SIQ17 Online

2015

OCT - DEC 2015

ISSUE 17/2015 PLUS:

COVER STORY:

RM13.3 BILLION INVESTMENT FOR MANUFACTURING SECTOR

SEDIA ANNUAL REPORT 2015

INTERNATIONAL BIOMASS CONFERENCE

MINIMUM WAGE IN SABAH

BREWTROLEUM – NEXT WAVE OF RENEWABLE FUEL?

Page 20

Page 23

Page 25

Page 27

Page 29

T

his is the last issue of the SIQ for the year 2015.

It has been quite a challenging year with many headlines; Slow down in China and devaluation of Ren Min Bi, drop in commodity prices and crude oil trading below USD 30/- per barrel, fall in value of Malaysian Ringgit and other regional currencies, bearish Capital market and a brewing political storm to unseat the Prime Minister and the Government. Albeit all these challenges and a weak global market, Malaysia’s economy continues to register a strong sustainable growth.

In the words of the Prime Minister Najib Razak: “ These achievements were based on the Government’ focus to ensure sustainability, inclusivity and innovation. So it is clear that we have an economic plan that works for the benefit of Malaysian not just today, but tomorrow and in the years and decades to come”.

Malaysia has played an active role in the negotiation of the Trans Pacific Partnership Agreement (TPPA), which is signed by the 12 participating nations on 4th February 2016.

SIQ17 offers it’s quick overview including the highlights of the

studies on the cost-benefit analysis and thereby, its benefits to the State of Sabah.

Over the next two years, the Government will have to make the necessary ratifications as agreed between the nations to fulfill its promising objectives.

The United States of America has the same task of getting its people to buy into the TPPA much alike to other participating nations. Caught with the upcoming Presidential election, running candidates fear more jobseekers than job openings, decide to join the chorus for protectionism and reject the TPPA. For TPPA in USA and/or any of the other partners, the ringing question is- To Be or Not To Be? Advocates of freer trade have always known that some lose out even the great majority will benefit. The case for free trade is overwhelming. But Losers need more help. It is the Government to decide and has the right economic policy to help the Losers.

This Issue also highlights the International Biomass Conference and a bigger effort will be made to cover the Sabah Biomass Industry Development Plan in the forthcoming publications.

SIQ will continue to highlight business opportunities in Sabah and provide valuable information for doing business in Sabah. At the same time, I would welcome any person to contribute information or articles. Be assured that I would make space for your contribution.

Raymond Tan April 2016

2016

* The Star Graphics

CONTENT 1 Contributors Ministry of Industrial Development (MID) Department of Industrial Development and Research.

(DIDR) Kota Kinabalu Industrial Park (K.K.I.P.) Sdn. Bhd. POIC Sabah Sdn. Bhd. Sipitang Oil & Gas Development Corporation (SOGDC) Bilson Kurus, PhD Team of Sabahtoday

Published by Ministry of Industrial Development Tingkat 9, 10, 11, Blok C, Wisma Tun Fuad Stephens, Karamunsing, Beg Berkunci No.2037, 88622 Kota Kinabalu, Sabah, Malaysia.

Design and Artwork by Sync Max Sdn. Bhd. Lot 5, Block B, 2nd Floor, Wisma CTF, Damai Plaza, Phase 3, Jalan Damai, 88300 Kota Kinabalu, Sabah. www.sabahtoday.my Printed by JC Printer Sdn. Bhd KDN PQ1780/K/38 (048467) No. 15, Lorong Dewan, 88000 Kota Kinabalu, Sabah.

Tel: 088-230649 Fax: 088-235806 jc.printer@yahoo.com

COVER STORY: The Trans-Pacific Partnership Agreement (TPPA) – A Quick Glance At Its Implications On Malaysia Malaysia; A Party In TPPA Negotiations and Signatory Economic Independent Studies TPPA; A Critical Review

by Rubyanne Disimon

Inside ParliamentHighlights of Ministers’ response on TPPA

Palm Oil Certification Schemes: Similar Directions, Differing Approaches?

by Bilson Kurus, PhD

Heart of Borneo Facts & Figures

23 25

International Biomass Conference

26 26

MIDA Seminar Highlights Investment Opportunities In Sabah

TPPA; Potential Impacts on Oil & Gas

by SOGDC

RM13.3 Billion investment for manufacturing sector

2016

SEDIA ANNUAL REPORT 2015: Launch of third phase of the SDC underway

27 Minimum wage in SABAH

17

29 Brewtroleum – next wave of renewable fuel?

31

20 COURTESY CALL

21

32

COVER STORY: Trans-Pacific Partnership Agreement (TPPA)

1

2

Malaysia; A Party In TPPA Negotiations and Signatory

T

he TPPA is now a binding and sealed legal document of an ambitious, comprehensive and high standard of the future free trade partnership framework, comprising 30 legal chapters that was ever negotiated and concluded, with its traditional scope of Free Trade Agreement (FTA) framework being expanded to incorporate harmonizing rules and disciplines for new and emerging trade and cross-cutting issues, such as competition, labour, environment, e-commerce,

government procurement and intellect property rights.

The TPPA is a farreaching future trade agreement that will open doors to new markets, investments; set new trade rules to address 21st century issues: The TPPA is expected to become a platform for the formation of the Free Trade Agreement for the Asia Pacific (FTAAP) involving all 21 Asia-Pacific Economic Cooperation (APEC) member countries.

The TPPA builds on from the Trans-Pacific Strategic Economic

Partnership Agreement (TPSEP) signed between four APEC countries of New Zealand, Singapore, Chile and Brunei Darussalam (known as Pacific 4 or P4) in 2005 and came into force in 2006. The TPPA is a collective initiative by 12 out of 21 APEC member countries to establish a comprehensive and the largest Free Trade Agreement.

3

2016

SOURCE: (PricewaterhouseCoopers Report)

TPPA Highlights in the context of SABAH •

Will provide duty free market in 4 countries which Malaysia has yet to have trade agreement with namely Canada, Mexico, Peru and United States;

•

Will gain duty free market access to other TPP countries for its main exports namely crude oil, CPO, methanol and plywood. Currently, existing import duties for plywood to the US is 5% whereas for Japan is between 6-10%. Import duties for seafood products to the US is between 0.5–7.5%;

•

Will benefit consumers in terms of product options and services at very competitive prices;

•

Will have to adhere to higher global standards in international trading;

•

Will not affect the State government’s rights over land and property under the State list, government revenues on State level and local authorities;

• Will give exemption to State statutory bodies and its

subsidiaries from the State-owned enterprises (SOEs) obligations; •

Will not limit the rights of the State to draft new laws under its jurisdiction. For example, Sabah has the rights to draw laws with regards to the sale and purchase of lands and also to set conditions for foreign workers;

•

Will improve the welfare of labours;

•

Will limit in the liberalization of services sector involving professionals and not semi-skilled workers or foreign workers;

•

Will open the opportunity for Malaysian professionals to offer their services in other TPPA partner countries;

• Will ease the movement of our businessmen into TPP countries; •

Will not effect the existing policy on foreign workers and;

•

Will not cause influx of foreign workers;

2016

* Based on answer to questions raised in State Assembly Sitting held in November 2015 4

Economic Independent Studies (a) National Interest Analysis (NIA) of Malaysia’s Participation in the Trans-Pacific Partnership by the Institute of Strategic and International Studies (ISIS) Report In its conclusion, the Institute of Strategic and International Studies (ISIS) Report has underlined that Malaysia’s participation in TPPA is in the national interest. ISIS cautioned that critical domestic issues will have to be addressed and cannot be taken lightly in areas relating to Bumiputera, labour, Investor-State Dispute Settlement (ISDS), intellectual property (IP) and state-owned enterprises (SOE).

