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.