The Malaysian Government has implemented a policy which reserves the transportation of goods in the domestic trades to ship flying the Malaysian Flag. This policy was necessary because only a small number of Malaysian registered ships were playing the coastal routes.
The policy which reserves the domestic trade to its own flagged vessels is known as Cabotage Policy. It was implemented in Malaysia on 1 January 1980. To implement the policy, the Merchant Shipping Act 1952 (MSO 1952) was amended.
With the amendment to the Merchant Shipping Act 1952, the Government provide for the appointment of a Domestic Shipping Licensing Board (DSLB) to regulate and control the licensing of ship engaged in domestic shipping between any ports in Malaysia. The purpose is to encourage local participation in domestic by encouraging local registration of ships and local incorporation of companies participating in domestic shipping.
The rationale of the cabotage policy can be seen as part and parcel of the government’s policy objectives of:
Making Malaysia a maritime nation;
Reducing the country’s dependence on foreign ships by increasing the level of participation in Malaysia international and coastal shipping business;
Engaging in shipping commitments through bilateral, regional and other trade agreements;
Training and development of Malaysians in technical, professional and commercial aspects of shipping business, especially in regard to the Malaysianization of floating staff and support to higher educational institutions.
Domestic Shipping as defined under the Merchant Shipping Ordinance 1952 means the shipment of goods or passenger:
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
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