Malaysia Country Report

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SEDIA drives Sabah's riseas global connectivity hub

PUBLISHED : Tuesday, 08 December, 2015, 12:12pm
UPDATED : Wednesday, 23 March, 2016, 5:09pm

Paradise may not even begin to describe Sabah, but it comes close. Home to Malaysia's highest mountains, dense tropical rainforests and some of the world's most diverse marine life, the state located in northern Borneo is one of the fastest-growing eco-tourism sites in the world - with tourists averaging more than 2 million annually over the last 10 years.

Today, the state is attracting more than international divers, golf aficionados, mountaineers and other adventurers. From small- and medium-sized enterprises (SMEs) coming from across the country to global investors and multinationals around the world, Sabah's new wave of visitors are discovering more rewarding reasons to stay.

"With the state's rapid development and rising recognition - not only for its natural beauty but also for its increasingly diverse investment opportunities - Sabah is set to embrace a new role as a hub for Asean and global connectivity," says Dr Mohd. Yaakub Johari, president and CEO of Sabah Economic Development and Investment Authority (SEDIA). "The goal is to provide improved air and sea linkages infrastructure and attract investment as well as increased trade, particularly between Sabah and the Asean region."

The Asean region's combined gross domestic product (GDP) is about US$2.4 trillion and its consumer base exceeds 640 million people, representing nearly 9 per cent of the global population. Sabah's strategic geographic position allows it to have direct connectivity to other key destinations including China, Singapore, Indonesia, South Korea and Japan.

This position is further strengthened by the Sabah Development Corridor (SDC) initiative launched in 2008, where SEDIA is tasked to transform Sabah into a prime business and leisure destination by 2025. In addition to positioning Sabah as a gateway for trade, investment and tourism, SDC aims to create job opportunities, make the state more technology-savvy and more comfortable to live in - and transform it into a harmonious state regardless of race or religion.

In the next decade, Sabah is envisioned to triple its GDP per capita and create more than 900,000 jobs.

Beyond facilitating permits and licences for local and foreign companies exploring SDC, SEDIA provides investment advisory and tailored incentive packages for various enterprises. More importantly for those venturing into the state or the country for the first time, SEDIA helps businesses find the right partners.

"The ultimate goal is to enhance the quality of life of the people by accelerating the growth of Sabah's economy," Johari says. "Promote regional balance and bridge the rural-urban divide while ensuring sustainable management of the state's resources."

Ensuring seamless movement of people, goods and services

As revealed in the 11th Malaysia Plan, SEDIA is set to intensify its efforts to enhance Sabah's global connectivity and smooth transformation into a diversified, knowledge-intensive and high-added-value economy.

"Such a vision entails seamless movement of people, goods and services," Johari says. "Competitiveness in the modern global economy has come to rely heavily on service efficiency and a competent workforce including talented entrepreneurs; that is why we are also putting emphasis on human capital and entrepreneurship development."

SEDIA is also focusing on improving broadband internet services and other relevant infrastructure and the integration of land, sea and air services to boost the efficiency of the logistics sector.

Through the Sapangar Bay Manufacturing and Logistics Cluster (SMLC), SEDIA aims to harness Sabah's geographical advantages to improve its manufacturing competitiveness. SMLC is home to the Kota Kinabalu Industrial Park, which focuses on manufacturing industries such as rubber, furniture and vehicles, and the Sapangar Bay Container Port, which is being developed as a regional transshipment hub.

Despite an assortment of local and global challenges in recent years, Sabah's economy has been resilient - and steadily improving. Last year, the state posted a historical record of container throughput of 398,000 TEUs from 292,688 TEUs in 2010. It also made 6.32 billion ringgit (HK$11.5 billion) from tourism and saw an improved competitiveness of Malaysian exports. From 5.2 per cent in 2013, the unemployment rate went down to 4.6 per cent last year, enhancing the overall growth potential of the state.

This year, SEDIA has launched two programmes to support the development of home-grown entrepreneurs, better known locally as the Bumiputera business sector. One is the Incubator Programme designed for start-up companies and the other is the Enterprise Accelerator Programme for existing SMEs.

Initiatives under the programmes will be implemented in collaboration with Bumiputera agenda-focused government unit TERAJU, Yayasan Sabah (Sabah Foundation), Universiti Malaysia Sabah and other institutions.

SEDIA has also been aggressive in promoting investment opportunities in the knowledge-intensive sector, such as in biotech-based industries. Among SEDIA's recent programmes is the Bio Borneo 2015 conference and exhibition held in Kota Kinabalu, organised in partnership with the Ministry of Science, Technology and Innovation, and BiotechCorp.

