Cabotage Flexibility Could Ease Sabah's Shipping Costs

By Jailani Hasan

LABUAN, Oct 23 (Bernama) -- A time-bound exemption to Malaysia’s cabotage policy could help ease Sabah’s long-standing shipping imbalance and high logistics costs, drawing lessons from similar policy adjustments in the United Kingdom (UK) and Indonesia.

Chartered Institute of Logistics and Transport (CILT) Malaysia former president Datuk Ramli Amir said Sabah, which relies heavily on maritime transport for over 90 per cent of its goods movement, continues to face high freight rates due to a significant imbalance between imports and exports. 

He cited Statistics Department Malaysia data that Sabah’s total trade in 2024 reached RM107.8 billion. Imports surged 10.2 per cent to RM46.4 billion and exports fell 2.3 per cent to RM61.3 billion, cutting the trade surplus by 27.9 per cent from a year ago to RM14.9 billion.

“Imports dominated roughly 80 per cent of container flows at its main terminals such as Sapangar Bay and Tawau. Ships often leave ports with a large space empty on the return leg,” Ramli told Bernama today.

“The consequence is an import-weighted freight imbalance that drives up logistics costs and, ultimately, consumer prices,” he said.

Ramli said targeted cabotage exemptions, similar to measures adopted abroad, could provide Sabah with a more competitive and sustainable logistics framework.

“The UK and Indonesia’s experiences showed that controlled and time-bound exemptions did not undermine national shipping industries. Instead, they addressed temporary market failures while ensuring long-term resilience,” he said.

The UK’s 2021-2022 temporary cabotage waiver allowed foreign hauliers to perform unlimited domestic trips within 14 days of entry. This helped stabilise supply chains during driver shortages. 

“The move demonstrated that short-term exemptions can resolve market failures without compromising domestic industry resilience,” he said.

He added that in Indonesia, the Izin Penggunaan Kapal Asing permit allows foreign vessels to serve domestic routes only when local ships are unavailable.

“Governed under Law No 17 of 2008 and refined through Ministerial Regulations PM 100/2016 and PM 2/2021, this system has improved service frequency and reduced freight costs by 15 to 25 per cent in remote provinces,” he said.

Both cases underline how strategic exemptions can reinforce, rather than replace, domestic capacity, balancing foreign participation with national oversight.

“With Sapangar Bay, Tawau, Sandakan, and Lahad Datu more than 1,500 km from the peninsula’s main shipping and industrial hubs, the state is operating at the periphery of national shipping economics.

“Most Malaysian-flagged carriers servicing the Peninsular Malaysia–Sabah route face high operating costs and limited competition, leading to freight rates higher by up to 25 per cent against comparable distances within Peninsular Malaysia,” the statement said.

Ramli said a selective, time-bound exemption could lower freight costs by 10 to 20 per cent in the first year, encouraging new industrial activity and integrating Sabah more effectively into ASEAN trade corridors such as the Borneo, Indonesia, Malaysia, Philippines–East ASEAN Growth Area.

Cheaper backhaul services could help make export-oriented manufacturing viable, particularly in sectors such as furniture, processed palm oil, and aquaculture products from Sabah’s Blue Economy initiatives, he said.

“Sabah’s logistics ecosystem requires pragmatic flexibility and targeted exemption. It could transform inefficiencies into economic opportunities, enhancing Sabah’s competitiveness within Malaysia and the broader regional market,” he said.

-- BERNAMA