SARAWAK Malaysia’s largest state is transforming itself into an industry-driven modern economy
The resources to be a winner

Sarawak’s capital Kalimantan: with its rivers and plentiful rainfall Sarawak has potential for further hydropower generation on a dramatic scale

arawak is the largest Malaysian state, separated from the mainland by the South China Sea. While the other 12 states surged ahead to become a tiger economy in southeast Asia, Sarawak’s development lagged behind. But, today, the state, which occupies about a sixth of the island of Borneo and is
rich in natural resources, is undergoing a rapid transformation from a primary product exporter to an economy driven by industry.
Largely an agricultural-based economy a quarter of a century ago, Sarawak was dependent on timber, oil and gas exports, all subject to fluctuations on the world market. “We thought this was too narrow a base,” says Sarawak deputy chief minister George Chan Hong Nam.

The state government established a ministry of industrial development in 1987. At that time, industry made up less than eight per cent of the gross domestic product (GDP). “Today it accounts for 22 per cent of GDP and by 2005 we expect it to be about 30 per cent,” says Mr Nam.
“This means that we are going towards industrial development, which will be the driving force of the economy. Having said that, we do wonder how we are going to compete with China and this is worrying at times.”
In the last two decades about a dozen industrial estates have been created, as well as the Sama Jaya Free Industrial Zone (SJFIZ), a centre for hi-tech. “We are going into electronic industries, but they are at the high end as we know we cannot compete at the low end,” says Mr Nam.
“Penang is having problems with the low end because it cannot compete with Vietnam, Indonesia and China. Eventually, their industries will move because companies have no loyalty and will go wherever it is cheaper to operate.”

So what has Sarawak got to offer potential industrialists? “We are able to offer very cheap land,” says Mr Nam. “Compared with other countries, it is practically free. We have industrial estates throughout the country and they are all linked by fibre optic networks, so as far as telecommunications are concerned there are no problems there.
“We haven’t got highways connecting the whole state, but these will be built within the next three to five years. We have a deep-sea port at Bintulu and we will probably build another nearby. We plan to invest heavily in developing our infrastructure and, although we are behind the mainland, I believe that we will catch up very quickly, especially in IT and telecommunications.”
A second key factor is the availability of electricity, generated by hydropower stations across the country. With its many rivers and plentiful rainfall, Sarawak has considerable potential for further hydropower generation and Mr Nam believes 20,000MW is achievable.

Dr abdul Taib, chief minister of Sarawak, says we concentrate on technical education

A third factor vital to Sarawak’s industrial growth is to develop an educated workforce. The chief minister, Dr Abdul Taib bin Mahmud, says: “At any one time there are between 20,000 and 25,000 people being trained, more in technical education rather than in the old style of education.
“We have a whole university of our own and three branches of other universities, including two from Australia that are private universities. This has enabled us to accelerate our rate of training. We ought to be able to train between 8,000 and 10,000 new engineers in various branches by 2010,” he says.
The primary sector will remain important, he says, and a great deal of investment is being made in agriculture. “We are going to concentrate on food industries,” says Dr Abdul Taib.

“China is currently undergoing a shift of population towards the cities and by the year 2010 a lot of the Chinese countryside may no longer have surplus labour. They may have to import food and we are anticipating that. By 2005 we ought to be exporting high-quality food products.”
Sarawak is the biggest contributor to Malaysia’s foreign exchange reserves, says the chief minister, and the state has always had a surplus balance of payments.
He points out that Sarawak cooperates with Brunei, Sabah, the southern Philippines, Sulawesi and Kalimantan (Indonesian Borneo). “Asean works well in the western region between Thailand, the Malaysian peninsular and Singapore, but not so much on our side because we do not have the economic muscle to mobilise ourselves.

“Next year there will be an Asean free trade area. Sarawak will not gain much in terms of fiscal changes, but we do expect more activity as a result – that is very important for us as we will achieve maximum return on our infrastructure development.
“In the long run, I believe that by pulling together Kalimantan, the southern Philippines, Brunei, Sabah and Sarawak, we will create a new prosperous region in the east of Asean.”

Talib Zulpilip, chairman of SEDC, says logging of timber will give way to furniture making

In 1972, the Sarawak Economic Development Corporation (SEDC) was founded as a state-owned agency. Its chairman, Talib Zulpilip, says the agency has been instrumental in broadening the economic base of the state.
“This shift is best reflected in the corporation’s venture into hi-tech industry, with its involvement in 1st Silicon, a $1.3 billion wafer fabri-cation project, which is the first of its kind in Malaysia,” he says.
“This process of diversification will ensure that Sarawak continues to stay ahead in a changing economic landscape, both locally and internationally.”

Regulations governing the timber industry will ensure it remains sustainable

Sarawak’s rainforests are the source of tropical hardwoods, but the important timber industry is being encouraged to switch from the export of logs to downstream industries such as furniture-making. The government has strict regulations governing the timber industry to ensure it remains sustainable.

Chief executive of the Malaysian Timber Council Ismail Awang believes it is paramount that new technology is introduced in order to establish downstream industries, particularly in fibreboard production.
“Once we can produce these materials, they can go into many different products such as furniture, flooring and panels, with whatever finish is wanted - it is just a matter of wrapping and the technology is already there.”
Mr Awang adds that consumers would be prepared to pay higher prices if the quality was high. “When you consider Italian furniture, for example, the image is that of good design. But, in truth, when you actually compare it to the low-end range it’s nothing special at all.”