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0 Sabah Development Corridor 2008-2025 Briefing EU Economics & Commercial Counsellors IDS Conference Room 14 th May 2009.

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Presentation on theme: "0 Sabah Development Corridor 2008-2025 Briefing EU Economics & Commercial Counsellors IDS Conference Room 14 th May 2009."— Presentation transcript:

1 0 Sabah Development Corridor 2008-2025 Briefing EU Economics & Commercial Counsellors IDS Conference Room 14 th May 2009

2 1.Key development challenges: High cost of doing business – poor infrastructure and high freight costs Shortage of critical mass of human capital Highest incidence of households living in poverty 2.High cost of doing business mainly due to high shipping costs and poor infrastructure Shipping costs: low originating cargo, low ship call frequency and double handling Unreliable electricity supply and shortage of water supply Poor road and rail connectivity leading to high transportation costs 3.Shortage of talents in strategic sectors; and heavy dependence on foreign labour 4.Largely rural, with a poverty rate of 23% (6.5% hardcore poor). 5.Gross Domestic Product: Sabahs GDP of RM15.1 Bn is 7th largest in Malaysia 6.GDP per capita in 2005: RM5,100 ; Malaysian average: RM9,800 7.Monthly household income in 2004: RM2,487; Malaysian average: RM3,249 8.Unemployment is currently at 5.8%; Current workforce is 1.198 million (2006), 9.Population: 3.1 million (2006) 10.Education: 79% of persons aged 6 and over attended school (national av: 90%)

3 Narrow-base of national export: too dependent on electronics, oil & gas and palm oil Relatively weak resource-based industries Widening income inequality Employment growth lagging behind economic growth Relatively weak linkage between economic growth and poverty incidence Lack of human capital in strategic sectors Heavy dependence on foreign labour in agriculture and construction Sabah Development Corridor 2008-2025: The National Context: Issues and Benefits

4 KLSE COMPOSITE INDEX: JANUARY-DECEMBER 2008 39% Decline over the period

5 The United Nations says the world economy faces its worst downturn since the Great Depression... [and] expects world economic output to shrink by as much as 0.4% in 2009, due to a slump among developed countries - particularly the US and in Europe. … This would mark the world economy's first year of contraction since the 1930s (Source: the BBC) The eurozone economy will shrink 1.9% in 2009 and grow by only 0.4% in 2010…. (the European Commission, 2009) WORLD ECONOMY WEAKEST SINCE 30s: the United Nations

6 - Sabah Development Corridor 2008-2025 The vision for Sabah is to be a vibrant, economically successful and liveable state SDC is underpinned by 3 key principles Capture higher value economic activities Promote balanced economic growth with distribution Ensure sustainable growth via environmental conservation Catalysing future growth via infrastructure as well as high economic impact and poverty eradication projects Phase 1 (2008-2010) Building the foundation for growth Phase 2 (2011-015) Accelerating economic growth Higher order value-add activities, the presence of global companies and a strong base of local SMEs An attractive destination for FDIs with strong supporting infrastructure, global companies and knowledge workforce Phase 3 (2016-2025) Expansion

7 Sabah Development Corridor 29 January 2008 6 A preferred gateway for trade, investment and leisure for leading businesses and talent from around the world in key areas A happy and cohesive community that lives in harmony and prosperity regardless of race, language or religion A tech-savvy state that uses and showcases technology in enhancing quality of daily life A place of opportunity where residents and foreign talents find rewarding employment opportunities Amongst the most liveable place in Asia with culture, heritage, quality of life and clean environment The vision for Sabah is to be a vibrant, economically successful and liveable state by creating and articulating a set of 5 unique attributes that will mould the future of Sabah:

8 7 Sabah is blessed with excellent Location, Resources and Bio-diversity which it can build on… Location Cultural and Bio-diversity Resources Gateway for regional trade Ideal for transhipment and value add for cargo between Kalimantan–South Philippines and North Asia (China, Japan, Korea) Capitalise on market deregulation of AFTA Rich in natural resources (oil & gas, fertile agriculture land, minerals, forestry) Capture high value add downstream activities such as oleo chemicals, gas processing plant, oil refineries and wood based products Position Sabah as centre of excellence for agriculture Rich bio-diversity (flora-fauna and marine life) 32 ethnic groups spawning diverse cultural backgrounds Capture knowledge from international researchers Stimulate biotech activities

9 Vision & Sectoral Focus

10 9 SDC VISION To be a leading economic region in Asia by being the preferred gateway for trade, investment and leisure Physical infrastructure Agriculture: Services: Manufacturing : Sector-specific visions Harmonious and Cohesive society Social Environment Structured infrastructure development in transportation, utilities and communication to enhance living standards and enable commercial activities Soft Infrastructure Systematic skills upgrading of existing workforce in key industries, retain talented Sabahans and targeted import of foreign talent in professional and managerial positions Pristine and well conserved Confident and Independent Highly productive Food self- sufficiency High value jobs High value add downstream Successful pool of SMEs Premier eco- tourism Second home Low cost of business Sustainable and safe Renowned worldwide No Hardcore Poverty

