Malaysia Country Report 2014

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Discovery Reports

Opening Sabah's treasure troves

PUBLISHED : Monday, 24 March, 2014, 3:08pm
UPDATED : Wednesday, 20 June, 2018, 4:21pm

Some 20 metres from the shores of Sipadan Island in Sabah, Malaysia, the coral reef suddenly drops 1,000m to 2,000m. Divers perched atop the edge of the reef wall can watch from a distance of 10m thousands of swirling barracudas, mating hawksbill sea turtles and many other marine creatures.

One of the best diving sites in the world, Sipadan Island has one of the largest collections of rare marine life in one place. It is a front-row seat to the world-renowned Coral Triangle bordered by Sabah in the west, the Philippines in the north, Indonesia in the south all the way to the Solomon Islands in the east. Considered as a global centre of marine biodiversity and as the "Amazon of the seas", the triangle is home to six of the world's seven marine turtle species and the living specimen of coelacanth thought to be extinct 65 million years ago.

Sabah Development Corridor

To harness Sabah's natural attributes, the Malaysian government created the Sabah Development Corridor (SDC) in 2008. One of Malaysia's five economic corridors, SDC aspires to turn Sabah into an internationally recognised destination for business and leisure by 2025. SDC aims to raise Sabah's liveability index and attract investments through infrastructure development and a lower cost of doing business. Focused on tourism, oil and gas, palm oil, agriculture, education, manufacturing and logistics, the corridor targets high-value industry and services, balanced economic growth and environment conservation.

The following year in 2009, the government created the Sabah Economic Development and Investment Authority (SEDIA) as a one-stop authority to drive SDC's growth. Tasked primarily to plan, co-ordinate, promote and accelerate the development of SDC, SEDIA will help Sabah raise its gross domestic product fourfold by 2025, while creating 900,000 new jobs. This is expected to raise per capita income threefold, thus creating a vibrant local market for businesses.

Competitive advantages

"We are leveraging Sabah's competitive advantages in terms of geographical location, natural endowment and multicultural background to propel its growth," says Dr Mohd Yaakub Johari, president and CEO of SEDIA.

Strategically located in the middle of Southeast Asia, Sabah has strong air and sea links with major cities in Asia-Pacific. These include direct connectivity to 13 major world destinations including South Korea, Japan, China, Indonesia and Singapore. Sabah accounts for about 25 per cent of Malaysia's oil reserves and 30 per cent of the country's palm oil production.

As the second largest state in Malaysia, Sabah has 32 ethnic groups. An extensive exposure to the Chinese, European, German, Spanish and English cultures accounts for its openness. But Sabah's core strength lies in tourism. Aside from Sipadan Island, the Malaysian state boasts Mount Kinabalu.

The Unesco World Heritage Site is the highest peak in Southeast Asia.

Sabah also showcases the world's oldest rainforests, which remain unaffected by the last ice age that started millions of years ago. Maliau Basin, for example, has a rare assemblage of 12 forest types, which culminate in the seven-tier Maliau Falls. The 43,800-hectare Danum Valley Conservation Area, meanwhile, is a pristine rainforest home to 340 species of birds and 200 species of plants per hectare.

"Because of these specific natural endowments, tourism has become one of our most dynamic focus areas," Johari says.

Investors going into tourism do not have to pay income tax for 10 years or they can avail of an investment tax allowance of 100 per cent on qualified capital expenditures for five years. The investment tax allowance can be offset against 100 per cent of statutory income. Businesses may also forgo import duties, sales tax and stamp duties on land acquired for development.

Economic clusters

"The idea is to support specific economic clusters, from tourism and palm oil to manufacturing and education," Johari says. "The clusters will basically act as a driving force to help pull up the rural areas while enabling investors to benefit from the initiatives."

Offering a similar incentive scheme as in tourism and developing the needed infrastructure support, SDC is keen on pursuing the economic clusters. These include flagship projects such as the Kinabalu Gold Coast Enclave, the Palm Oil Industrial Clusters in Lahad Datu and Sandakan, the Sipitang Oil and Gas Industrial Park and the Sapangar Bay Manufacturing and Logistics Cluster.

"As a foundation for the development of knowledge-intensive industries, we have also focused on education and human capital development, positioning Malaysia as a centre for learning in the region," Johari says.

SDC is developing the 500-hectare Sandakan Education Hub, which caters to institutions of higher learning and research through access to well-equipped public facilities and state-of-the-art infrastructure. SDC has been encouraging universities from Britain, Australia, China and other countries to set up campuses in Sabah for the regional market. One such institution is Britain's University of Warwick.

Early success

"We have already had significant success in transforming the economic landscape of Sabah," Johari says. "Imagine the changes we will see as current investments take off within the next five years."

Winds of change are indeed blowing across the Malaysian state. Investments have continued to pour in. Private developer Tekun Cemerlang, for example, will be building Alila Dalit Bay Integrated Resort in Tuaran, comprising about 450 hotel rooms and 130 villas.

As businesses continue to grow, the poverty rate across Sabah has fallen from 20 per cent in 2009 to only 8 per cent in 2012.

Tourists share the excitement of the locals. As the sun sets over the bustling Kota Kinabalu City Waterfront Boardwalk, people in the outdoor restaurants and bars admire the final changing hues of the sea. South Korean children pass by chanting "KK" for Kota Kinabalu. They tagged along with their fathers who just went over the weekend for a game of golf.


Sabah Economic Development and Investment Authority (SEDIA)