By Datuk Ts Dr. Hj Ramli Amir, former President of the Chartered Institute of Logistics and Transport (CILT) Malaysia and Vice-President of CILT International for Southeast Asia
KOTA KINABALU: Sabah’s “golden age” of direct sea trade didn’t just fade away; it was systematically dismantled. For decades, the state’s ports in Kota Kinabalu, Sandakan, and Tawau were bustling international gateways.
Majestic cargo ships from Europe, East Asia, and the Americas docked directly at their wharves, loading timber, rubber, and spices while offloading manufactured goods from across the globe. Sabah was a player on the world stage.
This era was not destined to end by chance, but by choice. A confluence of two pivotal government policies—one a protective law, the other a centralizing strategy—acted in tandem to sever Sabah’s direct links to global trade routes.
This created a structural bottleneck that would hobble the state’s economic competitiveness for generations.
The first policy erected a legal wall around domestic shipping, creating a protected and costly domestic fleet. The second policy centralized all international traffic, collectively re-routing Sabah’s inherent prosperity through a single, congested funnel far to the west.
The First Blow: The Cabotage Policy of 1980 – Legislated Isolation
In 1980, the Federal Government enacted the National Cabotage Policy. Framed with the noble intentions of building a national shipping industry and asserting maritime sovereignty, the policy reserved all domestic sea transport between Malaysian ports exclusively for Malaysian-owned, Malaysian-flagged, and Malaysian-crewed vessels.
For a maritime state like Sabah, separated from the peninsula by the vast expanse of the South China Sea, this was not merely a regulation but an economic sentence. The state’s most vital logistical artery—its connection to the rest of the country and, by extension, the world—was now restricted to a protected domestic fleet.
The Law of Unintended Consequences: The policy inherently shielded the domestic shipping industry from international competition. Without the pressure of global market rates and service standards, the inevitable outcome was higher costs and reduced efficiency. The inflated expense of operating this protected fleet was systematically baked into the price of every essential good—from construction materials and machinery to consumer staples like rice and milk—that arrived in Sabah by sea.
This imposed a permanent and structural cost-of-living disadvantage on its citizens; a phenomenon often termed the “Sabah Tax.”
The Second, Devastating Blow:
The “National Load Centre” (NLC) – Strategic Marginalization
If the Cabotage Policy provided the legal framework for isolation, the subsequent informal but forceful designation of Port Klang as the “National Load Centre” (NLC) was the masterstroke that cemented Sabah’s dependency. Emerging from national port development strategies in the 1990s, this directive fundamentally reshaped Malaysia’s maritime architecture.
It mandated that the nation’s primary international container traffic be consolidated and funnelled through this central hub in Port Klang.
Erased from the Map: The consequence for Sabah was catastrophic. The international mainline vessels from Europe, East Asia, and beyond that had once sailed directly to its ports were now systematically rerouted.
They were no longer permitted to efficiently carry cargo directly between a foreign port and a port in Sabah if that cargo was also destined for other Malaysian points; the system incentivized and often required discharge at the central hub. Sabah was abruptly erased from the global shipping atlas, transformed from an international destination into a subsidiary, feeder spoke.
The Birth of the “Double-Handling” Model: A Convoluted and Costly Chain
From this policy framework, a new, convoluted, and inherently inefficient logistics chain was born. Let’s follow the journey of a single container of medical supplies from Singapore to a hospital in Kota Kinabalu under this “Double-Handling” model:
The First Leg (International): A container ship from Singapore discharges all its Malaysia-bound cargo, including the Sabah-bound container, at the Port Klang terminal. This is its final port of call. The efficient, cost-effective deep-sea leg of the journey is now complete.
The Bottleneck (Administrative and Physical Limbo): The container of medical supplies is unloaded and stacked in a vast yard in Port Klang. It now enters a state of bureaucratic and logistical limbo. It requires complex customs clearance documentation for domestic movement and must await space on a separate, smaller vessel. This process can take days, or often weeks, subject to feeder ship schedules and administrative delays.
The Second, Costly Leg (Domestic): After the delay, the container is physically relocated and reloaded onto a smaller, Malaysian-flagged “feeder” vessel, which operates under the protection of the Cabotage Policy. Only then does it begin the final journey across the South China Sea to Kota Kinabalu.
This model meant every single container was touched twice, shipped twice, and incurred charges at least twice. It was a system designed not for logistical efficiency, but for the consolidation of traffic at a designated national hub.
