KUCHING: Sarawak shipping companies, already facing prolonged depressed freight rates, are in for tougher times with the scrapping of the cabotage policy.
The policy change means that foreign cargo ships will be allowed to call directly at ports in Sarawak, Sabah and Labuan, and to transport cargo from Peninsular Malaysia to the East Malaysian states and Labuan.
Last week, Prime Minister Datuk Seri Najib Tun Razak announced the exemption of the cabotage policy for Sarawak, Sabah and Labuan, which will take effect next month, on calls by the leaders from the two states.
The 30-year-old policy, introduced in the 1980s to promote Port Klang as Malaysia’s main transhipment hub, limits the shipment of goods from Peninsular Malaysia to Sarawak and Sabah to only Malaysian-flagged ships. The policy has in fact been partially liberalised in recent years and foreign ships such as Evergreen Marine Corp Ltd have been going direct to Bintulu without first having to call at Port Klang.
However, this policy will still be applicable to cargo transportation within Sarawak, Sabah and Labuan.
It means that only local shipping companies will be eligible to ship cargo within and between ports in Sarawak, Sabah and Labuan.
Despite the scrapping of the policy, the latest policy liberation, according to Hubline Bhd chief executive officer/managing director Dennis Ling Li Kuang, will open up competition between Malaysian and foreign-registered vessels.
“Local shipping companies are already faced with the very low freight rates. It will be very tough for them (to face the coming competition). There will be more suffering for local shipping firms,” he told StarBiz.
Hubline, which operated several dozen cargo vessels servicing domestic and Asean routes during the good old days, exited the containerised cargo transportation business in 2015 after suffering years of huge losses. The shipping firm now concentrates on the dry bulk business.
The shipping industry, which has been in the doldrums since the 2008 global financial crisis, also saw Swee Joo Bhd - one of Sarawak’s oldest and biggest listed shipping firms - wound up its business after being weighed down with huge debts.
Another Sarawak-based shipping firm, PDZ Holdings Bhd, also faces difficulties. It was reported earlier this year that Dan-Bunkering (Singapore) Pte Ltd has served a warrant of arrest on its vessel - PDZ Mewah - over the supply of marine fuel oil and/or marine gas oil to the company.
Ling said local shipping firms would find it difficult to compete with the larger internationalshipping lines, such as those from China and Taiwan, which could group and ship their cargoes together and call on bigger ports in Sarawak, Sabah and Labuan.
Syscorp owns and operates a fleet of 14 container vessels, serving ports between Peninsular Malaysia, Sarawak and Sabah. The company transported over 105,000 TEUs (twenty-foot equivalent) containers in the financial year ended June 30, 2016. Meanwhile, the Malaysian Shipping Association has painted a gloomier picture for local shipping firms following the cabotage removal. Its chairman Ooi Lean Hin was quoted in media reports as saying that the Government’s lifting of the cabotage policy “is going to kill all of us (shipping firms).”