KUALA LUMPUR: It looks as though Malaysia’s once sleepy shipbuilders are soon to be jolted out of their slumber. If it happens the promise is of the creation of some 55,000 jobs between now and 2020, says the nation’s International Trade and Industry Ministry, giving the country’s near comatose economy a much needed fillip. Shipbuilding revenue, it is argued, is also vitally needed following the fall in oil and commodity prices, on which the nation depended heavily in the past.
Not since Kuala Lumpur adopted its controversial cabotage policy in the 1980s – a policy it retains to this day, against better counsel – has the nation taken a real look at how it can tap its shipbuilding sector that, either by accident or default, has remained too dormant for too long.
“The country is the right choice to invest in, as it has a promising future based on its strategic location, competitive cost, a skilled and talented workforce, advanced infrastructure and extensive trade agreements regionally and globally,” claimed international trade and industry minister Datuk Sri Mustapa Mohamed in August.
That ‘strategic location’ and ‘skilled and talented workforce’ was soon to become cause for Mohamed to grant new companies either pioneer status – with a 70% income tax exemption on their statutory income for a period of five years – or an investment tax allowance of 60% on the qualifying capex incurred within five years from the date their first qualifying expenditure. Existing shipbuilding and ship repair companies will be given an investment tax allowance of 60% on the additional qualifying capex if they are formalised within five years.
The announcement and the slew of initiatives come amid a squall engulfing yards and businesses across Asia. The Malaysian government has been paying attention, as well as learning from the past misfortunes of it and other countries. When the world learned of the debacle behind Vietnamese state shipbuilder’s Vinashin implosion years ago, a home truth came calling: do not over extend one’s abilities.
When Singapore’s Neptune Orient Lines (NOL) downsized last year and then went under, it told Malaysia that container vessels are not just cumbersome, capital intensive and with costly outlays, but they rarely make any commercial sense to build; for all that happens upon completion is for them to be laid up somewhere in the seas surrounding Malaysia. The country’s own experience with liner company MISC some years ago amply vindicated that outlook, as does the recent bankruptcy of Korea’s Hanjin Shipping.
