Prime Minister Datuk Seri Najib Tun Razak has announced the abolishment of the cabotage policy for Sabah, Sarawak and Labuan starting from June 1, 2017.
Najib said leaders from Sabah and Sarawak have been continuously requesting for the policy to be reviewed as it is said to be the cause of high prices in both states.
However, the policy would still be applicable to cargo shipping operations within Sabah, Sarawak and Labuan.
Najib said this during the launching of the Ekpresi NegaraKu programme at the Sandakan municipal field on Sunday, May 7.
The cabotage policy was enforced since 30 years ago in Sabah, Sarawak and Labuan and it functions to control goods shipped from the peninsula to Sabah and Sarawak.
HOW CABOTAGE MAKES GOOD EXPENSIVE IN SABAH AND SARAWAK A double cheeseburger in New York will cost the same in Los Angeles. Sabah and Malaya are within less than 1-hour time zone, yet the goods having huge price differences - about 20 to 30 percent more than in peninsula.
For example, the price of national dailies - Utusan Malaysia, Berita Harian, The Star, New Strait Times is about 50sen to RM1 more in Kuching or Kota Kinabalu than in Kuala Lumpur.
The cost of transporting container from Hong Kong to Port Kelang is about RM200. The same container, when shipped out of Port Klang to Kota Kinabalu is RM2,436 - cost thousand times over.
Shipowners often giving unreasonable excuses for the huge markup - such as not enough container going to Kota Kinabalu or out of Kota Kinabalu. It is a lame excuse said Zainnal Ajamain.
If Federal Government abolished the cabotage and allow ships from Hong Kong to stop over in Kota Kinabalu before proceeding to Port Klang or elsewhere, the price of transporting the container can drop from whopping RM2436 to less than RM200. The huge saving will help reduce the price of goods sold in Sabah and Sarawak substantially according to Zainnal.
It also encourages foreign and local investors to invest in Sabah and Sarawak as the cost of transportation can be reduced substantially without the cabotage policy.
"Shipping one 40ft container from Sabah to Europe cost approximately US700 and is more expensive than exporting from Port Klang or Ports in China or Vietnam to Europe" said Sharon Tsang, President of Sabah Furniture Association, report Daily Express on May 13, 2010.
"The cost of shipping 40ft container from Sabah to Port Klang is RM1,000 (US$300) this is one of the reasons foreign buyers view products manufactured in Sabah as very expensive.â€
WILL GOODS CHEAPER AFTER CABOTAGE? However, Transport Minister Datuk Seri Liow Tiong Lai said: "a World Bank study on national port strategy found that cabotage and shipping costs are not the main reasons for the higher price of goods in Sabahâ€.
"According to the study, the high costs are a result of weak distribution channels, high handling charges, and inefficient inland transportation" Liow said.
In terms of transport connections, he acknowledged, however, that Sabah should tap its strategic position within the Brunei, Indonesia, Malaysia and the Philippines-East Asean Growth Area.
"Sea routes as those from South America and Australia to China particularly favours Sabah's geostrategic location.
"Sabah needs to unlock its potential to emerge as a substantial player in the maritime and logistics sector" he added.