SIQ5 online

APR - JUN 2012

ISSUE 05/2012

HIGHLIGHTS: SABAH TO HAVE FIRST REGASIFICATION PLANT SME VILLAGE PLAN SABAH HOT ON INVESTORS’ LIST SABAH IS GOOD FOR BUSINESS

Published by Ministry of Industrial Development, Sabah

Contents

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LAHADDATUTOHAVESABAH’S FIRST RE-GASIFICATION TERMINAL

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MINISTRYMULLSSMEVILLAGE AT KKIP

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MALAYSIA’S SME POLICIES PRAISED

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Datuk Raymond Tan Shu Kiah

Minister of Industrial Development, Sabah

SMESECTORAIMSTOACHIEVE 8.7% ANNUAL GDP GROWTH

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BIOMASSSECTORTOATTRACT POTENTIALFDIWORTHRM3.5b

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SABAH LEADS THE NATION – RM10 B IN PRIVATE INVESTMENTS IN Q1

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PALMEX 2012 SANDAKAN DRAWS STRONG INVESTOR INTEREST

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SABAH EXPANDS OIL PALM INDUSTRY THROUGH DOWNSTREAM PUSH

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SABAH GOOD FOR BUSINESS

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LABOURSHORTAGEHITSPALM OIL EXPORT EARNINGS

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SABAH BUSINESS GATEWAY HUB LAUNCHING IN OCTOBER

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PEAT LAND FOR OIL PALM IS ‘TIP OF THE BORNEON BOG’

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MALAYSIAJOINSHANDSWITH INDONESIA TO COUNTER US RULING ON PALM BIODIESEL

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EDITORIAL TEAM Publisher/Advisor Datuk Dr. Pang Teck Wai

The recent (May 23-25) Palmex Malaysia 2012 Exhibition and Conference in Sandakan focused on promoting oil palm-based small and medium enterprises (SME) development. Exhibitors showcased technologies suited for SMEs and speakers spoke extensively on the potentials for SME involvement in deepening the oil palm industry in Sabah.

Industrialisation is needed to up a nation’s GDP; and industrialization, as illustrated by the experiences of Korea, Japan, Germany and China, is best achieved by generating SME activities. Malaysia has come through a similar transformation. Through manufacturing growth from 19.8% of the GDP in 1978 to about 40% currently, it was able to grow out of a low-value agricultural economy to being a major trading nation of the world and a major exporter of manufactured products.

Art /Graphics Joztudio Advertising Sdn Bhd (855924-D)

Malaysia recognizes that SMEs are the building blocks for economic growth, and SMEs have indeed been the backbone of Malaysia’s economic growth in the last three decades. The Asian economic crisis of 1997-1998 (when FDIs fled to cheaper destinations) showed clearly that while foreign direct investments helped Malaysia’s manufacturing growth, the key to sustaining the momentum is to promote domesticled growth through SMEs.

Circulation & Subscription Enquiries Malvina Flant

In Sabah’s present context, SMEs in the oil palm sector are seen as crucial in helping it to attain the goals of the Economic Transformation Programme.

Editor CC Pung, JP ccpung2121@hotmail.com

(The views expressed in the articles herein do not necessarily reflect that of the publisher.)

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The size of Sabah’s oil palm industry (about onethird of Malaysia’s) offers many opportunities for domestic-led investment and economic expansion. The State government, through the Ministry of Industrial Development, is aggressively promoting SME development not only in the oil palm industry, but also in the oil & gas sector through the Sipitang Oil & Gas Industry Park (SOGIP), the most recent addition to MID’s list of agencies.

At just about 10% contribution to the State GDP, the manufacturing sector in Sabah has the best chance of expanding through utilization of its oil palm and O&G resources.

Sabah needs to industrialise, and rapidly, to add value to its resources, to create more and higher-wage jobs, generate more business opportunities and catch up on GDP per capita income.

SOGIP at Sipitang is attracting major O&G projects led by national petroleum company, Petronas. These projects are generating a multitude of business opportunities being taken up by domestic O&G contractors.

At the state-owned palm oil industrial clusters in Lahad Datu and Sandakan, major oil palm-based industries are being set up and they

are spawning a myriad of opportunities for SMEs. Although local oil palm players are beginning to warm to the prospects of participating in oil palm downstream processing, the momentum needs to be hastened not only because of the 2020 target of the ETP, but also to take advantage of the numerous incentives offered by the government under the oil palm NKEA (national key economic area) in replanting, mechanization, oleochemical development and raising oil extraction rate.

