Briefing Highlights on

Sabah.LEAP Long Term Strategic Action Plan 2035

By Unit Perancang Ekonomi Negeri (UPEN)

Presented for Economic Corridors Development Programme by ADB on 19 July 2018

1 BRIEF BACKGROUND

The main objectives of .LEAP were: (i) To provide a long term strategic development roadmap for Sabah for the period 2016 to 2035; (ii) To elevate the State into an innovative, knowledge- based, competitive and resilient economy; (iii) To develop Sabah into an attractive high end environmentally friendly investment destination; (iv) To position Sabah as a world class eco, wellness, health and sports tourism destination; and (v) To propel Sabah towards the upper middle income and subsequently to high income status.

2 BRIEF BACKGROUND

Sabah.LEAP contains a holistic vision that provides the long term strategies or general forward looking directional guide for realising the Vision and associated targets.

Sabah.LEAP is not meant to be too specific so as not to be constraining or restricting the State Government nor the private sector.

Sabah.LEAP also lays out the “must haves” or critical factors required in order to leap the State onto a higher phase of development.

3 LAND AREA 73,620 square km POPULATION BY AGE GROUP 2016p

TOTAL POPULATION ('000) COASTLINE 1,440 km 800

SOIL FERTILITY 30% suitable for 600 agriculture 400 development

FOREST COVER About 58% of 200 total land area 0 ALL AGES TOTAL • 3.80 million POPULATION (2016e) • 3rd highest populated state • 12% of total ’s population • 75.8% of the population is less than 40 years of age • 20-59 years old working group make up about 58.2% of the total AVERAGE 1.7% p.a population POPULATION (2011-2016) •20-39 years old young working group make up 39.6% of the total GROWTH RATE population YOUNG POPULATION AND YOUNG LABOUR FORCE UNEMPLOYMENT 5.4% (2016) RATE

POVERTY RATE 2.9 % (2016) Sabah’s Strengths

• Strategically and centrally located in the ASEAN and Asian region

• Strategic gateway to ASEAN and BIMP-EAGA with a market of of 580 mil and 73 mil respectively

• Regional hub and gateway to East Asian and the southern Asia Pacific region (Australia and beyond)

• Potential transhipment and aviation hubs for the region STRATEGIC LOCATION Sabah’s Strengths

• Rich in natural resources (oil & gas, fertile agriculture land, minerals, forest, marine) • Largest crude palm oil producing State in Malaysia • Largest producer of cocoa beans in Malaysia • Largest aquaculture producer in Malaysia • Sits on one of the largest oil reserves in Malaysia (9 new oil discoveries in the span of 2002-2005) • Rich biodiversity (flora, fauna and marine) • Nation’s largest Ramsar site – 78,803 ha. • 58% still under forest cover and part of Heart of Borneo Initiative, oldest tropical rainforest • Rich marine resources – located at the Sulu Sulawesi Marine Eco region, Coral Triangle and RICH RESOURCES global center of marine biodiversity. 75% of Malaysia coral reefs of 3,600 sq km found in Sabah. • Largest marine Park in Malaysia – Tun Mustapha Park (898,763 ha). Has 6 marine Parks in Sabah. Sabah’s Strengths

Cultural Diversity -more than 42 ethnic groups -Best example of 1 Malaysia GROSS DOMESTIC PRODUCT GDP: Real GDP Growth Rate %, 2011-2016 RM 73.8 BILLION (2016P) Sabah Malaysia 6.0 6.1 RM 58.1 BILLION (2010) 5.5 4.7 5.0 5.0 4.7 4.2 3.3 INCOME PER CAPITA: 3.2 2.1 RM 21,081 (2016P) 1.5 RM 17,831 (2010) Note: P = preliminary

2011 2012 2013 2014 2015 2016P % Contribution to GDP By Sector, 2016 40.8 Services 36.6

