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, among other things, 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 July 4, 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 five 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 per cent of the world’s shipping traffic, including 30 per cent 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 per cent 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 Jan 18, 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 give preference
to Malaysian tonnage for shipping their goods.
Remove Financing Barriers and Introduce Malaysia’s Own Fleet
The government should remove barriers for ship owners to secure offshore financing.
“This would enable owners to tap financing options offshore since local banks generally
shy away from vessel financing,” said Ooi.
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 Mohamed 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.
