Getting around: The country is carrying out multiple transport infrastructure upgrades

With its coastline bordering three seas and its capital just three hours flying time from a host of Asian financial, business and political centres, Sabah is a natural international transportation nexus. However, with 3.5m people spread across nearly 74,000 sq km of some of the most varied – and often difficult – terrain in the world, the state also presents a major transportation challenge. Sabah is the most distant Malaysian state from that country’s economic and political centre of Kuala Lumpur, too, and thus faces the challenges posed by internal trade across the thousand miles of sea that separate Malaysia’s capital, Kota Kinabalu (KK), from the peninsula.

While also in proximity to Brunei Darussalam, Indonesia and the Philippines, transport links to these emerging markets from Sabah are largely under-developed, with much to do in expanding and upgrading connections. Tackling these challenges, while leveraging the state’s geostrategic advantages, is thus the key task of Sabah’s transportation development policy – a challenge being addressed by both the public and private sectors. It is also key to a range of other developmental goals for the state, with logistical difficulties a major impediment to economic growth – whether that be in the tourism sector, as getting tourists beyond the main centres entails a lengthy journey, or in bio-energy, where distant plantations often struggle to deliver palm-based feed stocks to renewable energy power plants. Transport is thus central to Sabah’s future – a status that state and federal authorities acknowledge.

Planning Ahead

Starting in 2008 and due to run for some 18 years, the Sabah Development Corridor (SDC) is the state’s main dedicated development plan, while Sabah also benefits from many projects contained within the federal Economic Transformation Programme (ETP), the Government Transformation Plan (GTP), the 10th Malaysia Plan (2011-15), and in all likelihood, the state will also benefit directly from the upcoming 11th Malaysia Plan.

The SDC sees the development of transport and logistics infrastructure as a central element of the whole corridor. The plan notes that while the western and eastern coastal regions have the highest densities in terms of road infrastructure, the mountainous Crocker Range in central Sabah – which, with the 4095 metre Mt. Kinabalu, has the highest peak in Borneo – makes connecting these two regions a major challenge. At the same time, connectivity between the major settlements in the western and eastern regions has historically been below the standards – in both quality and density – of peninsula Malaysia. Thus, much of the SDC is dedicated to improving connectivity within Sabah by boosting road, rail, air and sea links. This major task has been under way for some years and is set to continue, too, with each state and federal development programme for keeping transport centre stage.

Road Runners

According to the director at the Sabah Public Works Department, John Anthony, by September 2013 the state had some 21,136 km of roads – 10 times the length when the state became independent from Britain to become part of Malaysia in 1963. The 21,136 km breaks down into 1501 km of federal roads and 10,747 km of state roads, with the remainder under local government jurisdiction. Of the federal and state roads, roughly half are sealed, while the local roads are around 39% sealed.

With increasing urbanisation and economic development concentrating on the west coast area around KK, along with other hubs such as Lahad Datu on the east coast and Sandakan in the northeast, these areas have the greater proportion of sealed roads and highways. The interior, meanwhile, is often rugged, consisting of dense forests and mountain ranges, making the rivers the traditional transport channels. Yet, for these interior regions to develop, and for the state to be able to offer its rural citizens the same kinds of opportunities and services available to urban dwellers, the rural road network is in need of a major upgrade in September 2013. Anthony additionally told reporters that the maximum road load for vehicles in Sabah varied between 6-38 tonnes, with this lower than in the peninsula mainly due to the lower load bearing capacity of the state’s bridges. At the same time, more vehicles are using the roads as Sabah’s GDP per capita rises, which reduces the road and bridge lifespan and adds to the repair and maintenance bill, as well as boosting the number of traffic accidents. Natural disasters, such as floods and landslides, are also not uncommon in Sabah’s tropical climate.

Playing Catch-Up

The federal and state governments have been pursuing a series of programmes to enhance the road infrastructure, though the costs are large. Anthony stated in August 2013 that some RM2bn ($624m) was needed to catch up with the maintenance programme alone, with some 4560 km of roads in urgent need of repair. Under the SDC, a wide range of road and bridge improvement, repair and construction schemes have been green-lighted, with work on-going since. Allocations have also been made from state budgets – some RM347m ($108.3m) in the 2014 budget was for roads – along with allocations in federal schemes. The 10th Malaysia Plan specifically calls for some 2540 km of new roads in Sabah. The 11th Malaysia Plan, set to run 2016-20, is also likely to include funding for the state’s transport infrastructure development.