19.1 Agriculture 27.3 2016 2010 29.6 Mining and Quarrying 24.2

7.5 Manufacturing 8.3

2.6 Construction 3.2 Source: Department of Statistics, Malaysia GDP BY STATE 2016

SELANGOR (RM251.6BIL) WP KUALA LUMPUR (RM169.9 BIL ) SARAWAK (RM108.8 BIL) JOHOR (RM104.5 BIL ) SABAH (RM73.8 BIL ) PULAU PINANG (RM73.7BIL ) PERAK (RM60.4 BIL ) Sabah ranks no. 5 PAHANG (RM46.8 BIL ) NEGERI SEMBILAN (RM38.8 BIL ) KEDAH(RM37.2 BIL ) MELAKA (RM33.2 BIL ) TERENGGANU(RM28.6 BIL ) KELANTAN (RM20.7 BIL ) WP LABUAN (RM5.5 BIL ) PERLIS (RM5.1 BIL ) Source: Department of Statistics, Malaysia EXTERNAL TRADE RM Million

2010 2011 2012 2013 2014 2015 2016Pp Import 27,913.3 32,772.1 37,427.1 36,759.4 35,460.5 30,242.3 28,957.2 Export 43,613.7 49,395.1 47,684.8 45,307.8 47,406.5 40,837.5 41,400.1 Balance of Trade 15,700.5 16,623.1 10,257.7 8,548.4 11,945.9 10,595.2 12,443.0

Note: p = preliminary

Source: Department of Statistics, Malaysia EXPORT OF MAJOR COMMODITIES, 2016p Crude Petroleum 37.0% Palm Oil 31.2% Others 15.8% Palm Kernel Oil 6.7% Methanol 4.3% Plywood 2.7% Hot Briquetted Iron 1.2% Others: Palm Kernel Cake, Palm Based Oleochemical, Refined Petroleum Prawn, Fresh or Frozen 0.7% Products, Sawn Timber, Sawlogs, Veneer Sheets, Mouldings, Uncoated Printing & Writing Paper Rubber 0.4% IMPORTS OF MAJOR ITEMS, 2016p Machinery and Transport Equipment 37.3%

Mineral Fuels, Lubricants, etc. 9.6%

Manufactured Goods 11.9%

Chemicals 11.1%

Food 14.8% Others: Beverages & Tobacco, Crude Materials, Animal & Vegetable Oil and Others Fats, Miscellaneous Manufactured 15.3% Articles, Miscellaneous Transactions and Commodities Source: Department of Statistics, Malaysia AGRICULTURE

LAND USE BY AGRICULTURE CROP CRUDE PALM OIL PRODUCTION (HECTARES) (TONNES)

Palm Oil 1,647,001 6,055,569 5,776,459 5,722,928 Rubber 148,133 5,542,649

4,847,450 Paddy 43,536

Coconut 16,491 % SHARE (2015P): Fruits 16,737 Oil Palm alone contributed about 87% Others 589

Cocoa 7,134

Note: Others include coffee, sugar cane, tea, Vegetables 4,026 tobacco, cash crops, spices etc Note: p = preliminary 2012 2013 2014 2015 2016

Source: Sabah Agriculture Department, Department of Statistic, Malaysia AGRICULTURE

GROSS FISHERY PRODUCTION, 2014 & 2015 SELF-SUFFICIENCY IN FOOD, 2014P (%) 2014 2015 106% 100% 100% 100% Production Quantity Wholesale Quantity Wholesale 85% (Tonnes) value (Tonnes) value (RM’000) (RM’000)

Marine Fish 214,676 1,043,112 175,443 902,476 50%

Brackish 21,483 385,867 16,900 301,097 Water Fish 23% 12% Fresh Water 4,109 49,176 4,196 54,159 Fish Rice Fruits Vegetable Seaweed 245,332 81,460 260,760 57,338 Beef Pork Poultry Culture Egg Milk

TOTAL 485,602 1,559,616 457,300 1,315,072 Note: p = preliminary Source: Sabah Agriculture Department, Sabah Fishery Department, Sabah Veterinary and Livestock Department TOURISM Tourism Receipts TOURISM ARRIVALS: TOURISM RECEIPTS: RM6.7 Bil RM7.5 Bil RM5.3 Bil RM6.63 Bil RM6.60 Bil 3.427 Mil (2016) RM 7.5 Bil (2016) 7.9% 13.5% 3.176 Mil (2015) RM 6.6 Bil (2015)

