Challenging year for Sabah

THE year 2009 provides the opportunity for Sabah to catch up economically. The implementation of the Sabah Development Corridor (SDC) will pave the foundation for a balanced, high value-added knowledge-based sustainable economy. Sabah, in particular and Malaysia cannot afford to be a low-cost production centre with cheap labour anymore.

Sabah needs to move quickly to fix the basics by shifting away from an economy dependent on primary commodities with low value-added towards a more diversified, high value economy. Measures identified under the Ninth Malaysia Plan should be implemented as scheduled. The effectiveness of these projects, especially in terms of poverty eradication target should also be regularly monitored.

Policy and strategic measures which need to be considered are as follows:

1. Implementation of the SDC

The speedy implementation of the SDC will ensure that the strategic soft and hard infrastructure needed be put in place. The fiscal stimulus package announced should be complementing the SDC initiatives and the Halatuju Agenda.

In the short term, effective and speedy implementation of these measures shall pump-prime the state’s economy, very much now needed as a counter-cyclical tool. The multiplier effect shall provide jobs and business opportunities beyond the construction sector. In the longer term, these measures will help the state to move up the value chain.

2. Transforming the agriculture sector

The heavy dependence on the export of primary commodities, palm oil in particular, which has relied on cheap foreign labour, has prevented the State to realise the optimum value of the industry. This has resulted in the perpetuation of a vicious cycle of an economy characterised by low wage with minimal value-adding.

The current turmoil should therefore be seen as an opportunity to restructure and transform the oil palm sub-sector in particular, and the agriculture sector generally. This can be pursued more aggressively through human capital upgrading, and R&D activities, especially in yield improvement, new product development and labour-saving technology.

3. Expediting the implementation of the National Food Security Policy

Meanwhile, the implementation of the National Food Security Policy should also be aggressively pursued in Sabah. The National Food Security Policy is in line with the Halatuju Agenda as well as the SDC initiative.

In the short term, aggressive implementation of this policy will not only enhance national resilience should the global economy weaken going forward, it will also enable the state to capture higher value in the agriculture sector while providing a safety-net for the smallholders affected by the drastic decline in the price of crude palm oil and rubber. This can be done, for example, by rearing livestock in mature palm oil and rubber plantations.

In the longer term, these measures may spawn viable agro-industrial activities which can expand and deepen the value chain in the food manufacturing sector.

4. Greening the economy

Sabah, in line with the SDC initiative may also take the opportunity to invest much more aggressively in its natural capital by promoting the conservation of its biodiversity resources. Innovation in clean and renewable energy and waste treatment – such as the bio-diesel, the potential of wind, solar, and hydro-electric power – should also be actively explored.

Active bio-prospecting and commercialisation activities of new products, such as agro-biopharmaceutical products from Sabah’s biodiversity resources, should also be promoted.

The unpolluted environment together with the preservation of Sabah natural capital, such as its pristine rainforest, wildlife, unique geological formation and marine life offers Sabah as an unrivalled tourism destination. Domestic tourism should be promoted and handicraft development and homestay programme will ensure that the benefit of tourism will benefit the rural community.

5. Going forward: Some reflection

Sabah indeed is a truly blessed State. The political tsunami had not dented the state government and therefore administrative continuity. The Sabah State Government is also in a strong financial position – as indicated by the 2009 State Budget – to navigate the State through the anticipated hardships generated by the financial tsunami.

Major signature projects under the SDC – such as the Palm Oil Industrial Cluster (POIC), Sandakan Education Hub, Agro-politan projects, Integrated Livestock Breeding Centre, Handicraft Village, Sapangar Bay Container Port, and Sabah Agro-Industrial Precinct are at various stages of being implemented.

The measures highlighted earlier by no means are exhaustive. These will no doubt complement other measures introduced by the state and federal governments. Bank Negara should consider lowering the Overnight Policy Rate (OPR) further as the inflationary pressure now had substantially eased. This will allow more domestic spending; thereby mitigate the downward pressure on economic growth.

The year 2009 will indeed be a challenging year. The nation as a whole is expected to bear the full brunt of the global economic crisis. The federal government had already revised downward its economic projection for next year to 3.5 percent. The World Bank and the IMF have in no uncertain terms describe the economic turmoil as the worst since the Great Depression 0f 1929.

Going forward, the people of Sabah at least can rest assured that they are in good hands under the leadership of a stable government, having a chief minister who is business savvy, no-nonsense on performance and perhaps more importantly, responsive to the needs of the people. Our progress in this respect is clearly a matter of interest to the whole nation, especially in regard to Sabah’s secret recipe for success.