They will need to be managed politically and through public policies if they are not to be economically and socially disruptive. It’s a bold message that Malaysia as a trading nation must secure its future with the necessary institutional frameworks to be able to engage, advance and defend its interest. This NIA report concludes that the TPPA should still set into motion significant structural changes that will result in net positive outcomes. (b) Potential Economic Impact of TPPA on the Malaysian Economy and Selected Key Economic Sectors by the PricewaterhouseCoopers (PwC) Report

5

2016

In its conclusion, the PricewaterhouseCoopers (PwC) Report has drawn fair commentary that the TPPA presents net economic benefits to Malaysia, but there will be adjustment costs to firms from increased competition and cross-sectoral TPPA obligations. Structural reforms and a period of adjustment by firms will be required to maximize realization of potential benefits and mitigate potential costs.

It’s a necessity for businesses and SMEs to intensify on sharpening its competitive edge to face imminent external forces in due course as competition will intensify.

IF Malaysia participate in TPPA

•

GDP is projected to increase by USD107-211 Billion over 2018-2027, driven mainly by lower NTMs

•

Additional economic activity could create 1-2 Billion job by 2027*

•

Export-oriented firms in the textiles, automotive components and Electrical and Electronic (E&E) sectors will benefit from greater market access

•

Firms in more liberalized sectors post-TPPA, such as Oil & Gas (O&G), construction and retail may face increased competition

•

Bumiputera businesses and SMEs will be largely+ protected

State-Owned Enterprises (SOE’s) mechanisms to support nation building may change

Investor State Dispute Settlement (ISDS) will protect investment to and from Malaysia, while preserving Government control in setting public welfare policies and mitigating risk of nuisance suits

Adoption of International Labour Organisation (ILO) rights could increase risk of production disruptions arising from labour disputes

* The number of jobs created or sustainable would be less if productivity increased sharply.

+ The current practices will be continued except for those bidding for government

procurement above the agreed thresholds within the agreed transition timeframe

have to compete openly for contracts with an agreed percentage to be reserved

for bumiputera businesses and SMEs.

IF Malaysia DO NOT participate in TPPA GDP is projected to decline by by USD9-16 Billion over 2018-2027 from baseline

•

Potential GDP gains foregone of USD107-211 Billion over 2018-2027 from baseline

•

Investment is projected to decline by USD7-13 Billion, from 2018-2027 from baseline

•

Firms cannot benefit from increased markets access when exporting and investment opportunities

•

Sectors such as textiles and Electrical and Electronic (E&E) will likely suffer potential loss of competitiveness to other TPPA countries e.g. Vietnam

•

Current mechanisms for State-Owned Enterprises (SOE’s) to support the nation- building agenda will be preserved

•

Bumiputera and SME policies will remain status quo

•

Extensive safeguards secured would be foregone and may not be achieved again in the future

2016

•

SOURCE: PricewaterhouseCoopers (PwC) Report

6

During the course of the TPPA negotiations, Malaysia has secured extensive safeguards on several issues and concerns raised by Malaysians. These issues and safeguards are presented in the following table.

7

2016

SOURCE: PricewaterhouseCoopers (PwC) Report

TPPA; A Critical Review by Rubyanne Disimon

D

uring President Obama’s Asia Pacific Tour, he was faced with immense protests for the presupposed free trade bargain made known to be the Trans Pacific Partnership (TPP). It was among the first racket of scrutiny to follow suit years on. Timely enough, the official agreement whom was previously under wraps was leaked on October 9th 15’ leading, for full disclosure in respective countries. (oops) The agreement, worth

30

chapters,

6350

pages,

5

years of negotiations

have led to, no surprise, little readership owing to little clarity in of the text. But first-what are free trades and is it, as advertised, “free”?

Free Trade, simply put, is a policy put forth to lower restrictions for foreign markets to enter a country’s borders and in that way, yes; it frees the gross market flow. But as any bonding contract, it often bear flaws.

NAFTA, North American Free Trade Agreement, TPP’s largest foreshadow between America, Canada and Mexico in the mid-90s resulted an influx of labour forces into Mexico. The transfer has caused several heated criticism over the loss of jobs of American families. But, inversely, the model has brought a culmination of commercial downpour deeming it hard to pinpoint its virtues and vices. Will the TPP fair better?

and 11-members of the Pacific Rim Countries comprising of Malaysia, Australia, Canada, Japan, Mexico, Peru, Vietnam, Chile, Brunei, Singapore and New Zealand. There are 21 topic divisions concerned, covering standard rulings and a few radical reforms on grey issues as administrative transparency and dispute settlements among many.1

Among its exceptional points, what strike as odd

TPP, rebranding trade deals

by the public was China’s absence from the binding list of members. Naturally, it conspired accusations one being, US’s strategic plot to topple the power dynamics of China in Asia.

However, under closer

2016

The pact is an extensive guideline threading amongst the United States

inspection, these appear to be rather short-sighted accounts. Without legal regulations; supremacy indefinitely falls on the lap of big economies. As emerging markets, it is in our self-servitude to champion fair competitions and only then, would we benefit the most. Other power houses, including China, in point of fact, have expressed their interests publicly on joining themselves. However, don’t expect any calls just yet from China as she will likely frame her own. 2

Malaysian Inclusion; an offer you can’t refuse Malaysia had only joined the partnership during the third round of deliberation on the 5th of October 2010 in Brunei Darussalam.

Previously, United States and Malaysia failed to conclude a pending trade agreement between them spawning from compliance on certain terms. Now, it is unclear whether it might be the real reason for Malaysia’s eagerness to 8

9

Cross border efficiency. Our biggest proponent of exports is sourced from Electric and Electronics (E&E) firms.

But, current provisions on government procurement, particularly in the US, have resulted in minimal growth for up scaling. If per se, data movements were to move freely across borders, operational efficiency can be maximised.

Transferable data will allow collaboration of ideas between global minds for product examination and production. By leveraging on these findings, domestic corporations can build up an analytical baseline for positive improvements up the value chain. If so, what is the wait for?

Sensitive Spots; More than we want to trade in The negotiating phase for the agreement attests for global compatibility. It bears out the consecutive effects thereafter. Disagreements in certain aspects could derail the approval processproven to be true in previous cases. Our concern in particular is under the chapters; Government Procurement, Competition, Intellectual Property, Labour, i.e. How are these issues?

Government Procurement (GP); refers to the process by which public authorities, such as government departments or local authorities, purchase work,

goods or services from companies.6 Build-Operate-Transfer (BOT); an arrangement in which the private sector builds an infrastructure project, operates it and eventually transfers the ownership of the project to the government. 7

Malaysia, for one, prioritises the significant roles of State-Owned Enterprises in the national foreground of business policies.

Although TPP is not entirely harming the prospect of favouritism for our domestic companies and staple goods, it might be heading that direction. Government Procurement signals each nation for a national treatment in equalising market access. Under the heading, domestic or foreign suppliers, will measure up to the same approach for global reach in our marketplace. Fairly, foreign corporations will be entitled to obtain sensitive information on procurement contracts in the works and access to lending and awarding opportunities.

This is equally new and puts attest to our Malaysian policies particularly on the Build-Operate-Transfer (BOT) contract for construction services. BOT is a type of PPP (Public Private Partnership) involving private corporations hired by the government to build facilities in a contract basis. After it has reached its close, the entity will be transferred back for government use. However, 2016

join forces. But by merging onto TPP, a total population of 793 Million residents, shouldering a total GDP of USD 27.5 Trillion, it poses a definite gain over the loss.

In and of itself, it surpasses our national market gauge of 29.5 Million3 people and our current GDP of USD300 Billion3*.

