We refer to the Malaysiakini report MCA faulted for Cabotage policy woes .

The cabotage policy is a policy that is practiced by many nations worldwide including developed nations. For some of these nations, it is so strictly implemented that no foreign-owned vessels are even allowed to operate within their domestic waters.

The Malaysian cabotage policy began in 1980 with the purpose of developing Malaysian ownership and local shipping in general whilst at the same time minimising Malaysia’s dependence on foreign vessels as well as the outflow of foreign exchange in the form of freight payments.

The cabotage policy also acts as a platform for local shipping companies to gradually expand and reach out into international waters.

The cabotage policy does not at all prohibit vessels from foreign ports to call directly to/from any Malaysian port including ports in Sabah and Sarawak. For example, a vessel from Singapore or Hong Kong is free to call directly to/from any Malaysian port such as Sepanggar, Bintulu etc.

At the same time, the cabotage policy that Malaysia practices is a liberal one as Malaysia also allows foreign vessels to operate within our domestic sector through the granting of an exemption issued by the Domestic Licensing Board upon fulfilling the criteria set.

The freight rates that are charged is a result of the imbalanced trade pattern between East and West Malaysia. Currently, and it has been so ever since, there is less backhaul cargo from East Malaysia to West Malaysia.

Such an imbalance and the consequent freight rate level is a normal phenomena and also does exists on other routes like in Europe and the Far East.

Meanwhile, the high costs of goods cannot be blamed solely on the cabotage policy without also referring to the total costs of transportation and logistics ashore including port costs and the high surcharges in Sabah and Sarawak.

The low productivity at the ports in Sabah and Sarawak also adds towards additional shipping costs. Freight is only one component which makes up 46% (from a study by Malaysian Shipowners Association) whilst others such as forwarding, trucking, storage etc make up the rest.

The cabotage policy has successfully encouraged more and more locals to venture into shipping. By numbers alone, in 1984 there were only 622 vessels with a total gross tonnage of 1.3 million tonnes but today, the nation has 4,291 vessels with a total gross tonnage of 9.9 million tonnes.

Such tonnage has given employment to more than 15,000 Malaysians nationwide including in Sabah and Sarawak. The policy has also created opportunities for supporting industries such as shipyards and slipways in both East and West Malaysia.

The cabotage policy has also facilitated the transition of our local ship owners into international shipping notably Shin Yang Shipping, PDZ Shipping and Hubline apart from MISC which has become a household name.

Currently, the ministry of transport is reviewing the implementation of the said policy where due consideration and attention will be given to the interests of all affected parties.

The writer is Special Maritime Advisor, Ministry of Transport, Putrajaya.