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Virtual Professional Dialogue on Cabotage Policy and Bunkering Industry

The Centre for Maritime Economics and Industries recently conducted an online dialogue to discuss two matters – the effectiveness of liberalising the cabotage policy in Sabah and Sarawak, and the issues and prospects of the bunkering industry in Malaysia. The dialogue was a way to ensure the assessment of these subject matters would be based on the evidence drawn from discussions and surveys with industry players.

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Datuk Dr Sabirin Ja’afar and Cdr Ang Chin Hup (R) listening to the participants in the virtual dialogue.

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Participants sharing ideas during the virtual dialogue.

Director-General Datuk Dr Sabirin Ja'afar opened the dialogue by delivering his welcoming remarks to the participants. The objective of the first dialogue was to provide snapshots of the cost of living, price of goods, cost of doing business, and logistics, before and after the liberalisation of the cabotage policy in Sabah and Sarawak.

The dialogue also sought to study issues and prospects in the Malaysian bunkering industry, therefore the discussion also covered the following aspects: effective governance (both administrative and enforcement), tax and bunker fuel price, safety specifications for bunker ships, quality of fuel, professional training, accreditation, and certification. These points of discussion were moderated by Cdr Ang Chin Hup (R).

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Datuk Dr Sabirin Ja’afar officiating the virtual dialogue session.

Adjunct Professor (UMT) Nazery Khalid shared his insights on the cabotage policy's impact on the shipping industry. There were both positives and negatives in liberalising the cabotage policy, as it involved many stakeholders with compelling stands and points of interest. He suggested that the cabotage narrative should expand beyond shipping and manufacturing to encompass economic or industrialization policies. Following this, he pointed to several areas in Sabah and Sarawak to look into, namely the level of industrialisation in the two states; the manufacturing of high-demand global products; the volume of import and export between the states; cargo imbalance between East and West Malaysia; the lack of port capacity and features, the designation of ports, and other costs which contribute to higher prices of goods in the two states.

President of Sarawak Association of Maritime Industries (SAMIN), Dr Renco Yong countered that the cabotage policy was not the cause behind the high cost of living in Sabah and Sarawak. While the prices of goods in East Malaysia was high, some increased even after the cabotage exemption. He commented that there were many shipping companies in Sarawak and that the major issue was the possibility of foreign operators dominating the market, which may limit the movement of domestic cargo.

Meanwhile, Johor Port Authority (JPA) General Manager, Muhammad Razif Ahmad highlighted Malaysia have the potential for a bunker market in with the right location, good demand potential, good pricing, excellent storage facilities and established players as the Straits of Malacca is one of the busiest shipping lanes in the world.. As an aside, he shared that JPA was working on a pilot project of an e-Bunkering system with the Lembaga Pelabuhan Johor (LPJ).

Chairman of the Shipping Association Malaysia (SAM) Ooi Lean Hin related the possibility of transforming Port Klang into a bunkering hub. He saw an opportunity when the regulatory changes that result in ships operating beyond specified emission control areas need to reduce the sulphur content of ships' fuel oil to 0.5%. Since Port Klang has a ready market of 13,500 vessel calls, Port Klang can also compete on price as Petronas produces LSF locally and is able to tap into the region's 40,000 bunker calls.

According to Jeffrey Tan from Blackhem (M) Sdn Bhd, certain Malaysian ports have the potential to be a bunker destination for liners and shipowners. He opined that if authorities would provide legislation and bunkering SOPs, it would inspire confidence to liners and shipowners in terms of quality and quantity. The concerted efforts from various parties to promote Malaysian ports as bunkering destinations and local bunker suppliers to encourage foreign liners and ship owners to consider bunkering in Malaysia and to deal directly with local bunker suppliers.  His other recommendations to improve market growth and operation time include a speedy and efficient processing of licences, a longer validity for bunker permits, and more available pilots for bunker ships.

MIMA expresses its deep appreciation to the participants of this virtual dialogue. The suggestions and ideas from various industry players and government agencies from both East and West Malaysia were insightful and will further improve the cabotage policy and bunkering industry in the country.

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