March 20, 2009
Traders in Kota Kinabalu pooh-pooh the ‘chicken-and-egg’ (CAE) theory being advocated by Peninsular Malaysia-based ship owners defending the National Cabotage Policy (NCP) – currently being reviewed by the federal government – and which has since come under attack amidst calls that it be scrapped.
MCPXInstead, the traders fault MCA for holding back Sabah and Sarawak in the last 25 years.
Under the NCP, foreign shippers are not allowed to visit Borneo ports directly with their goods. They have to offload at Port Klang, the designated national load centre. About 3,400 Malaysian-owned ships engage in the domestic trade.
“Any investigation will lead us eventually to the decision-making body that has been maintaining the NPC since 1980. This includes the Domestic Shipping Licensing Board (DSLB) and the Transport Ministry,” said one importer in KK who requested anonymity.
“It’s not surprising that both these bodies are actually under the purview of MCA which is in the pockets of 15 shippers who control the domestic trade.
“MCA should not just pay lip service. They should look after the welfare and interests of all Malaysians. They should not just look after the welfare and interests of an elite few, a particular race or clan.”
Citing some figures, the importer pointed out that it costs RM2,436 to ship a 20-foot container from Port Klang to Kota Kinabalu, Sandakan (RM3,236), Tawau (RM3,336), Lahad Datu via Sandakan (RM4,186) and Lahad Datu via Tawau (RM4,386).
Kota Kinabalu for example, said the importer, is closer to Saigon (to import rice) or Hong Kong (consumer goods) compared with Port Klang.
He described the Malaysian Logistics Council (MLC) as another ‘red herring’ being thrown into the discussion by Deputy Minister V K Liew, also president of the Liberal Democratic Party (LDP). The MLC is said to have very little to do with the problems of Sabah and Sarawak under the NCP.
Exporters fear that the Sabah Development Corridor, Kota Kinabalu Industrial Park (KKIP) and the Palm Oil Industrial Cluster (POIC) will become white elephants as “investments are being discouraged by the NCP.”
Main critical element
Shipping has also been identified as the main critical element in the development of the Bimp-Eaga economic growth triangle which brings together Sabah, Labuan, Sarawak, Brunei, southern Philippines, Kalimantan, and other parts of Indonesia in Sulawesi, Moluccas and Irian Jaya.
“If you cannot export your finished products directly because of the NCP, then you are stuck with goods that you cannot sell in the global market,” said an exporter.
“We may have all the tropical hardwood in the world, for example, we can call ourselves resource-rich, we can talk about value-added manufacturing and backward and forward integration of the timber industry but we can’t compete with even Vietnam in terms of furniture exports for the European market because of the NCP.”
Generally, port authorities in Kota Kinabalu have noted that since the Transport Ministry is MCA territory, “the recommendations of MCA ministers carry more weight than all the other federal cabinet ministers combined when issues involving the ministry are brought up in the cabinet”.
Edward Khoo, the sole MCA representative in the Sabah cabinet, denies his party is pro-NCP and reveals that the state government is working on finalising its own report for submission to the ministry.
Apparently, the report will call for the abolition of the NCP and the recognition of Sepanggar Bay Port near KK Port as the main hub in the state along the lines of Bintulu which has long won the status for Sarawak. This is expected to boost Sepanggar as a premier port in Bimp-Eaga, according to FSM (Federation of Sabah Manufacturers) president, Wong Khen Thau.
The consensus in Malaysian Borneo is that the crippling consumer prices in are a result of the NCP. The CAE theory is that consumer prices in Malaysian Borneo remain the same even when freight charges drop and hence the NCP cannot be blamed.
Masa (Malaysian Shipowners Association) maintains that shipping is only one component of the total transportation and logistics cost which makes up 46 percent of the total. The association claims it has since identified eight other cost components in the transport charge from the exporter to the importer and the charges include, among others, port charges, forwarding, trucking, storage and terminal handling charges.
Neighbours will do something
This argument doesn’t sit well with port authorities in Borneo who complain that “the government gets only a few thousand ringgit from licensing Malaysian-registered ships, the truckers don’t get much, freight forwarders and shipping agents are basically just runners squeezing out a meager existence while port authorities are also in the same position”.
“If high shipping cost was the only reason, one could assume that when shipping cost declines, the prices of goods would likewise drop. But this has not been the case,” said Masa chair Nordin Mat Yusoff.
“But this has not been the case. Total ocean freight rates declined by about 41 percent in the last six months in the Peninsular Malaysia-Sarawak-Sabah trade but this has not been reflected in the landed prices of consumer goods.”
“There is a need to find an answer instead of blaming the NCP.”
Industry watcher Loong Chai opines that Nordin’s statement must be taken with more than a pinch of salt since he’s also the vice-president (fleet management) of MISC Bhd which has deployed 80 percent of their 109 ships in LNG, petroleum and chemical transportation.
“MISC fears that without the NCP, they will lose 80 percent of their business to Japanese and Korean ships since they can’t compete,” said Loong Chai.
Institute of Development Studies Sabah (IDS) executive director Yaakub Johari warns that “eventually, if we do not open up, our neighbours will do something against us.”
“The progressive removal of the NCP, leading to the forging of alliances with other major ports and shipping lines, and liberalising shipping licences to increase competition among local operators, will lead to lower freight costs,” said Yaakub.