With other countries tightening their cabotage policy, Malaysia's recent move to lift it will affect the domestic maritime industry despite it being said to be in adherence with free market dynamics.

The industry may be affected in such a way that there would be no business for local ship builders and ship repairers (SBSR), the sub-unit of the maritime industry.

With the lifting of the policy, Malaysian ship owners would be able to order ships from and repair ships in foreign yards if it is cheaper or more convenient for them to do so, or if it fits their business strategies.

Meanwhile, the cabotage policy is being imposed by countries to prevent foreign vessels from operating within their sovereign waters.

Globally, the European Union has introduced rules to limit cabotage journeys undertaken by foreign carriers within the waters of member states, while Australia too has tightened cabotage restrictions on coastal shipping.

However, the tightening of cabotage rules in Indonesia had an adverse effect on several Sarawakian yards which used to undertake new building projects for Indonesian ship owners, which includes passenger vessels, tugs, barges and offshore support vessels.

Indonesia's move has reversed the tide, with many shipyards in Indonesia getting more business from local ship owners, as Sarawak yards reel from the loss of business.

The lifting of the more than 30-year-old cabotage policy had stirred the market and received mixed views, with some supporting the change, while others said the industry was losing its support.

Effective June 1, Sabah, Sarawak and the Federal Territory of Labuan will no longer be bound by the policy imposed on all cargo shipping services between Peninsular Malaysia, Sabah, Sarawak and Labuan.