Tariff liberation. In actual fact, existing tariffs stand reasonably low at 0.07%4 among two-thirds of the TPP participants.

Granted it is insignificant in amount, the remaining one-third of the tariffs is drawn in the range of 0.20% to 17.25%4* individually.

As a trade-member in the partnership, it not only reinforces our reserving economic relations within the Asia Pacific border but as well as aid new engagements with other trading partners of which were inaccessible before namely, the United States, Mexico, Peru and Canada.

In 2015, the cumulative exports for Malaysia accounts to RM711.65 Billion5.By large, 80.1%5*of it was registered from manufactured goods inclusive of duty charges. . Fittingly, if observed through the free-tolls, trade goods can be accessed at a much lower costs and surplus yield can be utilize for investment in production staging. In terms of sectorial benefits, Malaysia’s largest import, plastics can be sourced at lower barriers for downstream processing of that will drive up our potential for international expansion.

during that period, these private firms will receive funding from the charging costs of facility use. The synergy of public and private parties creates a fair arrangement but it includes a “tie-in effect� whereby, we will not escape the agreement for low-switching cost in domestic ventures.

As a result, local companies have to compete with established companies from TPP states. Also, it questions the responsiveness of these companies to serve along our local sectors and abide to local policies. Whilst it is yet to be decided, if Malaysia creates an open system, it will encourage state companies to be more competitive by introducing better, cost-efficient methods for operation.

Intellectual Property Rights (IPR); protection of distinctive signs, in particular trademarks (which distinguish the goods or services of one undertaking from those of other undertakings) and geographical indications (which identify a good as originating in a place where a given characteristic of the good is essentially attributable to its geographical origin).8

2016

In an age of innovation, nearly every line of work is directly and or is indirectly related to IP intensive industries. It seeks to protect and benefit innovators and encourage new creators for new novelties...but it gets grimier. Many countries, including Malaysia, have

critical reservations against the overarching division of goods and its extension, the immediate price hike. These approaches, although balances the copyrighted systems globally, alter precisely how we utilize goods while posing an isolated victory for the other party. What do I mean? For one, drug patents will raise the prices of medicines.

The monopoly of one pharmaceutical corporation for the manufacture of drugs will undoubtedly deter any direct competition or generic versions in the market. Unsettlingly, the poor will get the short end of the stick. Whether the countries will be passing these ruling would be a matter of a compromise.

By and large, national laws have to be restructured for these new obligations or else, suffer the consequences in the long term. In any case, it should open up a dialogue for a respectable solution to aid the bigger majority in the contract.

Solutions; but there are limits?

Upon signage of a treaty, such as this, a definite level of conviction is shared among the TPP-members to see it through. Even so, countries of controversial background are in the wake of a trial round to adhere to the adjustments in order to receive the benefits

ensued. The failure to realise the requirements will result in, as drafted, penalties or total member exemption.

However, it does recognise that adapting to these conducts requires stages to make true. Hence wise, options are put forth for ease as follows: watereddown commitments, longer transition periods for implementation, limiting commitments through the non-conforming lists and absolute carve-outs.

For Malaysia, we have agreed upon the removal of all types of labour discrimination in par with the International Labour Organization (ILO) while ensuring acceptable conditions for the labourers.

In terms of environmental clauses, we are working towards establishing our commitments with other pact members to meet new regulations on illegal practices. Likewise, it includes monitoring and tracking other members in terms to holding their respective responsibilities.

Opt-out Clause; ..I change my mind TPP has, since its inception, upheld an open system of accepting voluntary participations. So, it is only fair that a voluntary withdrawal to be a variable option Malaysia, as stated in a separate letter, is the 10

only country-member of TPPA to have been granted an exception for an optclause within the 12 months of the Parliament’s verdict.

Whether the reason be a flair in negotiations, or favouritism, in reality, it takes the allure out of the state of affair. Should Malaysians be concerned?

Minister of International Trade and Industry, Datuk Seri Mustapa Mohamed, raised that if we were to withdraw, it would put the country at a less competitive edge in international trade.

Other neighbouring TPPmembers in the region would claim a better investment destination than ours due to the inclusive benefit between members.

Thus, painting a difficult situation to part whenever it is deemed fit because

it could hold detrimental effects beyond the outline of these pages. It is clear by now that not only does our concern rests on strategic trading but includes geopolitics at its most.

All in all, the outcome is dependent on the final tally in respect to these.

parliamentary meeting. It is expected that the deal will be in motion by 2017 through fast-track authority9 in the United States. By then, a new US administration will monitor the particulars and hereby take charge of it.

Until otherwise, the question remains; can we deliver?

Next up; the votes are in On the January 26th 2016, a special hearing was held in the Parliament during which the agreement was debated thoroughly by 15 lawmakers from the national front, Barisan National and 15 from the opposition and later, tallied for a final vote.

At a 127-84 split, the motion has been passed ending the two-day televised

RESOURCES: BRIEF ON THE TRANSPACIFIC PARTNERSHIP (TPP) Ministry of Trade and Industry 1,3,3*

Public Procurement European Commission 6

www.investopedia.com/ terms/b/botcontract.asp 7

Regional Comprehensive Economic Partnership (RCEP) 2

agreement without reopening any of its provisions, while retaining the ultimate power of voting it up or down- US Foreign Policy

What are intellectual property rights?- World Trade Organisation 8

Top 10 Major Export Products, 2015 - MATRADE 5 , 5*

11

Fast track is an expedited procedure for Congressional consideration of trade agreements. It requires Congress to vote on an 9

2016

Study on Potential Economic Impact of TPPA on the Malaysian Economy and Selected Key Economic Sectors - www.pwc.com 4,4*

T

2016

he ultimate outcome, arising from the TPPA, will see greater competition and economies of scale and the government hopes that this will compel local firms to raise production efficiency and thus lower the cost of goods and services to consumers.

Admittedly, the Government recognizes that there will be costs to local firms in adjusting to increased competition especially in oil & gas, construction and retail sectors. However, the Government believes that by complying with TPPA obligations and by going through structural reforms the country and the local firms would be able to maximise and realise the full potential benefits under TPPA.

What will TPPA mean to Oil and Gas sector in Malaysia?

The Government appointed PwC to conduct

TPPA; Potential Impacts on Oil & Gas by SOGDC an objective analysis of the potential economic costs and benefits of Malaysia’s participation in the TPPA.

The study does not, however, require PwC to make strategic recommendations on Malaysia’s position towards TPPA membership.

The following are the summary of the key findings

by PwC on the potential impact of the TPPA on the O&G sector in Malaysia:

Finding No.1: Minimal benefits from lower trade barriers PwC found that the benefits to the O&G sector from lower trade barriers would be small. This is because most tariffs for the export of petroleum-related products to TPPA countries are already at or close to zero percentage.

For example, PETRONAS would gain vey little from lower trade

barriers as 74% of PETRONAS’ exports are to non-TPPA countries. In addition, a significant portion of PETRONAS’ exports to the TPPA countries (except for USA) are already incurring zero tariffs. For example, 60% of PETRONAS’ export of liquefied natural gas (LNG) are destined to Japan at zero tariffs.

Finding No.2: PETRONAS’s rights and obligations under Petroleum Development Act 1974 (PDA ’74) are largely protected The safeguards under the TPPA will preserve PETRONAS’ rights, vested by the PDA 1974, to determine the selection of contract parties and the forms and conditions of contractual arrangements for foreign participation, except in 12 goods and services*. This will allow PETRONAS to largely continue supporting the 12

Finding No.3: Threshold on local preference could raise level of competition There are safeguards under TPPA that allow PETRONAS to continue with its Bumiputra development agenda.

