Strengths and Weaknesses of Sabah’s Economy in a Nutshell
Sabah’s strengths are no doubt revolve around the abundance of its natural resources ranging from the beauty of its touristic landscape, agriculture (livestock, paddy and aquaculture) to its oil and gas. All in all, Sabah is yet to develop and utilise all its natural resources and people in order to fully relish the potential of Sabah to be an important player in global economy. These industries are not only to be fully developed but also to be revolutionaries and supported by hard and soft infrastructures.
However, despite having all the agendas put forward in the direction of Sabah, little is mentioned on the obstacle faced by Sabah’s economy in terms of participation of the people, high dependency on foreign labour force in labour-intensive industries as well as the lack of highly-skilled work force to run the high-end industries.
In addressing such issues, Sabah is diversifying its focus not just on the development of hard infrastructure but also on the soft infrastructure namely the human capital. The aim of this is to prepare the Sabahan for growing industries as well as industries that are yet to emerge as a result of globalisation of the world (biotechnology).
With the current development going on, Sabah has managed to increase its GDP growth from RM59.3 billion in 2011 to RM73.8 billion last year and obtained surplus budget with amount of RM64.89 million in the year 2018. Therefore, by addressing the missing factor responsible in maximising economic performance, Sabah could be in transition period from being contributor to Malaysian economy to a key player in global economy.
Development of Human Capital Policies to Pump Sabah’s Economy
Most economic discussion revolves around the GDP growth and income per capita, however little is mentioned on the human capital, which is the driving force of a country’s economic development. Human capital generally refers to the ‘people that keep the machine running’ where an individual’s skills, capabilities and talent are the contributing factors to a country’s economic growth.
Developing human capital is centred upon one important aspect which is an investment made by an institution or a country that would consequently produce individuals with series of skills and talents that could be utilised to develop the economy. Thus in this sense, human capital is said to be directly related to the economic growth of a country.
Human capital was first measured with school attainment where education is believed to be the area in which the government should invest in. However, after series of development in economic empirical models and studies, its development is measured conveniently by looking at ‘cognitive skills’ of an individual. Looking at this measurement, there is a huge gap presence in human capital development as a mean to drive economic growth between developed and developing countries.
Looking at Sabah’s strength in its natural resource and diverse cultural heritage, there are many areas upon which the human capital development can be fitted into. There are a lot of opportunities that could be explored and expanded, however Sabah’s economy is lacking in connecting factors that could translate the abundant resources of economy into profitable revenue. Therefore, in order to actively, if not be in par, with the global economy, Sabah is in urgent need to develop the human capital by establishing a set of policies that could support the potential industries catering to both labour-intensive and highly-skilled work forces.
There are several industries identified as the pillars of Sabah’s economy and display huge potential to be further developed. These include creative industries and oil and gas industries. These sectors are lacking in suitable and appropriate working force, hindering its full potential to be relished. Under such circumstance, Sabah has to focus on developing human capital to produce a dynamic working force that will not only run these industries but also to revolutionise these industries, making them a highly profitable and contribute to State revenue.
Creative industries entail three main sub-industries that are interconnected with each other, namely performing, arts, cultural heritage and creative media. Renowned for its large pool of artistic talents, world-class touristic destinations and diverse cultural heritage, Sabah is able to expand its human capital development from acquiring just a standard ‘cognitive skills’ to harnessing creativity of the people instead. Couple with concept of unity, creative industry is a harmonious blend between strengthening the sense of patriotism to hundred years of Sabahan unique tradition and developing the quality of work amongst the people in order to generate a better income.
Performing arts: The establishment of the first multi-purpose experimental Black Box theatre to attract and promote young talents in dancing, singing and acting. The Black Box provides a platform for the young talents to practice. Sabah is gearing its development in film-making, aiming to revive its glory as the main hub for film making. Solid standard of performing arts, via film-making, songs or theatre utilising the cultural heritage as the gist of the performance could be showcased to neighbouring Asia Pacific regions. This can bring about an increase in exposure for Sabahan talent at the same time giving them an opportunity to expand their skills at international level.
Cultural heritage: A socio-economic study has shown that the main factor contributing to the lack in motivation to participate in entrepreneurship among rural community in Mantanani Island is lack of personal skills and traits to be an entrepreneur.
The effort in preparing Sabah’s economy to grow in this industry is to promote the participation of rural communities in entrepreneurship by converting the natural resources using their creativity and local experts into resource-based (handicraft, cuisine) and cultural-based (homestay, cultural events) products for commercialisation. The skills and capabilities required to do so will be obtained through series of human capital programmes (training, education and outside/urban exposure to induce self-confidence).
Creative media: Tied closely to cultural heritage, this sub-industry utilises the internationally-established touristic destination comprising of abundant flora and fauna as well as rare wildlife species. This could be developed to make Sabah an attractive place for documentary, commercial photography as well as film-making. By having talented Sabahan to capture the beauty of Sabah and translate it into high-standard of work, Sabah can be more internationally recognised by international film-making industries as well as other creative media industries worldwide.