SME development is not just about creation of new enterprises. It is also about existing entities raising productivity and improving quality through innovation and application of new technologies. SMEs themselves must become aware that they are not insignificant. In fact, statistics shows that 99% of Malaysia’s total business establishments are SMEs, and 80% of them are micro-enterprises each employing less than five workers. Here in Sabah, we need to connect the dots between government agencies (state and federal), industry players, financial institutions and the market.

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LAHAD DATU TO HAVE SABAH’S FIRST RE-GASIFICATION TERMINAL Petronas (Malaysia’s national petroleum company) has announced in May 2012 that it has allocated RM1 billion for the construction of a re-gasification terminal at the Lahad Datu palm oil industrial cluster (POIC Lahad Datu).

It will be the first such facility in Sabah. This facility will supply gas to power a 300 megawatt generation plant to be built by Tenaga Nasional Berhad and to be sited in Phase 3 of POIC Lahad Datu.

But what is re-gasification.

The liquefied natural gas (LNG) chain consists of four main steps: gas production, gas liquefaction, LNG shipping and re-gasification.

LNG is primarily methane, nature’s simplest and most abundant hydrocarbon fuel - composed of one carbon and four hydrogen

atoms - which has been converted to a liquid by cooling it to a temperature of approximately minus 162°C at atmospheric pressure.

In its liquid form LNG occupies less space because its volume is 600 times smaller than as a gas. It can therefore be easily stored in tanks, pumped into ships and transported long distances to the markets where it will be regasified and distributed.

demand is expected to reach approximately 500 million tons per year by 2030, an increase of over 200 percent since 2005.

Liquefaction makes LNG transportable in large volumes for shipping to consuming countries.

Re-gasification is a relatively simple efficient operation, which consists of warming the LNG to a point where it reverts to its original gaseous state. The key element of this phase is the LNG Terminal.

When the tankers reach the Terminal, the LNG is unloaded and stored in special tanks at the same atmospheric pressure and temperature of minus 162°C used on the ships.

It is then sent to the Terminal’s re-gasification plant where it is reconverted to its natural gaseous state through a controlled increase in temperature. Once this process has been completed and the gas has naturally expanded in volume, it is ready to be dispatched through a pipeline.

Petronas has its first regasification facility at Sungai Udang in Melaka which is due for completion in July 2012. This facility, costing RM1.07 billion, has a send-out capacity of 3.8 million tonnes of gas per year.

Liquefied natural gas is one of the fastest growing sources of energy supplies. Global LNG

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“Now is absolutely the right time to come in and seriously look at the opportunities available in Sabah. I urge all the state government link companies to be more proactive and aggressively be involved in this sector and initiate a lot of efforts in discussions and to form understanding with major players in the oil and gas and Petronas with the objective that the state may have significant shares in the equity be it in the exploration and production, refining, energy, petrochemicals marketing and even storage activities that will push the state’s bilateral trade and investment figures to increase exponentially in the future.�

- Datuk Musa Hj Aman, Chief Minister of Sabah, at the Sabah Oil & Gas Conference on Apr 9, 2012 more on pages 15 - 17

Photo of a re-gasification plant belonging to Spanish multi-national Endsea showing that such facility can be safely located near populated areas.

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MINISTRY MULLS SME VILLAGE AT KKIP The Sabah Ministry of Industrial Development plans to create a SME Village in the Kota Kinabalu Industrial Park’s dedicated food hub in an effort to boost the state’s Small and medium entrepreneurs marketing and production performance.

Its minister Datuk Raymond Tan said the clustering of SMEs in one area will enable entrepreneurs to develop synergy to enhance their production and quality.

Datuk Tan (centre) launching the One District One Industry Entrepreneurs Carnival in Kota Kinabalu

The proposed village will benefit from the existing infrastructure in a matured KKIP, which has been in business since 1995. Support, including finance, from government agencies such as SME Corp and SME Bank will enhance the chance of success.

“We are going to develop (the village based on) the idea of clustering . We are thinking of creating as a food hub within the KKIP because there are many SMEs involved in food production,” he told reporters at the State SME - One District One Industry Entrepreneurs Carnival in Kota Kinabalu in June 2012.

According to Tan, the ministry also plans to emulate other countries in building an exhibition centre for the SME entrepreneurs so that they can hold exhibitions regularly as opposed to annually.

Meanwhile, SME Corp chairman Datuk Mohd Al Amin Haji Abdul Majid, said SMEs make up over 99 per cent of business entities in Malaysia and they are the catalysts for Malaysia’s economic growth.

