Sabah: Eyeing downstream potential

Efforts to harness Sabah’s abundance of natural resources for downstream industries look to be paying off, with figures showing that investment in the state’s manufacturing sector is rising.

Sabah’s wide-ranging strategy to galvanise value-added production from its resources, which include timber, oil and gas, forms part of the state’s long-term bid to boost the contribution manufacturing makes to growth.
 
However, industry players said more incentives and improved infrastructure were needed to give local firms a better chance of competing both nationally and internationally in downstream processing.

The state plans to roll out a number of initiatives for downstream processing activities, including the high-profile Palm Oil Industrial Cluster (POIC), which is earmarked for the east coast.

The cluster would be instrumental in driving forward value-added production in Sabah, which is Malaysia’s largest producer of crude palm oil.

Other manufacturing activities, such as the automotive, rubber and furniture clusters at Kota Kinabalu Industrial Park, have been set up to support the state’s efforts to channel its resources from agriculture, forestry and hydrocarbons into manufacturing.

With an estimated 12.1 trillion cubic feet in natural gas reserves, Sabah is also keen to begin mobilising downstream activities in its oil and gas sector.

In February, state energy giant Petronas announced plans to invest RM45 billion (US$14.7 billion) in upstream and downstream activities from Sabah’s petroleum sector.

Key projects include the RM3.8 billion (US$1.24 billion) Sabah Oil and Gas Terminal and the Sabah- Sarawak Gas Pipeline.

Data issued by the Malaysian Investment Development Authority (Mida) showed Sabah attracted RM4.8 billion (US$1.57 billion) of investment for manufacturing ventures in the first seven months of 2012, coming second in the country only to Selangor.

The figure marked a huge rise in manufacturing investment, which reached a full-year-total of just RM921.4 million (US$301.6 million) in 2011, according to the national statistics department.

Sabah’s value-added exports were also on the rise, totalling RM4.6 billion (US$1.5 billion) in 2011, which marked a year-on year rise of 2.7 per cent.

However, while manufacturing sector exports were increasing, the state’s higher logistics costs continued to irk industry players.

In an attempt to address business leaders’ concerns, the government announced a raft of subsidies and measures on September 29 as part of the 2013 national budget, aimed at reducing the cost of transporting essential items and lowering the price of goods.

While the initiatives have been broadly welcomed, representatives from the manufacturing sector said that a failure to address key issues, such as the pitfalls of a three-decade old cabotage policy and the state’s inefficient transportation network, meant pricing inequalities looked likely to remain.



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