New Corridor


Economic News

22 Jul 2010
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While 2007 had been dubbed the year of the corridors, with the northern, eastern and southern portions of peninsular Malaysia each having launched development programmes, the country has just released a fourth plan aimed at spurring economic growth and eradicating poverty.

On January 29, the state of Sabah, located on the Malaysian portion of the island of Borneo, announced the launch of its own Sabah Development Corridor (SDC); an 18-year plan aimed at positioning the state as a centre for trade, investment and leisure by 2025.

While the sectors targeted by the new project vary slightly from those of the previous three projects, the biggest difference lies in the scope of the programme, which is indeed not a corridor at all. While the original conception was confined to Sabah's east coast, the SDC is now set to cover the entire state.

Sabah Chief Minister Musa Aman, who requested the expansion, told a press conference, "We want a balanced development between urban and rural areas and do not want to leave some areas behind while others surge ahead."

The programme aims to bring in total of RM105bn ($32.4bn) in investment, mostly from the private sector. Agriculture, tourism and manufacturing have been targeted as the core areas for development and subsidiary industries such as construction and logistics are predicted to enjoy spin-off returns.

The first phase of development will run from 2008 to 2010, focusing on quick-win agriculture projects to redress the areas most adversely affected by poverty. The medium term phase (2011-2015) will focus on human capital and infrastructure development and the encouragement of small- and medium-sized enterprises (SMEs) in downstream manufacturing. Finally, the long-term phase (2015-2025) will concentrate on conservation, research and new tourism products, as well as the development of business and residential centres.

Under the programme, Sabah's gross domestic product (GDP), which stood at RM16bn ($5bn) in 2006, is targeted to grow almost fourfold to 63bn ($19bn) in 2025. Officials expect more than 900,000 jobs to be created, while the state aims for GDP per capita to increase from RM5331 ($1647) to RM14784 ($4568).

The government will allocate RM5bn ($1.54bn) to kickstart the project, and observers expect government-linked companies such as the Sabah Economic Development Corporation, Sabah Foundation Group, Sawit Kinabalu Group and Suria Capital to be awarded the bulk of the initial infrastructure projects. A one-stop centre headed by the state and federal secretaries will be established to offer customised incentive packages and support to both local and foreign investors.

As Sabah is the fourth corridor launched in the past 12 months to offer free trade zones and has similar growth targets to the others, exploiting its natural advantages will be the key to its success. Pointing out the state's strategic location as a gateway for international trade and trans-shipment, Aman said, "We are closer [than Peninsular Malaysia] to Hong Kong, Seoul, Tokyo and Manila [...] Plus we are next door to the East Asian Growth Area comprising Sarawak, Brunei, Kalimantan and Sulawesi in Indonesia and the southern Philippines."

In addition to its strategic location, Sabah's natural assets include oil and gas, minerals and forests, as well as fertile agricultural land. The rainforests of Borneo are famous for their unique biodiversity. The state hopes to capitalise on these areas by attracting eco-tourism and international scientific researchers, as well as stimulating biotech activity.

Carter S Roberts, the president and chief executive of the US-based World Wildlife Fund (WWF), told OBG, "The biodiversity that exists on Borneo is on par with that found in other top-flight conservation priorities such as the Amazon and the Congo."

While agriculture, through the planting of food crops, will be a key component at the initial development stage, it is expected to remain a mostly home-grown industry aimed at self-sufficiency, leaving tourism and manufacturing as the sectors with the strongest opportunities for foreign investment.

Tourism currently contributes 10% to Sabah's GDP and the SDC expects tourism receipts to grow significantly from RM2.88bn ($889m) in 2006 to RM48.5bn ($14.9bn) in 2025. While this figure seems ambitious, Sabah is making a name for itself domestically and internationally. Tourist arrivals have more than doubled in the past five years, from 1.1m in 2002 to 2.5m in 2007. Sabah currently has 287 hotels with total occupancy of 12,367 rooms and the Sabah Tourism Board has stated that the state will need an additional 6000 rooms by 2010.

Under manufacturing, the state intends to boost capital investments from RM208mn ($64.2m) to Rm2.96bn ($913m) by 2025. Oil and gas and biomass recovery will be given top priority as the state looks to exploit its richness in commodities by investing in downstream activities such as oleo-chemicals, gas processing plants, agro-industry and timber-based manufacturing.

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