Saturday, 4 August 2012

Shipowners say industry wrecked without cabotage

By Hafidz Baharom

Aug 04, 2012
KUALA LUMPUR, Aug 4 — Shipowners have warned that Pakatan Rakyat’s (PR) pledge to abolish the national cabotage policy would not lower prices of goods in east Malaysia but would put local shipping lines and thousands of Sabah and Sarawak crew members out of work.
The Malaysia Shipowners Association (MASA), the country’s sole shipowners’ group, pointed out in a statement to The Malaysian Insider that 60 per cent of the final price of goods does not come from ocean freight charges but from poor land transportation within the east Malaysian states.

These logistic costs, it said,were largely due to issues like poor overland infrastructure, low port productivity and performance, hidden and dubious charges including profiteering by other intermediaries in the total transportation and distribution.
“Why these charges have not been given the scrutiny as shipping escapes MASA. Or are all these charges being lumped as shipping charges merely to reinforce a weak argument against cabotage?
“The ocean freight charges therefore make up about 40 per cent of the total logistics costs from factory floor to shelf,” MASA said in the statement.
The association said shipping lines were only accountable for the ocean freight charges and not for the shelf price of goods.
“There are eight intermediations from the time the goods is carried from the point of origin and destination, and ocean shipping is only one of the eight intermediation points, others being outbound haulage, warehousing, freight forwarding and port handling and the same intermediations in the inbound movement up to the shelf,” it pointed out.
PKR promised earlier this week to abolish the cabotage policy which, it said, requires goods to be shipped domestically with only local vessels, in a bid to make cars and other products cheaper in Sabah and Sarawak.
The party’s de-facto leader Datuk Seri Anwar Ibrahim had said the policy should be revoked completely as it makes “no economic sense”.
Politicians and folk in Sabah and Sarawak have long been railing against the cabotage policy, arguing that it should be done away with to help normalise the economic divide between east Malaysia and the peninsula.
The 1980s policy requires all domestic transshipment of goods to be done using Malaysian vessels, which is said to have contribute much to rising shipment costs and subsequently the higher cost of goods in east Malaysia.
“Why must we, say, take goods from Hong Kong, for example, why must it come via Port Klang? I mean it is totally unacceptable.
“It does not even make economic sense, except for the cronies interested... so you are actually just enriching the few at the expense of the masses in Sabah and Sarawak,” Anwar had said.
But MASA disputed the claim that the cabotage policy bars foreign vessels from visiting Borneo ports directly.
“Under the government’s cabotage policy, there is no restriction for any foreign shipping lines to call at any Malaysian port, including at ports in Sabah to load or discharge cargo from or to any foreign port,” MASA said, repeating an assertion yesterday made by Transport Minister Datuk Seri Kong Cho Ha.
The group added that there are foreign shipping lines that call directly at Sepangar Bay (Kota Kinabalu), Tawau, Bintulu and Kuching, and even at some of the smaller ports.
“Foreign shipping lines are also allowed to transship at Kota Kinabalu, Kuching and Bintulu where they could consolidate larger threshold volumes to reshipment to third countries,” MASA said.
The group argued that it was misleading to assume that if cabotage was removed, consumers would not have to pay any shipping charges and goods would be delivered free by the foreign shipping lines.
“It is only a conjecture that freight rates would go down if the cabotage is no more in place. No one can firmly vouch by how much it would decline, if at all it would decline, that is,” MASA said.
It said the issue of cabotage should not be seen in a “we” against “them” scenario by pitting peninsula Malaysia against Sabah and Sarawak, adding that it was protecting member shipping companies from both the states.
“If the policy is dismantled the bigger losses will be borne by these companies and the collateral damage or losses on the economies of the two states will be substantial.
“This is also because most of crew members of the ships deployed by the shipping lines, totalling more than 5,000, are from Sarawak and Sabah,” it said.
The association added that most of the shipping companies support the local ship repair facilities and shipyards and the maintenance services available in the states.
MASA also pointed out that it has repeatedly said that there were other remedies that would help lower shipping costs including reducing port handling and marine charges for domestic shipping lines as well as reviewing charges for handling empty container for re-positioning and taxes on bunker upliftment for coastal operators.
“Ultimately, no one should deny that with better ports with higher productivity, better roads, better warehousing/storage facilities, closer enforcement on price profiteering by the Ministry of Domestic Trade and a more efficient physical distribution of essential/control items, there would be better control over shelf price of goods in Sabah,” it said.

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