OBG talks to Abdul Kadir bin Abdullah, CEO, Sipitang Oil and Gas Industrial Park (SOGIP)

Interview: Abdul Kadir bin Abdullah

What can Sabah do to draw more foreign investors?

ABDUL KADIR BIN ABDULLAH: The single most important thing for attracting investors is flexibility. They often have countless sites to choose from, so one seemingly minor problem has the potential to spoil a huge venture. Kota Kinabalu Industrial Park has been highly successful in providing facilities for local small and medium-sized enterprises by providing ready-built factories on plotted land. Since petrochemicals investors operate on a much larger scale, we are taking the opposite approach at SOGIP. One must be flexible in every regard. Rather than give land to the first investors interested in building minor storage facilities, it is important to wait until the larger key tenants come in so that they are able to communicate their needs. The difficulty will be upgrading rural infrastructure for a full-blown industrial complex. Sabah has many resources to market, but micro-management will only get in the way of foreign investors. This is especially true for experienced players in the oil and gas or petrochemicals industries that have a lot of money to invest, as well as highly specific requirements.

How can locals with little expertise in these areas benefit from this sort of investment?

KADIR: Attracting investment is the first step, but it is important to make sure Sabahans benefit. Direct benefits for locals include roles as joint venture partners, construction contractors or service and maintenance. Though Sabah’s talent pool is still developing, the education sector is visibly gearing up for oil and gas training. We are adding value not just to our natural resources but to our human resources. Under-employed graduates are still many, but so are training providers, so in time the sector will mature. The short-term challenge is getting qualified lecturers and educators to train tomorrow’s specialists. Indirectly, the new investment in Sabah’s oil and gas industry will create thousands of jobs across all sectors, from construction to education and even tourism. A chief beneficiary of Petronas’s $1.5bn investment in the Sabah Ammonia and Urea Project will be agriculture, the main driver of the state’s GDP. Sabah consumes 30% of all fertiliser in Malaysia, and meeting demand domestically will save the country some RM4bn ($1.25bn) in fertiliser imports alone.

How would you describe the ease of dealing with both the state and federal governments?

KADIR: The government has a clear vision of what it wants and is open to suggestions. It has been helpful not only in designing a tax incentive regime for investors through the Sabah Economic Development and Investment Authority, but also by remaining flexible as our goals have evolved. This adaptability has enabled us to fundamentally change the investments we want to incentivise without having to go through time-consuming bureaucratic processes. Admittedly, at the early stage, cooperation from the federal government was slow, but this was due to lack of clarity in SOGIP’s direction. Once we created the SOGIP Master Plan together with Petronas and key federal and state agencies, the support has been encouraging and positive.

Support from the state government has been excellent, as our board members comprise key government officers. The challenge in upgrading infrastructure is that, without firm investor commitment, the government is cautious, yet investors want to see solid infrastructure before they commit. Thus far, we have managed to secure our basic and immediate needs. For example, the amount of water required by Petronas was 27m litres a day, and while we started with zero capacity, we can now produce more than 40m litres a day and their plant has yet to come on-line. While persuading the federal agencies that Sabah is capable has been an uphill battle, we have been successful. It took time to convince the sceptics that everyone will benefit more from a downstream industry for urea production rather than simply exporting it all. In the end, it took the leadership of the state government and Petronas to reach the most optimal mix. This was made possible by the excellent working relationship they have.