Malaysia’s cabotage issue: Three questions for Wee Ka Siong

PETALING JAYA : Transport Minister Datuk Seri Wee Ka Siong has recently responded to our post about MyIX’s statement on the new submarine cables by Facebook to Singapore and Indonesia. In case you missed it, MyIX had issued a statement describing the new submarine cables as a huge win for Singapore and Indonesia but a significant loss for Malaysia.

MyIX which is known as the Malaysia Internet Exchange is an initiative under the Malaysian Communications Multimedia Commission (MCMC) and it’s Malaysia’s only non-profit national internet exchange body operated by the industry. MyIX is managed by a committee consisting of local Internet Service Providers (ISP) such as TIME dotcom, Maxis, YTL Communications, MyKris Asia, Celcom Axiata, Redtone, TT dotcom and Telekom Malaysia. Some of its international membersinclude Akamai, Alibaba, Amazon, Facebook, Google, Microsoft, Netflix and Telenor.

Transport Minister Datuk Seri Wee Ka Siong speaks during a press conference at the Parliament Lobby in Kuala Lumpur July 15, 2020. — Bernama pic
Transport Minister Datuk Seri Wee Ka Siong speaks during a press conference at the Parliament Lobby in Kuala Lumpur July 15, 2020. — Bernama pic

For the past few months, MyIX has called upon the government to reinstate the cabotage exemption for foreign vessels to conduct undersea cable repair works or risk losing out more foreign direct investments (FDI) to neighbouring countries. The cabotage issue is seen as a stumbling block for Malaysia to position itself as an investor friendly country for submarine cable investments which will provide a robust and reliable internet infrastructure.null

It appears that Wee wasn’t too pleased when former Transport Minister Anthony Loke shared our post on Facebook with the caption “Thanks to Wee Ka Siong for his ‘brilliant’ strategy of protecting one company at the expense of the nation’s interest!”

In his response on Facebook, Wee described this publication (SoyaCincau) as an untrusted source and had accused his predecessor as trying to be a hero ahead of his party elections. You can read the full post on his Facebook page.

According to Wee, the accusations were baseless and it doesn’t provide a clear picture of the actual situation. He explained that Facebook’s newly announced Echo and Bifrost submarine cable projects aren’t exactly new and were planned since 2015. He added that both submarine cables were originally meant to land in Singapore instead of Malaysia because Facebook has a data centre at Tanjong Kling Data Centre Park in the island republic.

Wee also said that the data centre was built in Singapore because Malaysia doesn’t have the data centre infrastructure. This is surprising coming from the minister as Malaysia has a growing data centre industry with revenues expected to hit US$800 million (about RM3.3 billion) by 2025.

Some of the major investors include VADS Berhad, Keppel Data Centres, and Alpha Data Centre Fund, Katalyst Data Management, and Regal Orion. Even MDEC Chairman, Rais Hussin has urged Wee to check his facts when talking about data centres.

The Transport Minister had also fired potshots at the previous government. He claimed Pakatan Harapan, which ruled between May 2018 and February 2020, had wasted time on projects such as flying cars instead of data centres and Industrial Revolution 4.0 (IR4.0).

Interestingly, the minister who announced the flying car project, Mohd Redzuan Md Yusof, is now serving as the Minister in the Prime Minister’s Department for Special Functions under the current Perikatan Nasional government.

It is worth mentioning that Keppel Corp had announced a new data centre at Johor in November 2018 while Telekom Malaysia had unveiled its state-of-the-art Klang Valley Core Data Centre (KVDC) at Cyberjaya in May 2019. The Pakatan Harapan administration had also kickstarted Malaysia’s 5G journey by introducing 5G showcases and demonstration projects in late 2018. 5G is seen as a huge enabler to accelerate IR 4.0 and Malaysia was supposed to launch 5G services by Q3 2020.

Unfortunately, Malaysia’s 5G deployment was put on hold after the change of administration and the government has shifted its focus to improve existing 4G networks under the Jendela plan. Under the current MyDigital plan, Malaysia now aims tolaunch 5G services by Q4 2021 via Digital Nasional Berhad.

Going back to Wee’s Facebook post, he also said that due to tensions between the US and China, American companies now avoid laying submarine cables in the South China Sea. He said this is due to concerns that US communications may be exposed to Beijing’s surveillance. As a result, he said most new submarine cables are placed in the Pacific Ocean instead.

On allegations of delay of domestic shipping licence (DSL) approval, he shared that his ministry has approved undersea cable repair requests for foreign vessels within three working days except for one application which took six days. He said this is proof that his ministry didn’t delay requests for foreign ships to conduct undersea cable repairs.

As we’ve covered in November 2020, the Transport Ministry has introduced an electronic domestic shipping licence (eDSL) to shorten the approval process from 30 to 5 working days if there are no blockage in the application. The Malaysian Shipowners’ Assocation (MASA) are now given 48 hours to object the use of a foreign vessel for undersea cable repairs starting from 2nd December 2020.

The Transport Minister also emphasised that the cabotage exemption was revoked to protect our local shipping industry. He also said the decision was made based on several considerations which include the reduction of outflow of foreign money through freight charges and to reduce dependencies on foreign vessels by promoting participation from local shipping industry.

