Sarawak scores high on foreign investments

Sarawak is riding on more investment to empower the state to achieve high income by 2020.

Last year, the state emerged the top among all the states in Malaysia which brought in the highest amount of foreign direct investments (FDIs) totaling RM8.4 billion, according to statistics from the Malaysian Investment Development Authority (Mida).

Besides that, Sarawak also ranked the second in terms of total proposed capital investment which amounted to RM9.6 billion.

In the last five years, Sarawak consistently pulled in billions of ringgit from investors especially in the form of FDI, attributed to investment in energy intensive industries at Sarawak Corridor of Renewable Energy (SCORE) area.

Minister of Industrial Development Datuk Amar Awang Tengah Ali Hasan previously said over the years, Sarawak has become a favourite destination for investment into Malaysia.

“Based on Mida’s records, the state has been among the top four destinations for foreign and domestic investment since 2008.” During the last state assembly’s sitting, Awang Tengah revealed that the major sources of Sarawak’s FDI last year came from Japan, which invested RM5.1 billion in chemical product manufacturing, followed by a Japan-South Africa-Taiwan investment of RM1.25 billion in basic metal manufacturing.

It is believed that the Japan-South Africa-Taiwan investment is being channeled for the construction of the manganese alloy smelting plant in Samalaju Industrial Park (SIP) belonged to Sakura Ferroalloys Sdn Bhd (Sakura Ferroalloys).

Sakura Ferroalloys, is a joint venture of South Africa’s Assmang Ltd, Japan’s Sumitomo Corp and Taiwan’s China Steel Corp.

Sakura Ferroalloys previously said the smelting plant project will be commissioned in October this year whilst full production is expected to be in July next year.

The smelting plant, which has an estimated cost of about RM1.2 billion will have production capacity of 81 MVA, installed capacity of 170,000 tonnes per annum of high carbon ferro-manganese and silicon manganese.

Sakura Ferroalloys is one of the three companies involved in the production of ferroalloy and manganese at SIP.

Two other companies involved in the production of ferroalloy and manganese are OM Materials (Sarawak) Sdn Bhd – a 75: 25 joint venture between Australian OM Material Holdings Ltd and Cahya Mata Sarawak Bhd (CMS) – as well as Pertama Ferroalloys Sdn Bhd.

Other companies operational at SIP include Press Metal Bhd (Press Metal), Japan’s Tokuyama Corporation and Iwatani-SIG Industrial Gases Sdn Bhd (Iwatani-SIG).

Apart from that, Cosmos Chemicals Bhd, Elkem Carbon Malaysia Sdn Bhd and Malaysian Phosphate (Sarawak) Sdn Bhd are in various stages of site preparations while Asia Advanced Materials Sdn Bhd has completed site preparatory works.

In Tanjung Manis, Awang Tengah observed that Taiwan-based Sea Party International Co Ltd and Omakane Surimi Sdn Bhd, which are involved in halal seafood processing and aquaculture activities, have initiated their operations.

Chief Minister Datuk Patinggi Tan Sri Adenan Satem was quoted as saying that 19 projects in SCORE worth more than RM32 billion in FDI had been approved so far.

He noted 15 projects with a total investment of more than RM27 billion are in SIP while the remaining four projects with investment of more than RM5 billion are located in Mukah, Tanjung Manis and Kidurong.

Japanese firm Tokuyama Malaysia Sdn Bhd (Tokuyama Malaysia) has over the years invested several billions to produce polycrystalline silicon for solar panels and semiconductor.

Last year, Press Metal has further committed more investment for its proposed Phase 3 aluminium smelting plant at SIP while the company also has another aluminium smelting plant in Mukah with an investment of RM600 million.

Other than that, Iwatani-SIG has invested RM30 million to produce industrial gases and OM Sarawak has poured in RM1.04 billion to produce ferrosilicon and manganese alloy.