The Strangulation of an Economy: The Tangible Consequences
The impact of this dual-policy pincer movement was immediate, severe, and enduring:
The Cost Explosion: Sabahan businesses and consumers were now burdened with a double freight: the international cost to Port Klang, plus the protected domestic feeder cost to Sabah. Compounded by additional terminal handling charges, storage fees, and administrative costs at the hub, the total landed cost of a container could skyrocket by 50% to 100% compared to pre-policy or direct-call rates.
This amounted to a permanent “logistics tax” imposed on every imported item, stifling business investment, discouraging industrial development, and chronically inflating the cost of living for ordinary citizens.
The Time Delay: What was once a swift, direct journey of days becoming a weeks-long logistical ordeal. The delays at Port Klang—for transshipment, documentation, and feeder vessel scheduling—crippled supply chain predictability. For industries dealing in perishable goods or just-in-time manufacturing, this was a death knell.
It isolated Sabah’s businesses from the rapid turnaround times required in modern commerce, making them unreliable trading partners.
The Strategic Marginalization and Lost Potential: Sabah’s ports were systematically demoted. Without direct international calls, they lost the revenue, expertise, and incentive to develop deep-water capabilities.
This stunted their growth and limited their ability to attract major global investment. The state, rich in natural resources and agricultural potential, was caught in a cruel paradox: it was too expensive to import the machinery and materials needed for development, and too expensive to export its finished products competitively. This locked Sabah into a cycle of exporting raw commodities instead of developing its own value-added industries.
A Legacy of Constraint
For over three decades, this was the unyielding reality for Sabah. The state watched as neighbouring regions like Singapore, Hong Kong, and even later, Surabaya and Manila, grew into global maritime giants. Meanwhile, Sabah, endowed with a strategic location and immense natural wealth, saw its potential constrained by the very structures that were meant to foster national unity and growth. The double blow of the Cabotage Policy and the National Load Centre strategy did not just increase costs; it fundamentally altered Sabah’s economic destiny, relegating it from a self-sufficient trading hub to a dependent periphery in the global economy. The fight to reverse this legacy and reclaim its place on the world’s shipping maps would become a central economic and political struggle for the state.
Conclusion: The Weight of Dependency
For over three decades, the dual-policy pincer of the Cabotage Policy and the National Load Centre strategy defined Sabah’s economic reality. It was not merely a logistical model but a cage of dependency. The state’s natural advantages—its strategic location, rich resources, and deep-water ports—were rendered null by a system that mandated a costly and inefficient detour. The consequences were profound and systemic:
Economically, a permanent “logistics tax” stifled business, inflated the cost of living, and locked the state in a cycle of exporting raw materials instead of building finished goods.
Strategically, Sabah was demoted from an international player to a feeder spoke, eroding its maritime prowess and isolating it from the dynamism of global trade.
Socially, the policies contributed to a growing sense of inequity, as Sabahans watched the nation’s prosperity flow through a centralized hub far to the west, while they bore the burden of its costs.
The golden age of direct trade was not a distant memory but a stark contrast to the daily reality—a testament to a severed lifeline and a constrained potential.
A Glimpse of What’s Next: The Winds of Change
But no system is permanent. The 21st century brought new forces that began to strain this decades-old model. The very globalized world that once passed Sabah by now began to expose the flaws in its logistical chains.
In the next part of this series, we will explore the cracks in the dam and the rising tide of change. We will examine:
The Digital Uprising: How the internet and social media empowered Sabahans and businesses to publicly quantify the “Sabah Tax,” turning quiet frustration into a loud, data-driven demand for reform.
The Economic Imperative: How global competition and supply chain crises like the COVID-19 pandemic revealed the fragility of the centralized model, forcing both federal and state governments to reconsider the cost of inefficiency.
The Policy Shifts: The significant, though partial, exemptions to the Cabotage Policy—what they achieved, what they left unresolved, and why they were only a first step.
The New Dawn: The emerging vision for a Borneo Economic Block and the renewed push to transform Sabah’s ports back into international gateways, not just domestic terminals.
The story of Sabah’s sea trade is entering its most pivotal chapter. The struggle is no longer just about diagnosing an old problem but about forging a new solution. The question is no longer if the system is broken, but whether Sabah can finally, and fully, reconnect itself to the world.