PETRONAS can still accord 13

preferential treatment to local companies (mostly Bumiputra companies) in its purchase of goods and services in Malaysia, except for the 12 goods and services, up to the following thresholds: for upstream activities up to 70% in the first 5 years upon signing and 40% for downstream activities, within the territory of Malaysia

As of 2014, PETRONAS contracted approximately 70% of its purchase of goods and services for commercial activities in Malaysia to majority Bumiputera companies.

Given the capping of domestic preferences, local companies are expected to be ready to face increasing competition. However, it is important to note that contracts awarded to local companies based on merit are not considered as domestic preferences.

Finding No.4: PETRONAS benefits very little from TPPA PwC found out that even without the TPPA, Malaysia has already attracted over RM 330 Billion worth of upstream investments cumulatively as of 2013.

Malaysia is already exporting 74% of its oil & gas related products to nonTPPA countries. In fact, 60% of PETRONAS’s LNG exports designated to Japan is already attracting zero tariffs.

In 2013, 98.4 Mbbls of crude oil and petroleum products were exported

with minimal to near zero tariffs.

Further, 5% of PETRONAS group’s revenues are from Petrochemical products, due to existing FTAs with the exception of urea to Singapore and Ammonia to Japan.

Finding No.5: Stronger investor protection in TPPA countries

The increase in investor protection under TPPA will provide PETRONAS with greater security for its investments in the TPPA countries. At present, 5 out of the 12 countries where PETRONAS has foreign operational presence are TPPA countries.

The stronger investment protection mechanism under the TPPA will also support, and potentially further spur, the growing investments

by Malaysian firms in the O&G sectors of the TPPA countries. Thus, Malaysian companies that have been awarded contracts in Mexico, Vietnam and Australia would enjoy greater protection for their investments. (note: Malaysia ranks no.4 in terms of protecting minority investors ahead of countries like Canada (6), USA (35) and Japan (36).

A Special Mention on the Impact on State-owned Entrprise (SOE) and Bumiputra Vendor Development Programme (BVDP)

SOEs under TPPA are 2016

growth and development of Malaysia’s O&G sector, including through technology transfers, and advancing nation building agendas, such as local capability building.

The liberalisation of the 12 goods and services under the TPPA is also not expected to incur significant adverse implications on domestic firms. This is because the business operations in the 12 goods and services are already dominated by foreign companies. Licensed vendors with PETRONAS in the 12 goods and services constitute only 10% of its entire vendors (389 of 3,636). (*note: 1.Seismic data acquisition, 2.Directional drilling services; Gyro while drilling services; Measurement while drilling services; and Logging while drilling services, 3.Cementing-related services, 4.Gas turbines and related maintenance and repair services, 5.Control valves services, 6.Oil country tubular goods, 7.Induction motor services, 8.Distributed Control System (DCS) services, 9.Transformer services, 10.Structural steel, 11.Line pipes and 12.Process pipes)

2016

expected to conduct its businesses that are similar to a privately owned enterprise in the relevant industry when purchasing goods or services. This inevitably may constrain the role of some SOEs in supporting local enterprises. Any policy by some SOEs, which may not be consistent with commercial considerations such as price, quality and availability of the good or service to be purchased has the potential to breach the commitments set out in the TPPA.

In addition, the prevailing procurement mechanisms under the BVDP (for example, preferred suppliers) could be limited under TPPA participation. Such preferential treatment will be capped at a maximum of 40% of the SOEs’ annual budgeted purchase of goods and services under TPPA. As of 2014, SOEs’ spending on Bumiputera businesses exceeded 40%.

On the whole, however, due to safeguards negotiated and secured

earlier, the overall Bumiputera businesses are not adversely affected under the TPPA. This is because under the safeguards the Government maintains the flexibility: a) to set aside up to 30% for Bumiputera contractors in construction services that is open to TPPA members; and b) SOEs will have the flexibility to give preferences to Bumiputera and SME suppliers up to 40% of their annual budgeted purchases in the territory of Malaysia.

14

Inside ParliamentHighlights of Ministers’ response on TPPA Jan 27, 2016

It is untrue that 30% of small and medium enterprises will foil if Malaysia participates in TPPA. The Government had conducted several studies on the impact, which showed that the benefits would outweigh the negative implications.

There was a lot of assumption but it will not be as high as 30% SMEs closing shop. The figure is too drastic.

Bumiputra firms’ interest in government procurement would still be protected under the international business deal.

Under TPPA, there is a carvedout clause that allocates 30% for Bumiputera contractors for government procurement. This is to ensure that Bumiputera interests will not be affected, as it develops and contributes to the economy.

Datuk Seri Dr. S. Subramaniam, Health Minister Signing the TPPA would not contradict the objectives of the National Medicine Policy to provide access to affordable and safe medicines. It would not be an obstacle to the local generic medicine industry. I hope the MPs will not link the issue of raising the prices of medicines to the issue of patent. The prices of medicines are

15

influenced by several factors, including the currency exchange, procurement regime, research cost, and supply and demand.

Datuk Seri Richard Riot Anak Jaem, Human Resources Minister Eight labour laws will be amended to improve labour standard in the country after Malaysia finalized its participation in the Trans-Pacific Partnership Agreement (TPPA). The laws were the Trade Unions Act 1959; Industrial Relations Act 1967; Employment Act 1955; Sabah Labour Ordinance (Chapter 67); Sarawak Labour Ordinance (Chapter 76); Private Employment Agencies Act 1981; Minimum Standards of Housing and Amenities Act 1990 and the Children and Young Persons (Employment) Act 1966.

Malaysia needs to implement reforms and improvement in labour legislations in line with the high labour standards requirement, like other TPPA member countries. If Malaysia does not comply with the labour standards, it is likely to be prosecuted under the dispute settlement mechanism, in which case, it will be detrimental to Malaysia.

I also rejected the perception that the TPPA would lead to the influx of foreign workers, as the scope and discipline in

the chapter on labour in the agreement did not contain any provision to encourage and improve the mobility of workers between the countries of TPPA, as had happened in the European Union. It aims to improve the welfare of workers and enforce rights of employees who work in Malaysia. The entry of foreign workers into TPPA countries are subject to the policies and laws set by the country itself.

On the issue of foreign workers holding trade union offices, l admits after the TPPA is signed, foreign workers will have the same right as local workers, including becoming the leader of a union. The ministry through the Department of Trade Unions Affairs was at the stage of amending the Trade Unions Act 1959 (Act 262) to fine-tune specific conditions to enable a foreign worker to be selected or appointed as an officer of a union. Among the conditions are requiring that a foreign worker should be legally employed for at least three years in Malaysia as contained in Article 10 of the Labour Consistency Plan (LCP), if he wants to be selected as an officer of a union. The government would monitor the activities of trade unions especially those led by foreign workers.

Hajah Nancy Shukri, Minister in the Prime Minister’s Department 2016

Dato’ Seri Abdul Wahid Omar, Minister in the Prime Minister’s Department

Foreign corporations could not sue the Malaysian Government arbitrarily upon signing the TPPA. This is because the terms under the InvestorState Dispute Settlement (ISDS) have been tightened, making it comparable to the mechanism adopted in other free-trade agreements (FTAs). For example, Chapter 9, Articles 9.17 provides a provision for consultations and negotiation processes between the Government and the corporation must be conducted within six months to find amicable solutions before the matter was brought to an international tribunal.

Few safeguards are stipulated under the TPPA. The investor needs to prove the loss incurred due to the action of a government (before suing a government). The investor needs to pay the legal cost to the government in a frivolous case.

