Sapangar Bay Container Port as a
national load centre to cure Sabah's shipping woes
Issues on cabotage has gone quiet for a while. The last that was
heard from the Authority is the announcement on exemption to the Cabotage
Policy with a lukewarm response from those that has interest in them in Sabah
and Sarawak. It has in fact amused the public that there was no details on the
mechanism for implementation. What was received from the Ministry of Transport
is that, 1.the Prime Minister upon his announcement of
the Cabotage Policy Exemption on May 7, 2017, did not set any time frame for
the implementation of the exemption. 2. the Minister of Transport also did not
set any time frame for the exemption, and 3. that towards this end, the
Ministry of Transport has set up a Task Force to assess the effect and impact
of the exemption of the Cabotage Policy. These findings will be used as basis
for assessment of the effectiveness of the exemption. The assessment exercise is
expected to take at least a year.
Looking at it from Sabah's perspective, the author is not at all
confident that the Authority will move forward to abolishing the cabotage
policy on a probable account that the ship owners association will make a very
very strong representation to protect the benefits that they have received as a
member of the association, though the public may dispute this that it is time
to end the preferential treatment that they have been receiving of which
taxation is one that makes for the best part of these benefits which in return
there is nothing to show from the association in respect of improving shipping
fleets as part of the deal.
The Authority will also be hard pressed to trade off the national
interest aspect of the policy in which shipping fleets will be available to the
government to make use in time of emergencies where these commercial fleets can
be commanded to carry supplies and people as the need be. Sabah for that matter
will have to respect this clause in the Ordinance of 1952, that it may help
Sabah to resolve issues as it affect them during emergencies.
With the above situation what chance has Sabah got to ensure that
its economy can be boosted as a result of the situation that cabotage policy
has apparently and in part caused their product becoming uncompetitive for
overseas market. I would say lets kiss the issue goodbye and focus on a
practical and proven solution to attract shipping activities into Sabah water.
There are basically three interest groups that shipping services and
statistics will impact upon in Sabah. They are the ports (Sapangar Bay
Container Port specifically), the manufacturers and the government.
Sapangar Bay Container Port
Sapangar Bay Container Port (SBCP) strength is its strategic
location along the maritime silk route on the South China Sea. It is midway
between the Far East countries and Singapore and Peninsula Malaysia. It can be
turned into a transshipment hub for cargoes destined for the East Indonesian
market, the Pacific belt and down south to Australia and New Zealand. It is a
perfect location for the BIMP-EAGA market.
SBCP is affected in a way that with or without cabotage policy ships
will shy away from coming. Although direct shipping services by foreign vessels
can visit SBCP even under the cabotage rule, they can only carry such numbers
of containers that is required of the Sabah market. However the coming of the
ships has to be balanced by the number of containers that they are able to
bring back on its return voyage. It has been proven that there is no sufficient
numbers that can justify a balanced cargo load for making the trip. What has
happened is that, the ship may come but the journey to Sabah can be costly to
justify the cost of the voyage. Importers may have to be charged a penalty
equivalent to perhaps double the freight cost taking into account the nearly
empty load on its return journey. SBCP needs the volume to be considered worthy
as a premier port. It can take its time to build on this but it will also take
that long for the industry at the backyard to prosper as they depend on the
port as their outlet to the market. The question therefore, is there a way to
get those numbers of containers fast?
The answer is YES, not relying on the laws but on a practical
solution that has been proven to work. The answer is declaring SBCP as the
National Load Centre for cargoes that is carried by ships on the South China
Sea route for the Asian market. The Asian market comprises of the groupings or
regional cluster of countries of The Far East markets, East Asean region and
also the BIMP - Eaga region. These clusters has its own market for the
container trades. The capability of the port to handle the number of cargoes
that is derived from the cluster will determine which cluster that can best
suit the volume that can be effectively handled by SBCP.
On a general assumption, the cluster of the Far East countries
comprising China, Japan, Korea and Taiwan will be too large for SBCP to handle
in the near future when the expansion project is completed in 2020. SBCP on
completion is only forecasted to handle slightly over 1 million teus. The
cargoes generated for the far east market account for more than 2million teus.
Since it is a big market we have to allow for the freedom of choice for the
market to determine which port to use. Ships and shippers are free to choose if
to use SBCP or Port Kelang in this situation. A lesser tonnage which will come
from the cluster of countries in the East Asean region which comprises
basically the Indochina countries of Vietnam and Cambodia, those cargoes
generated from the eastern port of Thailand that is port like Laem Chabang and
also from the Philippines. It is safe to assume that the cargoes from this
cluster will be ably handled by SBCP.