Harnessing Strategic Development Areas

For many years, the state's economy has been driven primarily by tourism, agriculture and manufacturing, with palm oil and petroleum as top commodities for export. SEDIA aims to strengthen these areas while creating new and exciting industries that will accelerate the state's development.

In line with Malaysia's Economic Transformation Programme (ETP) and National Key Economic Areas (NKEAs) that are designed to transform the country into a high-income nation by 2020, SDC focuses on key areas: agriculture, palm oil, tourism, logistics, manufacturing; oil, gas and energy; and higher education.

Sabah is also projected to excel in the services industry and resource-based business ventures, thanks to its rich natural resources and deep cultural heritage. Within these sectors, SEDIA has identified six Strategic Development Areas (SDAs) with corresponding fiscal incentive packages offered to investors.

Greater Kota Kinabalu leads the SDAs, followed by the Bio-Triangle, Agro Marine Belt, Interior Food Valley, Kinabalu Gold Coast Enclave, and Brunei Bay Integrated Development Area and Oil and Gas Clusters.

Each SDA is forecast to fuel regional growth, consisting of distinct economic clusters and projects. Greater Kota Kinabalu, for example, focuses on projects designed to modernise Sabah's biggest urban centre, covering the surrounding towns of Penampang and Putatan. These have opened up investment prospects not only in increased tourism but also in real estate, education and health care.

The Interior Food Valley, meanwhile, leverages the state's fertile land for innovative programmes, such as in integrated cattle farming and agro-based industries.

"This is one of the many projects that will benefit from close collaboration with partners in the Asean region and China. Brunei, for example, is keen to invest in the livestock industry," Johari says. "We know that more and more Chinese and Asia-Pacific companies are keen on global expansion - and Sabah is positioned as a key destination for high-growth industries, especially in knowledge-intensive, resource-based industries."

Another flagship project is the Sabah Agro Industrial Precinct (SAIP), which is an emerging centre of excellence in agro-biotechnology. With a vision of yielding more value-added food and speciality products based on plants and animals, SAIP provides support to entrepreneurs seeking to invest in food ingredients, pharmaceuticals, neutraceuticals, cosmetics and industrial enzymes.

Highlighted by a dedicated Halal Park, it also offers management services, post-harvest handling facilities, processing assistance and logistics, in addition to incubator support.

Green technology and environmental rehabilitation are other major development areas that are gaining wider recognition globally, and SEDIA seeks to attract international partners to explore other related ventures, including fruit, herb and livestock production.

With nearly a third of Malaysia's palm oil production coming from the state, Sabah presents various resource-based opportunities as well. These include wood- and marine-based manufacturing activities and biotechnology initiatives.

Sabah's oil and gas industry likewise holds immense potential, with about 25 per cent of the country's petroleum and natural gas under the state's waters. Reaping such a rich resource has always been hindered by downstream processing challenges - but this is now being addressed by SDC initiatives focusing on the oil and gas cluster.

Showcasing Sabah as a vibrant cultural and eco-tourism centre, the Kinabalu Gold Coast Enclave SDC aims to attract long-staying visitors, prime eco-adventure tourists and holiday home buyers. Projects include the establishment of leisure and creative industries alongside high-end resorts, stretching along more than 100km of waterfront and beaches.

"The number of tourist visits in Sabah doubles every four years, providing a lot of room for investments," Johari says. "By 2020, we expect total receipts from tourism to come close to 17 billion ringgit."

Fortifying public-private partnerships

Core to the realisation of Sabah's envisioned growth is a solid partnership between the public and private sectors.

"Rather than expecting the government to solely pump in funds, we are encouraging the private sector to come in and uncover potential investments that interest them," Johari says. "Let private institutions see whatever gap that they might observe to enhance their investment return - and allow them to address it while using it as a business opportunity."

SEDIA is also tapping the private sector to enhance Sabah's quality of human capital, welcoming educational and research institutions to establish facilities in the state.

One flagship project aimed to address this need is the 500-hectare Sandakan Education Hub, which is designed to support research and academic institutions through access to state-of-the-art infrastructure and well-equipped public facilities. By 2020, private institutions are projected to double their capacity to about 20,600, with more than 20 per cent of the population representing international students.

"This will complement the natural endowment that we already have, and improve our value propositions further by capturing more value through research and innovation," Johari says. "As a greenfield area, we welcome investors, tourists, visitors and students to discover the leisure and entrepreneurial opportunities that Sabah offers as the rising Asean hub for business, culture and nature."

Sabah Economic Development and Investment Authority (SEDIA)