Sabah: Surpassing targets

As the second phase of the Sabah Development Corridor (SDC) gets under way, the chief minister, Musa Aman, has announced that cumulative planned investment in the programme has reached RM57bn ($17.7bn) – almost four times the target value set just last year.

The chief minister also said that the state government is encouraging new investments in the form of anchor companies, small and medium-sized enterprises and other start-ups in targeted sectors. These include the biotech and information and communications technology (ICT) industries and designated strategic development areas (SDAs).

To sweeten the deal, a competitive package of customised incentives to attract private-sector investment to the state is in the planning stages, Musa, who is also the chairman of the Sabah Economic Development and Investment Authority (SEDIA), said at a September 8 meeting of the authority.

SEDIA’s remit includes promoting and accelerating the development of the SDC into a leading economic region and a preferred investment destination. SEDIA is also laying the groundwork for future growth by drawing pioneering technology to SDC, including ICT firms.

The SDC, a federal government initiative launched in 2008, aims to triple the state’s GDP per capita and increase its total GDP four-fold by 2025. In all, the SDC is expected to create more than 900,000 new jobs.

While Sabah’s state government agencies and government-linked companies are tasked with carrying out SDC’s initiatives, overall implementation of the plan is the responsibility of SEDIA, which has been participating in domestic and overseas investment and trade missions.

The response from the trade missions has been quite promising, with cumulative planned investment in the SDC reaching RM57bn ($17.7bn) between the programme’s launch in 2008 to the first half of 2011, Musa said.

According to Economic Planning Unit figures cited in the 10th Malaysia Plan (10MP), the target value of investment in SDC is RM16bn ($5bn). At the end of the fourth quarter of 2009, the SDC had secured actual investments of almost RM12bn ($3.7bn).

The energy, manufacturing, and oil and gas sectors have attracted 45.6% (RM26bn, $8.1bn) of the cumulative total investment planned, while the services sector, especially real estate and tourism, has brought in 39% (RM22.1bn, $6.9bn) of the total planned investment.

Coming in last place is the agricultural sector, which has historically been a main pillar of the state’s economy, but has accounted for only 5.5% (RM3.2bn, $994.6m) of planned investment. However, agriculture’s poor performance is expected to improve with the implementation of key agro-based projects.

“Related agro-based projects include the palm oil industrial clusters in Sandakan and Lahad Datu; agropolitan projects in Tongod, Kemabong, Pitas, Kota Belud and Beluran; Keningau Integrated Livestock Centre; permanent food production parks; [and] Sabah Agro-Industrial Precinct and Fisheries Complex in Kuala Penyu,” Musa said.

Indeed, the Brunei Investment Agency has shown interest in participating in the development of Sabah’s agro-based sector via these projects. In addition to Brunei Darussalam, government and business leaders from East Kalimantan, or Kaltim, have approached the Sabah government, Musa said.

“Enhanced economic and trade relations between Sabah and Kaltim, together with Brunei, will boost the potential of Sabah to serve as a regional trading and logistics hub. At the same time, this development may lend some support to the SDC initiative to carve a new East Asian silk route linking the rapidly growing BIMP-EAGA [Brunei Darussalam-Indonesia-Malaysia-the Philippines East ASEAN Growth Area] to the dynamic East Asian economies,” Musa said.

In its first phase, which ran from 2008 to 2010, the SDC focused on boosting Sabah’s liveability and making it easier to conduct business in the state, with infrastructure upgrades, lowered costs of doing business and poverty eradication projects the main accomplishments.

Now in its second phase, which will run until 2015, the SDC’s major initiatives include a long list of SDAs that are meant to generate employment and income for Sabahans and help jump-start sustainable economic growth in the state.

In the long term, the SDC’s growth blueprint involves a wide variety of measures, including leveraging Sabah’s geographical location, natural resources, cultural heritage and biodiversity; building a high-margin services sector in logistics and tourism; bringing rural people into the economic process; enhancing agricultural yields; increasing the value of Sabah’s resources by fostering downstream manufacturing; conserving and protecting the environment; and implementing growth via good corporate practices.

These are ambitious goals, but with planned investment already almost four times the target value – and neighbours lining up to get in on the action – it seems as if the SDC is firmly in control of the state’s future growth.