Barter Trade and socio-economic implications for Sabah

Ramli Dollah

Diana Peters

Amrullah Maraining

Introduction • Malaysia-Indonesia-Philippines relations can be seen

from 2 different perspectives

– Macro – state to state relations – mostly negative representations

– Micro – people to people relations – mostly in harmonious terms

• However most of the researchers focuses on the macro/structural level – ignoring the micro level.

• This paper aims to look into one of the component at the micro level by looking at barter trading and its implications to Malaysia’s socio-economic condition, in particular Sabah.

Malaysia’s Economic Cooperation

• Malaysia’s regional economic cooperation:

– Bilateral – involving only 2 sovereign states

– Multilateral – involving more than two states. Eg. AFTA, BIMP-EAGA

• In Sabah, Barter trade is part of the arrangements under BIMP-EAGA.

Barter Trade in Sabah • Barter trade is an old concept referring to the act of two or

more parties trading goods/services without the use of money.

• In Sabah, barter trade activities have existed for 2 centuries - Warren (1985) demonstrated existence of trade relations between Mindanao, Sulawesi and other localities in Sabah, eg Sandakan & Tawau before/during the colonial era.

• Sabah’s strategic location made it one of the site for barter trade in this region (Hamzah & Ongkili 1988).

• After the formation of Malaysia, barter trading continued, albeit more formally, regulated by the government – Semporna was permanently ceased in 1976.

New Concept of Barter Trade • The new concept of barter trade cannot be

understood or equated with the old concept.

• Formal – supervised and monitored by the KDRM together with Lembaga Pelabuhan, Jabatan Laut etc.

• Sandakan and Tawau as the major ports.

• In practice, the trader will;

– survey the needs and prices

– contact the suppliers – bargaining process

– If agreement is reached, dealer will order the items needed - pay some amount of money to their counterparts in Indonesia to get the goods and then it will send it to barter trade ports in Sabah.

• The buyer have to complete several forms (K1, K2 etc.) to obtain the permission before items sent to Malaysia.

– to avoid contraband items (subsidized goods such batik, petrol, diesel etc).

• Goods will not be sold to individual.

• Imported items include sugar, marine products, fruits, forest product etc.

• Exported items include snacks/instant foods, various bicarbonate drinks, Milo etc.

Socio-Economic Implication

Positive implications

Physical Development of the underdeveloped area

• Government-private initiative

• Pulau Sebatik for example, a marginalized area which can be developed into barter trade hub.

– To catch up with development of other region

• Previously Pulau Sebatik developed by private initiative, namely North Borneo Timber (NBT)

Economic Development • Hilmi Yahya, Finance Ministry parliamentary sec.

while proposing tax-free status for Sebatik; ‘This will

help to boost the revenue of the Government .. It will certainly reap enormous commercial benefits to the country through

trade activities’ (BP, 1.7.04).

• During economic crisis 1997 barter trade

– played a major role in the recovery of Malaysia – in the second quarter of 1998, the value of barter trade reached RM1 bilion (BT, 20.2.99)

– Tan Shu Kiah, Sabah Ministry – ‘greatly aided the state during the economic crisis… the govt managed to control currency inflow’ (DE, 27.8.98)

• With various taxes and duties imposed, activity generated considerable amount of income for the government.

– Taxes and duties collected between 2000-05 amounted more than RM6 million.

Job Opportunities • Indirectly provided job opportunities to the local

population.

• In Sandakan for example, 60% of the workers are Malaysian (based on the registered name) (Senisia, 2014).

• In Tawau, study shows that barter trade activities had encouraged more women to be involve in small business – with small capital they can set up new business (Sabturiana, 2014).

- Improve their socio-economic status.

Diversity of Consumer Goods

• The local people can get goods that are not produced in Malaysia.

Provide Cheap Consumer Goods • It provide a relatively cheap price for several items

especially marine products.

Regional Cooperation

• Diplomacy at the low level – people to people.

• Interdependence - harmony

• Encourage sub-regional development – ASEAN Framework for regional development.

Negative implications

Illegal immigrants

• Sometimes, the boats used for barter trade are also used by illegal immigrants.

• If such situations are left unchecked, it will encourage others to follow suit and used barter trade as a channel for illegal entry into Malaysia.

Smuggling • Subsidized goods such as sugar, petrol, rice.

• Illegal shipment of firearms and contrabands items.

• Several methods of smuggling are conducted and barter trade is used most commonly used.

• Tax evasion through smuggling resulting in losses for the government.

Conclusion • How should the government promote barter trade and

regional development, while at the same time contain undesirable elements which are detrimental to national well being.

• Two crucial issues;

– Enforcement agencies need better equipment and infrastructure

– To educate local people (esp. those on islands and coastal areas) about the dangers of illegal activities and its negative implication for the country.