11 10 Characteristics of Sabah Development Corridor SDC is made up of 3 sub-regions –Western Sub-region: Kudat, Kota Belud, Tuaran, Kota Kinabalu, Penampang, Papar, Beaufort, Kuala Penyu, Sipitang –Central Sub-region: Pitas, Kota Marudu, Ranau, Tambunan, Keningau, Tenom, Nabawan –Eastern Sub-region: Sandakan, Beluran, Kota Kinabatangan, Tongod, Lahad Datu, Kunak, Kalabakan, Semporna, Tawau Sabah consists of 5 administrative divisions*, subdivided into 24 sub-divisions (or districts) 32 officially recognised ethnic groups Area = 73,997 km 2 (22.4% of Malaysia); Population = 3.1 million** *1. West Cost Division: Kota Belud, Kota Kinabalu, Papar, Penampang, Ranau, Tuaran; 7,588 km2, popn.=953,900. 2. Interior Division: Beaufort, Nabawan, Keningau, Kuala Penyu, Sipitang, Tambunan, Tenom; 18,298 km2, popn.=420,800. 3.Kudat Division: Kota Marudu, Kudat, Pitas; 4,623 km2, popn.=189,500. 4.Sandakan Division: Beluran, Kinabatangan, Sandakan, Tongod; 28,205, popn.=676,000. 5. Tawau Division: Kunak, Lahad Datu, Semporna, Tawau; 14,905km2, popn.=756,800 **Department of Statistics Malaysia (2006) Source:IDS Concept Paper; Team analysis Sabah Development Corridor is made up of 3 sub-regions

12 11 Core Components of Sabah Development Corridor Sub-Regions

13 KOTA KINABALU (1): Regional Growth Centre 323,817 SANDAKAN (2): 268,821 Secondary Regional Growth Centre TAWAU (3): 155,099 Sub-Regional Growth Centre CURRENT URBAN HIERARCHY AND LINKAGES FOR SABAH LAHAD DATU (5): 71,176 KUDAT (11): 27,443 KENINGAU (9): 32,754 SEMPORNA (7): 41,624 RANAU (12): 22,425 KOTA BELUD (10): 31,001 TUARAN (8): 35,499 PAPAR (6): 42,598 Penampang (4): 81,867 Sub-Regions

14 KOTA KINABALU CONURBATION Regional Growth Centre Secondary Regional Growth Centre Sub-Regional Growth Centre THE PROPOSED URBAN HIERARCHY AND LINKAGES TO REDUCE SUB- REGIONAL AND RURAL-URBAN GAP Sub-Regional Growth Centre Urban Growth Centre Rural Growth Centre Sub-Regions

15 Services Tourism & Logistics

16 15 TOURISM: Sabahs beauty and rich cultural and bio diversity Eco-Certification One District One Product Tropical Research Field Station Tourism Skills Training Centre Arts & Culture Development Fund Tropical Research Centre of Excellence Keningau Handicraft Production Village Maliau Basin Danum Valley Poring Hot Spring Spa

17 16 Four main strategies under the tourism sector... Tourism Strategy Position Sabah as the premier eco-adventure destination 1 Develop new tourism products anchored by signature resorts 2 Market Sabah as the exclusive holiday home destination 3 Encourage rural participation through community-based tourism 4 Rationale Leveraging on Sabahs natural endowment Tapping on fastest growing segment of tourism industry; eco- tourism growth of 20% compared to 7% for overall tourism 1 Moving towards high-yield market Leveraging off their marketing efforts and loyal customer base 1 The International Ecotourism Society, Ecotourism Fact Sheet (September 2005) Increasing demand for exclusivity among the rich and famous – Sabah is still largely undeveloped unlike Phuket and Bali Extending length of stay of high-end visitors Enhancing rural income Encouraging entrepreneurship

18 Agriculture

19 18 Keningau Integrated Livestock Centre R&D Centre Integrated Collection Centre Permanent Food Crop Production Parks Upgraded fishery landing sites E E Sandakan Education hub Aquaculture zones Agrifood production zones Agrifood industrial zones Livestock cluster Jelapang Padi Programme (7,000 families) Jatropha Pilot Site Sabah Agro-Industrial Precinct Jatropha Site Seafood Terminal Bengkoka Rubber Resettlement (2,500 families) Palm Biotech R&D Centre National Marine Aquaculture Centre AGRICULTURE: Focus on food sustainability, high value export to North Asia and poverty eradication