2016

Other ISDS reforms under the TPPA include allowing the government to use preliminary objection procedures if foreign investors were to make frivolous claims. ISDS is an instrument of public international law, that grants an investor the right to use dispute settlement proceedings against a foreign government outside the country. ISDS was not new to Malaysia as it had so signed 74 bilateral investment agreements and eight

FTAs which contained the mechanism. The mechanism would safeguard foreign companies from countries under the FTAs. Malaysia had never been sued by any foreign investor at the international Tribunal under ISDS provisions provided for in the FTAs it has ratified.

Datuk Seri Dr. Wan Junaidi Tuanku Jaafar, Natural Resources and Environment Minister A national committee would be set up to monitor and implement the environmental chapter in the TPPA. The purpose of this committee is to discuss the implementation of the commitments concerning the environmental chapter under the TPPA, including all other Free Trade Agreements.

Datuk Seri Mustapa Mohamed, International Trade and Industry Minister The TPPA was not a trade pact drafted solely by the United States as Malaysia also participated in the drawing up the international agreement.

Malaysia was also involved in preparing the draft of the TPPA, among others Chapters 6, 21 and 24 in relation to cooperation and capacity building of small and medium enterprises and development as well as other important chapters not contained in any other trade agreement.

As such, the assumption that Malaysia made use of the United States template (in drafting the agreement) is not true. Malaysia would not be influenced by the capitalist system if it were to sign the TPPA and it would also not change the national economic system because Malaysia’s was a mixed economy. The negotiations on the TPPA were not a oneman show but involved many parties, and the matter was brought before the Cabinet more than 40 times over a span of five years.

Economic superpowers such as the US and Japan did not have veto powers in the TPPA and this would not affect the nation’s economy as Malaysia practiced a mixed economic system. I also dismissed allegations that Malaysia would be colonized by the US’s capitalist system. We have intervention. The country’s economy is not based on capitalism and socialism… we are in the middle. Hence, the TPPA will not change the economic model (Malaysia).

This is because we will continue to have Bumiputera, government-linked companies and also the 11th Malaysia Plan which has a chapter specially related to the B40 (Bottom 40) group. It’s clear that our economic model is a mixed economy.

16

Palm Oil Certification Schemes:

Similar Directions, Differing Approaches?

by Bilson Kurus, PhD

The introduction of certification schemes to cover key commodities such as palm oil, soy, timber and fish has been primarily driven by the sustainability equation.

Certification schemes have evolved as key mechanisms to encourage and enforce the sustainable production and sourcing of these commodities.

Taking different forms, the most popular and more successful tend to be multistakeholders roundtable.

Two such examples are the Roundtable on Responsible 17

Soy (RTRS) for soy and the Roundtable on Sustainable Palm Oil (RSPO) for palm oil.

Most certification schemes are grounded on a set of principles that all certified bodies covered under the schemes must adhere to. These principles are further broken down into subsets, or ‘criteria’ that provide specific guidelines and requirements for reporting. Different certification requirements often apply for different stakeholders depending on their supply chain roles. Thus, the standards for upstream players are different to those for downstream players.

The Certification Mix

Within the palm oil industry, the RSPO is perhaps the most talked about certification scheme.

However, it is not the only certification scheme with some bearing on the palm oil industry. As can be seen in the summary in Table 1, there are a number of other certification schemes that have a bearing on some aspects of the palm oil industry. However, for Malaysia the RSPO and the International Sustainable and Carbon Certification (ISCC) would be the most pertinent international standards.

2016

Introduction

Oil Palm plantation in Lahad Datu

As Table 1 shows, while the various certification schemes may differ in some ways, they all revolve around the key issue of sustainability. The RA is the earliest to be established while the MSPO is the latest. However, similar to the ISPO, the MSPO is applicable nationally only.

The RSPO, ISCC and the RA/ SAN are more international in their coverage.

Some Key Issues

2016

While the oil palm tree originated from West Africa, the global palm oil industry today is dominated by growers far from the palm’s origin. The leading crude palm oil producing countries are all located in countries with high annual rainfall within 10 degrees of the equator. Of these, Indonesia and Malaysia account for the largest bulk (about 85%) of the global CPO output.

The geographic link between the equatorial belt and palm oil growing regions had invariably given an added dimension to the sustainability issue of palm oil. The equatorial belt is home to the earth’s vital tropical rainforest stands that are mandated as the earth’s green lungs.

Coupled with the presence of longstanding indigenous communities within some of these rainforest regions, the industry’s perceived linkages with the issue of deforestation and destruction of wildlife habitats explains why palm oil is often linked to the sustainability equation more so than any other vegetable oils.

Not surprisingly, industry players in both Indonesia and Malaysia have often borne the brunt of the sustainability issues surrounding the palm oil

industry. Fueled in parts perhaps by what is seen as the growing dominance of downstream players in the RSPO decision-making process, both countries have decided to initiate a degree of control over the certification standards by establishing their own national certification schemes. Indonesia took the lead with the ISPO in 2009 followed by Malaysia with the MSPO in 2015. In both cases, the certification schemes were established under the purview of their respective applicable national rules and regulations.

The formation of the Council of Palm Oil Producing Countries (CPOPC) by Indonesia and Malaysia towards the end of 2015 may be a reflection of the desire by both countries to somehow ‘reshape’ the palm oil sustainability 18

Implications for Sabah

Contributing the largest share of the Malaysian CPO output, Sabah accounts for 12 percent of the global CPO production. Palm oil related products also account for around one-third of Sabah’s export value. Long distinguished in leading the nation in yield per hectare, Sabah took the bold step in 2015 to take a jurisdictional approach towards the set goal of producing only Certified Sustainable Palm Oil (CSPO) by 2025.

While Central Kalimantan, Indonesia, is also committed to taking a similar step, the approach is being hailed as a global first.

The jurisdictional approach is seen as a more integrated effort as it allows local stakeholders to work with the government to improve the welfare of small-scale farmers while instituting environmental friendly practices and

19

addressing supply chain inefficiencies. This would address the longstanding difficulties of small-scale farmers in fulfilling the relevant sustainability criteria.

The decision by the State Government is particularly pertinent in light of the linkages between the environment, sustainability and eco-tourism, which is a key economic sector for Sabah. The emphasis on an internationally recognized standard would suggest that the RSPO certification scheme may be the preferred reference point for Sabah. Nevertheless, this would not necessarily contradict the MSPO’s stipulated requirements given that local palm oil growers would have to be nationally certified under the full implementation of the MSPO scheme.

A Sabah Standard?

The bold step taken

by Sabah does raise an interesting thought: a Sabah Standard. Some factors are worth considering.

First, land is a state matter.

Second, Sabah has its own set of environment regulations – beyond the

nationally mandated laws.

Presumably the applicable state laws are already subsumed under the MSPO. Third, currently it would appear that there is no one dedicated body within the state governmental machinery to oversee the local palm oil industry; the only exception is the collection of the applicable CPO sales tax.

Concluding Remarks

Yet, whichever direction the stated CSPO goal of the State Government will take, the prospect of fulfilling both an internationally recognized standard amidst the concurrent implementation of the MSPO would already suggest that industry stakeholders in Sabah would be involved in a noble and ground-breaking undertaking. Sabah’s efforts will no doubt be watched with much interest by all sides of the palm oil certification mix - locally, nationally and beyond.

2016

debates. Therefore, the CPOPC is arguably another facet of the underlying concerns that both countries have over the palm oil certification schemes.

RM13.3 Billion investment for manufacturing sector

M

2016

alaysia had only finalized its last league of execution of the 10th Malaysian plan and the Manufacturing sector has proven to be its largest contributor of capital gains. In Sabah alone, the manufacturing sector amounted to RM13 Billion in total investments, of which RM2 Billion being foreign investments. At the State Assembly address, Datuk Seri Panglima Raymond Tan reasoned that during the first 5 years under the 11th Malaysian Plan, the Government will focus on its efforts to cultivate Small & Medium Industries (SMIs).

