12th Malaysia Plan: Policies that could help Sabah and Sarawak

DESPITE various efforts to reduce the development gap between Peninsular Malaysia and Sabah and Sarawak over the five-year implementation of the 11th Malaysia Plan (2016-2020), the two states continue to face enormous challenges in catalysing socioeconomic development.

According to the 12th Malaysia Plan (2021-2025) recently announced by Prime Minister Datuk Seri Ismail Sabri Yaakob, both Sabah and Sarawak recorded the lowest GDP growth compared with other Malaysian states – at merely 1.0% and 0.9% per annum respectively between 2016 and 2020. The economic performance of both states during the past five years is lower than the national average of 2.7% per annum.

Besides the ongoing Covid-19 pandemic, the low prices of crude oil, palm oil and rubber are among the factors leading to the slower economic growth of Sabah and Sarawak, translating to a high poverty rate of 25.3% and 12.9% respectively in 2020.

Among the 10 poorest districts in Malaysia, eight are from Sabah and one from Sarawak. Out of the eight poorest districts in Sabah, Tongod (with a poverty rate of 56.6%) is the poorest district, followed by Pitas (53.6%), Kota Marudu (46.1%), Beluran (45%) and Kudat (41.5%). Pusa is the poorest district in Sarawak (38.6%).

The other consequence of the pandemic, the continuous closure of international borders, has also hit Sabah and Sarawak hard as the states previously had a thriving tourism industry. Foreign tourist arrivals into Sabah plunged by 87.7% from 1,469,475 in 2019 to 180,284 in 2020. Similarly, Sarawak recorded a drastic drop of 82.6% from 2,082,444 to 363,304 within the same period.

In addition, Covid-19 further exposed how vulnerable Sabahans and Sarawakians are when it comes to accessing road networks and treated water supply as well as health, education and digital infrastructure.

Although a total of 892.2km of rural roads in Sabah and 795km in Sarawak were constructed and upgraded in the 2016-2020 period, only 44% of the 15 work packages for the Pan Borneo Highway Sabah project has been completed; Pan Borneo Highway Sarawak is 59.4% completed.

Aside from sanitation and drainage systems, the provision of sewerage and waste disposal services in rural Sabah and Sarawak remains a challenge due to the sparsely populated areas, challenging geographical terrain and poor accessibility to project sites. State district officers still have to drive on muddy, uneven roads as well as travel by boat to reach the more remote populations.

Sabah and Sarawak also have a smaller distribution of doctors compared with the peninsula. In 2019, Sabah and Sarawak’s official ratio of doctors to the population was 1:817 and 1:682 respectively, lower than the national average of 1:482. This lack of medical specialists and amenities has tremendously raised the cost of healthcare.

A low return of investment in the rural areas, high permit charges and complicated local authority procedures are issues that has deterred telcos from providing digital services in Sabah and Sarawak. Students have had to wander around to look for a particular spot to find Internet access for the online learning necessitated by the pandemic – Veveonah Mosibin from Pitas, Sabah, had to resort to climbing a tree to take her online university exams. A teacher in Sarawak had to lead a group of primary and secondary school students from his village in Nanga Sumpa and nearby Nanga Jambu in Lubok Antu on a jungle trek just for better Internet coverage.

Limited access to digital devices has also stopped some rural students from accessing online learning materials. Even before online learning became an issue, however, face-to-face learning was a problem too: Dilapidated schools in Sabah and Sarawak are not conducive to an effective teaching and learning environment.

The number of students graduating from the remote areas of Sabah and Sarawak is lower due to a limited number of Comprehensive Special Model Schools 9 (K9), which offer schooling from Year One to Form Three. As a result, only 12.7% and 13.4% respectively of the rural workforce in Sabah and Sarawak had tertiary education qualifications in 2020.

Low educational attainment and insufficient skillsets among the populations of these two states have resulted in fewer locals being able to find employment in better paying high-productivity and knowledge-intensive sectors. According to the 2019 Household Income and Basic Amenities Survey Report, only 14.4% and 20.3% respectively of Sabah and Sarawak’s workforce are skilled workers. With most Sabahans and Sarawakians having low-skilled jobs, median household income in rural areas is low: RM3,172 for Sabah and RM3,195 for Sarawak in 2019, compared with the national average of RM3,828.

Due to underdeveloped infrastructure, Sabah and Sarawak continue to face challenges in attracting investment for industrial development. When there is a lack of a supportive ecosystem (ie, the availability of local technology, skilled talent, efficient supply chain and attractive incentives) as well as lower production, investment and consumption, GDP growth is lower, and by extension, unemployment is higher.

Sabah continues to record the highest unemployment rate in the country: 5.8% in 2019 and 8% in 2020. For Sarawak, the rate increased from 3.1% in 2019 to 4.3% in 2020. Unemployment has become a special issue among Sabah and Sarawak’s youths. In 2020, 17.3% and 12.3% respectively of Sabahan and Sarawakian youths were unemployed, higher than the national average of 12%.

To narrow the socioeconomic gap among Sabah and Sarawak and Peninsular Malaysia, Emir Research offers the following policy suggestions for federal and state governments to look into:

> Federal and state governments need to conduct periodic reviews (ie, once in three months) of all short-, medium- and long-term development strategies together, ensuring all plans are implemented within the specified time frames.

> State government agencies in both states have to work closely together with the private sector in rural areas to help attract higher value investment, promote rural tourism activities and agrotourism, enable agriproducts to be sold via digital applications and social media, as well as enhance employability of the rural population through knowledge enhancement and skills training.

> Both state governments have to increase crop diversification and produce high-quality agricultural products to diversify their revenue streams. Besides reducing dependence on palm oil production, Sabah and Sarawak potentially could develop as Borneo food hubs to fulfil increasing demand from major markets such as Brunei, China and Singapore.

> The Federal Agricultural Marketing Authority and related government agencies can assist farmers to transport agricultural products to major cities within both states or to export internationally – this could especially help the eight poorest districts in Sabah to rise out of poverty.

> The Federal Government needs to expand fibre optic networks and support the commercial development of communication infrastructure in the rural areas of Sabah and Sarawak, bringing connectivity to more rural households and entrepreneurs on top of bridging the urban-rural digital divide.

> The Federal Government needs to work closely with the Malaysian Communications and Multimedia Commission as well as state governments and local authorities to ensure there is no variation in quality and cost of building digital infrastructure in Sabah and Sarawak.

> Both state governments have to improve the coverage of primary healthcare in remote areas with mobile clinics and flying doctor services.

It is good that Sabah and Sarawak will each continue receiving between 15% and 18% annually of the total basic development allocation to improve infrastructure and basic facilities under the 12the Malaysia Plan. However, to realise the goal of increasing Sabah’s and Sarawak’s annual GDP growth to 6.5% and 5.3%, it is time for the state governments to enhance the development potential of cities and towns in the next four years.

For instance, Keningau, Kota Marudu, Lahad Datu, Sandakan and Tawau in Sabah, as well as Bintulu, Kapit, Miri and Sibu in Sarawak have their respective strengths and could generate more economic activities.

In a nutshell, relatively equitable distribution of socioeconomic benefits across income groups, ethnicities and states would provide the opportunity for Sabahans and Sarawakians to improve their economic livelihoods, thus generating socioeconomic development in both states.


Emir Research

The letter writer is a research analyst at Emir Research, an independent think tank focused on strategic, researched-based policy recommendations.

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