20 19 Three main strategies for the agricultural sector... Agriculture Strategy Enhance food-based agriculture sub-sectors 2 Rationale Position Sabah as the centre of excellence for oil palm 3 Sabah is the single largest contributor to the oil palm industry in Malaysia Sabah has high potential in downstream activities for palm oil Develop high-value, high-potential products 1 To move towards high value markets Leveraging off the natural biodiversity strengths of Sabah from both sea and land Potential enhancement via increased R&D and marketing To reduce Sabahs food import requirement To enhance involvement and income of rural community Potential enhancement via increased technical and financial support

21 Manufacturing

22 21 Wood-Based Industry Cluster Industrial Corridor Sabah Oil and Gas Terminal Energy Intensive Cluster POIC Sandakan POIC Lahad Datu Minerals Based Industry MANUFACTURING: Sabah will focus on leveraging its natural resources as feedstock to capture value in downstream activities

23 22 From landing site… …to an integrated gas or petrochemical complex, attracting investments and spawning high value jobs MANUFACTURING: Integrated Petrochemical Complex at the Kimanis landing site will generate RM5bn of private investments and create high value jobs Tank farm Stabilisation unit Slug catcher and gas conditioning LPG bottling plant Hydrogen peroxide NPK plant Ammonia/ urea 300MW Power plant GPPFuture Export Gas pipe to Bintulu LNG plant Compressor station Gas Crude oil Natural gas Condensate LPG Off gas Source:Interviews with Oil & Gas expert

24 23 Three main strategies for manufacturing sector... Manufacturing Strategy Enhance basic infrastructure, focus on reducing cost of doing business 1 Invest in human capital for existing and new industries 2 Attract world class companies in high value add downstream activities 3 Rationale Basic infrastructure is crucial to operational efficiencies of manufacturers Cost of doing business is fundamental to investors choice of location Skilled manpower is key to manufacturing competitiveness Systematic approach to matching industry needs with supply of human capital via fine-tuning current education and training courses Leverage Sabahs natural resources as feedstock raw materials Elevate the standards of local SMEs supplying to world class companies Serve as a draw for talent and quality FDIs (management and technical knowhow) into Sabah

25 Infrastructure and Human Capital

26 25 INFRASTRUCTURE SDC infrastructure vision Key targets by 2025 61% of all roads are still gravel & earth roads 80% of all gravel roads to be sealed by 2025 Focus on enabling intercity connectivity and SDC projects 1 CONNECT SABAH Ensure connectivity to enable productivity via roads, rail, sea and air Current coverage is 67% 90% of population covered by 2010 Enhance rural electrification Increase capacity and strengthen grid 2 POWER UP SABAH Provide sufficient & reliable electricity for Sabah Current broadband penetration is 4.9% 65% of population connected by 2025 Enable businesses and move towards a knowledge based economy 4 EMBRACE TECHNOLOGY Enhance data connectivity 3.95% of population with tertiary education in 2000 15% of population with tertiary education by 2025 Using companies and MNCs to develop talent 5 INVEST IN SABAHS TALENT Build human capital to provide skilled talent pool Current demand outstrips supply by 23% Supply to meet demand by 2010 Reduce NRW from current levels of 57% to 25% by 2025 QUENCH SABAHS THIRST Provide sufficient water to keep pace with demand 3

27 Environment

28 Mt. Kinabalu Mt. Tambayukon Mt. Trusmadi Imbak Canyon Maliau Basin Sabahs Lost World Crocker Range Danum Valley Nature at its Best Heart of Borneo Adventure Experience… Adventure Experience… of Pristine Wilderness in Primeval Rain Forests of Pristine Wilderness in Primeval Rain Forests

29 28 ENVIRONMENT: Conservation is necessary to preserve our heritage, boost tourism and export of agriculture related products Source:Team analysis Forests Clearly demarcate boundaries and regulate forest reserves Restore degraded forests Biodiversity Preserve marine and wildlife Preserve flora and fauna G2G agreements on protection of highly migratory species Infrastructure Manage sewage and solid waste Protect settlements, river systems, mangrove Education and awareness Educate public on recycling, cleanliness, conservation of biodiversity, preservation of clean river system, etc. Physical conservation Shoreline management Conserve World Heritage sites Sustainable development Promote certification of agriculture produce to comply with credible sustainable standards (s.a. RSPO) By 2025, most liveable place in Asia

