Malaysia working on transport infrastructure upgrades

Developing Sabah’s infrastructure – from the provision of basic services such as electricity, water and sewers to crucial transport links such as ports, airports and roads – has long been vital to the state’s development but, given its mountainous terrain and relatively small population, is also a major logistical challenge. As in the rest of Malaysia, the state has relied increasingly on investment from the private sector, including government-linked companies and foreign-owned firms, to drive development.

Sabah is stepping up its efforts to upgrade the state’s infrastructure as a way to improve the quality of life, especially in the villages of the interior, and make it easier and less expensive to do business. The state is aiming to have GDP growth accelerate to 4.6% a year over the course of the 11th Malaysia Plan (11MP), which runs until 2020. The state government envisages improvements to infrastructure as a key part of the Sabah Development Corridor.

Flight Path

It has already made significant progress in modernising the airport at Kota Kinabalu, where a 10-year improvement plan was completed in 2015. The upgrade included an extension to the runway – it can now accommodate the world’s biggest aircraft, the Airbus A380 – and an enlarged passenger facility at Terminal 1, which is now the main hub for commercial flights. Kota Kinabalu International Airport (KKIA) is Malaysia’s second busiest international airport after Kuala Lumpur International Airport and 6.57m passengers used the facility in 2015 (3.2% less than in 2014), according to Malaysia Airports. Cargo movements rose to 24,768 tonnes in 2015, compared with 23,769 tonnes the year before.

Malaysia-based low cost carrier AirAsia and its Indonesian and Philippines affiliates are the airport’s main customers, responsible for 49% of capacity. Malaysia Airlines, the national carrier, which uses KKIA as its eastern hub, has about 36% of seats while Malindo, the Malaysian venture of Indonesia’s Lion Group, has less than 5%. Three China-based airlines – Spring Airlines, China Southern and Shanghai Airlines – also started operating from the airport in 2015 with direct flights to cities in mainland China, while AirAsia began daily services to Wuhan in central China in January 2016. China is the biggest international market for KKIA, representing 25% of all capacity at the airport, followed by South Korea with 17%, according to CAPA, the Centre for Aviation. Malaysia Airports, which manages KKIA, is planning further expansion of the airport facilities in anticipation of increased demand. Work will begin in 2016 on the construction of 10 new overnight parking bays for jet and turbo-prop aircraft. KKIA currently has 22 bays.

On The Roads

While aviation is crucial to forging connections within Sabah and across Borneo itself – MAS wings, the regional unit of Malaysia Airlines, offers a network of local flights including three short take-off and landing ports – the state is also moving to improve its road network. Coverage increased from 5606 km in 2009 to 7246 km in 2014, according to the 11MP, but that compares with a system on the peninsula that covers 38,131 km. The centrepiece of the road development is the toll-free Pan-Borneo Highway, which will be built in three phases and enable goods and people to travel in a loop around the entire state once it is complete by the end of 2021. The RM13bn ($3.2bn) project is being managed by Pan-Borneo Highway PDP, which is 40%-owned by UEM MMC Joint Venture, a partnership between government linked construction giant UEM and infrastructure company MMC. The remaining 60% is owned by the Sabah-based construction company Warisan Tarang. The first phase of the project includes the construction of dual-carriage way road from Sindumin Sipitang Sabah ending in Tawau Sabah. It will also include the construction of a single-carriage road from Tuaran to Kudat, and its total length will be 706 km. Successful contractors are expected to come from the state, and the first contracts are to be awarded in June 2016. An improved road system will bolster the state’s ambitions for its ports sector where the state government’s plan to transform the port at Sapangar, just south of Kota Kinabalu, into a trans-shipment hub, is under way already, supported by RM800m ($198m) in funding from the federal government. Capacity is expected to increase to 300,000 twenty-foot equivalent units (TEUs) by 2020. A 180-acre inland port at the Free Economic Zone, which is scheduled to open in 2022, is expected to be able to handle 0.5m TEUs. “It will become an economic impetus for the state,” Leonard Poyong, principle assistant secretary in the state’s Ministry of Infrastructure Development, told OBG. “We are plagued with a high cost of living and doing business in Sabah, and while a lot of people blame it on the cabotage policy it is actually the low trade volume. We will try to engage with the main-line shipping companies to create the volume.” Under cabotage, only Malaysian shipping companies can carry goods within the country’s waters.

The Pan-Borneo Highway, which will be dual carriageway in each direction for most of its length and include rest-stops, will make it easier for tourists to get around the state and for agricultural produce to be transported from farms and plantations in the interior to ports such as Sapangar, but also the dedicated palm oil ports in the east at Lahad Datu and Sandakan at the centre of the palm oil industry.

Ports

Palm Oil Industrial Cluster Lahad Datu already has a dry-bulk port terminal and a liquid terminal. A container terminal costing RM450m ($111.4m) will open at the end of 2016. The initiative had attracted investments of RM9bn ($2.2bn) by January 2016, according to the Sabah Economic Development and Investment Authority. Sabah also has many other ports around the state, but these are expected to be rationalised or turned into dry ports once inland transportation has improved, Poyong told OBG.

Utilities

Basic services including water supply and electricity provision are also being improved, with 94.1% of rural homes now having electricity coverage, compared with 77% in 2009. Some 80.6% now have water supplied compared with 59% previously. The federal government has set aside RM515m ($127.5m) to strengthen and upgrade the state’s power transmission and supply systems and reduce outages. Sabah is also looking into renewable energy to ensure all villages in the state have electricity. Malaysia’s first geothermal power plant is under construction near Tawau and is due to be completed in 2016. Sabah has also signed inter-connection agreements with Sarawak Energy that form part of the latter’s attempt to push forward the idea of an ASEAN electricity grid.

ICT Infrastructure

An undersea cable between Sabah and Peninsular Malaysia, which is expected to be ready by 2017, should help improve mobile phone and internet coverage in the state, which has long lagged behind the peninsula. The Ministry of Communications and Multimedia has also been building scores of new telecommunications masts and is drawing up plans to install telecoms towers along the Pan-Borneo Highway. The lack of a reliable fixed broadband service means many people in the state access the internet through their phones, but Sabah is benefitting from the broadband general population initiative to bring high-speed internet to more rural areas as well as the high-speed broadband (HSBB) 2 project for urban centres. In March 2016, the state government signed a partnership with Chinese telecoms company Huawei, which is part of the HSBB project, to develop further the state’s ICT infrastructure. By 2020, under the 11MP, all state capitals, including Kota Kinabalu, are expected to be equipped with high-speed broadband of up to 100 Mbps.

Congestion

As the per capita GDP of the state has risen more people have the means to buy cars, adding to congestion in towns and cities such as Kota Kinabalu. The Pan-Borneo Highway will include a bypass to redirect through-traffic around the city, but authorities also aim to improve public transport so residents will no longer need to use their cars as frequently.