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Scrapping Malaysia's cabotage risks disaster for domestic shipping
MALAYSIAN shipping lines have reacted angrily to the scrapping of cabotage laws for Sabah, Sarawak and Labuan, claiming it will be disastrous for the industry and likely have impact lowering costs to consumers.
The effect of the new policy is expected to be felt by domestic lines in Sabah and Sarawak, which are already under pressure from the downturn in the shipping industry.
These include small domestic-focused players such as MTT Shipping, AML Shipping, MSC Shipping, Harbour-Link Marine Services and Shin Yang Shipping, reports Colchester's Sea Trade Maritime News.
Other Malaysian shipping companies such as MISC, Hub Line, Swee Joo Coastal and Geniki Shipping have already exited the container shipping business because of unsustainable freight rates, while PDZ Holdings is on the ropes battling several arrest orders on its ships.
Two Malaysian shipping bodies have come out to suggest various negative scenarios that could be triggered by the new policy.
Shipping Association Malaysia (SAM) chairman Ooi Lean Hin told local media that some shipping companies had been considering relocating their business to Singapore.
The Sarawak Sabah Shipowners Association (SSSA) warned that Sarawak's maritime interests could be irreversibly harmed and might result in even higher costs in the long run.
SAM's chairman highlighted positive factors in Singapore such as tax-exempt status and no national restrictions on crew if they were to move operations to the Lion City.
"But the question is, how many of us can bring our businesses to Singapore and why should we?" he asked, comparing it to allowing international carriers such as Singapore Airlines to compete with AirAsia on domestic Malaysian routes.
Mr Ooi declined to forecast potential losses for local shipping companies, but claimed current margins on the trade are only between eight per cent to 10 per cent.
The SSSA presented figures to show that their rates are much lower on domestic routes compared to international carriers on similar routes. For example, the protected Port Klang to Kuching route has average rates of US$409 per TEU while the rate from Singapore to Kuching averages $673 per TEU for a slightly shorter voyage.
On the backhaul route from Kuching back to Peninsular Malaysia, the difference is even more severe, with the $131 per TEU being charged by domestic lines on the cabotage route being about half the $259 per TEU charged for Kuching to Singapore boxes.
SSSA warned that any rate reductions by international carriers after cabotage was lifted would only be temporary and used as a predatory move to eliminate the domestic players with much smaller pockets. Once competition is eliminated, the market would be at the mercy of the big players, the association said.
The effect of the new policy is expected to be felt by domestic lines in Sabah and Sarawak, which are already under pressure from the downturn in the shipping industry.
These include small domestic-focused players such as MTT Shipping, AML Shipping, MSC Shipping, Harbour-Link Marine Services and Shin Yang Shipping, reports Colchester's Sea Trade Maritime News.
Other Malaysian shipping companies such as MISC, Hub Line, Swee Joo Coastal and Geniki Shipping have already exited the container shipping business because of unsustainable freight rates, while PDZ Holdings is on the ropes battling several arrest orders on its ships.
Two Malaysian shipping bodies have come out to suggest various negative scenarios that could be triggered by the new policy.
Shipping Association Malaysia (SAM) chairman Ooi Lean Hin told local media that some shipping companies had been considering relocating their business to Singapore.
The Sarawak Sabah Shipowners Association (SSSA) warned that Sarawak's maritime interests could be irreversibly harmed and might result in even higher costs in the long run.
SAM's chairman highlighted positive factors in Singapore such as tax-exempt status and no national restrictions on crew if they were to move operations to the Lion City.
"But the question is, how many of us can bring our businesses to Singapore and why should we?" he asked, comparing it to allowing international carriers such as Singapore Airlines to compete with AirAsia on domestic Malaysian routes.
Mr Ooi declined to forecast potential losses for local shipping companies, but claimed current margins on the trade are only between eight per cent to 10 per cent.
The SSSA presented figures to show that their rates are much lower on domestic routes compared to international carriers on similar routes. For example, the protected Port Klang to Kuching route has average rates of US$409 per TEU while the rate from Singapore to Kuching averages $673 per TEU for a slightly shorter voyage.
On the backhaul route from Kuching back to Peninsular Malaysia, the difference is even more severe, with the $131 per TEU being charged by domestic lines on the cabotage route being about half the $259 per TEU charged for Kuching to Singapore boxes.
SSSA warned that any rate reductions by international carriers after cabotage was lifted would only be temporary and used as a predatory move to eliminate the domestic players with much smaller pockets. Once competition is eliminated, the market would be at the mercy of the big players, the association said.
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