The once underdeveloped transportation infrastructure is transitioning from a maligned weakness to a position of strength as improvements across air, sea and land connections continue to ease the flow of goods and people both within Sarawak and abroad. For an island state whose inland waterways also still serve as the primary conduit for moving people and cargo internally, water transportation remains a key element in Sarawak’s logistical network and its further augmentation remains a focal point for future development. As free trade agreements continue to break down barriers to movement for goods and people, both air and road links are also benefitting from substantial investment to upgrade their reach and capabilities.

ROAD TO SUCCESS: Road interconnectivity has been a high priority for the national and state governments in recent years, included in federal development plans as a national key area as well as an essential prerequisite of the Sarawak Corridor of Renewable Energy (SCORE) project. The resulting investment in recent years has yielded a more than 50% increase in roadways across the state in the 2009-13 period as new interconnections are made between upstart industrial nodes and transport hubs and from new pathways forged into the jungle in the search for more resources.

A total of 32,091 km of roadway connected Sarawak at the end of 2013, up from 20,661 km in 2009, according to data from the Department of Statistics Malaysia (DOSM). More than half of these, 18,003 km, consisted of paved state routes, along with 8313 km of dirt track, 4352 km of gravel roads and another 1424 km of paved federal highway. The most significant growth in paved roads, which added 4277 km between 2009 and 2013, were due to infrastructure supporting SCORE as well as improvements made along the state’s primary road artery, the Trans-Borneo Highway (also called the Pan-Borneo Highway. Long considered a key component of the island’s land transport network, the 2083-km Trans-Borneo Highway runs from Sematan in south-west Sarawak through Brunei Darussalam all the way to its north-eastern end in Tawau, Sabah. While much of the existing route is already in place, substantial improvements are required along numerous segments of the road in order to upgrade the capabilities to be more representative of a true national highway. With this in mind, the federal government allocated RM27bn ($8.2bn) in the 2015 budget for construction works on the highway, 936 km of which are lie in Sarawak.

The other key area of road expansion is within SCORE. With more tenants moving in a ramping up operations, the state continues to invest heavily in new construction projects. Many of the major works initiated under the Ninth Malaysia Plan remain under construction including the RM742m ($225.7m), 66-km Murum Hydro Electric Power (HEP) Plant road; the RM823m ($250.4m), the 127-km Baram HEP road; the 159-km Samarakan/Sangan/Kapit road (RM1.81bn, $550.6m); the 73-km Baleh HEP road (RM1.48bn, $450.2m); the 22-km Limbang HEP road (RM171m, $52); and the Tunoh road (RM561m, $170.7m). These were followed up by a smaller number of projects in the 10th Malaysia Plan including the RM450m ($136.9m) Tanjung Manis Halal Hub roads (on which around RM10m, $3m, had been spent by the end of 2013) and a RM77m ($23.4m) bypass at Mile 32 in Bintulu of which RM7.9m ($2.4m) had been spent through 2013.

Outpacing even the growth of these paved projects, a total of 5128 km of new dirt roads were added over the same six-year period, mostly as the result of agricultural plantation expansion as well as timber operations pushing deeper into Sarawak’s forested regions.

AIRPORTS: The primary gateway for the vast majority of travellers into and out of Sarawak is through Kuching International Airport, the state’s only international facility. Another seven smaller domestic terminals are located throughout the state at Sibu, the recently constructed airport at Mukah, Bintulu, Miri, Marudi, Mulu and Limbang, along with dozens of smaller remote landing strips serving rural communities and businesses. The recent uptick in business and investment has led to a surge in traffic as total passengers handled annually by Sarawak’s airports rose by more than 2m over four years from 7.1m in 2010 to 9.42m in 2013, according to Ministry of Transport (MoT) data. Meanwhile, Kuala Lumpur International Airport handled 47.14m passengers in 2013 and Sabah International Airport 9.84m.