In Sabah, there are 24,794 SMEs, representing 4.5 per cent of the country’s SMEs. Seventy-six per cent of the Sabah SMEs are micro entrepreneurs (with nearly 20% of them small enterprises while the rest are medium sized enterprises.

Nearly 88 per cent of the SMEs in Sabah operate in the service sector, while the remaining six per cent in the manufacturing and agriculture sectors.

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MALAYSIA’S SME POLICIES PRAISED Malaysia is in the forefront of small business development policies across the globe, says Ken Phillips, an international small business expert.

Hafsah talked on Malaysia’s policy towards small businesses development and its integration into national economic advancement. Phillips sees this as unique

Phillips, the chairman of Australia’s Council of Small Business Australia, said that compared to Malaysia, small business policies in developed economies of Europe, North America and Australia frequently look like kneejerk reactions to political imperatives rather than ‘thought through’ economic policy.

“What’s most interesting about this Malaysian approach is that they see a direct connection between a high-income economy and the proliferation and strength of small businesses. I can’t say that I have seen this sort of economic development analysis before and certainly not one translated into direct government policy and action.

Phillips highlighted the consistent government leadership as being important to Malaysia’s small business success and was impressed that Malaysia’s Prime Minister Datuk Seri Najib Tun Razak chaired Malaysia’s National Small and Medium Enterprises Development Council, according to a report in the New Straits Times of July 20, 2012.

“This leadership showed a level of sophistication to economic development (in the case in the small business sector) that is often hard to find in the so-called advanced economies,” he was quoted as saying.

Phillips is a leading small business authority and heads Australia’s Independent Contractors’ Association. He conducts global research and commentary on government politics towards the self-employed.

Along with contributions to international SME academic publications, his book entitled Independence and the Death of Employment is one of the few detailed publications on the self-employed.

Phillips’ comments followed a presentation by Datuk Hafsah Hashim, chief executive officer of SME Corp Malaysia, at the global small business conference in Wellington, New Zealand, in June 2012..

The International Council for Small Business World Conference is an annual gathering of top academics, senior government officials and SME experts.

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“Within the orthodoxy of what constitutes most economic development policies, the Malaysians stand out as different and in front.

What’s almost unique is the degree of hard evidence-based analysis driving their policies.”

Phillips said Malaysia’s policy success is apparent.

“This is demonstrated by the growth of SME contribution to the Malaysian gross domestic product since 2004 and exceeds overall GDP growth.

“Looking forward, the fourth phase of Malaysia’s overall development agenda involves the creation of business eco systems for SMEs,” he said, adding that small business development was intended to take Malaysia from a middle-income economy to an advanced and high-income economy by 2020.

Sabah Chief Minister Datuk Musa Hj Aman (front row, 4th from right) and cabinet ministers at the launch of the SME Carnival.

SME SECTOR AIMS TO ACHIEVE 8.7% ANNUAL GDP GROWTH SME Master Plan launched

6 High Impact Programmes Strengthening support institutions SME Corp rebranded as One Referral Centre

Malaysia’s small and medium enterprise (SME) sector aims to achieve average gross domestic product (GDP) growth of 8.7 per cent annually from this year until 2020, through the SME Masterplan 2012-2020 launched by Prime Minister Datuk Seri Najib Tun Razak.

SME Corp Malaysia said the contribution from SME sector to GDP is targeted to increase to 41 per cent in 2020 from 32 per cent at present, while contribution to employment and exports will increase to 62 per cent and 25 per cent from the current 59 per cent and 19 per cent, respectively.

“The SME master plan marked a new beginning in the development of SMEs by giving focus to a new approach to take them to a higher level by stimulating growth through increase in productivity and innovation.

“The plan will set the policy direction for SMEs in all sectors to achieve high-income nation towards 2020 in line with the New Economic Model,” according to the statement released following the launch of the master plan.

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Datuk Musa (centre, photo right) in a teleconference with Prime Minister Datuk Najib Tun Razak (left, photo left) in conjunction with the launching of the SME Carnival.

The SME Master plan also aimed to increase company registrations by six per cent per year, expand high-growth and innovative companies by 10 per cent annually as well as raise labour productivity from RM47,000 in 2010 to RM91,000 in 2020.

It will also formalise efforts to promote growth and fair competition in which the informal sectors’ contribution to gross national income would be reduced from 31 per cent currently to 15 per cent in 2020.

The SME Master plan proposed six High Impact Programmes (HIP), namely, integration of registration and licensing of business establishments, technology commercialisation platform, SME investment programme, going export programme, catalyst programme and inclusive innovation.

