The National Conference on Economic Corridors (NCEC) The 10 th Anniversary of Sabah Development Corridor (SDC)

Transcription

1 The National Conference on Economic Corridors (NCEC) The 10 th Anniversary of Sabah Development Corridor (SDC) The Success in Achieving Wealth Creation and Social Well Being through SDC Presented by Prof. Datuk Haji Kasim bin Haji Md. Mansur Contributors Haji Kasim bin Haji Md. Mansur, Tuan Haji Dullah Muluk, Mori Kogid, James Alin, Caroline Geetha Faculty Business, Economics & Accountancy, Universiti Malaysia

2 Economic Transformation Program (ETP) The Economic Transformation Program is an initiative by the Malaysian government to turn Malaysia into a high income economy by the year of It aims to triple the country s Gross National Income (GNI) from RM660 billion (US$188 billion) in 2009 to close to RM1.7 trillion (US$523 billion) by This translates into an increase of GNI per capita from RM23,700 (US$6,700) to at least RM48,000 (US$15,000), meeting World Bank s high-income nation benchmark. The country is expected to grow its GNI at six per cent between 2011 and 2020 to hit the target.

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4 National Key Economic Areas (NKEAs) NKEA is a driver of economic activity that has the potential to contribute directly and materially to a quantifiable amount of economic growth.

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6 10 National Key Economic Areas (NKEAs) The ENTRY POINT PROJECTS IS THE CATALYST FOR ECONOMIC GROWTH. 71 Entry Point Projects (EPPs) within the implementation of the Economic Transformation Program (ETP) in Sabah. They are merely initial catalysts to spark further new projects and economic growth momentum over the next 10 years, said Dato Sri Najib Tun Razak, Prime Minister of Malaysia. Agriculture, Palm Oil Tourism. Oil, Gas & Energy, Financial Services, Business Services, Wholesale & Retail, Education, Electrical & Electronics, Healthcare, Communications Content & Infrastructure, all other NKEAs are industry sectors.

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8 Sabah Development Corridor (SDC) initiatives was align with the ETP

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10 SABAH DEVELOPMENT CORRIDOR (SDC) The SDC aims to use its competitive advantage like rich natural resources and strategic location in the South China Sea region to propel the state s economy forward. This holistic development was themed Harness Unity in Diversity for Wealth Creation and Social Wellbeing.

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12 SUB-DIVISION Western Central COMPETITIVE ADVANTAGE Sabah s Industrial Belt Food Production Belt Eastern Self Sufficient Belt

13 Wealth Creation With the Sabah Development Corridor, Sabah's economy has consistently increased in growth, narrowing the gap with the national economy. In 2011, the State's economic growth was 2.1%, while Malaysia's was 5.3%. In 2015 and 2016, Sabah s economic growth surpassed the national growth. Sabah s economy grew at 6.1% and 4.7% in 2015 and 2016 compared to the national growth of 5.0% and 4.2% respectively in the same years. YEAR GDP SABAH GDP MALAYSIA

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15 WEALTH CREATION

16 Wealth Creation The ETP aims to transform agriculture into agribusiness Commercial grade seaweed farming, leveraging on the state s strategic location in the Coral Triangle together with Indonesia and the Philippines. This triangle supplies nearly 80 percent of Kappaphycus seaweed, which is highly sought after in the processed food and pharmaceutical industries. The seaweed mini-estate initiative aims to increase yield from 1.5 metric tonnes to five metric tonnes of dried seaweed per hectare per year in a farmed area totaling to RM28,000 hectares. The Sabah state government has designated 7,500 hectares of new areas for seaweed cultivation under the Industrial Aquaculture Zone (ZIA), and an additional 20,500 ha will be designated by 2020

17 Wealth Creation: Poverty Eradication Sabah s seriousness about poverty eradication is reflected in various economic activities which led to the drastic reduction of poverty rate from 58.3% in 1975 to 2.9 % in YEAR INCIDENCE OF POVERTY IN MALAYSIA (%) INCIDENCE OF POVERTY IN SABAH (%)

18 Wealth Creation: Cost of Doing Business Sabah Development Corridor Blueprint published a decade ago (December 2007), outlined the logistics strategy for Sabah as follows; Lower freight and logistical cost by progressive review of the Cabotage Policy for shipping, while enhancing the cost competitiveness of ports in Sabah via alliances with other global port operators and shipping liners; Establish Sapangar Free Zone (SFZ) annexed to Sapangar Bay Container Port (SBCP) by providing attractive incentives to potential investors to set up their manufacturing facilities and distribution centres in SFZ; Position Sandakan as the regional trading hub in Borneo by expanding the role of Sandakan Integrated Trade Exchange Terminal (SITExT) to leverage the impending AFTA. (Sabah Development Corridor Blueprint , 2007: 19)

19 Wealth Creation: Cost of Doing Business The inflation rates in Sabah was higher than in the Peninsular Malaysia in 1968, 1969,1971 and 1975, four years out of 12 years for the Cabotaj Policy was implemented. Similarly, in years after Cabotaj Policy up to Partial Liberalization, only four years, 1983, 1985, 2006 and 2009 out of 20 observation showed that the inflation rates in Sabah was higher than Peninsular Malaysia after Cabotaj Policy was implemented. After Partial Liberalization was implemented only 2 years, 2012 and 2013 inflation rate was higher in Sabah compared to the Peninsular Malaysia out of 4 years. This clearly indicates that the effectiveness of the Partial Liberalization did not help to reduce the cost of doing business in Sabah. The consumer price index or the inflation was due to other factors and did not have anything to do with Cabotaj Policy.

