Sarawak set to become a powerhouse

A nighttime aerial view of Kuching city. — ZULAZHAR SHEBLEE/The Star

PETALING JAYA: Sarawak appears to be in a transition to become an economic powerhouse of Malaysia, underpinned by increased infrastructure projects in the state.

This is in light of the higher development expenditure allocated for the state, not just at the federal level, but also the state level, which RHB Research said, will result in catalytic infrastructure enhancement taking place.

“This is further backed by the state’s Post Covid-19 Development Strategy 2030, which aims to reach gross domestic product of RM282bil by 2030 versus the estimated RM146bil for 2023, based on the projection by Sarawak’s Economic Planning Unit,” the research house wrote in a report yesterday.

Among the sectors RHB Research identified as presenting infrastructure-expansion opportunities were water (pipe works, flood mitigation and water treatment plants), transportation (Kuching Autonomous Rapid Transit and several highway projects), and renewable energy (in the form of hydropower) via cascading dams and industrial gas production (hydrogen), and the potential setup of data centres.

New oil well discoveries off the shores of Sarawak, combined with its location to be a prime spot for carbon capture and storage, could also drive the demand for related infrastructures, it added.

According to RHB Research, Sarawak is also in a sweet spot to gain from foreign investments.

“Factors such as having the most competitive unsubsidised electricity tariffs in Asean, business friendly policies and abundant renewable energy sources from hydropower have enabled Sarawak to attract foreign investors,” the research house said.

In 2022, the state attracted foreign investments worth RM12.4bil compared with RM9.4bil in 2021 – making it the the third-highest state in terms of foreign approved investments after Johor (RM58.8bil) and Selangor (RM33bil).

“The inflow of foreign investments may translate into the need of setting up infrastructure in industrial areas such as the Samalaju Industrial Park and Sarawak Petchem Industrial Park in Bintulu,” RHB Research said.

The research house also noted that in 2022, Sarawak recorded the fifth-highest value for construction projects in Malaysia at RM9.9bil.

In terms of value of construction work done, Sarawak has seen a continuous increase since 2017, except in 2020, when the sector was hit by the pandemic.

In 2023, Sarawak recorded RM14.6bil in terms of value of construction work done.

This places the state as the fourth-largest after Selangor, Kuala Lumpur and Johor – representing a five-year compounded annual growth rate of 4.5%, which was commendable in comparison to most other states, which saw a decline.

For stock ideas, RHB Research’s top pick for Sarawak plays under its coverage would be KKB Engineering Bhd, given the company’s diverse infrastructure exposure, followed by IJM Corp Bhd, which is gradually regaining its footprint in the state.

RHB Research said it also took note of Gamuda Bhd’s track record in Sarawak via the Pan Borneo Highway and Second Trunk Road projects, while Ibraco Bhd would be its non-rated idea for Sarawak.

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