Dr Wee’s Facebook post mainly talks about the cabotage and the shipping industry but he didn’t address the elephant in the room, which is submarine cable investments into the country. That’s one of the main issues at hand which MyIX and the tech industry have been highlighting since the cabotage exemption for submarine cable repairs was revoked in November 2020.

Here are the 3 questions that we would like the Transport Minister to answer:

Has MOT addressed concerns of Tech Giants?

After the cabotage exemption was revoked, tech giants including Facebook, Google, Microsoft and MyIX have expressed urgent concerns about the decision and they have sent a joint-memo to the Prime Minister Muhyiddin Yassin. According to the sighted memo, the cabotage will cause delays in repairs which will severely affect the internet stability, quality and speed to Malaysian consumers and industry.

MDEC had also released a position paper which highlights the impact of the cabotage policy. It stated that Singapore is an Entrepot for communications cables and Thailand aspires to be the second ASEAN connectivity hub, leveraging their Satun-Songkhla “Digital Panama Canal” which allow cables to bypass Straits of Melaka and reduce cable length by 1,200km. To mitigate the threat from both north and south, MDEC says Malaysia needs to review and change policies that increase risk and uncertainty to submarine cable operators.

MDEC’s paper also said the cabotage will reduce internet stability, quality and speed, provide negative impact on digital economic growth, negative impact on domestic telcos and reduced foreign investment including data centres. According to a report by The Edge, one of the tech giants have told Dr Wee that it may review its cable investments in Malaysia.

To recap, the cabotage exemption for foreign vessels to conduct undersea cable repairs was introduced by Anthony Loke in April 2019 after it was requested by Telekom Malaysia and Time dotCom in November 2018. The move was also supported by the Ministry of Communications and Multimedia which was led by Gobind Singh.

Despite the quicker eDSL system being implemented, The Edge has reported in February that the tech giants are turning to the Ministry of Science, Technology and Innovation as well as the Ministry of Finance for help to solve the cabotage issue. Why are the tech giants reaching out to other ministries?

The Transport Ministry should clarify if the tech giants are satisfied with the faster approval process with the eDSL system and whether it is sufficient to provide assurance that submarine cables can be repaired within an acceptable time frame.

Does Malaysia have the required vessels?

The core issue is the lack of required Malaysian-flagged vessels to carry out the undersea cable works. As a result, they had to rely on foreign vessels such as the Asean Explorer (Indonesian-flagged) and Asean Restorer (Singaporean-flagged) as pictured above. — Picture from Asean Cableship
The core issue is the lack of required Malaysian-flagged vessels to carry out the undersea cable works. As a result, they had to rely on foreign vessels such as the Asean Explorer (Indonesian-flagged) and Asean Restorer (Singaporean-flagged) as pictured above. — Picture from Asean Cableship

The core issue is the lack of required Malaysian-flagged vessels to carry out the undersea cable works. As highlighted by MyIX and Anthony Loke, the tech giants require DP2 vessels which aren’t available when the exemption was revoked. As a result, they had to rely on foreign vessels such as the ASEAN Explorer (Indonesian-flagged) and ASEAN Restorer (Singaporean-flagged) as pictured above.

Dynamic Positioning (DP) is a computer aided system that helps vessels maintain a fixed position in the water by using a system of propellers and thrusters. When the cabotage exemption was revoked, there was just one Malaysian-flagged cable laying vessel called Cable Orchestra which is a barge that’s equipped with DP1 capabilities but the tech giants require a more advanced DP2 for insurance purposes.

In an interview with The Edge, Dr Wee said some of the tech giants’ arguments are illogical and he insisted that DP1 vessels are sufficient as Malaysian waters are largely shallow. He told The Edge, “If you talk to the players (undersea cable repair vessel operators), if you ask them whether you can’t use a DP1 vessel (in Malaysian waters), they will tell you it’s not true.”

On the tech giant’s insistence of using DP2, he said “What is the problem? To my understanding, the difference between DP1 and DP2 is the redundancy of software; 95% of the physical development of the (DP1 and DP2) vessels is the same except that there is a back-up to the existing software that’s all.”

How can Malaysia attract more international submarine cable landings in Malaysia?

Under the MyDigital blueprint that was announced by the Prime Minister, Malaysia aims to have the most international submarine cable landings in Southeast Asia by 2025. The question is how is Malaysia going to attract more investors if the cabotage is still a huge concern with foreign multinationals?

The Ministry of Communications and Multimedia is taking the lead for this submarine cable landing initiative, however, Saifuddin Abdullah hasn’t said much about how Malaysia is going to achieve its target.

When we asked the Malaysian Communications and Multimedia Commission (MCMC) about the cabotage issue during a MyDigital briefing, they told us that it is for the Ministry of Transport to respond. We hope Dr Wee can provide some clarity on the issue as MyDigital is expected to contribute 22.6% of Malaysia’s gross domestic product (GDP) and create as many as 500,000 jobs.— SoyaCincau

By : ALEXANDER WONG – SoyaCincau

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