OPEN SKIES: The improvement in Sarawak’s physical aviation infrastructure has been complemented by the liberalisation of international travel restrictions. One of the most important of these in terms of the movement of people across borders is ASEAN’s open-skies policy, designed to create a single aviation market through the gradual relaxation of barriers. The multilateral agreements of air services and the full liberalisation of freight services is intended to increase competition in the sector among member nations by curtailing restrictions on where and when airlines can fly and land.

The end result of this strategy is a more efficient sector offering passengers and logistics companies more flights at lower costs, which will bolster physical linkages within the region, ultimately resulting in increased intra-regional travel. Although the final barriers are due to come down by the end of 2015, some ASEAN members remain reluctant to fully exercise all components of the policy, which are known as freedoms.

The first two freedoms – the right for an airline to fly over foreign airspace without landing and the right to stop in another country for refuelling or maintenance – are already common practice. However, full implementation of the third, fourth and fifth freedoms, which guarantee airlines the right to travel to multiple countries without the need for prior intergovernmental approval remain a sticking point as of early 2015.

PLYING THE WATERS: As with any island-based state, Sarawak has always been highly dependent on its seaports to maintain its trade ties with the rest of the world. There are currently three primary state-operated ports in Sarawak: Kuching Port, serving the capital city in south-west Sarawak; Rajang Port in the town of Sibu, located along the Rajang River serving inland waterways; and Miri in the north-east. The sole federally operated port is in Bintulu, located on the central northern coast. While these well-established facilities are currently adequate for the industries and localities they were built to serve, the rise of SCORE and its substantial import and export requirements have created enough demand to warrant the construction of two new ports (see analysis). The first, Samalaju Industrial Port, is situated adjacent to the new heavy industry node at Samalaju and has been operating rudimentary barge and roll-on/roll-off service since 2012 while tenants bide their time until the first phase of port development is completed in 2016. Further to the south, the Tanjung Manis Industrial Port (TMIP) will cater chiefly to the needs of agricultural and light industrial projects such as seafood, timber and palm oil.

Fuelled by strong economic growth, robust activity in the offshore oil and gas sector and one the highest levels of foreign direct investment in the country, Sarawak’s maritime transport industry has been booming over the past decade. Combined throughput for the state’s four primary ports jumped 22% over the past decade from 50.74m freight weight tonnes (FWT) in 2004 to 61.94m FWT in 2013, the latest figures available from the DOSM. Reflecting Sarawak’s trend of running a positive trade balance fuelled by energy and agriculture products, exports well exceeded imports in the state to the tune of RM108.40bn ($33bn) to RM38.93bn ($11.8bn), respectively, in 2013.

Strong exports of liquefied natural gas (LNG) and palm oil have weighted cargo throughput towards liquid bulk cargo, which comprised the majority of freight in 2013, accounting for 39.15m FWT, or 63.2% of all cargo. This far outweighed the 12.27m FWT of containerised cargo moved in and out of Sarawak along with the 5.95m FWT of general cargo and 4.57m FWT of dry bulk goods.

BINTULU: The busiest seaport by far is the industrial port of Bintulu which serves as a key international transit point for both the energy sector with its natural gas liquefaction and loading facilities as well as standard cargo handling capabilities. While Samalaju Port is undoubtedly the face of future industrial shipping for projects within SCORE, the rapid pace of development at the industrial park has ratcheted up the pressure on existing facilities to handle an influx of throughput until the new industrial port is completed. In the interim, nearby Bintulu Port located just 45 km away is expanding its capacity to accommodate the inflow of building materials and exports from the recently completed Press Metal Bintulu factory, which began operating in 2013 producing up to 320,000 tonnes of aluminium ingots and billets for export annually.

Other major investments which are already shipping out product include polycrystalline silicone ( polysilicon) producer Tokuyama Malaysia with a capacity of 6000 tonnes per annum (tpa) at its first facility and a second 13,800-tpa plant expected to be operational in 2015. In all, the Samalaju Industrial Park attracted 21 companies producing export-oriented products including aluminium, polysilicon, metallic silicon, ferroalloys and food with total approved investments of RM34.5bn ($10.5bn) by the end of 2013, according to the Malaysian Industrial Development Authority.

