PETALING JAYA: Sabah is entering a “transformative economic phase”, shifting from a traditional reliance on raw commodity exports toward a sophisticated, capital expenditure or capex-led growth model.
In a report yesterday, BIMB Research also said the state’s “growth reset” is underpinned by aggressive infrastructure execution, structural resource advantages and political stability.
In the next five years, the research house said Sabah’s economy is projected to expand by 5.8% per year.
The growth would be primarily anchored by the services sector, particularly tourism, healthcare and trade.
Adding to the strength is Sabah’s robust fiscal position with reserves reaching RM6.8bil.
“This financial strength is largely attributed to revenue autonomy gained through state sales taxes on petroleum products and increased federal grants.
“Central to this strategy is a capex-led growth model where major projects like the Pan Borneo Highway phase 1B and expansions of the Sepanggar Bay Container Port and various airports provide long-term earnings visibility for the construction and logistics sector.”
The research house also noted that a significant structural shift is also occurring in Sabah’s resource sectors, particularly in plantations.
The state is transitioning from a raw commodity exporter to a high-value industrial hub, utilising the Lahad Datu palm oil industrial cluster as a strategic maritime platform.
“Ultimately, the successful execution of these infrastructure and industrial catalysts provides clear earnings visibility for local construction and plantation leaders.
“Companies like Hap Seng Plantations Holdings Bhd
and Azam Jaya Bhd are primary beneficiaries of this structural upcycle, benefiting from improved logistics and a funded pipeline of development projects,” it said.
Meanwhile, BIMB Research noted that Sabah’s fiscal revenue has strengthened in recent years, underpinned by both structural reforms and stronger commodity-linked income.
A key turning point came in 2020, when Sabah began imposing a state sales tax on petroleum products, following negotiations under the MA63 framework.
This significantly boosted state revenue autonomy and helped lift total receipts from RM3bil before 2020 to above RM5bil after the Covid-19 pandemic, according ot the research house.
On its reserves of RM6.8bil, BIMB Research pointed out that the amount has risen from RM3.3bil in 2019.
This underscored a marked improvement in fiscal discipline, supported by stable debt levels and stronger, more diversified revenue inflows, it said.
A key catalyst has been the special grant from the federal government, which had exceeded RM500mil per annum, providing Sabah with a larger and more predictable stream of intergovernmental transfers aligned with its constitutional entitlement.
“With reserves now at their strongest level in years and further reinforced by this recurring federal grant, Sabah has built a firmer fiscal foundation to institutionalise long-term savings.
“Establishing a Sabah sovereign wealth future fund would allow the state to transform fiscal surpluses and resource-linked revenues into enduring financial assets.
“This will strengthen intergenerational wealth, smooth exposure to commodity-cycle volatility, and enhance overall fiscal resilience,” the research house added.
