PUTRAJAYA (March 1): The Cabinet has agreed to reinstate cabotage exemption for foreign-flagged vessels conducting submarine cable repairs in Malaysian waters, Transport Minister Anthony Loke Siew Fook said on Friday.
The government is looking to make the exemption permanent, Loke said at a news conference. The measure is important to attract foreign investment in data centres, and accelerate growth of the digital economy, he stressed.
"This is crucial for information technology (IT) companies and telecommunications companies, and we aim to establish it as a permanent policy,” Loke said. “We will do everything necessary to assure them of certainty in the policy.”
Malaysia announced the cabotage exemption for undersea cables repairs in 2019, following appeals by state-owned fixed-line operator Telekom Malaysia Bhd and internet services provider TIME dotCom Bhd, amid a lack of qualified domestic ships to undertake the works.
However, the cabotage was restored in November 2020, following a change in government. The change in policy — broadly aimed at reserving the country’s sea-related trades, services, and activities for Malaysians — has been criticised for stifling potential foreign investment into the country.
Malaysia Digital Economy Corp (MDEC), a government agency promoting the sector, warned that potential data centre investment worth up to RM15 billion may be reviewed by global technology giants, due to longer repair times as a result of the cabotage.
But following the latest Cabinet approval for cabotage exemption, the Ministry of Transport would take the necessary steps to facilitate the gazetting process, with the policy likely to come into effect within two months, Loke said.
"The effective date of these decisions will be announced later," he noted.
Cabotage policy to be reinstated in Sarawak
Meanwhile, Loke announced that the Cabinet had approved the reinstatement of the cabotage policy for ships providing cargo services from Peninsular Malaysia to Sarawak.
The decision was made in response to the Sarawak government's request to bolster the growth of the local shipping industry, which has been under threat since cabotage exemption on June 1, 2017.
However, cabotage exemption for ships providing cargo services from the peninsula to Sabah and Labuan will be maintained, based on the Sabah government's stance on this issue, Loke said.
All local and foreign ships providing cargo services in Malaysian waters are required to obtain a domestic shipping licence for security reasons, though the application process is now streamlined and completed within three days, Loke said.
"It should also be emphasised that all foreign ships can provide direct call shipping services from foreign ports to any port in Sabah, Sarawak, and Labuan to transport imported or exported goods," he added.