2012 2013 2014 2015 2016 Top Ten International Arrivals To Sabah 2016 Country Percentage of Total Tourism Arrival International Arrivals 3,383,243 3,427,908 1. China (Including Hong 33.2% 3,230,645 3,176,226 Kong and Macau) 2,875,761 2. South Korea 17.5% 3. Indonesia 14.4% 4. Brunei 8.1% 5. Taiwan 4.9% 6. UK & Ireland 3.2% 7. Philippines 2.9% 8. Australia 2.7% 9. Japan 2.4% 2012 2013 2014 2015 2016 10. Singapore 2.0% International 941,765 1,089,320 996,522 978,426 1,128,776 Source: Domestic 1,933,996 2,293,923 2,234,123 2,197,800 2,299,132 MANUFACTURING

Approved Investment in Manufacturing Sector Manufacturing Sector Contribution to GDP (RM Billion) RM5.4 Bil

RM3.5 Bil RM3.0 Bil 2016 RM5.5 Bil RM2.4 Bil RM1.2 Bil RM0.7 Bil 2015 RM5.74 Bil

2011 2012 2013 2014 2015 2016 2014 RM5.73 Bil 201 2012 2013 2014 2015 2016 1

Number of 33 30 35 38 35 58 2013 RM5.3 Bil Project Applications Approved 2012 RM5.1 Bil Potential 2,5 2,896 2,333 2,205 1,361 5,070 Employment 52

Source: Malaysian Investment Development Authority & Department of Industrial Development and Research Source: Department of Statistic, Malaysia EMPLOYMENT CONTRIBUTION BY INDUSTRY (%)

35.3 Agriculture 31.9 16.5 Increase in Wholsale and Retail Trade 17.8 employment 8.3 Manufacturing 9.7 contribution: 8.4 Construction 7.2 Wholesale and 4.6 Retail Trade Public Admin & Defense 4.7 5.5 Manufacturing Education 4.8 Accommodation and Food & Beverage 6.4 Public Admin & Service Activities 7.7 D e f e n s e 0.4 Mining&Quarrying 0.4 Accommodation 14.6 a n d Food & Others 15.8 B e v e r a g e S e r v i c e 0 10 20 30 40 A c t i v i t i e s

2015 2016

Total employed : 1,771,100 (2015)

Total employed : 1,823,700 (2016) Source: Department of Statistics, Malaysia Key Development Challenges

1 To increase the value chain of economic activities

2 To develop more new growth sectors to spearhead growth

3 To minimise environment and biodiversity degradation

4 To reduce urban-rural socio-economic disparity

5 To address foreign workers and illegal immigrants issues

6 To produce high skilled workers and reduce brain drain

7 To improve provision of infrastructure & utilities, connectivity and reduce logistic cost

8 To further beef up security and minimise security concerns

9 To embrace and prepare for Industrial Revolution 4.0 Current Key Economic Challenges

1 Slow recovery in most economies globally – emerging economies

2 China factor – slower growth and imposition on outflow of funds from China and China-US trade war

3 Slow recovery in prices of commodities including CPO

4 Cautious consumer spending

5 Marginal strengthening of the Ringgit

6 Increasing cost of living

7 Creation and empowerment of more entrepreneurs

8 Lack of affordable housing Sabah.LEAP Long Term Strategic Action Plan (2016-2035)

BRIEF SUMMARY HIGHLIGHTS OF THE CONTENT OF THE PLAN

19 SABAH LONG TERM STRATEGIC ACTION PLAN (SABAH.LEAP) 2035

20 SABAH.LEAP COMPONENTS BY POLICY AREA

Dynamic, competitive, stable and sustainable economic growth, fully linked to the global economy Economic By 2035, the A vibrant and empowered private sector, fuelled by people of entrepreneurial zeal and attracting substantial Sabah will lead investment productive and Advanced education, healthcare, infrastructure, meaningful utilities, ICT and skilled human capital, providing fair lives in and equitable access to the people of Sabah harmony with nature, Maintain Sabah’s cultural heritage and diversity Social conserving it for future generations Safe and secure environment and supported by a vibrant Management and conservation of Sabah’s natural Environmental and sustainable resources economy.

