two-day Sabah Port Forum, Thursday.
Also present were Chief Minister Datuk Seri Musa Aman, Suria Capital Holdings Bhd Chairman Datuk Faisyal Diego and Group Managing Director Ng Kiat Ming as well as, Sabah Ports Chairman Datuk Karim Bujang.
According to Liow, the port would be transformed to match that of Port Klang, whereby the transshipment of goods from Kalimantan in Indonesia, Palawan in the Philippines and Brunei would arrive here before heading to its destinations.
Besides the RM1.1 billion allocation, long-term expansion of the port would also be carried out in stages and bankrolled by public funding from development expenditure.
The initial port expansion would involve expanding the Sepanggar Port's berth length from 500 metres to 1.2km and the stacking area from 15 hectares to 60 hectares, with an additional operations area to increase handling from 500,000 TEUs (Twenty Equivalent Unit) to 1.25 million TEUs.
Liow said the upgrade would be timely as the shipping industry has become increasingly challenging and many global shipping firms are consolidating to keep afloat.
He also said the vessels have doubled in size the past 25 years from 3,000 TEUs to 22,00 TEUs now, adding the upgrade would ensure Sepanggar Port would keep pace with the progress.
"Malaysia is also increasingly becoming a favourite cruise destination where 435 cruises with 682,000 passengers are calling in the same year," he said.
However, for Sabah to unlock to potentials of container exchange it has to deal with the lack of manufacturing and downstream processing activities that led to insufficient container volume.
"The volume of import containers is twice as large as export containers, thus affecting freight rates with ships having to return half-empty. The average size of shipment or container exchange in Sepanggar Port, for instance, was 287 TEUs in 2016, compared to 500 to 1,200 TEUs container exchange prevailing at the container ports of Peninsular Malaysia," he said.
Towards this end, Liow cited a World Bank study on the National Port Strategy commissioned by the Economic Planning Unit that shipping costs were not the main cause of the higher prices of goods in Sabah but the weak distribution channel.
A major number of industries in Sabah blamed the Cabotage Policy behind the higher prices of goods which saw items sold 30 per cent higher here than in the Penisular Malaysia. - Jason Santos