30 Implementation & Expectation

31 Impactful programmes Targeted resource delivery Balanced socio-economic 30 Key tenets need to be in place for SEDIA to have the best chance to successfully deliver the programmes planned in the SDC Blueprint Measure of successful implementation Key tenets for SEDIA The Sabah Economic Development and Investment Authority (SEDIA) Enactment 2009The Sabah Economic Development and Investment Authority (SEDIA) Enactment 2009 Joint Working teamsJoint Working teams comprising of federal and state agencies to expedite approvals Commitment and obligationCommitment and obligation on all parties concerned to meet set service levels PermanencyPermanency to stay the course of the Blueprint management structure and enablersRight management structure and enablers

32 SDC INVESTORS SEDIA Company Registration Licence Approval Work Permits Land Matters Incentives Planning Approvals Utility Approvals The government will put in place policies to make it easier to do business here... We will not compromise on the environment and our culture"- DATUK SERI PANGLIMA MUSA AMAN

33 Mega biodiversity, relatively unaffected by the Ice Age Kinabalu Park – Malaysias first World Heritage Site (UNESCO: Dec, 2000) Danum Valley Research Centre and Sepilok Orang Utan Rehabilitation Centre Islands (esp. Sipadan), Maliau Basin, Tabin Wildlife, Caves (Gomantong & Madai) Valuable ethnobotanical knowledge from the indigenous communities Infrapro & Deramakot (since 1992,FSC cert.) carbon sequestration model Multi-racial society with rich cultural heritage (Tingkayu Valley archeological sites Largest oil palm plantation area in Malaysia; Fertile soil, adequate rainfall and conducive climate Relatively clean and unpolluted natural environment Livestocks free from foot and mouth disease Access to deep water and sheltered ports Moves the economy up the value chain and promotes economic growth by optimising the utilisation of Sabahs factor endowments, locational advantages and competencies Rationalises the spatial distribution of Sabahs population and facilitates the integration of Sabah sub-regional economies, thereby reducing regional imbalance Enhances human capital thereby improving the quality of life and thus reducing social imbalances Attracts private investments, tourists, highly skilled workers as well as scientific researchers Offers Sabah and Malaysia generally, to participate in the vibrant knowledge-based economy driven by S&T convergence Reduces poverty by creating new business and employment opportunities

34 Roads Roads Replicate Agropolitan Replicate Agropolitan Sea Port Sea Port POICs (Sandakan and Lahad Datu) POICs (Sandakan and Lahad Datu) Human Capital: Sandakan Education Hub Human Capital: Sandakan Education Hub Biodiversity Conservation: Heart of Borneo, wildlife, marine eco-syst Biodiversity Conservation: Heart of Borneo, wildlife, marine eco-syst Agri-Business Accelerator: eg SAIP, Integrated Fisheries Compl Agri-Business Accelerator: eg SAIP, Integrated Fisheries Compl AgriExcel Outreach: Food Security and High Value Crops AgriExcel Outreach: Food Security and High Value Crops Direct assistance (hardcore) Direct assistance (hardcore) Tropical Biodiversity Research: Sabah Bio-X Tropical Biodiversity Research: Sabah Bio-X Mini Estet Sejahtera (MESEJ) Mini Estet Sejahtera (MESEJ) Big ticket items for remaining 9MP*

35 1.Tourism targets Increase average tourist spending from RM2,517 in 2006 to RM3,383 by 2012 and RM5,364 by 2025 Increase tourism receipts from RM2.88 billion in 2006 to RM8 billion by 2012 and RM48.5 billion by 2025 Increase rural community tourism receipts (handicrafts and homestay) from RM139 million in 2006 to RM 432 million by 2012 and RM4.5 billion by 2025 2.Agriculture targets Multiply GDP contribution by 4.1 times from RM4.1 billion to RM 17 billion by 2025 Increase total value of exports from RM9.1 billion to RM60 billion Reduce negative balance of trade of food by 60% from RM955 million to RM353 million 3.Manufacturing targets Increase capital investments from RM208 million (2006) to RM2.96 billion by 2025 Enhance employment in manufacturing sector from 135,000 to 228,704 by 2025 Increase proportion of manufacturing workforce with tertiary education from under 10% (2005) to 45% by 2025 4.Infrastructure targets Roads: all major towns and rural collection centres are connected by sealed roads Electricity: 90% of population is connected with SAIDI of 500 minutes (from 2,540 currently) Water: Reduce NRW from 57% to 25% and increase capacity to meet supply Data connectivity: Broadband penetration of 35 per 100 inhabitants from 4.9 currently Talent: Skilled talent pool for all targeted industries in Sabah


37 36 Sabah GDP per Capita (1987 constant prices) (RM) With SDC 9MP growth target 14,784 *ADB forecast a growth of 5.5% for Malaysia for 2006-2010. Constant growth is based on 6% in line with 9MP. SDC model in Appendix Source:Team analysis; Asian Development Outlook 2006 5,100 2.9x 15.1 GDP (RMbn) 21.920.345.736.363.248.632.027.1 11,363


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