 

Major FDI From Japan

With all these in place, it comes as no surprise that last year, Japan contributed the highest amount of FDI for the manufacturing sector in Malaysia amounted to RM10.9 billion for 55 projects followed by the European Union (RM8.4 billion), Singapore (RM7.8 billion), China (RM4.8 billion), South Korea (RM1.6 billion) and the US (RM1.4 billion).

Mida revealed that investments from Japan and other countries include several high value chemical and petrochemical projects as well as projects to manufacture wing-in-ground (WIG) craft and engines and engine components for energy efficient vehicles (EEVs).

Investments in Sarawak were dominated by the RM5.1 billion expansion of a foreign-owned project to manufacture various chemicals.

Mida noted most of the foreign projects approved involve high technology, high value added goods that describes Malaysia’s industrial ambitions.

Meanwhile, Second Finance Minister Dato Sri Wong Soon Koh during the last state assembly’s sitting said the manufacturing sector in Sarawak is estimated to grow by 4.2 per cent this year in line with the growth trend in private consumption and construction-related industries.

He added private investment this year is projected to sustain a growth of 9.7 per cent driven by investment in export-oriented industries particularly in SCORE area.

He further said public investment is forecasted to grow at 4.6 per cent during the year driven by the implementation of major infrastructure projects such as new Mukah Airport, Darul Hana projects, Pan Borneo Highway as well as upgrading of urban and rural roads and flood mitigation projects.

In terms of trade, Sarawak Matrade (Malaysia External Trade Development Corp) director Leany Mokhtar was reportedly said Japan remained Sarawak’s major export destination, accounting for 45.52 per cent of Sarawak’s export value last year.

She revealed that natural gas and manufactured goods dominated Sarawak’s main exports, representing 65 per cent of total exports last year, followed by petroleum and petroleum-related products at 25 per cent.

She noted Sarawak recorded an increase of seven per cent in export value last year to RM116.67 billion.

Business and Trade Opportunities in Japan

As for trade and business opportunities in Japan, Japan External Trade Organisation’s (Jetro) managing director Akira Kajita said natural resources-based industries have enormous potential in the Japanese market.

He added other opportunities available include healthcare, tourism, information technology and communication (ICT), green environment or new energy.

Kajita pointed out that with the Olympic games and Paralympic games to be held in Japan in 2020, there will be many business opportunities available there.

“The Japanese government is currently addressing many projects towards the big events.

“Thus, reinforcing tourism policy, construction policy and services policy related to the preparation for the big events could be some of the examples of business opportunities.

“Simultaneously, Japan is expecting people from all walks of life to visit Japan either for leisure or business,” he noted.

He stressed that there are also potential for the Muslims to expand their businesses there as halal food is one of the areas which is widely untapped.

Kajita believed that the food and beverage industry and services industry are some of the industries which offer good business opportunities for Malaysians and Sarawakians in Japan.

Moreover, he explained that Jetro provides various assistance for businesses which are willing to set up businesses in Japan.

“For beginners, Jetro Japan Invest Business Support Centre (IBSC) is one of the facilities that Sarawakian companies should not miss.

“IBSC is a temporary office space granted free for 50 days to potential investors that have intention to invest in Japan.

“IBSC is an excellent office space with trade and technical advisors where investors could tap various information before actually setting up office in Japan,” he said.

As for Sarawak, he observed that the state is one of the best destination to invest for energy-intensive industries.

“Sarawak is one of the best destination to invest for energy intensive industries such as metal, aluminium and other chemical related manufactures that consume huge electricity and water for their production.

“No other land in Southeast Asia has such plentiful of natural resources other than Borneo Island,” he observed.

Attractive Investment Destination

Global publishing, research and consultancy firm Oxford Business Group (OBG) in its latest report, ‘The Report: Sarawak 2015 said Sarawak could become the most attractive investment destination in Southeast Asia due to abundance of low-cost energy and a clear development Master Plan for SCORE.

