OBG talks to Musa Aman, Chief Minister of Sabah

Interview: Musa Aman

What kind of policy is being shaped to support downstream industrial development?

MUSA AMAN: Since 2012 tax incentives have been available for investment in Sabah Development Corridor (SDC) flagship projects, several of which encourage downstream activities, notably the Palm Oil Industrial Clusters, Sabah Agro-Industrial Precinct, Sipitang Oil and Gas Industrial Park, Interior Livestock Valley, and Marine Integrated Cluster. Incentives include full exemption on statutory income for up to 10 years, investment tax allowance of 100% on qualifying capital expenditure for five years, and full exemption on import duty and sales tax exemption, subject to current policy.

As of June 2014, some RM1.75bn ($546m) has been allocated by the federal government for infrastructure, focusing on transportation and logistics, power supply, and ICT enhancements to raise competitiveness and narrow the urban-rural divide. Global competitiveness is increasingly determined by service efficiency, so emphasis will be placed on internet connectivity.

How can Sabah capitalise on being part of Malaysia while taking advantage of its unique advantages?

MUSA: Initially, resource-rich Sabah saw development driven by commodity exports, first timber and later oil palm. In the 1990s the services sector grew significantly, particularly in tourism. In 2011 SDC was aligned with the national Economic Transformation programme through the Corridors and Regional Cities initiative to target investment not only for resource-based sectors, but also in education, logistics and agro-biotechnology, leveraging Sabah’s natural endowment, location and multi-cultural background.

Development efforts under SDC are underpinned by the need to capture higher value economic activities, promote distributed economic growth, and ensure sustainability. The goal is to create eco-friendly linkages in agriculture, tourism, logistics and manufacturing. For example, the Sandakan Education Hub, the Sepilok Orangutan Sanctuary and the Tabin and Danum Valley Research Centres together enhance Sabah’s biodiversity and environmental research, training and conservation programmes. The National Conservation Trust Fund also provides investment tax allowances for the purchase of green technology. The Sabah Economic Development and Investment Authority (SEDIA), as the investment promotion agency for SDC, is working closely with the Malaysian Investment Development Authority in attracting investments into SDC.

Meanwhile, SDC projects have paved the way for a knowledge-intensive economy, with emphasis on attracting and retaining talent in strategic industries, while reducing dependence on foreign unskilled labour. Since the launching of SDC in 2008, the contribution of the services sector to GDP has steadily expanded from 42.3% in 2008 to 47.4% in 2012, buttressing Malaysia’s aim to become a developed nation with a high-income economy by 2020.

The major challenge is giving workers the necessary technical knowledge to meet the demands of fast-growing oil and gas, ICT, biotechnology and green technology industries, where the existing workforce is insufficient. The government has collaborated with the private sector, investors and academic institutions via initiatives such as the National Talent Enhancement programme and the Accelerated Skills Enhancement Training programme, a cooperative effort involving SEDIA, the Sunway International Business and Management and selected hotels. SEDIA has promoted the Sandakan and Interior Education Hubs, and partnerships with UK, US, Australian and Chinese universities.

How can Sabah optimally brand itself to tourists as a safe, diverse and beautiful destination?

MUSA: To ensure that Sabah is a safe place for both residents and visitors, the federal government has bolstered security measures in the eastern part of Sabah via the establishment of the Eastern Sabah Security Command in the 10 districts of the Eastern Sabah Security Zone to preserve sovereignty and public order.