Public service A stable and efficient government delivery

21 Sabah State Library

22 Sabah Art Gallery Sabah State Library

24 Sabah Handicraft Centre, Keningau SMART GREEN STATE :TOWARDS GREEN INDUSTRY AND SERVICES

What Is It? What Can Sabah Do? . Conserve the environment by reducing the . Encourage eco-friendly hotels negative impacts of tourism . Offer “voluntourism” activities in local Green Tourism . Build environmental and cultural awareness communities . Contribute to local communities’ development . Offer eco-licencing services

. Reduce total environmental impact of chemical . Fair-trade and organic produce Green and water related pollution . Urban farming / agriculture Agriculture . Increase productivity of agricultural systems . Leverage tech to raise productivity . Conserve bio-diversity and the ecosystem levels

. Reduce waste, pollution, and resource use . Produce high-value green products Green . Develop environmentally friendly, “cradle-to- e.g. biomaterials, biopolymers Manufacturing cradle” products through efficient production and and Design operation

. Reduce carbon footprint associated with economic . Renewable and other forms of clean growth and increased energy use energy Green Energy . Derived from natural resources that are . Feed-in-tariff system renewable, e.g. solar, geothermal, hydro

. Create an environmentally friendly city with a . Green architecture – zero-carbon Green Urban focus on improving social aspects of life buildings or green existing buildings Planning . Designed in consideration of environmental impact . Strategic landscaping – tree planting, and minimising energy inputs, waste and pollution bicycle tracks

. Preserve existing ecosystems and biodiversity . Community-based protection of the Forest and . Use resources responsibly to maintain environment and a greater Marine regeneration capabilities with no permanent involvement of stakeholders Conservation damage to the ecosystem . R&D for conservation-related frontiers

26 PATH TO SMART GREEN STATE

What Is It? What Can Sabah Do? § Using digital technologies to enhance the liveability § Smart transport, integrating bus, taxi, and efficiency of cities and large towns rail and road travel Smart Cities § Integrating building management, public transport § Smart energy management e.g. and information services through district cooling § Smart sensing of crops / rainfall / fertility § Train farmers in digital technologies Smart § Smart mechanisation e.g. robotic harvesters § Provide communications infrastructure § Smart monitoring of animal health and production § Support funding of new technology Agriculture § Direct communications between store and farm to § Support research into new approaches order new supplies § Provision of education, healthcare, social services § Introduce smart e-government services Smart Rural and security / policing in rural areas using smart § Launch e-education and e-health Services technologies support for rural schools and clinics § Smart delivery of products to rural consumers § Use of technology to provide policing, security and § Support research and development emergency services in remote areas, e.g. via into smart security Smart Smart Security drones, static sensors and robotic watercraft § Collaborate with emergency services to Countryside § Smart communications between public and “smarten” their deployment in Sabah emergency services § Smart monitoring of illegal immigration § Use remote sensing and management technologies § Set up centre of excellence in smart Smart Smart to quickly identify and address environmental issues environmental management Sea Environment (e.g. air, water, soil pollution, waste management, § Introduce relevant legal / regulatory seismic changes) frameworks § Monitoring flora and fauna to ensure their health § Collaborate closely with research § Access control to protected areas efforts and incentivise new approaches Smart Nature § Remote experiencing of natural resources (enjoy § Introduce relevant legal / regulatory Conservation without disturbing) frameworks § Monitoring of e.g. fish stocks

27 PERCENTAGE SHARE TO GDP BY SECTOR BY 2035

40.9% (RM27.1 bil) Services 50.6% (RM106.7 bil) 25.3% (RM16.9 bil) Agriculture 9.7% (RM20.5 bil)

(RM14.5 bil) 21.8% 2014 2035 Mining and Quarrying 12.8% (RM27.0 bil)

