Cabotage Policy for Sarawak to be Reinstated

For those who didn’t know, the cabotage policy was liberalized in 2017, thereby allowing in a lot of foreign competitors in the shipping market of Malaysia at the expense of the local players who didn’t have the size, scale, or route coverage to compete. This had impacted the profitability of many of the Sarawakian operators—such as $HARBOUR / 2062 (HARBOUR-LINK GROUP BERHAD) and Shin Yang group $SYSCORP / 5173 (SHIN YANG SHIPPING CORPORATION BERHAD), amongst others.

Early this month, Anthony Loke announced that the Cabinet had agreed to reinstate the cabotage policy for Sarawak, at the State’s request. This is expected to benefit the local shipping industry and related services.

Sarawak’s Transport Minister Dato Sri Lee explained that any goods and passengers from any part of Malaysia, including exclusive zones, shall only be done by ships registered in Malaysia with valid Domestic Shipping licenses. Interestingly, there are no changes to Sabah’s cabotage policy. This tells me that it is likely to more impact Sarawak’s routes than Malaysia as a whole.

This is not really surprising to me, as I have written many times about how Sarawak is being very clear and eager to have more autonomy over their own affairs.

This is like how foreign airplanes can only land in International Airports like KLIA, and do not service local routes. Similarly, foreign ships will likely need to unload or transship their cargo in any of the international ports of the country, whereby local ships will then be responsible to transport the goods between the local ports (from other parts of Malaysia to Sarawak and vice versa).

My first thinking is that this would increase the cost of local shipments to other industries and ultimately end consumers. However, according to the Minister, it will not. Well, it’s not like the cost of goods at East Malaysia had come down since 2017, so maybe they are right. I shall reserve any opinions on this matter.

Regardless, removing competition is definitely beneficial to companies operating in this space. For context, we can see how negatively Harbour’s shipping segment was impacted in FY 2018 when the cabotage policy was first removed. Now that the reversed had happened, I am interested to see how much, if any, they can benefit.