The ETP, launched in 2010, echoes the need for road, rail and air development throughout Sabah, as does its sister, the GTP. Implementation of these projects has not always been 100%, however. Under the 9th Malaysia Plan, for example, some RM16.9bn ($5.3bn) was allocated to Sabah, yet projects worth only RM6.81bn ($2.1bn) were completed, according to the Prime Ministers’ Department. The 10th Malaysia Plan took up much of what had been left incomplete by the previous plan. The 11th Plan, when it is finally revealed next year, will likely be scrutinised to see if project implementation has improved.

Over & Under

One of the main schemes under development is an upgrade of the Pan-Borneo Highway, which runs for 1155 km through Sabah. By April 2014, some 94 km of this had been upgraded, the infrastructure minister told the state assembly. The objective is to make the highway, which is already entirely sealed, a dual carriageway, particularly for the stretches in and around major urban areas.

Another major project has been the RM66m ($20.6m), 2.5 km Sepanggar Port Tunnel, a dual carriageway due for completion in April 2015. A further important scheme under way is the Sapulut-Tawau road upgrade, with 36 km of the 140 km stretch completed by mid-2014, according to the Ministry of Infrastructure Development. This should greatly increase connectivity from the interior to the eastern side of the state. Rural road development is also a major element of the state’s transport infrastructure plans. According to the federal Ministry of Rural and Regional Development, by 2012, 87% of Sabah’s rural population had been brought within 5 km of a paved, gravel or laterite road, up from 82% in 2009 and meeting a GTP target, although the figure for the peninsula was 98.6%. Within the 2013-15 period, the target is to bring that figure up to a national average of 95-99%. This will be more challenging, however, as the second phase of this scheme involves constructing roads in ever more remote areas.

According to the ministry, a total of 1007 km of new roads need to be built or upgraded in the state by 2015, if the target is to be met. According to the Public Works Department (PWD), around 1000 km of new roads and 750 km of road upgrades had been completed in the three years up to July 2014, thanks to the GTP and other federal-backed programmes, which effected a significant acceleration on what could have been expected without such support.

In contrast, congestion is also an increasing concern in the more developed urban areas, particularly in and around KK. The capital’s real estate and investment boom has led to a jump in the numbers of cars on the roads, with calls for a number of schemes to address growing traffic jams. These include a tram system, one-way streets and a monorail. A special task force was also set up in late 2013 to look into ways to address this growing problem.

The PWD has also proposed the construction of four new flyovers in the city, in addition to two already approved and under construction, with an additional plan to widen the 6 km of road from the KK International Airport (KKIA) to Inanam Mile 5 to three lanes. Businesses are also lobbying for the road to the KK Industrial Park (KKIP) to be fully paved. The opening of the Sepanggar Port Tunnel should help alleviate congestion around this, too.

People Power

As part of its plans under the SDC to modernise KK, a 24-km pedestrian and cycleway path is also being constructed, from Tanjung Aru to the Universiti Malaysia Sabah. Use of this should ease traffic and pollution in the city due to the escalating number of cars. So far, most private sector involvement in the road transport sector has been largely on a contractual basis, with the high costs of many road schemes an obstacle to private-public partnership (PPP) development – some 60% of Sabah is hilly or mountainous, and 55% forested. Building to a standard capable of dealing with the extreme climate also adds to costs, with the enforcement of these standards crucial if future maintenance costs are to be kept down. Work is on an open tender basis and very competitively priced, in consequence. Currently, one area with higher-than-average private sector involvement is the Pan-Borneo Highway, with private contractors involved in many upgrade efforts.

Boosting Rail

Sabah has the only passenger railway network in Borneo – a 134-km single track from Tanjung Aru to Tenom. Overseen by Sabah State Railways (SSR), the plan is to improve the line to carry faster, more comfortable trains and, eventually, freight. Built originally to serve inland tobacco plantations in British colonial times, the train line also needs extending if it is to really be of service to industry – it does not for example, currently connect to the Sapangar Bay area and the KKIP.