OBG’s managing editor for Asia Paulius Kuncinas said, “Sarawak’s stable policy and business environment plays a crucial role in attracting long term capital,” he said.

Kuncinas pointed out that the long term power purchasing agreements and incentives offered by the state government were too enticing to be disregard by industry players in the steel, aluminium, iron, copper and other industries.

He observed that Sarawak is Malaysia’s ‘sweet spot’ in terms of investment due to rapid development and other factors such as one of the most open economy, vicinity to the Asean markets with population of 600 million people, clearly defined industrialisation and development map and access to ample energy resources and natural resources.

Nonetheless, Kuncinas observed that Sarawak need to address some of the challenges to ensure that the state continues to deliver sustainable growth.

“Sarawak’s success in delivering growth will crucially depend on its physical road, water and air connectivity as free trade agreements continue to break down across the borders.

“Generally, rural and cross island connectivity is still a major bottleneck for companies wishing to move goods across the island,” he said.

Echoing the same concern is Kajita who believed that Sarawak has vast potential for development but need to improve on its infrastructure to be able to attract more multinationals and foreign investors.

“Although Sarawak has huge potential to invest for energy intensive industries, the state government needs to improve the infrastructure as soon as possible.

“For example, Sarawak needs more hydropower plants to supply enough electricity for new incoming manufacturers.

“And new roads construction are required including some highway projects which should not be delayed,” he said.

He observed that the standard of living at SIP is still decent and there is a need to accelerate the development of the Samalaju township which require facilities such as hospitals, schools and shopping centres there.

Kajita noted that it is also important for investors to be given plenty of skilled labour force with reasonable wage level.

“Quality and quantity of human resource in Sarawak is another important factor for Japanese companies to invest there.

“I strongly believe Sarawakians have such requirements.

“Furthermore, Japanese investments in Sarawak depend upon how fast its infrastructure improve and how much is the availability of good labour force,” he said.

More funds for development In order to build more infrastructure and facilities to cater for higher number of investors as well as to spur the economic development of Sarawak, the state goverment requires more funds to implement its plan.

Adenan, last year said the state government will be seeking more funds from the federal government to finance infrastructure projects such as roads and utilities particularly in the rural areas.

He noted the capital expenditure required for implementing projects such as providing accessibility and upgrading of roads, supplies of electricity, treated water and other public amenities in the rural areas are substantial.

Adenan, during the state 2015 Budget presentation last year also said more than 50 per cent of the development allocation of the budget will be for implementing programmes and projects in the rural areas to ensure long term balanced distribution of development throughout the state.

He explained that the implementation of programmes and projects in the rural area is in line with the state’s continuous efforts to narrow the development gap between the urban and rural areas.

Adenan, who is also Sarawak’s Finance Minister said RM408 million would be allocated for public utilities, especially for the expansion and upgrading of water supplies, including those in the rural areas.

Datu Ismawi Ismuni, director of State Planning Unit (SPU) under the Chief Minister’s Department echoed Adenan’s remarks on getting more funds from the federal government to develop rural areas adding that it is crucial for the next stage of Sarawak’s economic growth.

He said the state government also hopes more funding from the federal government in the 11th Malaysia Plan (11MP) which will enable the state to implement more projects especially in the rural areas to propel the state’s economic growth.

“The rural community must also be developed in the right manner with focus on the socio-economic transformation.

“Right now, the bottom 40 per cent of low household income is in rural sectors and we are still lagging behind.

“We have to address income disparity throughout the state,” he said during Sarawak Business Summit last year.

Ismawi added the SPU is also exploring ways to enhance the services sector to provide more value-added services.

He noted the state’s economy could not rely heavily on the agriculture sector for growth and called for more private investments to develop new sources of growth.

Thus, Ismawi stressed that developing rural areas is the key points towards moving Sarawak’s economy up the value chain.

He explained that more allocation from the federal government will allow the state to carry out the Sarawak Socio-Economic Transformation Programme (SETP) starting from 11MP.

