SABAH has been and continues to be an interesting state for most analysts in Malaysia. The state government has changed so much in the past five decades, it has had the most number of chief ministers in Malaysian history and now, it has an unsolved crisis of two chief ministers. 

One has a clear majority in the assembly while the other one claims to have the majority. Putting the chief minister crisis aside, Sabah is a resource-rich state that has, for almost 15 years, been under Umno-led Barisan Nasional.

Despite some positive economic performances, development has not been very impressive, and Sabah remains one of the most underdeveloped states in Malaysia. Although BN has been ousted by newly formed Parti Warisan Sabah, we have yet to see its new economic development policies to transform the state. Although is quite early to judge, the Sabah people have high expectations of the government to transform the state’s economy and materialise its manifesto.

Business cannot be as usual for the new government as there are various aspects of Sabah’s economic development that needs to be addressed, such as infrastructure, human capital, employment, poverty, focus of trade, etc, and more importantly, state autonomy. 

Sabah’s gross domestic product growth has been positive since 2000, at which it stood at RM32.4 million and increased to RM73.7 million in 2016, becoming one of the five major states to contribute to the country’s GDP. 

Primary sectors, such as agriculture, plantation, forestry and petroleum, formed part of its main contributions to economic activities, as well as the service sector, such as tourism. Ever since BN has held Sabah, allocations for development increased over the years, from the 6th Malaysia Plan (1991-1995) allocation at RM2.3 million, 7th Malaysia Plan (1996-2000) at RM4.4 million, 8th Malaysia Plan (2001-2005) RM7.9 million, 9th Malaysia Plan (2006-2010) RM15.6 million and 10th Malaysia Plan (2010-2015) RM13.5 million to the latest figures in the 11th Malaysia Plan (2016-2020) at RM2.87 billion, an amount excluding funds for the mega Pan-Borneo project.

While a substantial amount has been allocated to the state, indicators for socio-economic growth remain low, based on recent Statistics Department data. The unemployment rate stood at 5.6% last year, higher than the national average of 3.3%. Despite the previous government managing to bring down the poverty rate from 19% in 2009 to 2.6% in 2016, Sabah recorded the highest incidence of poverty compared with other states in Malaysia. Even Sarawak’s poverty rate dropped to 0.9%. 

However, the increase in household income has been commendable, with median income growing from RM3,102 in 2014 to RM5,228 in 2016. But in general, household income does not reflect the true picture of Sabah’s real income growth as of the methodology used in calculating the figure tends to skew them. 

According to the Statistics Department, the GDP per capita in Sabah is RM19,734, one of the lowest in Malaysia after Kelantan. On average, Sabahans earn RM1,644 or less a month. Although the number increased from RM1,073 in 2012, the actual yearly increase is just RM114.2. This growth has not been in tandem with overall price appreciation of things such as property, rent and food. 

Meanwhile, Sarawak’s GDP income per capita is RM44, 012, double the number in Sabah. Sabah also recorded uneven income distribution, whereby income for those in the T20 bracket has increased more than the M40. 

In terms of trade, the economic profile reveals an ironic situation. Despite the state being rich in resources, food remains the second-highest imports in Sabah. While there is much export of raw materials, there is little effort taken to invest in food production. Sabah depends highly on peninsular imports for food while Sarawak has been able to diversify its food production and rely less on imports.

Sabah’s economic development, too, is far behind. To improve economic conditions in Sabah, strategic focus must be given to development based on its comparative advantage. Sabah should no longer be a “captive market”, where commercial activities are based on the extraction of raw material. The government needs to devise a plan to move up the production value chain. 

Here, industrial policy will be central to focusing Sabah on its manufacturing activities and diversification of production, which currently has scant attention paid to it in terms of state economic planning. It cannot just focus on extracting raw materials like crude oil; it has to focus on mid-tier or R&D activities, like Sarawak. More factories are needed to transform raw material to semi-finished and finished goods. It cannot simply export fish elsewhere and allow others to undertake the canning process. This can be done locally. 

Only through manufacturing and diversification can Sabah’s economic profile improve. Above all, if the state does not have sufficient autonomy to decide on its economic plans, then it will remain as it is. – July 4, 2018.

* Firdausi Suffian is a Political Economy and Policy Analysis lecturer at UiTM Sabah.

* This is the opinion of the writer or publication and does not necessarily represent the views of The Malaysian Insight. Article may be edited for brevity and clarity.