A recent assessment by HLA Consultants concluded that some RM450m ($140.5m) would be needed to protect current and future track, with the line needing more retaining walls, along with cement – rather than wooden – sleepers in the tropical, flood-and landslide-prone environment. The track also needs improved security, to guard against vandalism and theft of SSR property. Future plans also include linking the railway to KKIP, and to the Sipitang Oil and Gas Industrial Park. There are also plans to construct a new line on the east coast, connecting the Palm Oil Industry Clusters (POICs) at Lahad Datu and Sandakan. Funding for these projects had yet to be secured as OBG went to print. At the same time, the track is also used by a steam railway that is highly popular with tourists. Using locomotives and upgraded rolling stock from the days of British North Borneo, the steam trains are also a welcome revenue source for the SSR, which aims to expand services in tandem with tourism growth.

Port Developments

Sabah’s ports have been privatised now for around a decade, with Suria Capital Holdings the beneficiary. The state’s ports are now managed by Sabah Ports Sdn. Bhd. (SPSB), a fully owned subsidiary of Suria Capital. SPSB’s portfolio includes eight ports – KK, Sapangar Bay Container Port, Sapangar Bay Oil terminal, and Kudat Port on the west coast, and Sandakan, Tawau, Lahad Datu and Kunak ports on the east coast.

In 2013, Suria reported overall cargo throughput of 22.5m tonnes, excluding containerised cargo. This was slightly down on 22.52m tonnes in 2012, when 374,624 container TEUs were also handled; the respective 2013 figure was 373,042 TEUs. Sapangar Bay was the best performer last year, with a 4% improvement in container volume, to 260,664 TEUs. This also shows that the majority of traffic is through west coast ports, close to the capital, KK, and the industrial and commercial hubs around Sapangar Bay. Suria also operates bunkering facilities and ferry terminals in Sabah, including amongst the latter, the Jesselton Point Ferry Terminal.

The company is also launching the International Cruise Terminal (ICT) at KK Port as a complementary activity to the Jesselton waterfront development, bringing tourists directly to this new, mixed-use development. The ICT is part of the ETP, which is backing a ‘Straits Riviera’ project that will tie together cruise terminals across Malaysia’s maritime geography. This hopes to tap Malaysia more fully into the Asian cruise market, which the ETP states is currently growing at around 14% per year. SPSB is also involved in developing the Sipitang Oil and Gas Industrial Park (SOGIP), signing an MoU for jetty operations in June 2014. SPSB also developed a jetty at Lahad Datu. Sandakan is also to get a new jetty, with this currently in the design phase.

Safe Harbor

All these moves form part of the port development master-plan being implemented by SPSB, that runs to 2033. The Sabah Development Bank (SDB) is also involved in the financing side. More jetties are part of efforts to reduce the current level of congestion at the ports, too, as boosted economic activity races ahead of facilities on the ground. The POICs, for example, now have three operating ports within their territories, yet still need the addition of the new jetty being developed. Imports and exports have also been benefitting from a new, electronic Customs system, which makes processing goods faster, cheaper and subject to more consistent treatment.

Sabah’s ports operate under the Malaysian cabotage rules, which are controversial amongst many Sabahan businesses (see overview). Some enterprises suggest requiring domestic ships to be Malaysian flagged pushes up prices in Sabah, with negative effects on the state’s economy. Another concern is the currently low volumes of exports from Sabah, which make the state less attractive as a shipping destination for foreign companies. Even at KKIP, most production is for the local market, not export. This may change going forward, however, making direct routes to Sabah from outside Malaysia more profitable in the future. In the meantime, cruise ships visiting the ICT have already been granted exemption from the cabotage policy, enabling direct calls at the port. Perhaps in future, more dispensations of this kind could be granted.

Flying In

KKIA is currently the second busiest airport in Malaysia, after Kuala Lumpur International Airport (KLIA), while the KKIA-KLIA route is the busiest domestic passenger route. Located around three hours from Hong Kong, and two from Singapore, Jakarta and Manila, KKIA is a natural regional hub.

Owned and operated by Malaysia Airports Holding Bhd. (MAHB), figures from MAH show KKIA with 6.94m passenger movements in 2013, up from 5.85m in 2012 – an 18.6% growth. Of the 2013 figure, around 5.24m were domestic passengers, 1.69m international. The airport has two terminals, with one focusing on low-cost carrier operations. Plans to link the two by monorail have been mooted.

