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Cabotage policy change will bring economic benefits, say economists

Publish date: Thu, 30 May 2024, 06:20 PM

KUALA LUMPUR: The exemption of the cabotage policy for cable-laying ships can bring several economic benefits to Malaysia, say economists.

Universiti Putra Malaysia School of Business and Economics lecturer Associate Professor Dr Lee Chin said the installation, maintenance and repair of submarine telecommunication cables can be expedited with the move.

Among other things, she said, it would reduce downtime and operational costs, which are essential for maintaining robust internet connectivity.

"Improved and faster deployment of internet infrastructure could attract more foreign investment, particularly from international tech companies and data centres, thereby bolstering Malaysia's position as a digital economy hub in Southeast Asia.

"The cabotage exemption could have mixed impacts on the local maritime industry and related sectors," she told the New Straits Times.

However, Lee said, there is one potential risk: over-reliance on foreign entities for critical infrastructure projects, making it essential to simultaneously develop local expertise.

She suggested that providing incentives for foreign firms to hire local workers and offering training programmes to enhance the skills of the local workforce could mitigate this risk.

"Creating a more open and business-friendly environment can significantly boost investor confidence, signalling the government's commitment to modernising infrastructure and fostering a conducive investment climate.

"Enhanced infrastructure attracts diverse investments beyond the telecommunications sector, including in areas such as data centres, cloud computing services, and tech startups, creating a more vibrant economic ecosystem," she said.

While the cabotage exemption for cable-laying ships poses some risks to local industry, on balance, she said, it appears to be an important step to boost Malaysia's competitiveness in attracting high-value digital investments and stimulating the growth of the digital economy.

She added that close monitoring will be needed to maximise the benefits while mitigating the potential downsides of opening up this sector.

Meanwhile, economist Dr Geoffrey Williams welcomed the policy change, noting that calls to end the cabotage policy arose in 2021 when Facebook and Google considered bypassing Malaysia due to its impact on cable laying.

He believes the policy change will encourage investment from high-technology companies, driving new investments.

"Competitive markets open to trade and foreign investors are better than protectionist policies. This is the way forward," he said.

Yesterday,the Transport Ministry announced an exemption of the cabotage policy for all cable-laying ships engaged in the installation, maintenance and repair of submarine telecommunication cables.

Its minister Anthony Loke, said the exemption was made under Section 65U of the Merchant Shipping Ordinance 1952.

He also said the gazette will take effect on June 1, adding that the exemption was aimed at boosting investments in internet technology infrastructure in Malaysia.

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