8.6% (RM 5.7 bil) Manufacturing 25.4% (RM53.6 bil)

3.1% (RM2.0 bil) Construction 1.5% (RM 3.2 bil)

Total GDP: RM66.3 Bilion (2014) RM211 Bilion (2035)

28 MAIN GROWTH DRIVERS

Services sector - Tourism sector Asia’s No.1 Wellness, Health and Eco tourism

Logistics sector Transhipment and Trading Hub For Far East

Creative sector as Lifestyle Hub for Creative sector

Manufacturing sector - Resource based

Green manufacturing • Premium sustainable palm oil based products (biochemicals, biomaterials,etc) • High quality food based products • Premium Eco Green timber related products

Downstream oil and gas using clean technology

Agriculture sector - high quality organic produce High yielding premium agriculture, fishery and livestock production with best practices 29 KPJ Healthcare Centre

30 Jesselton MedicalJesselton Centre Medical Centre

31 GlenEagles Private Hospital Kota Kinabalu Convention City Sapanggar Bay Container Port ECONOMIC DEVELOPMENT : 5 YEAR THEMES

35 *Note: Themes/Initiatives may start earlier or concurrently when appropriate. Initiatives will be reviewed as and when needed. SOCIAL DEVELOPMENT : 5 YEAR THEMES

2016-2020 2021-2025 2026-2030 2031-2035

Speed up narrowing Further improve Drive improved student urban-rural performance secondary Achieve excellence in 1 outcomes in primary 4 7 10 Education gap in student school outcomes education across Sabah and secondary school outcomes throughout Sabah

Raise awareness of Enhance primary Expand the quality and Achieve excellence in proper healthcare and healthcare service reach of healthcare healthcare across Healthcare 2 improve service 5 8 11 offerings services Sabah offerings

Equip the B40 Focus on integrating the Address social needs Position Sabah as the Inclusive households to participate marginalised and driven by demographic region’s leader in social 3 in a productive and 6 those with special 9 12 Development societal change development prosperous society needs into society

36 *Note: Themes/Initiatives may start earlier or concurrently when appropriate. Initiatives will be reviewed as and when needed. ENVIRONMENT SUSTAINABILITY: 5 YEAR THEMES

Strategy& Prepared for UPEN 37 ENABLER DEVELOPMENT : 5 YEAR THEMES 2016-2020 2021-2025 2026-2030 2031-2035

Strengthen partnership Continuous enhancement Further strengthening Government with Federal Government of Government services Efficient and effective 1 capacity and expertise 10 19 28 to enhance citizen and through innovative government Delivery in the civil service investor services delivery models

Attract investments in Encourage re- Holistic Accelerate the growth of Position Sabah as the Sabah through investment into the investments and explore preferred investment Investment 2 campaigns and 11 20 targeted sectors of 29 sunrise industries destination in the region Development incentive programmes Sabah’s economy

Enhance integrated land Maintain a sustainable land Prioritise and build Expand integrated transport system transport system for critical roads to catalyse transport system to Mobility 3 12 focused on economic 21 30 efficient domestic and economic development more remote locations centres international connectivity

Enhance electricity supply Maintain a financially Drive sector reform and to support centres of Expand green sustainable electricity investment in Electricity 4 13 economic growth and 22 electricity generation 31 sector to provide efficient, capabilities more remote locations reliable power supply

Develop a robust water Balance expansion of Promote adoption of Achieve sustained and infrastructure services with advanced technology to adequate treated water enhance overall Water 5 development plan for 14 environmental 23 32 coverage for all sustainability of the water 2016-2035 protection industry

Enhance backbone ICT Improve ICT Foster a mature ICT Widen access to rural infrastructure and identify infrastructure service ecosystem to support the 6 15 24 communities and 33 ICT value proposition for levels and increase development of Sabah as secondary cities ICT across all sectors public awareness of ICT a Smart Green State

