Cabotage policy reinstatement is top maritime council agenda
Published on: Saturday, December 15, 2018

Kuala Lumpur: The reinstatement of the cabotage policy and dealing with freight losses worth billions due to cargoes transported by foreign vessels were among the major issues discussed during the recent National Shipping and Port Council (NSPC) meeting.Lifting the cabotage policy has resulted in loss of business for Malaysian vessels with local freight carried by foreign vessels projected to be worth around RM28 billion to RM30 billion this year, an increase from RM24 billion in 2017.

As a result of the cabotage exemption, foreign ships are able to transport cargoes domestically and it was reported that many local shipping companies, anticipating losses, contemplated shifting their bases out of the country after the government removed the cabotage policy on Sabah, Sarawak and Labuan beginning June 1, 2017.

Datuk Abdul Hak Md Amin, who leads the NSPC's advisory committee on Promoting Employment of Malaysian Ships, said due to the loss of revenue suffered by Malaysian vessels, the reinstatement of the cabotage policy was back on the table and the first topic discussed at the meeting.

Abdul Hak who is also Malaysia Shipowners' Association (Masa) Chairman, said that liberalisation of the cabotage policy was a wrong move as it partly caused the national fleet tonnage to decline.

"We have to inform the new government that the decision to remove the policy was wrong and harmed the (domestic) industry.

"Why did we do that while other countries such as Indonesia, Brazil, the US, Thailand and Vietnam tightened their policies even further," he told Bernama, citing that Indonesia has seen its fleet tonnage increase to 15 million deadweight tonnage (dwt) from 3.0 million dwt in just three years after implementing its cabotage policy.

Under the Malaysia Shipping Master Plan (MSMP), the targets are for domestic vessels to provide 20 per cent in global energy shipping, 30 per cent in intra-Asean shipping, 75 per cent in domestic oil support vessel (OSV) services, 90 per cent in domestic shipping and 100 per cent in local tugboat operations.

Abdul Hak believed that these targets were possible with the commitments from all stakeholders and key to this would be the restoration of the cabotage policy as the growth driver for the local shipping industry.

"Before the cabotage policy was removed, growth was really good but we cannot deny that during the economic downturn, a lot of companies were hurt.

"If you look at the cabotage policy, it was introduced in 1980, Tun Mathathir's time (as Prime Minister). At that time, the fleet tonnage was a meagre few hundred dwt but during the subsequent economic boom, we reached between 13 million dwt and 14 million dwt but now, the tonnage has declined to 9.61 million dwt," he said.

Abdul Hak also said there exist loopholes which must be addressed to ensure that Malaysia would not become a dumping ground for foreign tonnages taking advantage of local businesses.

"Another alarming situation that required urgent attention was the existence of Malaysian registered ships owned by foreigners, which fulfilled the basic requirement needed to tender for Petronas contracts," he said.

Another way of supporting local shipping firms, Abdul Hak said, would be main charterers such as palm producers selling or exporting their products via the cost, insurance and freight (CIF) method instead of free-on-board (FOB), so that we can prioritise Malaysian ships.

In CIF agreements, insurance and other costs are assumed by the seller, with liability and costs associated with a successful transit paid by the seller up until the goods are received by the buyer, while FOB contracts relieve the seller of responsibility once the goods are shipped.

"We do not expect all transactions to be based on CIF but at least, we hope to see a mixture of both because we used to practise CIF before," he explained.

Apart from that, Abdul Hak and his committee will also work on proposals on expanding the national fleet tonnage and reactivating laid-up vessels.

Laid-up vessels are unemployed vessels anchored at various locations and out from commercial operations due to, among others, lack of employment, bank loan issues, higher reactivating costs and freight rates that are insufficient to cover operating costs.

"We had our first meeting with representatives from government agencies and the corporate sector and we discussed industry issues, including local freight carried by foreign vessels which I projected to be worth around RM28 billion to RM30 billion this year, a major loss to us.

"Malaysia recorded a freight loss of about RM24 billion last year as more cargoes are transported by foreign vessels, and my committee members are working hard to come out with a proposal which will be submitted to the Transport Ministry in April next year," he said.

On the issue of laid-up vessels, Abdul Hak said three parties, namely the banks, shipyards and government-linked companies, should look into the matter and come out with a win-win solution to reactivate these ships.

He said if no action was taken, these laid-up ships would turn into rust buckets and cause huge losses, not only to the owners but also the banks.

"We believed there are 80 Masa registered laid-up vessels scattered in Labuan and Johor. We need to think of something to solve this because (in order) to reactivate these ships to be seaworthy, the repairs might require up to RM3 million per ship, which most of the shipowners can't afford," he said.

Meanwhile, other issues discussed during the NSPC meeting included the non-competitive bank loan rates which was interconnected to other issues and would eventually put Malaysian vessels in an unfavourable position.

"We demand a fair and level playing field, competitive bank loan rates and we should not liberalise the cabotage policy," he reiterated.

Back in September, Transport Minister Anthony Loke Siew Fook announced the establishment of maritime and aviation councils to spur the industry growth and more importantly, to speed up the MSMP.

Loke was committed to seeing the real outcome of the six focus areas of the MSMP, each to be led by an advisory council tasked with promoting the employment of Malaysian ships, promoting the employment and welfare of Malaysian seafarers, facilitating access to capital and ship financing, enhancing Malaysia's attractiveness to shipping businesses, promoting innovation in and sustainable growth of maritime ancillary services, and improving the competitiveness and productivity of Malaysian ports.

The advisory councils are led by prominent figures in their fields, including Malaysia Marine Department Director-General Datuk Baharin Abdul Hamid, MISC Bhd President and Group Chief Executive Officer Yee Yang Chien and Port Klang Authority General Manager Captain Subramaniam Karuppiah. – Bernama


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