UNIVERSITI KUALA LUMPUR

MALAYSIAN INSTITUTE OF MARINE

ENGINEERING & TECHNOLOGY
(UniKL MIMET)
(LGB41902)
MARITIME ECONOMICS AND TRANSPORTATION
ASSIGNMENT
CABOTAGE POLICY
NAME

ID.NO

MUHAMMAD SYAHIR BIN

SULAIMAN

5626711224
5

KHAIRUL RIJAL BIN ABDUL

AZIZ
MOHD FIRDAUS BIN ABD RAZAK

5626711215
5
5626711214
9

LECTURER: NORAZLINA BINTI ABDUL NASIR

What is cabotage?
The word comes from French - caboter which means to sail along a coast.
Generally refers to the transport of passengers and goods.
Involving the transport between two points in the same country and it is a trade
or navigation in coastal waters or the exclusive right of a country to operate the air
traffic within its territory.
Cabotage Policy (Malaysia)
The policy which reserves the domestic trade to its own flagged vessels known as
Cabotage Policy.
Cabotage policy or laws used to protect and to promote a strong national shipping
industry.
Malaysian government implemented a policy which reserves the transportation of
goods in the domestic trades to ship flying the Malaysian flag.
This policy implemented on 1st January 1980 with amendment off the Merchant
Shipping Act 1952 Government appointed Domestics Shipping Licensing Board
(DSLB) to regulate & control domestic shipping between ports in Malaysia.
This policy necessary because only a small number of Malaysian registered ships
were plying the coastal routes.
Shipping route between ports before partial cabotage liberalization:

Shipping route between ports after partial cabotage liberalization:

Recent Issues about Cabotage:

The Borneo Post/Use Muara port to circumvent cabotage policy/ March 7, 2011.
United Borneo Front (UBF) co-founder, Zainal Ajamain: Business in Sabah can avoid
the extra shipping costs caused by the cabotage policy by taking advantage of the
loophole in the system and ship their goods into the state using Muara Port Brunei.
The Borneo Post/ Impact analysis on liberalization from cabotage proposed/ Oct.
26, 2011. - Industrial Development Minister, Datuk Raymond Tan An impact
analysis on the partial liberalization of the cabotage policy affecting operational
costs in Sabah & Sarawak needs to be carried out.
We need to know ports like Kuching, Bintulu & Kota Kinabalu were liberalized from
cabotage policy, what impact it has, how much it affects the cost of operation within
these areas before we can say that the high cost of goods is because of cabotage
Deputy International Trade & Ind. Ministry Datuk Jacob D. Sagan Federal
government realizes that what the industries in Sabah want is for international
carriers & shipping lines to be allowed to bring imported goods direct to the state,
however, he pointed out that international carriers & shipping lines are reluctant to
come to this state because of the cost they will incur.
Daily Express / No decision yet to abolish cabotage policy / Nov. 23, 2011.
Industrial Development Assistant Minister Datuk Michael Asang There is no latest

development to the proposal to abolish the cabotage policy. Government is awaiting

an assessment report on the impact of its liberalization by Maritime Institute of
Malaysia.
My ministry has given its answer then and until today, the situation remains the
same as there is no latest development on the issue raised.
Terminal Handling Charge (THC) meeting / Nov.30, 2011 The meeting decided to
accept the proposed reduction on the THC to RM70 per container including the
transportation and depot handling cost. The meeting requested Mr.Lo Shu Kiong to
bring this proposed rate to MASA for further consideration.
Conclusion:
This cabotage policy is precisely made to protect the local shipping industry in
Malaysia. Shipping industry need to make a reformation by offering a healthy
competition between local and international shipping so as to developed other
industries part in Malaysia especially in Sabah and Sarawak. Therefore, a
comprehensive, thorough and fair study and discussion should be done for the
common good.
What is cabotage?
Cabotage refers generally to the transport of passengers and goods. Originally, it
referred specifically to shipping, but cabotage also applies to airlines, trucking, and
trains. Many nations have cabotage laws which dictate the terms which carriers
must follow when transporting people or materials within their borders. Many of
these laws are designed to promote the development of domestic transport
companies, and some cabotage laws have been criticized because they can restrict
free trade.
The word comes from the French caboter, which means to sail along a coast.
While the word initially referred to navigation and trade in coastal waters, it has
come to refer also to the right of a country to restrict its airspace. Cabotage rights
are guaranteed to all nations because a threat to national airspace can threaten
national security, and therefore countries need to be able to protect themselves by
protecting their airspace. In addition to keeping themselves safer, many nations
used cabotage laws to protect their economies and to promote a strong national
shipping industry.
Many countries give preference to domestic carriers in the air and in ports. The
United States is one such example; airlines operating domestic flights in the United
States must be American, although foreign carriers may fly into American airports.
In ports, under the Jones Act, domestic cabotage must be carried out by American
ships, although foreign carriers are welcome in international ports with trade goods