Through the nationallevel framework, business establishments can be raised by 6% in low-level and 10% in high-level innovative firms by the year 2020.

According to a census in 2010, 40,881 were registered as SMIs and 98.7% of Industries in

Left picture: Sabah Chief Minister, Datuk Seri Musa Aman (right) meets with the three Deputy Chief Ministers (from left) Datuk Seri Panglima Raymond Tan Shu Kiah, Datuk Yahya Hussin and Tan Sri Joseph Pairin Kitingan before the State Assembly sitting

Sabah are under the same division. Therefore, it is only right the Government concentrates its efforts to build an extensive network of programs and projects to contribute the overall development of the State’s economic wise. It includes, assisting in building new and improved infrastructures and equipment and in the same tangent, extend job prospects to the public and maximise the GDP growth.

Kota Kinabalu Industrial Park (KKIP), the State’s wholly owned company, has signed a sales agreement with F&N Beverages Manufacturing Sdn Bhd amounting to RM85 Million on a 21 acre land. As a result, it has culminated 2.6% increase in investments and 8.2% increase in job opportunities up until October 2015.

POIC, on the other hand, generated RM272 Million worth of investments in 2015 and further investments valued at 1.75Billion from

22 companies. Moving forward, POIC will focus on the development of Phase 3 covering 3300 acres of land in stages and implementing three major projects; Biobased hub, Halal park and Marine Logistics Facility.

Likewise, Sipitang Oil and Gas Development Corporation (SOGDC) will begin its works in developing a new Ammonia plant. In the present, only five types of Ammonia-based products have been identified namely, Caprolactum, Ammonia Sulfate, Ammonia Nitrate, Ammonia Chloride and Diammonium Phospate.

For the upcoming year of 2016, it hopes to enhance the Petrochemical Industry establish few supporting industries and businesses to provide reliable services for future investors.

Source: The 13th Sabah State Legislative Assembly, Nov 2015

20

Heart of Borneo

T

he Heart of Borneo (HoB), established in Feb 12, 2007, is a voluntary initiative spanning between its tri-members, Brunei Darussalam, Indonesia and Malaysia. Initially, it was instigated by the World Wide Fund for Nature to conserve 220,000ha of total forested areas in Borneo.

However, in respect to Sabah, it has successfully exceeded its supposed quote agreed on. In fact, it is tracking to expand its Totally Protected Areas (TPAS) by 9 percent from its present 21 percent of Sabah’s landmass in the course of a decade. In the

recent opening ceremony of International Heart of Borneo (HoB) Conference, Chief Minister Datuk Seri Musa Aman stated that, it exceeds the benchmark target of 10 percent by the International Union for Conservation of Nature and of 17 percent for the Convention on Biological Diversity.

"Malaysia is one of the world's few megabiodiversity hotspots.

In Sabah, our tropical rainforests are of immense value, extraordinary beauty and are havens for a great number of plants and animals…”, he expressed.

Leaf-ing a legacy: Musa Aman (left) receiving a memento of the new plant species from Dr Berhaman during the international conference

Our dependence on our Biological architecture to sustain our existence is the very basis to devise

21

2016

Facts & Figures

a sustainable economic blueprint. Therefore, by putting an urgency to safeguard our natural resource is almost, necessary. It is expected that, Sabah will surpass 1.8 million hectares by the end of the month, leaving about 400,000ha more left revealed by the Sabah Forestry Department Director, Datuk Sam Mannan. Both, the Federal and the State government are pressing their importance for its conservation. Even adding that, although much has been done, it will stop there and rather, continue to bypass its own track record.

By virtue of its commitments, it has designated around 4 Million hectares of land comprised of national treasures and highlands.

Evidently, sustainable logging commercially in forest reserves has generated high returns for the state. Datuk Sam Mannan unveiled that the Deramakot Log auction in itself gathered RM12 Million and later revealed and handed the mock cheque to Datuk Seri Musa Aman during the opening ceremony. In tandem, in celebration for the interest of conservation, around 463 hectares of land, previously under Liew Pin Cheong

2016

MALAYSIAN INVESTMENT DEVELOPMENT AUTHORITY

of Lebiha足sil Sdn Bhd was donated to connect Tabin with the Kulamba Wildlife Forest Reserves. On its own, the terrain is worth over RM20 Million adding that, a second donation of 28,375 hectares of Virgin forests to be reclassified to a Class One TPA.

22

SEDIA ANNUAL REPORT 2015:

Launch of third phase of the SDC underway

Left picture: Datuk Seri Musa Aman (3rd left) presenting the facilitation fund agreement to one of the recipients, with SEDIA board members and a TERAJU representative in attendance

23

totals up to RM262 Million for the implementation of these projects.

In addition, Musa disclosed in his opening remarks of the 20th meeting of the Sabah Economic Development and Investment Authority (SEDIA), the construction of Pan Borneo Highway from Sindumin to Tawau will be commenced in the course of 2016 while in Kota Kinabalu, a Bus Rapid Transit system.

Since the launching of SDC, RM150.7 Billion of cumulative investments were committed by the end of September 2015 by which RM55.1 Billion was realised.

As of November 2015, the disbursement of the SDC projects under both the 9th and 10th Malaysian Plan has estimated to be at RM1.732 billion or 93.38% of the sum allocations received by SEDIA.

As a matter of fact, during the 2nd phase of SDC, the states’s economy has achieved consistent growth, narrowing the national gap.

In 2011, the growth rate state wise was 2.1%, 5.3% nationally.

By 2014, it had increased to 5%

in Sabah, 6% at the national level.

He added that, the Mean Household Income per month had increased from RM2,866 to RM4,879 by 2014, while unemployment had declined from 5.6% in 2011 to 4.7% in 2014 since the launch of SDC initiatives.

“Sabah’s economy is now increasingly diversified, with the service sector gaining a greater significance,” said Musa.

Datuk Seri Musa also highlighted Sabah’s potential as an ideal getaway to the East Asia neighbouring economies, potentially to the Asia Pacific region, with the signage of the Trans-Pacific Partnership Agreement.

In the concluding segment, Tan Sri Pairin conveyed his thanks and appreciation to the SEDIA’s delegation for the continuous latest updates on the SDC and as of any development established in the corridor.

2016

I

n its entirety, Chief Minister Datuk Seri Musa Haji Aman concluded that, the second phase of the Sabah Development Corridor (SDC), between 2011 to 2015, has played a contributing role in driving the state’s development while mobilising greater input from the private sector. It is parallel to the aspirations under the National Key Economic Areas of the Economic Transformation Programme, covering key industry sectors; agriculture, energy, manufacturing, services and the general attraction of Kota Kinabalu.

Following its settlement, preparations for the commencement of the third phase has begun perfectly coinciding with the timing of the First league of the 11MP. According to Musa, RM2.404 billion in allocations was approved for the SDC projects under the 11MP. The new initiatives include the expansion of the Sapangar Container Port, a master plan study for an aviation hub and air freight logistics, and the construction of a jetty in POIC Sandakan. It

2016

International Biomass Conference

#SBIDP #8Dec15’ LAUNCH OF SABAH BIOMASS INDUSTRY DEVELOPMENT PLAN BY SABAH ASSISTANT MINISTER OF INDUSTRIAL DEVELOPMENT AND CEO OF AIM: (From left) Malaysia External Trade Development Corp (MATRADE) CEO Dato’ Dzulkifli Mahmud, MATRADE Chairman Datuk Noraini Ahmad, Minister of International Trade and Industry Dato’ Sri Mustapa Mohamed, Minister in the Prime Minister’s Department Dato’ Mah Siew Keong, Sabah Assistant Minister of Industrial Development Datuk Bolkiah Ismail, Agensi Inovasi Malaysia (AIM) CEO Mark Rozario, Malaysian Investment Development Authority (MIDA) CEO Dato’ Azman Mahmud and POIC Sabah Sdn Bhd CEO Datuk Dr. Pang Teck Wai at the International Biomass Conference Malaysia 2016 in Kuala Lumpur.