The other cluster comprising of the BIMP-EAGA countries may well be
too small a number if this cluster is considered for its cargoes to be handled
by SBCP. Further this market has not been fully developed for trading amongst
member countries to be commercially realised.
The National Load Centre
National load centre status had been conferred on Port Kelang way
back in 1993 via a Ministerial Directive coming
from the Minister of Transport. The effect is to cause all cargoes for shipment
from the various ports in the country to be shipped via Port Kelang so that
there will be a marked improvement of the number of containers handled whilst
at the same time each ports will and is free to handle its own container
cargoes meant for foreign destinations. The objective of this Directive is to
enable Port Kelang to catapult to a higher ranking position in a list of
world's busiest ports. This they did and they are now in 12th position and Port
of Tanjung Pelepas at 19th position.
Port Kelang has now outlived the necessity of having to rely on the
Directive as through the years they have developed their niche market that will
enable them to retain their 12th position or so in the world ranking. Will one
million teus extracted out of their statistics hurt them? No, as this statistic
will still feature in their books only that it may appear in a different
category for example either as export or transshipment cargo.
Now to help Sabah's economy to grow, SBCP need the one million teus
to enable them to achieve a hive of shipping activities in the shortest
possible time to help spur its manufacturing industry, and not rely on building
blocks one at a time where it may take a long time to realise the dream of
generating this volume of cargo. This reminds us of how Port of Tanjung Pelepas
came into being as an international status port with the injection of two
million teus brought by Maersk Line when it shift its operation from Singapore.
This was immediate. We hasten to think how long would they achieved this status
if there was not an immediate injection of the two million teus. The concept is
the same here for Sabah. An immediate injection of a sizable volume of container
cargo will immediately transform SBCP port to an international status and at
the same time spur the economic development of its backyard and manufacturing
sector.
Will a Ministerial Directive be had for Sabah? The beauty of this
directive is that it doesn’t hinge on the cabotage policy as domestic cargoes
will be carried by Malaysian registered ships from ports in Peninsula Malaysia
to Sabah and vice versa and the shipment out of Sabah will be a direct shipment
to foreign destinations well within the context of cabotage policy. Sabah will
therefore be able to operate as a transshipment hub. We take note that cabotage policy does not preclude or prescribe any vessel to make
port calls in any port in Malaysia.
With a
huge economic potential availed for Sabah as a result of increased shipping
activities, investment into the state will also increase and more so for
investment for port equipment to enhance its performance to meet new demands
and needs due to increased shipping activities.
The Manufacturers
The manufacturers woes is that their product has become
uncompetitive overseas as the freight they paid is excessively high due to
uneconomic operation of ships without a balanced cargo for both end of the
journeys causing the shipping company to charge a higher rate for the container
going one way. This means that the freight from say Japan to Sapangar Bay is
charged at a higher rate to justify for economics of operations for less than
cargo load carried. As is the current situation shipping their products via
Port Kelang attracts a far costly freight since there is an element of double
handling of the container when it reaches Port Kelang and also the fact is that
by going through Port Kelang it will be covering a greater distance compared to
shipping it direct from SBCP to the Far East market since distance wise it is
much nearer. Journey wise it is tantamount to doubling back to SBCP before
proceeding to its destination.
How will the national load centre concept work for them? With
increased number of ships plying in and out of SBCP, there is no more issue of
penalty to be imposed as there are enough load to carry to and out of SBCP.
This will generate increased production for the products and also generate
other economic activities for the export market. This is an immediate direct
injection of interest in the manufacturing sectors in Sabah arising from an
immediate availability of shipping space. If the port were to take its time in
coming up with the targeted number of containers to be handled, it will also
take time for the manufacturing industry to be rejuvenated.
The State
With increased and improved port performance on handling of arrivals
of more ships will denote a vibrant economy. A vibrant economy will attract
more investments for the benefit of the state economy.
A national load centre as a concept is the answer to the survival of
the state economy especially the manufacturing sectors for both downstream and
standalone projects. Reliance on tourism alone as the source of state income
and of shipment of crude and raw materials will not provide a broader base for
the state economy and therefore lacking in a solid platform for economic
survivability.
It will not hurt ship owners in Malaysia as they will still be in
business to carry cargoes from within the Malaysian ports. What we need is for
ships foreign and domestic alike to bunch into SBCP to create the hives of
shipping activities which will allow our local products to be shipped directly
to East Asian and including the Far East markets much more cheaply than before.
At the same time with opportunities such as this being available for our
exporters more investments will pour in to take advantage of this situation and
creating more export products and a healthy state economy.
Ramliamir is a member of the
Chartered Institute of Logistics & Transport Malaysia. He can be contacted
at ramliamir@cilt-m.com.my
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