CATERING TO EXPORTS: As a result of these new operations, cargo throughput has increased by nearly a third over the past decade from 33.62m FWT in 2004 to 43.81m FWT in 2013, according to data from the MoT. This was heavily weighted towards exports, which accounted for 87% of all cargo throughput including 3.19m FWT of palm oil, 4.49m FWT of petroleum and fuel oil, 932,000 FWT of processed timber, 838,000 FWT of logs and 384,000 FWT of palm kernel waste.

The port can accommodate a range of different cargo from containers to multiple bulk cargoes to LNG shipments. Three multipurpose general cargo berths of 514.5 metres with a depth alongside of 10.5 metres serving bulk, dry and liquid cargos can accommodate vessels of up to 25,000 FWT. These are further supplemented by an additional 270-metre bulk cargo wharf, a two-berth petrochemicals terminal, a liquid petroleum gas jetty, as well as an edible oils terminal, each with quayside depths ranging between 11 and 14 metres serving vessels of 30,000-60,000 FWT in size.

The Bintulu International Container Terminal is an extension to the existing 514.5-metre general cargo berth at the inner harbour basin. It consists of two container berths with a total length of 450 metres with a depth of 14 metres and capable of handling vessels of up to 55,000 FWT. Following a 2012 refit of the container port, which increased the number of cranes to 14, the estimated annual capacity of the port was boosted to around 400,000 twenty-foot equivalent units (TEUs) in anticipation of the rise in volume attributable to new industrial output from SCORE until the Samalaju Port comes on-line in 2016.

In spite of increasing throughput by more than 100,000 TEUs over the past decade, operations are still well within their capacity limits as the port handled 250,353 TEUs in 2013, up from 143,783 TEUs in 2004. The port was on target to improve upon this figure in 2014 with container throughput sitting at 202,064 TEUs through the first three quarters of the year.

The crown jewel of Bintulu – the vaunted LNG infrastructure which ranks it among the largest LNG export terminals in the world – is located away from bulk cargo operations outside the main inner harbour. Accommodating vessels of up to of 80,000 FWT in three berths with a quay depth of 15 metres, the dedicated facility hosts three berths and supporting LNG loading arms connected to the LNG gasification plant. The port exported 25.48m FWT of LNG in 2013, accounting for more than half of all tonnage moved through the port.

KUCHING PORT: Reflecting the dominance of resources within the state’s economy, the Kuching Port serving the capital city handled only approximately 15% of national cargo but was the focal point for container imports. Operations are split between two terminals according to cargo vessel type.

The Pending terminal handles primarily bulk and general cargo via a 613-metre jetty with a depth of 8.5 metres supplemented by the 93-metre-long Biawak oil jetty with a depth of 6.7 metres. Cargo operations are handled at the Senari terminal which has 635 metres of quay supported by 60-ha site.

Port activity has increased in line with economic growth and investment in the state over the past few years as cargo handled has grown from 7.13m FWT in 2004 to 9.58m FWT in 2013. As the state’s political and economic hub, Kuching differs significantly from the other resource-dedicated ports in the state with its imports accounting for the majority of cargo handled, primarily in the form of containers. Kuching continues to dominate imports, receiving 7.40m FWT of cargo in 2013 compared to just 2.18m FWT of exports. The majority of these consisted of containerised cargo, which posted a record high of 249,690 TEUs in 2013 compared with 141,227 TEUs in 2004.

“The major challenge facing Kuching Port is the need for dredging to deepen the Sarawak River on which Kuching Port stands,” Rosli Saup, acting general manager of Kuching Port Authority, told OBG. “Currently, vessels embarking from Kuching Port are only about half full due to the low draught present, but further dredging works would increase this capacity substantially.”