25

2016

Exchanging documents (left) Pierluigi Piccotti and Stanley Ng.

Signing of Term Sheet for PROESA License for the utilisation of proprietary technology in the conversion of biomass to ethanol, the Main Drivers for Sarawak Biomass Hub project between Brooke Renewables CEO Stanley Ng and Beta Renewables Business Development Director, Asia Pacific Pierluigi Piccotti

MIDA Seminar Highlights Investment Opportunities In Sabah

A

2016

seminar on Investment opportunities in Sabah was organized on the 9th of December 2015 in collaboration between The Malaysian Investment Development Authority (MIDA) and Department of Industrial Development & Research (DIDR).

It has attracted around 200 attendees from its own state alongside two sectorial speakers, Datuk Phang Ah Tong and Datuk Seri Panglima Raymond Tan.

During the half-day Seminar, Datuk Phang highlighted that in the midst of Global Economic downturn, Sabah has remain steadfast in attracting

lucrative investments. It is through the devotion of both, the Federal Government and its people, the state have shown consistent improvements in the development front. In fact, Sabah Development Corridor (SDC), launched in January 2008, is a proven commitment of the Government towards achieving such measures.

As of December 2014, 731 manufacturing projects were put into effect, totalling an investment of RM17.9 Billion by which 85% are resource-based firms comprising of Petroleum by-products including petrochemicals, food manufacturing, paper and etc. As

a whole, it compounds to RM16.0 Billion and sources more than 76,000 job vacancies.

Although Datuk Phang reasoned that while Malaysia remains to be a destination of choice for foreign investors, he pointed out that the growth of direct investments domestically remain to be an importance for securing the country’s maturation.

In keeping its promise, the Government has constructed strategic opportunities in providing necessary boosts to potential companies in the region while encouraging opportunity flows through the vendor development programme.

26

Minimum wage in SABAH

T

he Minimum Wage Initiative, for Malaysia, was first proposed in the Prime Minister’s Budget Speech in conjunction to the last league of the 9th Malaysian Plan. It was the government’s measure in

preparation to become a high income nation by initially setting a wage benchmark for Malaysian employees. Through the elaborate plan, it will minimize the likelihood of any party from deliberate exploitation of rights and an

improvement of wages over the long haul. According to Bank Negara Malaysia (BNM), in 2014, the policy was estimated to benefit 27% of workers nationally and on average, 33% rise in wages in West Malaysia and 38% increment in East

MONTHLY SALARIES & WAGES OF EMPLOYEES BY STATE FOR 2013 & 2014

SOURCE: SEDIA

MEAN HOUSEHOLD INCOME BY STATE IN 2012 AND 2014

27

2016

SOURCE: Department of Statistics, Malaysia

Malaysia.

Admittedly, the scope of wage distribution at present is slanted. For the state of Sabah, we pose a borderline mean income of RM910 at minimum and RM1020 at maximum. It clearly draws a definite gap with other neighbouring states. Policy makers, are obliged to reconsider these elements in their policies according to different criterion, based on the nature of the jobs and location. In our case, since we register a relatively low level of industrialisation, a clear road-map is needed

to boost the sector. Equally, there should be extensive value-added projects in all of the other sectors of the State’s economy namely, agriculture, tourism and manufacturing. As a whole, Sabah is in need of strengthening its industrial front while constantly rebalancing its output with the changing needs of society. By doing so, it can address the prevailing economic plight.

Generally, the view holds true that the rise of wages will indirectly affect the productivity index positively, creating a “win-

win� situation for employers and employees. However, in reality, if nominal wages increase faster than labour productivity, the economy will indefinitely experience an inflation. The most direct mechanism highly affected to productivity runs parallel through real wages, wages adjusted proportionally to the cost of living. Even economic theory suggests that neither labour share nor labour terms could sustain real wages. By right, ultimately it is only achievable through productivity growth.

since January 2013 and it was mandated under the National Wages Consultative Council Act 2011 (Act 732). Under this Act, a tripartite body known as the National Wages Consultative Council is formed to recommend the minimum wages rate to the Government and once approved by the Government, the Minister of Human Resources will

make a Minimum Wages Order. The employees and employers in Sabah were represented in the National Wages Consultative Council

by Madam Catherine Jikunan of Malaysia Trades Union Congress (MTUC) Sabah Branch and Mr. Alan Khoo Choom Kwong of Sabah Employers Consultative Association (SECA).

NOTE:

2016

In the 2016 Budget, the government stipulated that effective 1st July 2016, the minimum wage for employees in the private sector be increased from RM900 to RM1,000 per month in Peninsula Malaysia and from RM800 to RM920 for those in Sabah, Sarawak and Labuan. The minimum wages policy in Malaysia was implemented

28

Brewtroleum – next wave of renewable fuel?

Renewable energy is today a global conversation although fossil fuel is expected to still dominate world consumption in the foreseeable decades. Right here in Sabah, renewable energy from particularly non-oil sources such as biomass has been gaining traction with rising awareness and generous feed-in tariffs offered by Sustainable Energy Development Authority (Seda).

Biomass has for a long time been considered and treated as waste. Sabah’s sizable oil palm plantation is estimated to produce about 20 million tonnes of biomass per year.

Advances in science and technology in recent years promise lucrative returns from processing biomass to extract the many ‘goodies’ within, including bio-ethanol and bio-chemicals. ideas, Brewtroleum was hatched on a napkin at a bar.

“It’s a world first.

We’re helping Kiwis save the world by doing what they enjoy best: drinking beer.

We saw the opportunity to take the natural by-product of the brewing process and turn it into something

that can genuinely help the environment,” wrote Sean O’Donnell, head of domestic marketing for DB Exports.

Brewtroleum, which is 10 percent bio-ethanol and 90 percent premium petrol, is available at 60 Gull stations (a major gas station brand in New Zealand) on 2016

Beer has been powering your bad decisions since your 21st birthday, but now it could power your car, too. DB Exports, a brewery in New Zealand owned by the Heineken Company, has started producing Brewtroleum, a bio-ethanol made from beer waste.

Like so many good 29

2016

New Zealand’s North Island.

According to Simon Smith, a spokesperson for the company, the gas is selling well. “DB Export Brewtroleum has only been available for sale for a few days—launching on Monday, July 6—but the public’s response to the beer derived biofuel has been overwhelming.

Word of mouth has been incredible, with a large number of enquiries and positive comments,” he says.

Here’s how it works: When you make beer, you end up with a leftover sludge of yeast. When yeast consumes sugar, it produces ethanol. By extracting that ethanol, you can make a fuel product that, when added to regular gasoline, can run a car. DB Exports produces 150,000 litres of this yeast by-product annually. In the past, it fed most of it to livestock. Now, it’s making it into fuel— although the by-product left after the fuel is extracted is still fed to farm animals.

The company’s marketing for the new fuel is slim on subtlety. “Drink beer. Save the world!” it proclaims. While that kind of hyperbole may make you want to rip your shirt off Superman-style as you pop the top on a cold one, know that some biofuel experts aren’t convinced.

“It’s perfectly technically viable,” says Robert Rapier, director of Alternative Fuels Technology at Advanced Green Innovations. But he adds that there’s one

tiny problem: “It takes a tremendous amount of energy to remove the water from beer to make an ethanol. The energy inputs [for this process] would be tremendous.”