Accelerating growth in SCORE Area  As investors require good infrastructures before committing their investment in Sarawak, the state government will increase the pace of development in SCORE area and other growth nodes through SETP and projects under 11MP.

Last year, Adenan said efforts will be made to further develop SIP with the development of a service centre and a new township.

He said the state government’s next move is to attract downstream players to invest in SCORE.

“In years to come, we are expecting the development of industrial clusters.

Therefore, our next step is to attract downstream industries to invest in SCORE especially at SIP.

“The success in attracting these downstream industries is important as they are involved in higher value added activities and are able to generate good paying jobs for our people,” he said.

Last November, Adenan witnessed the signing of a Memorandum of Understanding (MoU) between Hock Lee Group and Biochemtex Agro to establish a hub for biomass-based industries which could likely be within the SCORE area as one of the many steps to attract more downstream players to Sarawak.

It is believed that industries for biomass is capable of contributing additional revenue of RM20 billion a year to the state and potentially provide more than 10,000 high value jobs for the people.

Adenan also pointed out that the SCORE Plan includes the development of the hinterland such as Murum, Tunoh, Baram and Baleh noting that the road to Murum hydroelectric power project (HEP) that provides good connectivity to those areas has been completed.

Likewise, Regional Corridor Development Authority (Recoda), the agency tasked with overseeing and managing SCORE noted the ongoing development of the economic corridor will also be spread out to secondary growth centres such as Long Lama, Semop, Selangau, Balingian, Bakun, Samarakan, Nangka Merit, Baleh and Murum in the future besides major growth nodes for instance, Samalaju, Mukah, Tanjung Manis, Baram and Tunoh.

Recoda believes the development of other secondary growth centres within SCORE can move Sarawak’s economy up the value chain besides attracting more companies to invest in Sarawak.

More companies expected to invest in Sarawak With steady flow of FDI into Sarawak, the state government is envisaged to keep on attracting more companies to invest in SCORE area to boost economic development.

Awang Tengah revealed that there were investors who were at various stages of discussion and negotiations with the state government on their interest to invest in SCORE, particularly at SIP.

Besides SIP, the state government is also gearing up to develop other growth nodes in SCORE such as Baram, Mukah, Tanjung Manis and Tunoh.

The state government added in 11MP, Recoda will be developing the Integrated Highland Agriculture Station (IHAS) in Baram with the Department of Agriculture (DOA).

It noted the DOA will implement the IHAS covering 634 hectares (ha) of land while work on 20 ha of land has begun.

The state government further observed that a 1,178 ha of high-yielding rubber project in Baram involving six villages had begun.

According to Recoda’s website, other economic potentials at Baram growth node include oil palm plantations, forest plantations, eco-tourism and most importantly hydroelectric power generation with the upcoming construction of the 1,200 megawatt (MW) Baram Dam.

Adenan recently said construction work on the Baram Dam will kick-off as soon as possible.

He said the majority folk from Baram has voiced their support for the construction of the dam following his meeting with community leaders and the majority people there.

As for Tunoh growth node, Recoda outlined that the area has oil palm and forest plantations as well as agriculture and eco-tourism potentials.

Moving on to Tanjung Manis, Recoda said ongoing development of the growth node, particularly for the supply of raw and treated water phase two from 2015 to 2017 and phase three from 2018 to 2020 will be carried out.

The move to provide treated water was in line with existing and potential investor needs which are estimated to be an additional 90 million litre per day (MLD) for current potential project development.

Recoda pointed out that investment in support infrastructure such as access roads, utilities, energy and telecommunications will be enhanced whilst the development of Tanjung Manis township will be constructed by zone.

On completion, Recoda said Tanjung Manis will be the largest and most advanced integrated Halal Hub in the world.

Additionally, the state government is extending the Sama Jaya Free Industrial Zone (Sama Jaya) in Kuching to meet the rising demand of investors.

