Local shipping industry will lose out: Exporter
Published on: Sunday, February 19, 2017
Kota Kinabalu: A local exporter, Richard Wong Tzu Piaw, claimed the local shipping industry could risk will lose out to foreign industry players if the Federal Government decides to do away with the controversial Cabotage Policy.He said some foreign shipping companies have very deep pockets and would gain full control over domestic sea logistics.Some of them are bigger than any companies listed on the Kuala Lumpur Stock Exchange (KLSE).
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He cited Maersk Line, which is the world's largest container shipping company that boasts having US$370 billion market capitalisation, as a possible contender."Assuming Maersk Line is to compete by offering promotional discounted freight charges to all Malaysian customers, do you think any of our local shipping companies can compete?" asked Wong.He was commenting on a statement by Transport Minister Datuk Seri Liow Tiong Lai that the Federal Government was set to review the Cabotage Policy that has been widely blamed for higher cost of goods in Sabah and Sarawak.The Minister said the Government was reviewing the policy even though the higher cost of goods in Sabah "are due to other factors."
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The policy requires all ships to first call at Port Klang and loading their goods onto Malaysian vessels to bring them to Sabah.It was aimed at developing the local shipping industry but critics said this did not happen the past 40 years.
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According to Wong, if local or regional shipping companies closed their business as a result of competition with the 89-year-old Maersk Line, there are possible worst case scenarios that could possibly happen.Firstly, he said the company may begin recouping its investment (promotion offered to compete with local or regional shipping companies) immediately after all of them give up on the Malaysian market and begin to increase their freight charges."If this happens, what other plans do we have to fall back on?" Wong asked.He said Maersk had successfully done it before in between 2008-2011 at the expense of local exporters when they lowered their price on outbound shipment to Europe as low as US$800 for a 40-footer container. The company increased the price to US$4,000 for the same container size when the market turned around."This caused Kota Kinabalu exporters by surprise," he said, claiming that Maersk Line is in fact known to be ferocious when it comes to business domination.Wong also argued that Maersk Line could cut cost and streamline their operation and re-schedule their shipping schedule.This can create a tight logistic situation within Port Klang and Sabah sector. If this happens what alternatives do we have?""Let's say they reduce from the current two to three ships per week on KK port to once a month using a bigger ship. What about the local shipping companies in Sabah? Will they be able to cope with this change of schedule? And do we have the warehouse capacity to deal with this scenario? Any change in business model can be costly," he argued.He also said if Maersk Line went out of business as in the recent case of Hanjing Shipping that was declared insolvent and went bust overnight, the entire domestic shipping logistics would be in a total mess.Stay up-to-date by following Daily Express’s Telegram channel.
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