The programmes will be strengthened by other complementary efforts, thus forming 32 initiatives altogether which include creating demand for SME products and services, encouraging resource pooling and services sharing, reducing information asymmetry and building capacity and knowledge of SMEs. SME Corp’s role as a coordinating agency will be upgraded to central agency considering it was given the mandate to spearhead the plan and carry out the functions of coordination and evaluation of SME programmes which involved 15 ministries and 60 agencies.

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The agency will be strengthened and given bigger power and autonomy through new laws, of which among the changes that will be implemented are strengthening support institutions to meet the needs for the implementation of HIP and providing sufficient funds allocation to develop system and skills.

“The transformation to implement the new mandate will be carried out in stages.

Good corporate governance structure to institutionalise the implementation through driving committee at the highest level and at the working committee level will also be done.

In line with this transformation, SME Corp Malaysia will be rebranded as One Referral Centre (ORC) for the development of micro, small and medium enterprises in the country,” according to the statement.

Palm oil to be Sabah’s economic thrust The palm oil industry will anchor the economic thrust in Sabah as the nation strives to become a high-income nation by 2020.

understanding beteeen state-owned Sawit Kinabalu and Universiti Malaysia Sabah to intensify training and research on the palm oil industry.

Palm oil is now the biggest contributor to the State with 1.4 million hectares planted. Sabah stands as the main palm oil producer in Malaysia.

“Our rich natural resources with vast fertile lands allow us to further improve our economic status and I believe there is still room for more development in this industry with more research and development programmes,” Musa said.

Chief Minister Datuk Musa Aman said the crop played an important role in the government’s aspiration to transform the nation, and Sabah welcomes any effort to further develop the industry. the

He said this after witnessing signing of a memorandum of

He also witnessed the presentation of RM1 million by Sawit Kinabalu as payment for daily distribution of the New Straits Times and Berita Harian to 50 schools and two universities in Sabah for a year.

BIOMASS SECTOR TO ATTRACT POTENTIAL FDI WORTH RM3.5b The biomass sector in Malaysia is expected to attract two potential major foreign direct investments (FDIs) worth about RM3.5 billion in the near future, Bernama reported.

The Technical Advisor to the EU-Malaysia Biomass Sustainable Production Initiative (Biomass-SP), Datuk Leong Kin Mun said an investment of US$300 million is expected to come from a US-based company to establish a bio-sugar plant.

He added that a Chinese company is seeking to invest RM2.5 billion in a biomass power plant.

“Both companies have expressed the desire to establish their plant here under the Biomass-SP and we are now working with all related parties to have the plans materialize.

“There is no specific timeframe for the projects to start as there are many issues to

be addressed before the deal is sealed and this includes the sustainability of feedstock supply,” Leong said at the EU-Asia Biomass Best Practices and Business Partnering Conference 2012 in Kuala Lumpur last May. More than 500 delegates from 25 countries attended.

The conference highlighted three major potentials for the conversion of biomass into high value products namely bio energy, ecoand agricultural products as well as high value chemicals.

It is understood that the US company is a leader in sustainable chemicals while the Chinese company is Wuhan Kaidi Holdings Investment Co, through its unit, Wuhan Kaidi Electric Power Co. The companies have met with state officials in Sabah, Terengganu and Perak and have submitted proposals to the Sustainable Energy Development Authority, SEDA.

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SABAH LEADS THE NATION – RM10 B IN PRIVATE INVESTMENTS IN Q1 Malaysia ranked 14th in global competitiveness 10th on FDI Confidence Index

Sabah was the most successful state in attracting private investments in the first quarter of 2012, according to International Trade and Industry Minister, Datuk Mukhriz Tun Dr Mahathir.

Selangor, Johor, Sarawak and Terengganu were the next best performers, he told Parliament on June 13.

Private investments in the period in Sabah totaled RM10 billion, Johor (RM2.6 billion), Sarawak (RM2.3 billion) and Terengganu (RM1.4 billion).

Mukhriz attributed the high investments in Penang and Selangor – two states ruled by the opposition alliance – to the infrastructure previously developed there by the Barisan Nasional Goverment.

“These two states are investment destinations due to their complete infrastructure such as ports, roads, universities and utilities, which were definitely due to the efforts of the previous BN administration,” he said.

Malaysia attracted RM17.9 billion in investments, including RM10.1 billion in domestic investments, for 268 projects in the manufacturing sector between January and April 2012.

Last year, Malaysia received investments worth RM56.1 billion in the manufacturing sector involving 846 projects, he said, adding the country also attracted RM32.9 billion in Foreign

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Datuk Mukhriz Tun Dr Mahathir

Direct Investments, compared to RM29.3 billion in 2010 and RM5 billion in 2009.

