New cab­o­tage pol­icy a boost for Sabah, Sarawak

New Straits Times - - Business -

THIS month, Prime Min­is­ter Datuk Seri Na­jib Razak an­nounced that the ex­emp­tion of the cab­o­tage pol­icy for Sabah, Sarawak and Labuan would start from June 1 this year. This is good news for in­dus­tries as well as the peo­ple of Sabah and Sarawak.

The cab­o­tage pol­icy was in­tro­duced in the 1980s as a way to pro­mote Port Klang as the na­tion’s main tran­ship­ment hub. At that time, it was a good de­ci­sion to po­si­tion Malaysia as a tran­ship­ment hub and re­sulted in Port Klang still be­ing ranked to­day as one of the top tran­ship­ment hubs in Asia due to its ex­cel­lent lo­ca­tion, in­fra­struc­ture, ser­vice level and costs.

How­ever, the re­sult of this pol­icy was that very few in­ter­na­tional lin­ers are call­ing in to ports in Sabah and Sarawak.

But if you study the global ship­ping routes mapped by the Global Po­si­tion­ing Sys­tem, which you can eas­ily find on the In­ter­net, you can better un­der­stand the full po­ten­tial of Sabah and Sarawak and Penin­su­lar Malaysia along these busy sea freight high­ways.

You will no­tice that high in­ten­sity ship­ping lanes will pass through the Straits of Malacca (pass­ing Pe­nang Port, Port Klang, Port of Tan­jung Pelepas, Jo­hor Port, Sin­ga­pore), but from Sin­ga­pore are spread in a thick bun­dle to the northeast to­wards Viet­nam, Philip­pines, China, South Korea and Ja­pan.

This means that many ship­ping lanes are pass­ing a rel­a­tively short dis­tance (of­ten less than 200km) from Sabah and Sarawak’s lead­ing sea­ports, such as Kuching Port, Bintulu Port, Miri Port and Kota Kinabalu Port, which have solid con­tainer han­dling fa­cil­i­ties.

For ship­ping lines, this is a fea­si­ble dis­tance to add an ad­di­tional port in an es­tab­lished ship­ping route. This is a busi­ness op­por­tu­nity for ports in Sabah and Sarawak to serve ship­ping lines pass­ing by Bor­neo.

Over the years, trade be­tween Sabah and Sarawak and Penin­su­lar Malaysia was served mainly by lo­cal op­er­a­tors. This pro­vides less com­pe­ti­tion and less choice of ship­ping lines vis­it­ing Sabah and Sarawak ports, re­sult­ing in limited reli­able fixed ship­ping sched­ules and high trans­port costs for sea trans­port to and from the two states.

This sit­u­a­tion has af­fected lo­gis­tics lead-times and costs for in­dus­tries there.

To­day’s in­dus­tries de­ter­mine production lo­ca­tion based on to­tal sup­ply chain lead-times and costs, which are heav­ily ef­fected by lo­gis­tics sit­u­a­tions. This made it less at­trac­tive for in­dus­tries to be lo­cated in Sabah and Sarawak than the penin­su­lar, lead­ing to fewer di­rect for­eign in­vest­ments in the two states.

The de­ci­sion by the prime min­is­ter, sup­ported by the Trans­port Min­istry, will there­fore pro­vide a boost for the economies in Sabah and Sarawak and re­sult in more in­dus­tries be­ing lo­cated in the states to lever­age their rich di­verse nat­u­ral re­sources, wa­ter qual­ity and avail­abil­ity, as well as large and well-ed­u­cated work­force with good English lan­guage skills.

With the com­ple­tion of the Pan Bor­neo High­way link­ing Sabah, Sarawak and Brunei, East Malaysia will be on a par with lo­gis­tics in­fra­struc­ture and sup­ply chain cost lev­els in Penin­su­lar Malaysia and one of the pre­ferred top in­vest­ment lo­ca­tions for in­dus­tries in Asia.

The de­ci­sion by the prime min­is­ter, sup­ported by the Trans­port Min­istry, will there­fore pro­vide a boost for the economies in Sabah and Sarawak and will re­sult in more in­dus­tries be­ing lo­cated in the two states...

marco@lb­bin­ter­na­tional.com The writer is founder and CEO of LBB In­ter­na­tional, the lo­gis­tics con­sult­ing and re­search firm that spe­cialises in agri-food sup­ply chains, in­dus­trial lo­gis­tics and third-party lo­gis­tics. LBB pro­vides lo­gis­tics diagnostics, sup­ply chain de­sign and so­lu­tions and mar­ket re­search in Asia, Europe and the Mid­dle East.

FILE PIC

A con­tainer ter­mi­nal at West­port in Port Klang. The ex­emp­tion of the cab­o­tage pol­icy for Sabah and Sarawak pro­vides op­por­tu­ni­ties for ports there to serve ship­ping lines pass­ing by Bor­neo.

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