The construction work on Phase 5 of Sama Jaya with an area of 70 hectares is expected to be completed by the end of this year.

Comtec Solar International (M) Sdn Bhd (Comtec Solar), a multinationals operating at Sama Jaya is constructing Phase 2 of its solar wafer manufacturing plant at the industrial zone.

The company, under Phase 1 of its solar wafer plant development has invested RM1.2 billion for the production of mono crystalline solar ingots and wafers which has an estimated production capacity of one gigawatt (GW) of N-type mono solar water upon completion of the plant.

Current players boost productivity

In the meantime, one of the Japanese-multinational corporation Taiyo Yuden Co, Ltd (Taiyo Yuden Group) through its operations at Sama Jaya, Taiyo Yuden (Sarawak) Sdn Bhd (Taiyo Yuden Sarawak) is looking to boost productivity to enhance growth.

Taiyo Yuden Sarawak’s managing director Hideo Yamada said the company will be investing to enhance its production and operations.

“We will invest in automation to improve productivity as well as manufacturing new lines of products to meet customers’ demand.

“Presently, our plant in Sarawak are producing multilayer ceramic capacitors.

We are manufacturing more than 10 billion units of multilayer ceramic capacitors per month at our plants here,” he told BizHive Weekly recently.

He explained that the component is widely used in electronic devices such as smartphones noting that the company will be increasing the production of a new product line due to surging demand for smart devices.

Yamada revealed that the company’s Sarawak plant located at Sama Jaya has eight factory buildings producing the multilayer ceramic capacitors.

Additionally, Yamada said the electronic components which Taiyo Yuden Group manufactures are widely used in smartphones, radio frequency devices, optical media as well as components in the automotive and healthcare industries.

He added the electronic components that Taiyo Yuden Group produced are also being installed in consumer products such as television, digital camera, personal computer and hard disk drives.

Furthermore, Yamada said the products which Taiyo Yuden Group manufactures are exported to various countries worldwide which include among others the US, Europe, South Korea and China.

He disclosed that Taiyo Yuden Group generated a total sales of 227 billion yen last year.

On another note, Yamada said some of the challenges that the company faced in its operation in Sarawak include shortage of skilled manpower and logistics issue.

He said the company is still looking for engineers who are capable to value add the company adding that Taiyo Yuden Group will also send potential engineer recruits for training in Japan to familiarise themselves with the operations of the group.

As for logistics issue with regard to shipping of goods, Yamada pointed out that Taiyo Yuden Sarawak will manage and control its lead time in managing the cost of transportation.

Yamada, who has been serving in Taiyo Yuden Sarawak for several years noted that Sarawak has a conducive working environment.

Besides conducive working environment, Japanese companies were drawn to Malaysia and Sarawak due to several factors among others low-cost electricity, location away from natural disaster, political stability and English speaking workforce.

The Ministry of International Trade and Industry (Miti) also noted that Malaysia is a highly sought after investment destination for Japanese firms as they search for safe and secure locations to cut rising insurance cost arising from natural disasters which disrupted their operations.

At the same time, Crewstone International Sdn Bhd’s chairperson Datuk Jalilah Baba noted that Sarawak which is blessed with abundance of natural resources and attractive destination for tourism will continue to witness healthy investment domestically and from international corporations.

“It is no secret that the state of Sarawak has long been a prosperous environment for trade and investments both inbound and outbound.

“In 2014, Sarawak registered total investment in the manufacturing sector valued at RM9.6 billion, of which 87 per cent came from foreign investment while the remaining ones from domestic investments.

“The figure alone demonstrates the power and potential the state has to offer,” she was quoted as saying.

She believed that Sarawak’s bio-diversity and rich natural resources environment could witness increased investment in those areas in the future.

Jalilah observed various incentives for the high-tech industries, small and medium enterprises (SMEs) strategic industries have been offered to support and encourage investments in the state.

With increased investment and funding to develop the state’s economy, Sarawak is on course to achieve high income in the next five years.

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