Mukhriz said the Institute for Management Development (IMD) based in Lausanne, Switzerland ranked Malaysia 14th in economic competitiveness this year, up from 16th last year.

Steps taken to raise Malaysia’s competitiveness included improving the public services system and enhancing transparency and accountability to promote a more sustainable private sector, he said.

IMD also found Malaysia has retained its second spot among countries with Gross Domestic Product per capita of less than US26,000 ahead of China and Chile, Mukhriz said, adding Malaysia also improved to 10th spot in the 2012 A.T. Kearney 2012 Foreign Direct Investor Confidence Index, from 20th in 2010.

PALMEX 2012 SANDAKAN DRAWS STRONG INVESTOR INTEREST The Sabah state government is committed to optimising its resources through value-added downstream operations.

Chief Minister Datuk Seri Panglima Musa Haji Aman said the setting up of the palm oil industrial clusters (POICs) in Lahad Datu and Sandakan was testimony of the government’s commitment in encouraging the establishment of businesses that added value to raw products like Crude Palm Oil (CPO).

“Much wealth can be generated by adding value to raw products, and now we are seeing growing interest among investors to set up base at the two palm oil industrial clusters.

“The Lahad Datu palm oil industrial cluster alone has attracted 40 investors, making it an industrial park with the largest concentration of investors in palm oil, with a combined investment value of about RM5 billion.

“The federal government has also recently announced an allocation of RM490 million for the development of a container port in the Lahad Datu palm oil industrial cluster that will allow for reliable and better shipping of palm oil products and will help further boost economic growth in Lahad Datu,” he said at the opening ceremony of Palmex 2012 Technology Exhibition in Sandakan at the Sandakan Community Hall.

Speaking about the event, he said the expo which was participated by about 130 companies not only drew the attention of foreign investors

and technology companies to the potentials in Sabah’s oil palm sector. It also attracted small and medium enterprises as there was money to be made beyond selling fruit bunches to be processed into CPO. “The participation of so many exhibitors from outside Malaysia clearly testifies to the potential that Sabah has in becoming a regional and eventually global centre that leverages on palm oil.

“I hope you will make use of this exhibition to form new partnerships and networks,” Musa said.

Musa hoped that local institutes of higher education and research centres would work with players in the palm oil industry to create technologies that could harness raw materials, including for bio-fuel.

“The downstream operations may boost research and development, and help generate new sources of creativity.

“This will also encourage the creation of quality jobs for our youths, especially those on the east coast of Sabah and we will start to see more locals venturing into downstream processing of this edible oil,” he said.

As a major palm oil producing state, Sabah must also continue to focus on what to do with wastes that came from this sector.

“In a world that is focusing on sustainable management of resources and wastes, Sabah must not miss the opportunity of taking part in solutions that deal with oil palm biomass.” he added.

He also encouraged industry players to work with companies that have solutions, and with research institutions to venture into this equally important segment of the oil palm sector.

(Source- The Borneo Post)

Datuk Musa (centre) launching Palmex 2012 Exhibition.

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Datuk Raymond Tan (3rd left) at the Palmex Conference held in Sandakan.

SABAH EXPANDS OIL PALM INDUSTRY THROUGH DOWNSTREAM PUSH The Sabah Government is expanding and deepening the oil palm industry by aggressively promoting downstream valueadding investments aimed at creating new wealth, new businesses and new jobs.

“The key to bringing about all this is the promotion and development of a whole range of small and medium enterprises,” State Industrial Development Minister Datuk Raymond Tan said at the opening of the Conference on Outlook in Palm Oil Technology for SMEs in Sandakan In the context of ensuring oil palm becoming a key contributor to Sabah’s

development and in a sustained and sustainable way, the providers of resources are needed to identify with the objectives of the Government for the State, the businesses and the people move forward in tandem, Tan who is also POIC Sdn Bhd chairman, said.

“This is really Malaysia’s Economic Transformation Programme in a nutshell. The ETP includes a range of national key economic areas, or NKEAs, one of which cover oil palm. This NKEA has great significance to Sabah because we produce about 34 per cent of the palm oil in the country,” Tan added.

The Government targets to triple the income - continue next page -

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from the oil palm sector by 2020 through replanting with higher yield oil palm trees, mechanization to improve plantation efficiency, improving oil extraction rate, production of highvalue oleo products and to optimize the utilization of oil palm biomass, he continued.

