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MDEC: The need to develop digital economy supercedes cabotage policy

08 Apr 2021 / 13:57 H.

KUALA LUMPUR: The need to develop a digital economy takes precedence over cabotage policy, and the exemption from this policy must be granted to make Malaysia an appealing investment destination for digital infrastructure, particularly in light of its aspirations to truly be the Heart of Digital ASEAN as outlined in the MyDigital blueprint.

Malaysia Digital Economy Corporation (MDEC) chairman Datuk Wira Dr Rais Hussin Mohamed Ariff said while there are two strong opposing views on the issue of cabotage policy and how it affects the undersea Internet cable industry, both appeared to have a strong argument with good intentions that requires clarification.

“However, on balance, the exemption from the cabotage policy for the industry is the right thing to do...the cabotage policy is detrimental in making Malaysia the choice as an investment destination especially for high-value digital investment,” he said in a statement.

The cabotage exemption must be restored immediately, he said, while the legislation must be amended to remove submarine cable activities from the definition of cabotage in order to attract more investments, particularly higher-value digital investments, in the long run.

Rais further explained that the reinstatement of the cabotage policy for submarine cable repair in November 2020 had surprised investors and local telecommunication companies and deemed as a step backward, as investors have expressed strong interest and some were in the final stages of committing investments, recognising that the exemption will reduce repair times and increase reliability.

“Hence, the industry is shocked by the abrupt decision on the reversal of cabotage exemption without meaningful stakeholders’ consultation to protect a single company. It creates risks to Malaysia’s critical digital infrastructure and growing digital economy by making it less attractive for infrastructure investment.”

From other perspectives, Rais said maritime players have raised concerns on the critical need to develop local capabilities, however, the occurrence of submarine cable faults in Malaysia is between six and nine annually in the past few years and this showed that the real domestic market opportunities is not high enough to make it feasible to invest in specialised vessels.

“Furthermore, there are other maritime services within Malaysian waters with larger market opportunities and lower entry cost that local players can participate and build up capabilities to compete,“ he stressed.

Add to that, he said there are fewer than 60 such ships in the world today and therefore they have to be shared.

The revocation of cabotage policy exemption has impacted investors as the changes made were without prior consultation, hence, there is no certainty or stability that would provide assurance to the investors.

“On the other side of the divide, the delay in repair works has already been reduced to 10 days, and thereby, harping on cabotage exemption is a minor issue.

“It misses the point in the sense that it’s not so much the delay but the changing of policy wilfully without consulting the relevant stakeholders is the issue, as it strongly signals uncertainty and increased risk on the part of the investors. What if the other policies change suddenly and arbitrarily?,“ he asked.

The impact in the reversal of cabotage exemption is immediate – two new cables were announced recently by Facebook and Google and will land in Singapore and Indonesia, both without any landing in Malaysia.

There are also strong industry sources indicating that three new cables originally planned to be landing in Malaysia are now “under review”, as are the potential data centre investments between RM12 billion and RM15 billion in foreign direct investment.

Emerging from the pandemic, Malaysia needs such investments more than ever, and in doing so, the country cannot afford to play the same old, same old protectionist games.

Annual submarine fault occurrences in Malaysia, as aforementioned, is small but for every minute of outage, there are huge economic, reputational and opportunity losses to the nation as the outage can run into days, weeks or even months.

The longer the time it takes to repair the submarine cables, the longer the country will be in a state of being digitally disconnected, thus depriving Malaysians from the basic fundamental right of modern-day utility, which is connectivity.- Bernama

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