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Road link to East, North Kalimantan will see boom on both sides
Published on: Sunday, August 27, 2017

By Dr Rafiq Idris
MY article in April this year has highlighted the potential benefits for Sabah if the road connectivity with Kalimantan materialises.

Demand from North or East Kalimantan for Sabah’s products could increase Sabah’s exports.

Sabah can do downstreaming activities by processing products/resources where Kalimantan has abundant stock of natural resources or vice versa, lower cost of importation, down streaming activities in Sabah will create more job opportunities and income among others, there are many measures that need to be undertaken.

In addition, I foresee the road has the potential of stimulating economic activities in Sabah and specifically in Tawau and Kalabakan if necessary actions are undertaken.

This includes the potential for tourism in general, medical tourism, SMEs and education sector in Tawau and Kalabakan to grow. This article shall highlight some issues that need to be addressed and some recommendations. The recent report on Malaysia’s GDP growth where it was reported to grow at 5.6pc in the first quarter of 2017 is a good start for Malaysia.

In addition, a report few months back which says that Ringgit is the strongest currency in Asia indicates that Malaysia is improving despite the slowing down of the world economy. The recent proposal to have road link with Kalimantan which is still under study is another government effort to ensure that Sabah’s economy further expand.

Just to share my recent presentation on Kalimantan Road Connectivity which was held at University of Cambridge, United Kingdom, I discussed the potential impact on Sabah’s export looking at Malaysia’s experience when having common border with good road.

The finding of my study which is consistent with many other past studies around the world indicate that common border has positive and significant effect on Malaysia’s export using an econometric approach on Malaysia’s trade data for 20 years involving more than 180 trading partners.

The positive effect for Malaysia’s export as a whole is hence projected to be similar in the context of Sabah-North Kalimantan road connectivity if appropriate measures and policies are in place.

On 6th August 2017, there was a seminar and roundtable discussion on market potentials in North Kalimantan organised by Society Empowerment and Economic Development of Sabah (SEEDS).

Representatives from chambers of commerce both in Sabah and North Kalimantan, NGOs and other stakeholders attended the event in Tawau.

The seminar intended to discuss the potentials that Sabah’s business community can grab if there is a road connectivity with Kalimantan and to obtain feedback on the issues they are facing in Tawau and Kalimantan.

Indeed there were a lot of issues and suggestions.

Among the issues highlighted by stakeholders was uncertainty about the use of ‘Kumpit’and they hoped that Kumpit will still be allowed for transporting goods via Tawau port or barter trade jetty. In addition, there were suggestions to ease the procedure of hiring foreign workers to reduce bureaucratic procedure and costs incurred.

The reduction in supply of foreign labor may affect production process.

Indeed, the relevant authorities understand more on the rationale of certain policies or regulations.

In this regard, to harness the benefits that Sabah may gain, I suggest that there is a review on the existing related policies, procedures or regulations if the relevant parties feel necessary and there is a need to improve the way certain policies/procedures/regulations work.

Secondly, we need to undertake more comprehensive study from various perspective to quantify monetarily the potential benefits and costs. The experience of other countries having common border with another country by looking at past studies on their issues and positive experience is necessary.

The idea of undertaking a fair cost-benefit analysis is not to discourage the idea but so that additional policies or measures can be introduced to cushion the possible negative effects. In relation to this, more stakeholders engagement program is beneficial to obtain feedback in formulating and reviewing policies.

Thirdly, assisting SMEs and strategic sectors on whatever form (tax incentives etc) is important to add impetus for them to further grow.

There is an urgent need to enhance our SMEs by producing more capable exporters so that they can export their products to other countries. SMEs in Tawau, Kalabakan and surrounding areas in particular must be assisted.

Fourthly, incentives to attract investments for down streaming activities in Sabah is extremely important.

For certain agricultural products to expand or to plant at large scale, factory for down streaming must exist.

Certain agricultural products may not be able to expand because no or less factory exist and the fact that those agricultural products such as fruits cannot be kept for long term.

Fifthly, for Tourism sector there is a need to enhance existing facilities in tourist spots and creating or positioning new tourist spots in Kalabakan and Tawau. This is to ensure Kalabakan and Tawau gain from economic activities in tourism industry.

To sum up, the proposed road connectivity idea by government which is still under study is a good thing and there are a lot of potentials in Kalimantan that Sabah can harness.

However, comprehensive study and review on existing measures or policies to further ease business activities are also important so that Sabah can further benefit via the framework of ASEAN Economic Community (AEC) where there will be freer movement of skilled labors and investment.

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