With a major upgrade and runway extension begun in the mid-2000s, KKIA has done well at attracting direct international connections too, with Asiana, Korean Air, Dragon Air, Royal Brunei, Cebu Pacific and Silk Air now all flying in. Air Asia has also been developing KKIA as a hub. This may give the state good leverage in the development of the Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA), particularly as the Association of Southeast Asian Nations (ASEAN) moves towards Economic Community in 2015. Air cargo is also not subject to the strictures of the cabotage law, giving it a distinct advantage over shipment by sea, even if volumes are necessarily lower.

Sabah also has airports at Sandakan, Lahad Datu and Tawau, although these only handle domestic flights. The development of regional airports is part of the SDC and ETP plans for the state, while SDB is involved in financing a scheme to upgrade Lahad Datu and Sandakan, pending federal approval in mid-2014. Currently, Lahad Datu’s runway is only capable of taking prop-aircraft, with ATR72s the main passenger plane. The most recent data available from MAHB for Lahad Datu showed the airport processed 147,733 passengers in 2012, along with 185 tonnes of cargo – up on 131,054 passengers and 42 tonnes in 2011. The 2013 data for Sandakan, meanwhile, showed 911,855 passengers and 2894 tonnes of cargo, up on 834,626 passengers and 2479 tonnes of cargo in 2012. Tawau processed 1.2m visitors and 2844 tonnes of cargo in 2013, up from 982,153 passengers and 2489 tonnes of cargo in 2012.

Sub-Regional Development

In terms of transport connections, Sabah is also uniquely and advantageously positioned within the ASEAN sub-region, BIMP-EAGA. The sub-region includes Sabah, Sarawak and Labuan from Malaysia, Brunei Darussalam, the Philippine provinces of Palawan and Mindanao, and 10 Indonesian provinces in Kalimantan, Sulawesi, Maluku and Papua. The development of this considerable geography is highly dependent on the creation of intra-regional transport links, with the approaching ASEAN Economic Community of 2015 heightening the potential benefits from such logistical improvements. This will make ASEAN the 8th-largest economy in the world, with Sabah in an excellent position to act as a staging hub for product distribution within the association. Sea routes such as those from South America and Australia to China are particularly favoured by Sabah’s geostrategic location.

However, without considerable changes to the cabotage policy, the state’s ability to take advantage of its location in ASEAN and BIMP-EAGA is severely limited. There are currently no direct, official shipping services between Sabah and Indonesian ports just down the coast in Kalimantan, as vessels must go to the peninsula first. “The cabotage policy is challenging and we have put across to the federal government that it could use liberalisation. There are many factors to consider, but an agreement can be reached,” Tan Sri Joseph Pairin Kitingan, minister of infrastructure development, told OBG.

In the air, meanwhile, MASW ings – a wholly owned subsidiary of Malaysian Airlines – has recently become a BIMP-EAGA airline, operating regular flights between KK and Bandar Seri Begawan in Brunei Darussalam, Tarakan in Indonesia’s Kalimantan, and Puerto Princesa in the Philippines’ Palawan province. There are also discussions under way on creating a single visa regime for tourists visiting the sub-region, which might considerably enhance traffic volumes and demand for transport facilities.

Meanwhile, improvements to sea infrastructure include an upgrade of the Kudat-Palawan ferry service to boost BIMP-EAGA connectivity. A RM20m ($6.2m) injection from the federal government into this facility, made in 2013, is enabling the construction of a roll-on roll off (ro-ro) ramp.


Sabah’s geostrategic location is a major potential bonus for the state, as it looks beyond Malaysia to strengthen business and commercial ties with its Asian neighbours. Land transport, however, remains a challenge, with a need for greater investment in the road and rail infrastructure, particularly to tie up the various industrial parks, ports and airports that are currently expanding, as well as deal with a growing congestion problem in and around KK. Meanwhile, on an industrial level, development of the new facilities at SOGIP, alongside efforts to establish Sapangar as a major bunkering centre, are also likely to be of great benefit to Sabah. All of this bodes quite well for the state’s transport sector, which will have much to do – and require a great deal of investment – in the years to come.


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The Report: Malaysia 2014

Sabah chapter from The Report: Malaysia 2014

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