This opens door for Sabah to attract foreign businesses in terms of creative media, which will produce many positive effects with increasing job opportunities being one of them. Additionally being more recognised by foreign creative media companies will increase the exposure of Sabah’s culture and customs and this can lead to an influx of tourists. Increasing tourists visiting these places that have been advertised by creative media can increase the income of the people residing in that area, of which mainly consisting of rural communities. This can increase the downstream business from tourism (homestay, handicraft commercialisation, cultural and heritage events and fresh seafood products) run by the rural communities in Sabah.
Example: Hobbiton in New Zealand being the filming place for famous series of ‘The Hobbit’ has advertised the country as well as providing opportunities to the local to not just generate income for themselves via available jobs but also to learn from mega film-production companies.
India, being known for its cultures, has attracted many international companies to produce many documentaries focusing on its society structure (strong patriarchy-based society, arranged marriage, conservatism of their customs). Consequently, this has attracted more tourists to come to India to experience the beauty of its landscape, cultural experience as well its natural-resources (spice) that have been converted to commercial products.
Oil and Gas
Oil and gas industries have been performing well in terms of its upstream industry. However, Sabah is yet to develop the downstream business from feed stocks (raw materials) that could increase the contribution of Oil and Gas industries to the Sabah’s economic growth. Currently, Sabah has three main mega projects namely Sabah Oil and Gas Terminal (SOGT), Sipitang Oil and Gas Industrial Park (SOGIP) and Sabah Ammonia Urea (SAMUR) and its functions and future development are mentioned below:
Sabah Oil and Gas Terminal (SOGT): Crude oil and raw gas are extracted from this terminal and this upstream business has proven to be developing well with 300,000 barrel of oil extracted per day. 500 million cubic feet is supplied daily to Bintulu via the SSGP pipeline to produce the liquefied natural gas, whereas 90 million cubic feet is supplied daily to SAMUR for production of urea from ammonia.
Sipitang Oil and Gas Industrial Park (SOGIP): This 4065 acres industrial park is yet to be developed and equipped with factories that could translate raw gas material into a product that could be exported out such as methanol, ammonia and urea as well as liquefied natural gas. This could provide significant job opportunities for the local not just to run the machineries but also in manufacturing necessary facilities within the industrial park (school, training centre, houses for workers).
Sabah Ammonia Urea (SAMUR): Production of ammonia and converting it to urea to be exported out. However, this is the only company that is processing ammonia in Sabah. More factories like this should be developed to establish a competitive environment conducive for the growth of the industries.
With the current oil and gas development, Sabah has already shown a positive impact on the state’s economy, however this development need to be further strengthened by diversifying the industries. Without processing the raw materials, Sabah could be exposed to the risk of running out such resources which consequently would significantly affect the state’s revenue.
In attempt to strengthen the oil and gas industries, Sabah has to use its upstream business and maximise it by converting it into downstream business that could contribute to the state revenue as well as be a platform to provide the local people with job opportunities. This development has been fully supported in terms of budget allocations by state and federal government (Budget 2018), however what is yet be done is to combine the government assistance with the availability of workforce.
Therefore, in doing so Sabah is to:
- Re-program the education and training centre to develop the cognitive skills to create a highly-skilled work force that could not just operate the high-end machinery of the plant responsible to process the raw gas but also a work force that could meet the demand of the investors.
- Assist, the partnership, with federal government to develop hard infrastructure in terms of connectivity to SOGIP to attract more foreign investments so more factories can be build in the industrial park.
- Diversify source of downstream business to methanol (to create the methanol conversion plant from gas as one in Labuan) and liquefied natural gas (as in Bintulu) to decrease dependency of processing Liquefied natural gas (LNG) in Bintulu. Having a workforce with high-end skills, obtain through series of human capital development programmes, running the machinery would make Sabah to be the main place of LNG processing. This is in line with the development of Sabah Port and could push Sabah to be the main hub for exports of processed gas amongst others.
- Diversify the oil industry by having a refinery that could process oil to be exported instead of selling just crude oil. Sabah is to set a timeframe in order to develop this and it should entail the time needed to establish the refinery as well as to train and make the local Sabahan to be prepared to run the business in Sabah.
- Liberalising the economy in oil and gas industries by reducing the entry barriers to attract more foreign investments.
Conclusion: Where to go?
In preparing Sabah to be a global economic player, the state institutions have to work collaboratively with other agencies to develop the human capital in Sabah. As such, Sabah is in position to push for human capital development policies for long-term plan. This is to ensure Sabah is prepared to participate in the fast-changing global economy by having a dynamic workforce that is equipped with necessary skills to support the industries within Sabah’s economy. Sabah should continue in pursuing the policies and securing funding in order to support the human capital program as obtained from the 2018 budget allocation where RM315.3 million has been allocated for the purpose of human capital development.
– Nurul Masyirah Aklee