Sabah: Investment gateway

With investors and policy makers gathering in Kota Kinabalu in late October for a key investment forum, Sabah’s decision makers were able to present a picture of growing confidence in the state’s economy and in its ability to leverage Sabah’s unique position in the Brunei Darussalam-Indonesia-Malaysia-Philippines-East ASEAN Growth Area (BIMP-EAGA).

The manufacturing sector, which has benefitted from increasing investments of late and is looking to the sub-region to expand its markets, was highlighted as a promising investment growth area, with a major new industrial park likely to be key to this development.

At the Sabah Domestic Investment Seminar held in Kota Kinabalu on October 25, Malaysia’s international trade and industry minister, Mustapa Mohamed, said in his keynote address that between January and August, the nation’s manufacturing sector accounted for more than 86.3% of Malaysia’s total exports, with most going to China, Singapore, Japan and the US.

However, for the rest of 2011, ASEAN and China will be the main destinations for Malaysia’s exports, the minister said. Over the same period, Malaysia’s total international trade grew by 7.9% to RM830.23bn ($265.42bn). Generating that kind of growth in Sabah’s manufacturing sector – and international trade – has long been an aim of the state’s development policies.

Historically dependent on raw material exports for revenue, moving Sabah’s economy up the value chain is thus a goal restated in many state master plans and federal budgets, including the 10th Malaysia Plan and the recent national budget for 2012.

Some results of this are already evident. Approved investments in Sabah’s manufacturing sector were worth RM692.3m ($211.32m) between January and August, the minister said. Additionally, the Malaysian Industrial Development Finance − a Ministry of International Trade and Industry agency − approved loans totalling RM611m ($195.34m) for 635 manufacturing and service-based projects in the state.

Following the minister’s keynote address, Sabah’s chief minister, Musa Aman, said in a speech read by state minister of industrial development, Raymond Tan Shu Kiah, “I believe, with the Industrial Development Ministry’s special attention and assistance, Sabah will be able to attract more investments into the manufacturing sector and subsequently bring industrial development to a higher level.”

One way of doing this is to boost trade with the surrounding sub-region. This had been highlighted a few days before the investment gathering, when high-level politicians from Brunei Darussalam, Indonesia, Malaysia and the Philippines met for the 16th BIMP-EAGA Ministers Meeting in Cagayan De Oro, Philippines.

One of the most urgent issues discussed by the four leaders was the necessity to improve connectivity in order to further boost investment in the region, Tan said in comments made to reporters after the Kota Kinabalu gathering.

Tan also stated that Sabah’s location in the middle of the BIMP-EAGA region was fortunate, as it enables the country to act as a gateway to facilitate investment. “We can see the interest and we can attract the investment that covers the whole region,” Tan said.

One outstanding issue, however, is how BIMP-EAGA nations can connect with one another to make it easier for business investors to move around the region. Tan said Sabah’s strategic location could hold the answer.

“With our position, we could actually get everybody connected with us. So there would be greater movement and ability to collaborate and share in terms of investments that come into this region,” he said.

Central to strengthening these connections and developing the state’s value-added industries in an increasingly competitive environment for foreign investment is Sabah’s Kota Kinabalu Industrial Park (KKIP).

KKIP already appears poised to emerge as a regional distribution centre for industries such as automobile makers, biotech firms and halal-oriented companies. More than 30 logistics outfits are also located at the KKIP, some of which are already using their facilities to break-bulk and distribute goods to the BIMP-EAGA region.

Connectivity enhancements of the sort that the KKIP offers could be instrumental in achieving the region’s strategic goals. In a joint statement issued after the BIMP-EAGA ministerial meeting, the leaders acknowledged that connectivity – including air, sea and land transport, as well as information and communication technologies – is a main driver of BIMP-EAGA’s efforts to integrate and achieve its targets within the sub-region.

The statement urged officials to prioritise and expedite implementation of trade facilitation and transport infrastructure projects to achieve a more coordinated approach to BIMP-EAGA’s overall development.

With its location at the nexus of several regional borders, state industrial development will likely prove to be instrumental in realising Sabah’s ambition to become a regional investment – and manufacturing – centre.