Photo shows a view of Kuching. Sarawak’s extensive development plan is projected to be favourable to the state’s construction sector, analysts say. — Photo by Kong Jun Liung
KUCHING: Sarawak’s extensive development plan is projected to be favourable to the state’s construction sector, analysts say.
Recently, AmInvestment Bank Bhd’s (AmInvestment Bank) analysts went to Kuching to gain insight into the state’s development plan (including potentially new projects, with the appointment of a new chief minister) and the progress of the projects’ execution.
The research firm’s analysts met with state agencies comprising the State Planning Unit (SPU), Regional Economic Development Authority (RECODA) and Sarawak Energy Bhd (SEB), as well as key Kuching-based public listed companies Hock Seng Lee Bhd (HSL) and Cahya Mata Sarawak Bhd (CMS).
According to AmInvestment Bank, the state government of Sarawak has outlined its development initiatives – the Sarawak Corridor of Renewable Energy (SCORE), Socio-Economic Transformation Plan (SETP) and creating a digital economy.
“These initiatives were aimed at transforming Sarawak into an advance and high-income state by 2030,” it said.
“The newly appointed chief minister has recently announced several plans including the setting up of Development Bank of Sarawak to fund SETP projects.”
AmInvestment Bank noted that the plans include a Light Rail Transit (LRT) system connecting Kuching, Samarahan and Serian, and a RM1 billion investment on ICT infrastructure to harness its potential in digital economy.
The research firm further noted that these plans would be implemented over the next three to four years.
With RECODA, AmInvestment Bank highlighted that the state agency would continue to focus on less developed growth nodes such as Tunoh and Baram.
The research firm noted that construction of roads is actively in progress to make these two nodes accessible via land transportation. It further noted that construction on an 80 kilometre (km) stretch connecting Baleh to Kapit (under Tunoh node) is expected to be completed by 2019.
“Baleh has been identified as the next location for a hydroelectric dam after Bakun and Murum,” the research firm said.
“Meanwhile, Baram has been earmarked as a highland agriculture zone, similar to Cameron Highlands in the Peninsular Malaysia, for products such as vegetables and flowers for domestic and export markets.”
it added that other nodes such as Mukah, Samalaju and Tanjung Manis will continue to be developed extensively by RECODA.
As for SEB, AmInvestment pointed out that with the grid generation capacity of approximately 4,640 megawatts (MW), the state government’s wholly owned company will continue to grow its capacity by building new plants.
“Sarawak Energy is currently expanding its capacity for SCORE usage earmarked under SCORE Phase 1 (to be completed by 2020); two electricity plants are currently under construction – Balingian coal power plant (624MW) and Tanjung Kindorong gas power plant (418MW).
“Meanwhile, under SCORE Phase 2 (to be completed by 2025), there are two additional power plants to be built which are Baleh hydroelectric power plant (1,285MW) and Samalaju gas plant (1,200MW),” the research firm said in a sector update.
AmInvestment Bank also highlighted that the ongoing development programmes have spurred robust growth in the construction segment.
The research firm noted that public listed companies such as CMS and HSL will be the main beneficiaries.
The vibrant catalysts that will boost the construction segment in Sarawak are better connectivity, SCORE and the digital economy.
Under better connectivity, AmInvestment said that the ongoing construction of the Pan Borneo Highway from Teluk Melano (south) all the way to Pujut (north) is progressing well, with experts reckoning that the current progress is approximately seven per cent completion.
“Proposed plan to build LRT from Kuching connecting Samarahan and Serian. In addition, the state plans to build a bus rail transit (BRT) from Kuching that connects to other major towns.
“These will spur the local economy and attract investment into the state particularly Kuching,” it added.
As for SCORE, AmInvestment Bank noted that the state government plans to build power plants, expected to be completed by 2025, which will provide up to approximately 8,180MW electricity capacity.
The research firm noted that these additional plants will continue to supply electricity demand across the state particularly in Samalaju where the heavy and energy extensive plants are located.
“The five growth nodes’ lack good road connectivity,” it said. “Hence, ongoing road construction across all these nodes is important for better accessibility.”
Lastly, AmInvestment Bank highlighted that the state government has allocated RM1 billion of investment to make Sarawak a digital hub in East Malaysia.
“The emergence of a digital economy will boost the state’s ability to attract investment globally,” the research firm opined.
Overall, AmInvestment Bank maintained ‘overweight’ on this sector in Sarawak with ‘buy’ recommendations on CMS and HSL.
“We believe such extensive development will be favourable to the state’s construction sector,” it said.