OBG talks to Khoon Ping Kuok, Executive Director, Pacific Sanctuary Holdings

Interview: Khoon Ping Kuok

How would you describe the overall environment for developers in Sabah?

KHOON PING KUOK: As an outsider coming to Sabah, the overall experience is generally positive. It is easy to do business here and the atmosphere is welcoming. In addition, there is racial harmony and a low crime rate, and the state has a progressive government with a good vision for the future. At the same time, the authorities have been wise to expand the city into new areas and focus on green projects such as the Tanjung Aru Eco Development, as well as walkways along the waterfront designed to preserve the coastline. Moreover, Sabah could become an entrepôt for ASEAN trade, owing to its position at the centre of several important trade routes. Due to this potential, real estate prices, often driven by speculation, have begun to skyrocket, making it a great time for development.

What improvements would you like to see in Kota Kinabalu’s (KK) infrastructure?

KUOK: The infrastructure plan for the city is already quite forward thinking. KK is a “ribbon town” with two or three ribbons in the north-south direction, and all growth will go in these directions due to the ban on land reclamation in the west and the mountain to the east. To the south, there will be an industrial belt based around Kimanis, with roads linking the city to Brunei Darussalam and Sarawak. To the north, the government is creating a tourism zone, the Kinabalu Gold Coast, from KK up to Tuaran. The state will have to continue investing in road development, especially to build connections to other cities such as Kudat, Sandakan and Lahad Datu. Improving these routes will facilitate trade and enhance security.

There is a definite need for mass transit within KK, as evidenced by the growing traffic volume. A tram system could be ideal for tourism, as it has been in San Francisco, Hong Kong and Melbourne. Given that KK is a linear city, this makes sense and would alleviate congestion within the city, while also promoting tourism.

What are the main challenges for investors in Sabah in terms of securing financing?

KUOK: We have definitely felt the effects of the tightening of liquidity by the central bank. Although financing is still available, it is harder for residents to make the required deposits for their homes. The government may be better off devising separate regulations for different parts of the country, since eastern areas are behind the rest of Malaysia in terms of wealth. Until the gap is narrowed and lending requirements for affordable housing are loosened, tight regulation is likely to slow development in eastern areas. Even lending of up to 95% of a home’s value could be healthy, as low-cost housing is generally done at near zero profit margins.

Other costs are also higher in Sabah than elsewhere, and this is squeezing our margins. Each pile for our developments has to come from Kuala Lumpur (KL), which increases the cost considerably. While Sabah might not be competitive enough to have a healthy export market, there is a definite need for a local building materials industry in order to help meet domestic demand. As inflation is expected to rise in the next few years, this could hurt Sabahan consumers, with prices equal to KL, but salaries at 60% of their KL counterparts.

How can Sabah’s human development be improved?

KUOK: In order to retain talent, more jobs are needed that can support the lifestyle that people now demand. As development continues, salaries will go up and this will be less of an issue. Sabah has a lot of advantages that it should capitalise on. Tourism and education, for example, can go hand-in-hand here. Development in local tourism will come from research into niche segments, where Sabah can utilise its diverse natural resources, while charging for high-end amenities. Furthermore, the government is also pursuing tourism development that draws on the state’s natural environment. More people from Peninsular Malaysia need to come to Sabah to experience the unique environment and culture, as they can learn much from the state.