February 23, 2012: Kota Kinabalu: People in Sabah seldom hear of Sarawakians complaining about the Cabotage Policy that is popularly blamed for contributing to the higher cost of living in Sabah when compared with prices of many local and foreign goods in West Malaysia and Sarawak.
This is because under the policy, all goods from wherever they originate and even if the source is closer to Sabah and Sarawak must still first go to Port Klang before proceeding to Sabah and Sarawak in domestic ships, an arrangement that costs time, money and additional charges for handling, etc. However, the shippers do not face the squeeze because the additional costs are transferred to the consumer through higher-priced items.
It has become a major issue in Sabah where industrial and consumer goods are said to be up to 30pc costlier because of this - reasons cited for the higher cost of living. The Barisan Nasional Government acted to liberalise the policy somewhat but it did not go far enough to satisfy business sectors and consumers in Sabah. The opposition has said that it will dismantle the policy if it comes to power.
Azman Hezri, a Sarawak Bumiputra supply chain and logistic business expert, was invited by the Sabah Economic Development and Investment Authority (Sedia) and SME Corporation Malaysia to speak at a Sabah Development Corridor (SDC) seminar recently on promoting SMEs and entrepreneur development in Sabah. He shared his views on the Cabotage Policy and related issues with Special Writer David Thien.
DE: What is your general view about the Cabotage policy which has blamed for higher cost of doing business in Sabah?
Azman: On the whole, it is bad for Sarawak as well. It was made a national policy for the interest of the domestic shipping industry at the expense of people in Sabah and Sarawak. Some politicians are well connected in the industry. Sabahans and Sarawakians are just too weak to influence national policies made in Kuala Lumpur by vested interests knowing that their representation politically does not count for much in Parliament.
DE: Should the state governments of Sabah and Sarawak set up their own shipping lines as well as airlines?
Azman: I am not so much in favour of the idea of government getting involved in business. It is already bad enough if you know what I mean.
Things can get messy when exploited looking at MAS and past bailouts with public funds. Taib (Sarawak's CM) has friends and ties in some Sarawak shipping firms. I am sure in Sabah private ship owners prefer less competition. The policy does add higher logistic costs on business.
Let me share a secret with you. Most shippers have already factored in the cost of their containers returning empty to Port Klang in their pricing. (from East Malaysia).
DE: What do you think can be done?
Azman: Speaking from my experience, some shippers already give lower rates to selected customers even when the policy was in force.
It is up to you how to negotiate. I know this because I do get to enjoy discount (in Sarawak) even before the partial liberalisation of the policy.
You know, the cost of the space size of every container seat on a ship is already determined for the ship's profitability. If you can save on your logistic costs which can add up to 30 per cent of your product cost, every percentage saved translates to more profit margins earned.
DE: Are you enjoying this because of your political or other connection, like who you know or who knows you?
Azman Hezri: No, what I meant was I could get more goods volume for the shippers' containers to command a better deal. The issue for shippers is the cost of their containers returning empty to Port Klang and most have already factored in the cost to compensate for this. Hence the high shipping cost. As I told some small scale Sabah entrepreneurs, they can set up a collecting station for their goods to be exported from ports in Sabah to Port Klang jointly in containers if they do not have the volume so that they can negotiate with shippers for better rates jointly as a business group.
East Malaysian entrepreneurs especially those in the export and manufacturing sectors in Sabah and Sarawak should be given incentives to expand by better Federal policy in order to grow the export volume sought by shippers to lower costs.
DE: What about the proposal using Brunei's Muara port to bypass the Cabotage Policy as suggested by some Sabah industry players and even BN politicians?
Azman: Yes, that was also mulled in Sarawak but road distance, conditions and border and customs complexities also add on to costs.
Asean is not yet an open border entity. Personally I don't mind using Bintulu Port if there is a good cost advantage for my business as it is a good trans-shipment port with a open sea trough of 15 metres deep compared to Sapangar's 11-12 metres deep (where not all giant ocean going ships can easily dock unlike Lahad Datu Port of 20 metres deep) but even Sarawakians are reluctant to use Bintulu.
DE: Why is that?
Azman: Because it is a federal port. Sarawak does not profit much from its revenue and its facilities."
(Bintulu Port was established for the import and export benefit of the federal driven Bakun Dam project and ancillary industries like aluminium smelting, oil and gas business of Petronas.)
To understand this, just as the Sabah Government cannot profit from the free port on the Federal Territory of Labuan, likewise Sarawak, although the bulk of Petronas' LNG and other products get sucked out of East Malaysia and exported from Bintulu Port and how Kuala Lumpur designated Bintulu as a trans-shipment hub port for East Malaysia since BIMP-EAGA was set up. The tug of war of the Labuan ferries issue with federal and state licensing differences in the landing right issue is one such case in point.