Friday 02 Jun 2023
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This article first appeared in The Edge Malaysia Weekly on September 6, 2021 - September 12, 2021

TECHNOLOGY giants Facebook, Google, Microsoft and Amazon, as well as the national internet exchange body Malaysia Internet Exchange (MyIX), have written to the Prime Minister’s Office to seek a meeting with the premier, Datuk Seri Ismail Sabri Yaakob.

A copy of the letter dated Sept 1, sighted by The Edge, indicates that the purpose of the meeting is to discuss issues with the cabotage policy.

The letter with the heading, “Request to reinstate cabotage exemption for submarine cable investments”, among others, touches on the Malaysia Digital Economy Blueprint (under the MyDIGITAL initiative), which outlines plans to accelerate Malaysia’s progress as a technologically advanced economy.

The letter states, “The 48 national initiatives and 28 sectoral initiatives that the government intends to implement over the next nine years under the MyDIGITAL blueprint are predicated upon having fast and reliable internet connectivity. Creating a supportive regulatory environment that encourages investment in digital connectivity infrastructure is therefore an important enabler of the MyDIGITAL agenda and the tremendous economic benefits that stand to be gained.

“As emphasised in letters to the previous administration (dated Nov 20, 2020; April 5, 2021; and April 20, 2021), we believe that there is an opportunity to make simple changes to Malaysia’s infrastructure policies that will reap considerable economic benefits. In particular, we remain very concerned about the decision of the Ministry of Transport (under the current minister, Datuk Seri Wee Ka Siong) in November 2020 to revoke the cabotage exemption that had been in place for submarine cable repair vessels. This exemption had ensured that submarine cable repair works could be conducted efficiently within a short time frame, thus minimising the duration and economic impact of cable disruptions.

“We believe that reinstating this cabotage exemption for submarine cable repair vessels would send a strong message about the government’s commitment to realising the MyDIGITAL agenda.”

The Edge understands that the tech giants are hoping that Ismail Sabri and recently appointed Communications and Multimedia Minister Tan Sri Annuar Musa may see things differently from Wee.

Annuar’s involvement in this issue stems from having MyDIGITAL under his purview.

To recap, issues with the cabotage policy pertaining to submarine cable repairs stem from the tech giants being unhappy with Wee, who exercised his powers under Section 65U of the Merchant Shipping Ordinance 1952, which basically revoked an exemption for cabotage policy involving submarine cable repair vessels. This reversed a decision by former transport minister Anthony Loke Siew Fook, who had approved an exemption for submarine cable repair vessels in March 2019, after complaints of delays for the repair of undersea cables by the tech giants.

Wee’s response

When asked to comment on the letter, Wee says in a brief phone conversation with The Edge that he is aware of the letter. “I agree with them [the tech giants] on the importance of the MyDIGITAL blueprint and its impact on the country … But what is wrong with us developing our own industries and local talents to support their investments?

“Actually, we are helping them [by] developing our local support system. What is wrong with us developing our local talents? I don’t understand.”

He adds, “Under my watch, it takes only two or three days [to get approval for a submarine cable repair and maintenance vessel to undertake work] and not 27 days as they claim.”

In a message to The Edge after the brief conversation, Wee says, “I really don’t understand why these tech giants don’t support the Malaysian government’s effort in developing the local industry and enhancing technical know-how among Malaysians. This effort will certainly help to support their investment here.”

In another WhatsApp message, the minister says, “The Malaysian government promotes the cabotage policy mainly to develop local know-how and expertise to support our country’s digital economy. Malaysia needs local expertise to ensure our national undersea cables are well maintained and not to be fully reliant on foreign companies.

“This is the first time I have ever heard that investors do not want availability of local expertise to provide support and services for their investment … If an undersea cable is cut and requires immediate attention, don’t you think a local presence is better than relying on foreign vessels as a first choice?”

The move by Wee, the tech giants say, has brought about delays of up to 27 days for the repair of undersea cables. This delay stems from the Malaysian Shipowners Association (MASA) looking to protect its members and blocking foreign-flagged shipping companies from operating in our waters.

In a nutshell, MASA has the right to block the use of a foreign vessel if there is a local company — a MASA member — that has a vessel capable of undertaking the required task, which results in much back and forth and time wasting, which the tech giants deem unacceptable.

However, Wee says that such delays are a thing of the past.

Will future investments be impacted?

There is widespread fear that the tech giants may review future investments in Malaysia because of the cabotage policy requirements for undersea cable repair vessels. This, however, was brushed aside by Ministry of Transport officials, who say other countries in the region have more stringent regulations than Malaysia, and that Chinese drones being found in Indonesian waters strengthen Wee’s argument that the cabotage policy is mainly for national security.

Last week, in an interview with a foreign media house on the cabotage issue involving submarine cable repair vessels which the tech giants have been complaining about, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said, “I believe there are geopolitical considerations ... when it comes to undersea cable connectivity, I cannot comment as much. But Malaysia’s current cabotage policy is sufficient in ensuring our sovereignty.”

Zafrul also said the government was waiting to make known investments similar to Microsoft’s US$1 billion investment over five years for data centres that was announced in April.

Recently, there was news that Facebook and Google would participate in the construction of a new 12,000km subsea cable system called Apricot, to be operational by 2024, that connects Singapore, Indonesia, the Philippines, Taiwan, Japan and Guam.

One industry player highlights that both Apricot and another undersea cable, Mist (Malaysia, India, Singapore, Thailand), are initiatives led by Japanese giant NTT Ltd. So, the plan all along was for Apricot to connect via Mist to Malaysia. Therefore, it would be inaccurate to say that Apricot bypassed Malaysia.

Similarly, there was a lot of confusion when Wee suggested that national security would be at risk with the involvement of foreign undersea repair ships in Malaysian waters. For the longest time, Asean CableShip Pte Ltd (ACPL) — which operates three vessels with undersea cable repair capabilities, the Indonesia-flagged Asean Explorer and Asean Protector and the Singapore-registered Asean Restorer — has been undertaking repairs of submarine cables in Malaysian waters.

ACPL was set up by the Asean telecommunications authorities, which is controlled by Telekom Malaysia Bhd (TM), CAT Telecom pcl, Eastern Telecommunications, PT Indosat Tbk, Telekom Brunei Bhd and Singapore Telecommunications Ltd.

However, with ACPL’s vessels not flagged in Malaysia, the recent change in cabotage policy prevents it from undertaking any jobs without the requisite licensing. This is despite TM having a 16.6% stake in the company.

TM’s largest shareholder is state-controlled investment outfit Khazanah Nasional Bhd, which has a 21.07% stake in the telecommunications company. As at mid-March, government-linked agencies Khazanah, the Employees Provident Fund, Permodalan Nasional Bhd and Kumpulan Wang Persaraan (Diperbadankan) held almost 57% equity interest in TM.

In February, OMS Group Sdn Bhd bought an undersea cable repair vessel, the Lodbrog and flagged it in Malaysia, which should considerably cut down the time taken for undersea repairs. Previously, OMS had a barge Cable Orchestra (previously known as Fu Xing), which was Malaysian flagged and had been handling some of the repairs for submarine cables locally.

In the middle of last month, OMS acquired another vessel, Cable Vigilance, currently flagged in France. But it is understood that once the cabotage policy is firmed up, the vessel could be Malaysian-flagged as well. OMS is a Malaysian company controlled by businessman Datuk Lim Soon Foo.


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