KUALA LUMPUR: Malaysia’s new national shipping policy must not only encourage the development of a robust domestic fleet to reduce dependency on foreign vessels but also provide more funding to modernise and accelerate the transition to green shipping.
Industry players said the policy should prepare Malaysian shippers to navigate the shifting dynamics of global trade and a volatile environment due to unforeseen circumstances such as regional conflicts.
They also hope that the new policy, which is expected to be presented to the cabinet by year-end, will focus on increasing Malaysian tonnage and reducing reliance on foreign vessels.
On 4 July, Transport Minister Anthony Loke announced that a national shipping policy would be introduced to guide the local shipping sector in exports and imports and create new job opportunities.
This was a timely announcement as the Malaysian Shipping Masterplan (MSMP) 2017-2022 was launched 5 years ago and is due for a review as the industry is still falling short of its targets.
Strategic Maritime Position Undermined by Reliance on Foreign Tonnage
Given its strategic location in the busy Straits of Malacca and part of the South China Sea waterways, Malaysia has long aspired to become a major maritime hub in Southeast Asia.
However, it relies heavily on foreign tonnage, leading to a transport services deficit of RM7.80 billion in the first quarter of 2024.
Against such a backdrop, the Malaysia Shipping Association Chairman Ooi Lean Hin emphasised that the nation must strategise and boost domestic shipping in the revised policy, which, he said, is the proper thing to do as Malaysia relies heavily on foreign vessels for maritime trade.
He cited the Red Sea crisis where Yemen’s Houthis attacked mainly Israeli-linked vessels as a good example of how escalating geopolitical tensions affect Malaysian shipping, as it led to a surge in shipping demand and prices.
For context, about 15% of the world’s shipping traffic, including 30% of global container trade, passes through the Suez Canal to and from the Red Sea.
The wave of disruptions has led major shipping companies like Hapag Lloyd, CMA-CGM, Cosco-OOCL, MSC, and Maersk to reroute vessels to avoid the Red Sea and Suez Canal.
Initially suspending their services in the Red Sea, they are now considering alternative waterways, resulting in soaring shipping costs, with ocean freight rates between various regions rising substantially.
The rising tension has caused about 95% of vessels to reroute around the Cape of Good Hope, adding nearly 4,000-5,000 nautical miles and 15-20 days to their journeys.
As of 18 January 2024, 158 vessels have rerouted away from the Red Sea, carrying over 2.1 million cargo containers.
“Mainline operators would change their service route to service these now highly profitable alternative routes to ports near the conflict areas, and those servicing our domestic route would change or terminate their service to serve these routes,” said Ooi.
Subsequently, local shippers complained that foreign shippers do not prioritise Malaysian goods, posing a significant threat to the national supply chain.
“However, Malaysia can navigate this situation by building up the national tonnage, thus supporting the domestic economy,” he said.
Given these challenges, Ooi called on the government to play a pivotal role by outlining clear policies that encourage and incentivise exporters and importers to prefer Malaysian tonnage when shipping their goods.
Remove Financing Barriers and Introduce Malaysia’s Own Fleet
Ooi believes that the government should remove barriers for ship owners to secure offshore financing, which would enable owners to tap financing options offshore since local banks generally shy away from vessel financing.
Echoing the sentiment, Malaysia Shipowners’ Association (MASA) chairman Mohamed Safwan Othman said that MASA has also presented an alternative funding mechanism to the National Shipping and Port Council and should be able to finalise the details by the end of the year.
However, he said he was unable to disclose further information on the funding mechanism.
Additionally, both Ooi and Mohanmed Safwan proposed for Malaysia to establish its own fleet.
“By having our own fleet, Malaysia can mitigate disruptions by maintaining trade routes and supply lines,” said Ooi.
Mohamed Safwan noted that most of the strategic cargoes, such as petroleum products, palm oil, and coal are being transported by foreign vessels.
“We are recommending to have the right policies to use our own Malaysian fleets. Apart from that, the support by the Malaysian local banks is vital,” he said.
To recap, there is no specific fund allocated for the maritime industry in Budget 2024.
Under the 2023 budget, a RM1 billion Maritime and Logistics Scheme was announced which boosted the maritime industry’s growth and accelerated the industry’s transition to green shipping.
— BERNAMA