Rapier says the only way this process could be done in an energy-efficient way would be if the yeast contained a high level of alcohol, or if waste or solar energy powered the plant doing the processing. He says the only other way this could be a cost-effective process is if DB Exports were getting some sort of subsidy.

“If, for example, they were using natural gas and getting subsidies for that, and then getting subsidies for producing bio-ethanol.

But if you did a total lifecycle carbon assessment around it, you would find that it actually increased total carbon emissions.”

DB Exports couldn’t comment directly on the amount of alcohol in its waste product or on how the plant that extracts the ethanol is powered (it’s not done on-site at the brewing facility). However, it claims that biofuels produce significantly less carbon dioxide per mile driven than traditional gasoline does—negating the energyintensive production process, according to a study by the University of North Dakota’s Energy and Environmental Research Center.

Chances are, beer to gasoline isn’t going to be the water-to-wine miracle that saves our planet. In fact, the world isn’t drinking

nearly enough beer to make as much fuel as we currently use.

“If you take the world’s entire consumption of beer and could magically extract the ethanol without major energy inputs, the resulting ethanol would have the energy content of 1.7 Billion gallons of gasoline.

That is equal to 1.2 percent of the annual U.S. gasoline consumption,” says Rapier.

And really, beer already does so much or us—like making time with your extended family bearable and giving us sick dance moves. Is it really fair to ask it to save the world too?

Many countries, both developed and developing ones are turning waste into wealth. The aim is to go green and sustainable.

That’s the future. Sabah is going the same path except that we are fortunate to have opportunity to make this our largest industry.

Source: The following article is extracted from outsideonline.com, published July 20, 2015

30

COURTESY CALL

Jan 15, 2016

Group photo with FSI members at FSI building KKIP

President of FSI Datuk Mohd Basri (2nd right), Datuk Seri Panglima Wong Khen Thau, Life President and Advisor (1st right) and other FSI members having dialog session with Datuk Seri Panglima Raymond Tan (2nd left) accompany by Datuk Hashim (1st left) and Mr. Patrick Tan (3rd left)

31

Datuk Seri Raymond Tan also shared with Datuk Mohd Basri Abd Gafar, President of FSI and his office bearers on the government’s agenda to achieve high income advanced economy by 2020, to create more high pay jobs and the need to increase the contribution of the manufacturing sector in Sabah to the state’s GDP by giving focus on oil and gas and palm oil downstream activities to boost the manufacturing sector in the next five years. This will allow our SMEs to get involved in the supply chain of both industries. Therefore, it’s importance for FSI to engage and work closely with his ministry to resolve problems faced by them.

In his response, Datuk Mohd Basri has brought up to the attention of the minister on some of

the issues affecting their members and accorded his appreciation to Datuk Seri Raymond Tan for his concern on SME development in Sabah and the suggestion for a closer working relationship between MID and FSI to strengthen the position of manufacturing sector in Sabah. Datuk Mohd Basri has also given his assurance on the preparedness of FSI to work closely with MID and the minister to resolve various challenges faced at hand.

On the sideline, Datuk Mohd Basri also took the opportunity to update Datuk Seri Raymond Tan on the progress of the organizing of upcoming Sabah International Expo (SIE) 2016, in which will be held from 15 to 18 September.

2016

Deputy Chief Minister cum Minister of Industrial Development, Datuk Seri Panglima Raymond Tan Shu Kiah accompanied by Datuk Hashim Haji Paijan, Permanent Secretary of MID, Mr. Patrick Tan, Director of Industrial Development and Research and Mr. Chang Shui Kiong, Political Secretary have made a courtesy visit to Federation of Sabah Industries (FSI) at KKIP recently.

In the discussion, the minister has made known his intention of having direct engagement with members of FSI to enable him to understand better the problems and challenges faced by SMEs in Sabah.

The minister has given his commitment to assist FSI to convey and voice up their problems to the relevant ministers and ministries for action. Aside that,

Bio-Economy Day

2015 December 2nd, turing renewable bytlet built on manufac ou ic tuk Seri eg at str of ve wa Innovation Minister Da d an y log no Bio-Economy is a new ch Te , ce and the second ovating clusters. Scien neer in South East Asia Pio products through inn a is ia ys ala M at me Minister , discloses th e endorsed by the Pri ut ro y Wilfred Madius Tangau om on -Ec Bio a g implemented player in Asia, of havin r. zak three years earlie Seri Mohd Najib Tun Ra 20. But across GDP per capita by 20 0 00 5, D1 US te ula m Federal , aspires to accu 13, Kuala Lumpur, the 20 In ly. se en Malaysia, as a whole m im s rie RM10,677, while the state figures va pied the lowest slot at cu the board, the gap of oc n ta lan Ke ile wh es herself for RM79,752 0). As Malaysia prepar ,00 D5 state, lead the poll at US er nd (u 3 ,60 realisation place at RM18 it is becoming a sour ar, ye xt Sabah stood at 12th ne n pla ian of the 11th Malays 2020. Datuk Seri the commencement P per capita goal of GD e th h ac re to le g, unless Sabah to be ab ed his concerns sayin ed nc that Sabah is unlikely co r, ste ini M ief per capita n, Deputy Ch , the USD15,000 GDP de ca de Panglima Raymond Ta xt ne e th r fo lion in FDI yearly h Development attracts about RM2 Bil lusion of the SDC (Saba nc co e th , 25 20 by even will not be achievable Corridor). mber ld on the 11th of Nove he s wa h, ba Sa in ustry players first league road show h Corp). About 200 ind Bio-Economy Day, a ec iot (B ion at or rp Co p which is a chnology the one-day worksho in d under Malaysia Biote te ipa rtic pa s ee formation ials of attend The Bio-Economy Trans e. m am and government offic gr Pro ion at onomy Transform tigious quality, ensuing blueprint of the Bio-Ec ive workforce of pres uc nd co a e ot om pr r wise, it hopes to aims to try’s economy. Numbe Programme, in itself, un co e th lize tria us d a total erall, reind creations of 170,000 an job w income growth and ov ne e, om Inc l of Gross Nationa generate RM48 Billion lion by 2020. investment of RM50 Bil , posits that Wilfred Madius Tangau ri Se k tu Da r ste ini M of oil and Innovation l with the abundance ica em ch Bio Science, Technology of t en m rp’s 2014 Annual fitting for the develop ce to the Biotech Co the state of Sabah, is an rd co ac in en Ev s. is notably the erials it ha ion as of late. Sabah ot m palm-based raw mat in be to d fie ssi tional ojects are cla ated the task as the na leg de en report, 32 out of 95 pr be s ha d an Chief lm Oil in Malaysia Dr Pang Teck Wai, the k tu Da r, ve we largest producer of Pa Ho . es at to the leverage high value oleo deriv aggressive approach an hub in the growth of s te ca vo ad tu Da r Datuk IC Lahad l Development Ministe tria us Executive Officer of PO Ind , him of r te or oss es. A keen supp lihood of raising its Gr like st he hig e of the state’s resourc th s ha h ly believes that Saba emical sector. estments in the bioch Seri Raymond Tan, firm inv t ec dir ign re fo h DP) throug Domestic Product (G will the incorporation of Bio s, ga d an oil m fro nt cides to shift its fro Malaysia, if ever so, de field. ier choice of playing indefinitely be a prem

WRITE IN

Please write your comments to:

Sabahtoday, Lot 5, 2nd Floor, Block B, Wisma CTF, Jalan Damai, 88300 Kota Kinabalu, Sabah.. contact@sabahtoday.my

32

2016