Implement Verbal Support of Sabah as Far East Hub – Dr. Jeffrey

Kota Kinabalu:    “The Sabah government should put its foot in its mouth and implement the proposed Plan of the Federation of Sabah Industries (FSI) (formerly Federation of Sabah Manufacturers – FSM) and turn Sabah into the “Hub of the Far East” as giving verbal support is of no use to the Plan" said Datuk Dr. Jeffrey Kitingan, STAR Sabah Chief, commenting on the report that the Sabah government supports the said Plan.

“The Plan by FSI to turn Sabah into the “Hub of the Far East” or so-called “Dubai” of the Far East is realistic, achievable and very good for the long term economic development of Sabah and welfare of Sabahans based on my briefing from FSM then” added Dr. Jeffrey.

Considering the overall benefits of the Plan, the Sabah government should quickly establish an Implementation Committee with the FSI and all stakeholders to put the Plan into action.

Sabah occupies a strategic and central location in the Far East and is nearer to Hong Kong, China, Taiwan, Japan, even to USA than Port Klang or Pasir Gudang in the Peninsula.  It makes no business sense for goods from and to these countries from Sabah to go through Port Klang first.  

The detour to Port Klang costs more money and takes a longer journey time.   In a comparative study, it cost RM3,833 and at least 14 days to ship a container from Kota Kinabalu to Tokyo, Japan but only cost RM2,082 and 11 days to ship the same container from Penang to Tokyo.   A similar container from Kota Kinabalu to Auckland. New Zealand, will cost RM5,033 and take 28 days compared to RM4,197 and 20 days from Penang.  

By shipping direct from Kota Kinabalu to Tokyo will render costs to be cheaper and faster thereby making exports from Sabah immediately more competitive as an investment and manufacturing destination.

Based on an analysis done on the revenues of local shipping companies protected by the unfair and crippling cabotage policy, Sabahans pay about RM1.2 billion a year based on 400,000 TEUs at RM3,000 average shipping costs per 20 foot container.   This works out to the equivalent of RM35 per Sabahan per month or RM175 per household of 5 persons.

RM175 per month may be loose change for corrupt leaders but it constitute 10% of the average Sabah household income of RM1,751 based on figures from the Ministry of Human Resources, Malaysia.

Therefore, it is imperative as part of the Sabah government initiative to make Sabah the Far East Hub, the Sabah government need to open up all the ports in Sabah to international shipping lines and bypass the Cabotage policy.   This can be done by a Sabah law passed in the State Assembly.

By opening up the ports in Sabah, it will be a boon for local manufacturing activities and immediately render Sabah exports more competitive in the global markets especially to Hong Kong, China, Taiwan, Japan and the USA.

From 2012, the income of shipping companies derived from the operation of Malaysian ships has been 70% exempted from tax and the income of any person employed on board a Malaysian ship is also exempted from tax.   

These incentives should be extended to Sabah manufacturers and industries with exports.  They need to be compensated in order to enjoy the same shipping costs as their Peninsula counterparts.  Therefore, the Sabah government need to secure that Sabah manufacturers and industries with exports be granted a 100% tax incentive for their export value for a period of 10 years.

This move, amongst the various other measures that can be adopted to make the Far East Hub a success, will enable Sabah manufacturers and industries to re-capitalize and re-invest.  It will also lure potential investors to invest in Sabah.

According to the Department of Statistics, in 2012 the manufacturing sector in Sabah contributed only 1.9% of Malaysia’s GDP with only Kelantan and Perlis having a lower contribution.  Domestically, the manufacturing sector contributed only 7.9% of Sabah’s GDP compared to 27.0% in Sarawak,   31.5% in Selangor and 48.4% in Penang.   There is much room for improvement for Sabah’s manufacturing sector.

If the Plan to turn Sabah into the “Hub of the Far East” is implemented and Sabah promoted as a competitive and investment destination, there will be much needed economic spin-offs.  Employment opportunities will be generated, human capital development will be enhanced rendering no necessity to “export” our youths to the Peninsula and Singapore for factory jobs.   

Only then will Sabah be an economic power house in line with the vision of the Sabah Development Corridor Blue Print 2008-2025.   The promotion of Sabah as the Far East Hub will grow and eventually contribute to Sabah’s and Malaysia‘s economic progress and development.