Malaysia risks tech investments with non-reversal of cabotage law

cabotage law Malaysia
Freight shipping containers at the docks in the port of Labuan island,Malaysia. Image by Zulkiffle Mohd Kassim | Bigstockphoto

Lim Guan Eng, an opposition lawmaker and former finance minister, recently urged Prime Minister Ismail Sabri Yaakob to reverse the cabotage policy approved by his predecessor.

Lim warned of possible consequences for investors if this wasn’t done, such as missing out on future investments due to the previous government’s refusal to grant a cabotage exemption. 

The cabotage law in Malaysia currently covers maritime services such as submarine cable deployment and repair. This means that when the best ship for a particular job is foreign, it needs to have an exemption under this law before taking up work on Malaysian waters. The exemption is granted through a Domestic Shipping Licence Exemption (DSLE).

Before 2019, the average time to get a permit for submarine cable repairs was 27 days, with one outlier case taking more than 100. Foreign investors highlight this as an issue when investing in Malaysia.

Lim also said that Malaysia missed out on Apricot, the undersea cable infrastructure project undertaken by both Facebook and Google, due to the former PN transport minister Wee Ka Siong’s refusal to grant a cabotage exemption. This ultimately jeopardized digital investments of as much as between RM12 to 15 billion from Facebook and Google.

RTI International’s 2020 report on Economic Impacts of Submarine Fibre Optic Cables and Broadband Connectivity in Malaysia showed that submarine cables landing contributed to a 6.9% increase in GDP per capita, as well as a 3.6% increase in employment from 2008 to 2015. 

A significant portion of the new investments were made by companies connecting their data centres via undersea fibre optic links rather than through satellite connections or terrestrial networks like microwave backhauls. 

“Without submarine cables, data centres will not flourish, and at that point how can we attract digital investments that matter? Why will renowned high-tech digital companies like Zoom or TikTok come here then?” Lim wrote in his statement.

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