The Malaysian Government, in a recent welcomed move, announced its intention to reinstate the exemption of cabotage policy for foreign ships involved in submarine cable repair in a bid to attract more foreign investments in the data centre industry and to spur the growth of the digital economy.
 
The Ministry added that it will proceed with the necessary steps to gazette the exemption and expects the new rules to take effect within two months.
 
According to the Ministry of Transport, all foreign ships will be allowed provide “direct call” shipping services from foreign ports to any ports in Sabah, Sarawak and Labuan for the purposes of transporting imported or exported goods. However, the cabotage policy for ships carrying out cargo services from Peninsular Malaysia to Sarawak will be reinstated, but the exemption will be maintained for ships carrying out such services from Peninsular Malaysia to Sabah and Labuan.
 
A cabotage policy is “a policy that governs the transport/ shipping of goods or passengers between two places along coastal routes in the same country by a transport operator from another country”.¹
 
The cabotage policy was introduced in Malaysia in 1980 after amendments to the Merchant Shipping Ordinance 1952 (“MSO”). Under section 65L of the MSO, no ship shall engage in domestic shipping without a licence issued by the Domestic Shipping Licensing Board. The term “domestic shipping” includes the use of a ship:    

• from any port or place in Malaysia to another port or place in Malaysia; or
• from any port or place in Malaysia to any place in the exclusive economic zone or vice versa. 

Pursuant to section 65KA of the MSO, no ship other than a Malaysian ship may engage in domestic shipping. A ship shall not be deemed as a “Malaysian ship” unless it is owned wholly by: 

• incorporated in Malaysia;
• have their principal office in Malaysia;
• the management is carried out mainly in Malaysia;
• the majority of the shareholding (51% or more) is held by Malaysian citizens; and
• the majority of the board of directors are Malaysian citizens. 

Presently, foreign registered vessels may only engage in domestic shipping if the Ministry of Transport is of the view that Malaysian vessels are unable to meet the demands of certain sectors.
 
The Ministry has stated that the approval process for a Domestic Shipping Licence has been eased and such licence will be processed within three days.
 
 
Alert by Dhanyaa Shreeya (Senior Associate) of the Maritime and Shipping Practice of Skrine. 
 

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