20 Wealth Creation: Cost of Doing Business Exporters or importers even if they owned the vessels, will have to pay for cost of shipping or carrying their commodities from or to the domestic ports of their choice. More than 95% of Sabah s EXPORT-IMPORT were transported by marine shipping.the demand for marine vessels to carrying EXPORT-IMPORT from and to Sabah was getting bigger over the years, but never bigger than Peninsular Malaysia. In 2012, Sabah contributed 6.7% to Malaysia total exports compared to 4.4% in On the hand, Sabah imports was 6.1% of Malaysia total imports value (in RM million) compared to 4.3% in Higher volume of EXIM also implied higher demand for marine shipping service. In a short run, this would push the price above and beyond it average especially when the market is competitive. Shipping companies with massive capitalization, huge market shares and longer history have access to new technology (containerized cargo was) which naturally limit the number of shipping companies in that market. This creates an oligopoly market structure. The rent created by price above average must be large enough for it to encourage existing shipping companies to invest large amount of money to buying new, larger or technologically better vessels. This causes the freight rates to increase and create cosh push inflation.

21 WEALTH CREATION: TOURISM RECEIPTS AND BALANCE OF TRADE

22 SOCIAL WELL-BEING: STOCK OF MIGRANT WORKERS AGAINS EXPORT

23 SOCIAL WELL-BEING: LABOUR FORCE BY EDUCATION ATTAINMENT (%) IN SABAH

24 SOCIAL WELL-BEING: COST OF LIVING Most of the consumers in Sabah do not consume the subsidized goods and price controlling items. They prefer to buy fragrant rice which is more expensive. Same situation goes for the cooking oil as well. Palm oil is one of the subsidized good in Malaysia. However, most of the respondents prefer sunflower and corn oil. Sugar and eggs are dairy products which are subsidized but consumers prefer buying eggs that are not subsidized due to health reasons. Since the findings revealed that consumers from the income category of RM3,000 to RM4,000 did not use subsidized goods, consumer price index was calculated on the products consumed by this income group. The inflation rate obtained was percent. Since all these necessaties were goods that were not subsidized, the rate of inflation of percent confirms a significant increase in the cost of living in Sabah. Furthermore the income range of RM3,000 to RM4,000 is the lower middle income group in Malaysia which constitues most of the population. Thus removal of subsidies for essential items is deemed appropriate and reduce the wastage and leakage in tax payers money. Provision of BR1M is found to be a suitable measure where money is given to the rightful people to receive the subsidy and not just distributing it in a blanket basis.

25 Social Well-Being: Cost of Living by removal of energy subsidy A study was consucted on the effect of subsidy and its removal on the consumption of energy in Sabah. The study revelaed that consumption for petrol was not sensitive towards subsidy and indifference towards income. Detail analysis confirmed that overconsumption was high among high income group compared to the low and the middle income group. This was mainly due to high income group seems to own vehicle which are 4 wheeled drive or with higher capacity cylinder that require more petrol. The high income group is also found to be responsible in the over consumption of diesel. Overconsumption of electricity is also found to be high in Sabah. The overconsumption is found to be high among rich income group due to the size of the house usually semi detached or bungalow and the type of lighting used. In terms of the consumption of electricity for the low income group it was found to be very small in quantity. LPG is found to be very sensitive in price in its demand for low and middle income group. LPG is not sensitive to the changes in demand for the high income group in Sabah. This is because the high income group use induction stove or electricity to cook their meal. It is concluded that removal of subsidy for petrol, diesel and electricity in Sabah was wise. The alloocation of subsidy used for these energy should be channeled in the development of the infrastructure. This will eventually reduce the cost of living. If the distribution of subsidy is given in a blanket basis, only the rich will benefit and not the poor. This distorts the whole principle of subsidy distribution which is suppose to help the poor. Subsidy given for LPG should be maintained because it is essential in preparing meal for the family especially for the low and the middle income group.

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27 Projection 2025 The target set under the SDC was GDP RM63.2 billion GDP per capita RM14,478. Sabah s GDP and GDP per capita in 2015 recorded RM70.4 billion and RM19,734 respectively (Department of Statistics, 2015).

28 Key Challenges faced by SDC a. Demand for Human Capital. Topping the list of skills that will be needed in 2020 are creative problem-solving and critical thinking, or more specifically, the ability to address issues from different perspectives and produce effective solutions. Another work skill that will be required in the future is the ability to manage people by empathizing and making human connections, a function that robots cannot take over. Other top skills include judgements and decisionmaking, communication, negotiation, cognitive flexibility and service orientation. 28

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30 b. Type of industries. 30

31 c. Readiness: Human Capital Human Capital: through education, training and experience Schools in Sabah: Science schools, Boarding schools, MRSM, Religious schools Computer Facilities and internet in schools University and private colleges Courses, training and certificates offered Global and borderless information Online learning Lifelong learning Jati Diri - always improving and renewing knowledge and skills 31

32 Readiness: Infrastructures WIFI and public internet Affordable Personal Internet, Broadband, Computers, Laptop and Smartphones Facilities in schools, universities, colleges, offices, library and public places State-of art technology Capital formation physical such as machines, equipment, vehicles, factories Openness to external development The importance of Foreign Direct Investment to inject more money capital and knowledge 32

33 Readiness: Economic Environment Economics growth in Sabah Potential in Agriculture (food) go for mass production and systematic land management Potential in Plantation new land, go for large scale Potential in Tourism Labor, hospitality and accommodation, natural resources, sea, island, beach, river, hills Potential of SME products Potential of craft business culture, traditions, multi ethnics Online business Delivery business Digital revolution will help to cross the border and reduce the distance 33