The cabotage policy is a policy that governs the transport/shipping of goods or passengers between two places along coastal routes in the same country by a transport operator from another country, practiced by many nations worldwide including developed nations. For some of these nations, it is so strictly implemented that no foreign-owned vessels are even allowed to operate within their domestic waters.
This policy began in 1980 (implemented on 1 January 1980, with the Merchant Shipping Ordinance 1952 was amended and the Domestic Shipping Licence Board was established) with the purpose of developing Malaysian ownership and local shipping in general whilst at the same time minimising Malaysia’s dependence on foreign vessels as well as the outflow of foreign exchange in the form of freight payments. This policy also acts as a platform for local shipping companies to gradually expand and reach out into international waters.
The cabotage policy allows vessels from foreign ports to call directly to/from any Malaysian port including ports in Sabah and Sarawak. For example, a vessel from Singapore or Hong Kong is free to call directly to/from any Malaysian port such as Sepanggar, Bintulu etc. Foreign vessels are also allowed to operate within the domestic sector through the granting of an exemption issued by the Domestic Licensing Board upon fulfilling the criteria set.