MIRI: The smaller Miri Port operates largely as a feeder port serving northern Sarawak, but has also established itself as a shipyard repair and maintenance hub for the offshore oil and gas industry and more recently has served as an increasingly popular port-of-call for tourists. The 94-ha facility is served by six berths along a 390-metre quay able to accommodate smaller feeder vessels up to 1500 gross registered tonnes.

Total throughput is continuing on a slow but steady increase, growing from 5.33m FWT in 2004 to 6.43m FWT in 2013. Of this, 86.5% was exported, almost all supplied by the oil and gas sector, which shipped out 3.46m FWT of petroleum and fuel oil in 2013, while the timber industry was the second-largest contributor with 974,000 FWT of processed timber exported on the year along with 838,000 FWT of logs.

THE RIVER NETWORK: Looking inland, rivers remain the lifeblood of Sarawak and have served as the area’s primary transportation conduits for centuries via a total of 55 navigable rivers with a combined length of 3300 km. In addition to serving as a commuting network for the population living in the state’s interior and along the coast, areas which are inaccessible by road, the rivers also provide efficient passage for resources such as timber and other agricultural goods to reach international deepwater ports for export. The hub of this inland network has historically been located at the town of Sibu situated on the Rajang River 113 km from its mouth. The port comprises four berths of 448 metres and a depth of 8.5 metres able to serve vessels with up to 10,000 gross registered tonnes.

While Sibu’s Rajang Port maintains adequate capacity to handle cargo coming to and from the interior, the ascendance of the new TMIP 45 km downriver has made some aspects of the older port redundant. As more cargo is diverted to the more modern facilities at the TMIP, throughput continues to decline in Sibu. After peaking at 5.17m FWT in 2010, throughput declined slightly over the next two years due mostly to economic factors before dropping off dramatically in 2012 to 3.26m tonnes when operations started up at TMIP. This figure further plummeted to 2.13m FWT in 2013 and is not expected to recover significantly in light of further expansion plans at the newer alternative site. The timber industry accounted for the largest proportion of cargo with 423,000 FWT of processed timber loaded in 2013 along with negligible amounts of palm oil (42,000 FWT) and palm kernel waste (20,000 FWT).

RAIL: Borneo’s dense jungles, marshy peat lands, dispersed population and plethora of rivers have so far proven a formidable obstacle for even the most ambitious railway schemes seeking to link not only Sarawak but the entire island of Borneo. While technical challenges and the high estimated construction costs continue to pose concerns for any new rail network, the attraction of reliable and efficient transportation has led to numerous proposals over the years.

One of the most ambitious of these is a plan put forth by Koperasi Bumiputera Bersatu Berhad (KBBB) in Brunei Darussalam to construct a $20bn Trans-Borneo Railway. The 4400-km project would link major population centres along the coastline of Kalimantan, Sabah, Sarawak and Brunei Darussalam with the objective of opening up the hinterland of Borneo to better access timber, coal and other minerals resources for processing and export. A memorandum of understanding to plan, monitor and evaluate implementation for the project was signed in 2013 by KBBB and the Brunei chapter of the BIMP-EAGA Business Council, according to local press. Plans for a smaller, dedicated railway line serving SCORE have also been floated as far back as 2008. The proposed 320-km network would link Samalaju heavy industrial node in Bintulu with the TMIP to the south by 2030. While work has yet to be initiated on any rail links, the Bintulu Development Agency announced in November 2013 that it had commissioned SMEC (Malaysia) to provide engineering consultancy services for the railway network.

OUTLOOK: Major investments in Sarawak’s transportation network are providing a substantial leap in capacity and capability which should provide a strong base for the expected growth in movement of goods and people in the coming years. The development of the Samalaju Port and TMIP will greatly improve the efficiency and export capacities of the state, particularly within the primary growth nodes which in turn should give rise to lower logistics costs and encourage further investment. In addition to the bricks-and-mortar improvements, the lowering of trade barriers as the result of free trade agreements combined with Sarawak’s geographic location bode well for trade growth and streamlining of the transportation and logistics sectors.