Sabah’s comparative advantages are, amongst others, its availability of raw materials to support a whole range of SMEs. We are looking at investment in oleo chemical plant that will Datuk Raymond spawn a myriad of SMEs to Palmex 2012. produce anything from soap to candles, personal care items to pharmaceutical products, Tan said.

witnessing the launch of a oil palm magazine in conjunction with

“We are looking at SMEs using oil palm biomass to make pellets for fuel, palm kernel cake and palm fronds into animal feed, mill gas into energy and empty fruit bunches into organic fertilizers,” the Minister said.

The Minister noted that the impact of the oil palm was surely and steadily spreading to all of Sabah. Thus the Government is working on encouraging young people to take ownership of the industry, to recognize themselves as stakeholders, not bystanders.

“The development of oil palm-related SMEs will give rise to demand for skilled manpower locally. As it expands, we need local workers for the entire value chain of the industry. Given palm oil’s growing importance among the 12 types of vegetable oils in demand around the world, the evolving of a

Malaysian work force with expert knowledge of the industry simply translates into global employment prospects and prosperity,” Tan added.

Also present were POIC Sabah Sdn Bhd CEO Datuk Dr Pang Teck Wai, Department of Industrial Development and Research Director Patrick Tan, EMPA chairman Haji Othman Walat and MPOA chairman Muhammad Tarmizi Taufek.

The guests speakers at the one day programme were Dr Bas Melssen (Agensi Inovasi Malaysia), Professor Luuk van der Wielen from the Netherlands, Gabriele Bacchini, Oleochemical Product Manager, Desmet Ballestra, Dr Loh Yueh Feng (MTIB), Mohd Ramadhan Khalid (MPOB) and Julia Majail (RSPO).

Palmex 2012... growing interests in downstream sector.

(Source: New Sabah Times)

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Sabah Oil & Gas Conference 2012

MUSA: SABAH IS GOOD FOR BUSINESS

Datuk Musa visiting the SOGIP exhibition booth.

The state government strives to create a conductive environment for business and investment.

Investors can be assured that Sabah is politically stable and peaceful as is true of Malaysia as a whole.

“We also have clear and defined economic and development policies that do not change overnight and that itself is an assurance of stability,” Chief Minister Datuk Seri Musa Haji Aman said in his speech at the 2012 Sabah Oil and Gas Conference and Exhibition.

The government was also committed to providing sufficient and efficient utilities and infrastructure facilities, and much of its development budget in fact was allocated for such purposes.

“We have been engaging with the federal government in the area of provision of funds for physical development of infrastructure and industrial facilities and with Petronas on

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matter such as gas supply.

“We will work with Petronas and the Malaysian Investment Development Authority (MIDA) to attract investors to establish oil and gas industrial activities in the state,” he said.

He also said there were a number of gas-related projects in various stages of development and they included the Sabah Oil and Gas Terminal (SOGT) in Kimanis, the SabahSarawak Gas Pipeline, gas-fired power plants in Kimanis and Lahad Datu.

These projects were generating investments, creating quality jobs, developing a whole range of value chain activities and ultimately will improve socio-economic development.

“It is worthwhile to mention that the urea and ammonia plant alone is estimated to bring in about RM4.5 billion worth of investment value and provide about 2,450 jobs as well as employment for some 2,000 people during the

Sabah Oil & Gas Conference 2012

construction of the facilities,” Musa added.

The Chief Minister also reminded the oil and gas sector on the need to constantly place emphasis on environmental and health safeguards.

“As stated in a number of plans, sustainable development is key to seeking balanced growth for the nation and state.

“The decision to form oil and gas industrial clusters will allow for better monitoring of environmental rules and regulations and I trust players in this very important sector will always be mindful of their responsibilities to the planet and people,” he stressed.

as spin-offs from oil palm, agriculture and the services sectors that include the all important tourism industry.

Also present at the launching were Deputy Chief Minister Datuk Yahya Hussin, Minister of Industrial Development, Datuk Raymond Tan Shu Kiah, Minister of Youth and Sports, Datuk Peter Pang, Petronas Carigali vice-president, Mohd Johari Dasri, organising chairperson Datuk Adeline Leong as well as over 250 participants including from five foreign countries.

(Source: New Sabah Times)

Meanwhile, Musa said the government also gives priority to human capital development and that apart from tertiary institutes, there were a number of skills training and research centers focusing on meeting Sabah’s specific human resource needs.

To promote industrialisation, the Chief Minister said the government has also developed modern and well-equipped industrial parks like the Kota Kinabalu Industrial Park (KKIP) and Palm Oil Industrial Cluster (POIC) in Lahad Datu and Sandakan.

