MyIX: Subsea Cabotage Issue Causing Foreign Investment Jitters

Malaysia Internet Exchange (MyIX) and the National Tech Association of Malaysia (PIKOM) have expressed ‘deep concern’ that the submarine cable cabotage issue has yet to be resolved, despite the government’s assurance that it was/is being looked into since April 2021.

MyIX chairman Chiew Kok Hin said that the ‘silence’ on this issue continues ‘to cause jitters with foreign investors which had invested in internet infrastructure in and leading into Malaysia’.

In a statement, Chiew said that, although he appreciates the government prioritising the current battle against the Covid-19 pandemic, the cabotage policy needs to be addressed “immediately”.

Although the government had publicly stated that the issue would be resolved by end-April 2021, the industry is still awaiting the announcement.

The cabinet had reportedly instructed six ministries to look into the matter in April. However, no announcement had been forthcoming since then.

MyIX has learnt that five ministries are in favour of reinstating cabotage exemption for foreign vessels undertaking submarine cable repairs.

“Multinational companies (MNCs) and foreign investors, some of which are MyIX members, are deeply concerned with the silence on the cabotage issue,” said Chiew.

“Some members are starting to believe that the issue would be ‘buried’. This situation does not bode well for Malaysia’s efforts to attract and retain foreign direct investments (FDIs).”

Industry sources have stated that new submarine cables that were planned to land in Malaysia have now been put on-hold by foreign investors. This is unfortunate, as it further hinders data centre investments by both local and global companies, while also affecting overall internet experience for Malaysians and local businesses.

“If this were the case – which I hope is not, I must stress – Malaysia would have an international credibility issue with foreign investors,” he added. “This would be a serious blow to the objectives outlined within the MyDIGITAL initiative, especially concerning FDIs.”

MyDIGITAL, which comes under the National Digital Economy Blueprint, is the government’s strategic initiative to further grow Malaysia’s digital economy. The aim is for the digital economy to contribute 22.6% of Malaysia’s gross domestic product (GDP) by 2025, while creating 500,000 new jobs.

One such strategic thrust under MyDIGITAL is the aim to attract more submarine cables to land into Malaysia to expand global connectivity, with desired outcomes being higher investments and more reliable and faster internet connections.

Last November, cabotage exemption for foreign vessels to conduct undersea cable repairs was revoked by the Ministry of Transport.

“This has resulted in undersea cable repairs taking up to 27 days in Malaysia which is way behind other countries in Southeast Asia. As a comparison, undersea cable repairs are said to take 20 days in the Philippines, 19 days in Singapore and 12 days in Vietnam,” said Chiew.

Meanwhile, PIKOM chairman Danny Lee has also strongly urged the government to reinstate cabotage exemption for foreign vessels undertaking submarine cable repairs.

He said that the current cabotage policy has affected not just the telecommunications and tech industries, but all sectors that rely on internet stability and strong infrastructure.

“A lot has been said in response to the cabotage policy, most expressing concerns that if not exempted for submarine cable installation and repairs, it will impact the economy and have dire consequences on tech investments. We are already beginning to see some MNCs giving Malaysia a miss,” said Lee.

“Submarine cables are the global backbone of the internet, and they play a critical role in Malaysia’s economy. The cabotage exemption is key to ensuring speedy repair of damaged submarine cables, thereby preserving internet stability, speed, and affordability,” he added.

“Failure to take the right action will put Malaysia at risk of losing its attractiveness as an investment destination for global tech companies. In addition to that, data centre investments are also making their way out of Malaysia, as repairs are now taking longer than they used to.”

MyIX is an initiative under the Malaysian Communications Multimedia Commission (MCMC) and the country’s only non-profit national internet exchange body operated by industry. Its committee members include representatives from Telekom Malaysia, TIME dotcom, Maxis, YTL Communications, MyKRIS Asia, Celcom Axiata, and REDtone.

PIKOM, meanwhile, is the association representing Malaysia’s technology industry with more than a thousand active companies and commanding some 80% of total tech business in the country.

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