DISTRIBUTORS in Sabah are allegedly exploiting the weak ringgit to keep prices of imported goods up following the implementation of cabotage exemption on June 1.

Consumers now have to buy goods at the same price before the exemption, although distributors now deal directly with firms from exporting countries.

Sabah Consumer Affairs Protection Society Business Practice Bureau Donny Yap said agents are marking up the cost of imports due to fears that the ringgit might drop further.

“They are increasing it to RM4.40 although the exchange rate was RM4.20 against the US dollar.

“True enough, the cost of importing had gone down as they no longer deal with companies in Kuala Lumpur, but they insisted on raising the prices to cover any eventualities,” he told The Malaysian Insight.

The cabotage exemption implemented on June 1 was aimed to lower prices of consumer goods as well as to promote Sabah’s manufacturing sector.

The policy change means that foreign cargo ships will be allowed to call directly at ports in Sarawak, Sabah and Labuan, and to transport cargo from peninsula Malaysia to Sabah, Sarawak and Labuan.

However, the policy is still applicable to cargo shipping operations within Sabah, Sara­wak and Labuan, which means that only local shipping companies are eligible to ship cargo between ports in Sarawak, Sabah and Labuan.

The move eliminates the need to engage peninsular suppliers and shipping agents as goods no longer shipped from Port Klang alone.

Previously, importers are forced to hire two shipping agents and this was among other reasons prices of consumer goods in Sabah are 30% higher than in the Peninsular Malaysia.

Yap also noted distributors had to settle the 6% goods and services tax (GST) in advance, or other payments like bank overdraft when making bulk orders.

Cap Kuda Coffee Company owner Yap Cheen Boon, however, said the market is presently adjusting to the ruling and consumers need to wait at least six months before prices of consumer goods eventually drop.

“The benefit is that the market is no longer pressured to increase prices. So it will eventually go down when the time comes,” said Yap.

He said the same about Sabah industries, they still need time to build their business before being able to start exporting.

Yap, however, could not say when, but noted that the matter depended on the need of Sabah Ports Bhd to improve on local ports’ efficiency.

Chartered Institute of Logistics and Transport Sabah chairman Ramli Amir meanwhile expressed his doubts whether prices of consumer goods would eventually drop.

“I think this is the trick in business. Once it prices had gone up, it’d be impossible for it to go down,” said Ramli, adding that the same in freight charges.

“Transporters would always find excuses… for example, prices of fuel had gone up or the exchange rate has gone higher.”

An in-depth study is presently being carried out on the effectiveness of the exemption by a committee established by the Transport Ministry on June 1.

In Sabah, the committee is chaired by Deputy Chief Minister Joseph Pairin Kitingan and will involve dialogue on the cabotage exemption from time to time. – July 26, 2017.