OBG talks to Faisyal Hamdain Diego, Chairman, Suria Capital Holdings

Interview: Faisyal Hamdain Diego

What progress has been made in terms of establishing Sabah as a key trading hub?

FAISYAL HAMDAIN DIEGO: While Sabah has not yet become a major hub for regional trading, container cargo volumes in Kota Kinabalu continue to increase year-by-year. Furthermore, trade volume in the state overall has held steady in the last year despite growing competition and a shaky global environment. A big area of potential growth is in the logistics and bunkering segments, which can take advantage of less congested ports and cheaper labour, particularly compared to Klang and Singapore. Sabah is a convenient place for maintenance and refuelling, which can cut out the two days often spent waiting or in transit. Although domestic demand does not currently attract international shippers to do business in Sabah, lower waiting times and other cost effective measures can attract them to the state’s efficient facilities. The federal government has pinpointed Sabah as a promising destination for cruise ship facilities, alongside Langkawi, Malacca and Johor.

Relocating more cargo operations to sites outside the city can allow for this new port facility to be developed. In addition, new ferry operations and cruise tourism will act as another source of revenue for the state, which already serves as a hub for tourists flying through Kota Kinabalu International Airport.

Jesselton Quay, which is due to be fully completed by 2021, is a RM1.8bn ($561.7m) project that will centre on this new cruise terminal and provide tourists with shopping and entertainment facilities. This will help cement Sabah’s position at the heart of Brunei Darussalam, Indonesia, Malaysia, Philippines- East ASEAN Growth Area (BIMP-EAGA), and even ASEAN.

What sort of developments would you like to see in terms of regional integration?

FAISYAL: Sabah is centrally located, which offers opportunities for greater trade connectivity. The agricultural output of BIMP-EAGA is only paled by its potential output and will likely become a key supplier to larger Asian markets. It is important that we boost connectivity regionally in order to compete on a global scale, especially maritime integration. Sabah is leading the way due to its prime location within ASEAN, progressive policies and infrastructural development.

Likewise, investment in logistics capacity ports, road connectivity will prepare the state for when the agricultural output of its neighbours rises. Free trade or Customs liberalisation in the region is also vital and will help to further unlock the state’s potential. As such, Sabah can serve as a staging ground for downstream activities and trade with Singapore, Hong Kong, Guangzhou, Manila, Jakarta, Seoul, and so many more.

How do you see the local regulatory environment and what does it offer private players?

FAISYAL: Regulatory conditions in Sabah are conducive to development. The state has a stable government with a clear policy direction, which reassures investors that it is a safe place. Challenges do exist, particularly for large projects, including delays in land purchase and acquisition, and receiving development approvals, but investors are generally welcome.

Streamlining these processes takes time but, compared to the rest of Malaysia, Sabah excels in the ease of doing business. The private sector welcomes the role that the federal government has in catalysing growth through development initiatives and megaprojects across the state. By offering up to 10-15% in reimbursements to firms investing in infrastructure via a facilitation fund, among other incentives, the federal government has shown its support for private investment. Of course, there is always room for further tax incentives and grants, but the existing policy has brought considerable success in driving development.

Thanks in part to his previous business experience, Musa Aman, the chief minister of Sabah, has helped create a cohesive environment to foster growth. Now is an exciting time for Sabah and in the next few years we can expect to see transformational development.