Sabah: Profits from the sea

Sabah Seaweed and Lobster

This is an interesting Economy Update taken from Oxford Business Group, published on the 23 Apr 2012. It highlights the marine based agriculture ( particularly the seaweed and lobster venture) backed by the State Government with the participation of both local and foreign bodies. Within the article itself highlights the potential challenges faced by the agriculture sector.

Recently launched government-backed ventures in aquaculture, including one to develop seaweed into a major economic product, look set to transform Sabah’s agriculture sector.

In March, the agriculture ministry, in collaboration with 11 companies, inaugurated a mini estate with the goal of producing 35,000 metric tonnes of seaweed as part of an entry point project (EPP) in seaweed production. This estate will be the first of 20 Sabah plans to build to fulfil its goal of generating RM1.4bn ($457m) in profit from the plant’s production by 2020. Together these estates should cover 3000 ha of sea and be a great boon for the state and the local producers who run most seaweed operations.

This venture is one of several government-sponsored projects to boost the seaweed segment. Expectations are for seaweed to become the state’s next big income earner, alongside palm oil. According to Mohd Johari Baharom, the deputy minister of agriculture and agro-based industry, RM12.8m ($4.2m) has been allocated to develop the industry, as well as RM750,000 ($244,921) to improve production standards, raising product quality for international markets.

The University of Malaysia Sabah is also participating, having signed three licensing agreements worth RM70,000 ($22,860) to monetise its seaweed production technology. The memorandum of agreement signed in March between the university and three firms – Green Leaf Synergy, VC United and Sebangkai Reef Eco – stipulates that the firms will market dry seaweed and support its production in return for the technology exchange.

The state foresees great potential in seaweed production: Sabah produced 23,940 metric tonnes of seaweed in 2011 and its medium-term goal is to produce 150,000 metric tonnes per year by 2020. Demand is also expected to rise, to 400,000 metric tonnes per annum, especially from countries like Japan, China, Australia and Canada. Apart from its consumption as a food source, the plant is used in many human products (such as cosmetics) and for nuclear fusion.

Lobsters are also attracting investor attention. US-based company Darden has formed a partnership with Sabah to develop an integrated lobster aquaculture park, with 9300 ha of sea space, 6000 ha of which will be devoted to commercial production. The project is forecasted to draw RM2bn ($653m) in investments and generate 9000 jobs by 2020. Set to contain its own lobster hatchery – rather than relying on seeds from the wild – the park will be the first of its kind in the world, according to Malaysian aquaculture specialist Ever Nexus, a partner in the venture. This provides a sustainable alternative to live capture, which over time could deplete the oceans of their lobster supply.

These projects bode well for an already healthy agriculture industry that is led by the palm oil segment. In the first three quarters of 2011, for example, Sabah saw RM16.75bn ($5.5bn) in palm oil exports, comprising 30% of all exports in the country. With 124 mills, 11 refineries and 14 palm kernel crushers, palm oil impacts the economy of the state deeply and widely. Other promising agricultural subsectors include bird nest production and rice.

Moreover, there are increasing financing options available for agriculture. Agrobank recently disbursed RM59,552 ($19,448) in funds for projects at its annual dinner. “Agrobank is offering special services to the agricultural sector not only on downstream but also on the upstream sector in order to help the industry to be transformed from a household income to an industry,” Mohd Fadzmi, the company’s CEO, said at the event.

Despite these developments, the agriculture sector still faces challenges. Once a state growth engine, agriculture now trails the energy, manufacturing and services sectors. While energy and manufacturing comprise 45.6% of planned investments and services holds 39%, agriculture accounts for only 5.5% of planned investment.

More effective capitalisation would go a long way in this regard, not only for the state’s economic development and investment, but also to assure national food security. But with strong performance in palm oil and major government-led investments in aquaculture, there are ample opportunities for the sector to rebound and play a more significant role in Sabah’s economy.