Transhipment Plan and develop port, Scale-up trading November 2015 Enhance service Position Sabah as a 8 airport and surface operations and offerings and promote highly efficient trading 7 16 25 34 and Trading infrastructure to drive implement international Sabah as an attractive hub, providing premium Hub increase in trade best practices trading hub service to the region

Expand the range of travel Enhance the Promote Sabah as a Develop plans to Leveraging options to BIMP-EAGA connectivity of Sabah to hub for trade and improve connectivity to 8 17 territories and expedite 26 facilitate an increase of 35 connectivity within BIMP-EAGA BIMP-EAGA territories border control procedures trade BIMP-EAGA Leveraging AEC, TPPA Maximise value from the agreements to support Sabah’s development and OBOR

Further improve tertiary Continue to attract, Prioritise human capital Human education, TVET, develop, and retain development based on Expand quality of talent 9 18 entrepreneurship and 27 36 highly skilled talent in Capital key growth industries collaboration with industry Sabah

*Note: Themes/Initiatives may start earlier or concurrently when appropriate. Initiatives will be reviewed as and when needed. 38 8 “Must Haves” for Sabah.LEAP

1. Implementation of Sabah.LEAP will be critical – it needs strong, empowered and effective leadership with sufficient resources. A clear structure will be put in place to enable this

2. Attracting investment is key – both government and private sector. Big steps must be taken to improve the ease and lower cost of doing business in the state, as well as actively courting private sector and foreign investors and federal funding

3. Talent is essential – both internally developed and imported (diaspora, other Malaysians, expatriates). Concrete programmes will be set up to attract and retain talent, and ensure effective quality education for all Sabahans

4. Security will be guaranteed within Sabah and at its borders – uncertainty is disastrous for both investment and tourism . The government will focus intensely on delivering a safe and secure environment.

5. Infrastructure will be developed in advance of demand to drive economic growth – particularly roads, ICT and sufficient supply of power and water

6. Government efficiency will be significantly improved – especially relating to ease of doing business and investment

7. Environmental protection will be built into every initiative which Sabah takes – the “Greenest Place in Asia” has to be inherent and genuinely built in development plans

8. State leadership will own and drive the programme, taking control of Sabah’s development, and ensuring that Sabah continues to have strong support from the Federal Government and beyond

39 RECAP SUMMARY: Sabah.LEAP : Making a difference for the people of Sabah over the next generation

Sabah.LEAP 2035 Vision Sabah as a Smart Green State

Green By 2035, the people of Sabah will lead productive and Green Manufacturing Green meaningful lives in harmony with nature, conserving it Urban and Design Energy for future generations and supported by a vibrant and Planning sustainable economy. Forest and Green Green Marine Green What this Means Agriculture Tourism Conservation Sabah: Smart The people of Sabah The people of Sabah Sabah will have a Green will be part of a well will continue to live in dynamic, competitive, State educated and learned harmony with stable economy, fully Smart Smart Nature Smart Security Smart society, with access to nature, and carefully connected to the Environment Conservation Social advanced healthcare Environ- manage and conserve Economic global and infrastructure mental Sabah’s rich economy, attracting services. biodiversity and significant levels of natural resources. private sector Every citizen will have investment and Smart Smart Rural the opportunity to lead Smart Cities generating Agriculture Services a meaningful life. sustainable growth.

GDP and Employment Projections Some Selected Targets by the Year 2035

Sabah.LEAP Real GDP Projections Sabah.LEAP Employment Projections RM Bn at Constant 2014 Prices Thousand Individuals

CAGR = 1.9% 0% Poverty >75% Green Incidence Buildings 211 2,400 CAGR = 5.2% 203 2,250 2,100 Percentage of Environmentally 172 1,860 households living under certified buildings the poverty line 1,583 132

96

69

100% Access to >30% Natural Utilities Environment

Sabah’s population with access to clean water Percentage of Sabah’s 201 202 202 203 203 Target 201 202 202 203 203 supply, sanitation, electricity terrestrial and coastal 3 0 5 0 5 High- 3 0 5 0 5 supply and internet waters protected Incom broadband e GDP in 40 2035 MOUNT TRUS MADI

Thank You

TIP OF BORNEO