and passengers. Foreign ships, like cruise ships, may be received special
dispensation so that they do not violate cabotage laws.
In terms of shipping, cabotage laws are very important. The Jones Act is credited as
being the driving force behind America's Merchant Marine, which numbers in
hundreds of ships and thousands of skilled sailors. By restricting domestic cabotage
to American-flagged ships, the United States government ensured that American
carriers would enjoy a wide range of privileges which some foreign companies
believe to be unfair. The justification for these cabotage laws is that the Merchant
Marines benefit the United States by ensuring that the country has a large fleet of
ships when it needs it, and the Merchant Marine would not be possible without the
assurance of cabotage restrictions.

What is cabotage regime?

According to Udeh (2001) - Cabotage usually refers to the exclusive reservation by a
State of the commercial operations between ports in that country for their own
national flag vessels. Cabotage Act has become the last bastion for the defense and
even creation of jobs for national seafarers in many countries. Cabotage principles
can also be applied within a given region or sub-region, rather than an individual
country, in order to favour local or regional employment. In countries where the
national fleet has virtually disappeared, the introduction of cabotage arrangements
represent the main and, sometimes, the only serious possibility remaining to prop
up indigenous enterprise and secure employment for local seafarers.
On the other hand, Malaysia operates a relaxed cabotage policy through laws which
permit foreign-registered vessels to be temporarily licensed by the Domestic
Shipping Licensing Board (DSLB) to carry on coastwise trading where the Malaysian
Shipowners Association (MASA) confirms in writing that there are no available
Malaysian vessels to carry the cargo concerned. The DSLB regulates and controls
the licensing of ships engaged in domestic shipping under stipulated conditions to
be met and based on applications by the parties concerned.
Advantages Cabotage Policiy
There are several advantages by implementing Cabotage Policy in Malaysia. the
shipping market at Malaysia will be improve because of the Cabotage Policy states
only the ship with Malaysia Flag State can be operate in Malaysia. This will improve
the number of the shipping company at Malaysia and also will increase the job
opportunity for Malaysia citizens. this is because the vessel with Malaysia Flag state
must to be operate majority by Malaysia citizens. Anything product that enter
Malaysia can be checking at the hub port. this will low the operation cost for the law
enforcement such as customs.

Disadvantages Cabotage Policy

Cabotage Policy have certain disadvantages, the main disadvantages are the policy
will be create a shipping company that will be monopoly the market and also the
operation cost to send a certain product to certain area of Malaysia will be increase.
The monopoly of the market will be happen when there have a large shipping
company with a fllet of vessel will be control the freight rate. when this happen the
new company can be bankrupt because of there have no abilities to fight with a
bigger company. Cabotage policy also will creat a kroninisme. This is because the
business trade will be goes to the company that have been recognise then to the
new company. The price of the product that will be sell far from the hub will
increase. The example is such as the price of product that are sell at Penisular
Malaysia more chepper than at Sabah and Sarawak.

Refferences

1. http://www.marineinsight.com/misc/maritime-law/cabotage-laws-in-themaritime-industry-has-it-met-its-intended-effects/
2. http://logistics-malaysia.blogspot.com/2009/06/cabotage-shipownersplea-to-defer.html
3. http://malaysiansmustknowthetruth.blogspot.com/2014/07/free-sabahsarawak-from-cabotage-policy.html
4. http://www.skrine.com/shipping-and-the-malaysian-oil-and-gas-industry
5. http://dapmalaysia.org/english/2012/apr12/bul/bul4938.htm