Apart from oil and gas, there were opportunities in a range of other sectors such

Some of the exhibition on display at the conference.

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Sabah Oil & Gas Conference 2012 Excerpts of the keynote address

by Datuk Raymond Tan, Minister of Industrial Development Sabah I applaud your interest and participation in this conference and exhibition. As a sunrise industry at a time when optimizing our resources holds the key the expansion of the Sabah economy, we need everyone on board for the full potentials of our oil and gas reserves to be realized.

During a forum on oil and gas in Kota Kinabalu last year, I was asked to talk about the role of governmentl i n k e d companies in the development of the oil and gas industry in sabah. In that talk, I emphasized that it will take more than the GLCs. I emphasized that IT IS UP TO US - people in Sabah, businessmen in Sabah, contractors, academicians, politicians - to identify and seize the opportunities.

IT IS UP TO US to claim our stakes in the oil and gas sector.

IT IS UP TO US to recognize the practicality of using our good relationship with the Federal government and Petronas to ensure that we in Sabah get a fair share of the O&G pie.

It is a big pie. It has always been a big pie and will continue to be so with all the new oil and gas fields discovered in offshore Sabah.

IT IS UP TO US to apply wisdom and tact, build alliance, working within rules and conventions, and within limitations contained in agreements signed a long time ago, and focus our energies on more productive and tangible pursuits. We should concern ourselves with securing the billions worth of contracts, the

countless jobs and businesses opportunities, and the unimaginably massive spread effects all these will have in the economy of Sabah, and how all that will propel Sabah forward as an integral part of Malaysia as envisaged in Vision 2020.

Sabah has an estimated oil reserves of 2.3 billion barrels. Based on current rate of production, these reserves will run out in 43 years. In gas, we have 12.1 trillion cubic feet in reserves that will last us 30 years.

Based on these resources, we have been told that about RM45 billion worth of investments are coming into Sabah’s oil and gas sector.

The numbers are big. For example, Petronas will have about RM 17 billion worth of downstream projects between now and 2015.

And, from now until 2014, some 28 billion ringgit worth of upstream projects will be generated from Sabah’s oil and gas fields.

Now that we know that we are richly endowed with oil and gas, the key question has to be; what can we do to make Sabah richer? That is, following on from the oil and gas industry, what are the investment and employment opportunities? Here, I like to propose two specific areas for us to think about.

1.INDUSTRIAL LINKAGES In all industrial sectors, investment and employment opportunities are available broadly in the forms of backward and foreward industrial - continue next page -

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Sabah Oil & Gas Conference 2012 linkages. Backward linkages refer to a wide spectrum of activities and skills needed to bring oil and gas out of the ground before they can be sold to the market. It is widely acknowledged that there are four main factors determining the advancement of backward linkages in the oil sector. These are i. ii. iii. iv.

local content policy and practice existence of domestic industrial base creation of knowledge networks; and supportive institutions for the development of the technological and innovative capacities.

Although Sabah has been mining petroleum and gas for several decade now, all these four areas are little explored. Hardly any Sabah-based companies are involved in the upstream activities either directly or indirectly. To start with, we may not have many Sabahans with the necessary skills to be actively employed in the upstream value chain industrial product segments even if the oil exploration and producing companies want to take in Sabahans. This has to change if we want to be actively involved in the industry.

Once we have the oil and gas, there are numerous processes of transformation before crude oil and gas become final products such as gasoline and kerosene. Presently, the nation’s major downstream facilities are concentrated in Melaka, Terengganu and Sarawak. Now that Sabah posseses significant amounts of both oil and gas, the situation has to change for the better. What this means is we need to begin at the very least, by setting up crude oil refineries, petrol chemical and gas processing facilities, all of which will in turn spawn factories making fertilizers, detergents, polymers, plastics and even alternative fuel.

2. DEVELOP SMEs My second point states that crude oil and gas found must remain in the state and process in Sabah before they are exported. Oil and gas found in Sabah must not be allowed to just “flow out” or “pass through” to regions outside of Sabah.

Because, if for instance, oil and gas are allowed to be exported in their raw form, we will get nothing more than the 5% royalty.Therefore, it is obvious that if oil and gas are used as energy to support

energy intensive industries or be processed into higher value products such as urea, we would have created more jobs and investment opportunities in Sabah.

We all know that in Sabah, manufacturing’s share of GDP is less than 10per cent. Given the importance of value-adding manufacturing in job creation, talent retention, economic diversification and resource optimization, I have often lamented about Sabah having missed many golden opportunities to industrialise. We used to have lots of timber, rubber and cocoa. Today, regrettably we don’t really have downstream sectors in these commodities that we can be proud off.

Statistics tells us that of the estimated 26,000 small and medium enterprises in Sabah, only about 30per cent are into manufacturing, and about 60 per cent are in services. The manufacturing column must grow as part of Sabah’s industrialization progresses.

SMEs will grow when our resources are retained for processing into higher value-added products. Any plan to move resources out of the state for processing elsewhere must be reexamined if for no other reason than the fact the under the Halatuju development priorities initiated

by Chief Minister Datuk Musa Haji Aman, manufacturing is one of them. Our resources give us the comparative advantages. To export our resources in raw form is tantamount to shooting our industrialisation objectives in the foot.

The Sabah government today is seriously doing something about expanding manufacturing and we are seeing some success, especially with our palm oil industry. We now have two palm oil industrial clusters in Lahad Datu and Sandakan respectively. They are both doing well, and have attracted more than 4.5 billion ringgit in investments just in the last few years.

We want to do the same with oil and gas.

We are glad that Petronas is building the Sabah Oil & Gas Terminal at Kimanis, the re-gasification terminal in Lahad Datu and the urea plant at Sipitang. The Sabah government has initiated the Sipitang Oil & Gas Industrial Park and given new roles to its Sabah Energy Corporation and stateowned Petrosab Sdn Bhd and POIC Sabah Sdn Bhd to see to a truly meaningful state participation in a national industry.

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LABOUR SHORTAGE HITS PALM OIL EXPORT EARNINGS

….billions of ringgit lost; 40,000 foreign workers needed to harvest ripe fruit bunches Malaysia is losing billions of ringgit in palm oil exports because there is not enough foreign workers to harvest fruit bunches in the oil palm fields.

The Malaysian Palm Oil Board estimates that the industry needs to hire another 40,000 foreign workers to harvest the ripe fruit bunches in order to achieve the 19.3 million tonnes of oil output target.

“Current planting materials are already capable of producing six tonnes per hectare in a year, but the country’s annual oil yield average is still stuck at four tonnes per hectare,” said IOI Corp Bhd executive chairman Tan Sri Lee Shin Cheng (photo above).

“The trees are fruiting, but there’s acute shortage of harvesters and this is affecting the country’s palm oil export earnings,” he told reporters on the sidelines of MPOB seminar titled ‘Labour – Key driver for Continued Sustainability of the Oil Palm Industry’ held in Kuala Lumpur on May 14.

“If the government approves of another 40,000 foreign workers, we can reduce wastage and surpass the 19.3 million tonnes output target easily,” Lee said.

It is estimated that millions of tonnes of fruit bunches rot in the fields because planters are not able to hire enough foreign workers to harvest them.

Assuming there is a five per cent wastage or loss of a million tonnes of crude palm oil, which works out to five million tonnes of fruit bunches left rotting across the country’s oil palm fields.

At a conservative pricing of RM3,000 per tonne, it translates into at least RM3 billion loss in export opportunity and millions of ringgit in tax loss to the federal and state governments.

Many oil palm planters are already mechanizing agriculture practices wherever possible and offering better wages in the estates.

Despite this, many locals continue to shun plantation jobs.

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Lee highlighted the industry’s wastage in the fields is also the government’s loss in tax collection.

Deputy Plantation Industries and Commodities Minister Datuk Hamzah Zainuddin, who officiated at the seminar, acknowledged that the oil palm industry is the most heavily taxed sector in the country.

Planters are paying windfall tax, cooking oil cess, research and marketing cess, sales taxes to the Sabah and Sarawak governments on top of usual corporate tax and foreign workers’ levies.

He pledged support that his ministry will continue to forward the oil palm industry’s appeal to the Home Affairs and Human Resources Ministries for an additional 40,000 foreign workers, so that industry can achieve the RM80 billion target in export again.

“Last year, we did well as palm oil prices were high,” he said adding that MPOB had recently updated 2011’s palm oil exports amounted to RM83.4 billion.

In mid May, the third month benchmark palm oil futures on the Malaysian Derivatives Exchange closed RM125 lower, or 3.8 per cent at RM3,150 per tonne, the worst single-day loss since February this year.

When asked to comment, Hamzah replied: I don’t see palm oil dropping below RM3,000 per tonne, this year. Palm oil prices are likely to stabilize in the immediate term as global edible oil supply is still lagging behind demand.”

Business Times May 15, 2012

Malaysia’s oil palm industry is foreign labour-dependent.

Business in The Cloud 2.0

SABAH BUSINESS GATEWAY HUB LAUNCHING IN OCTOBER

Eric Cheng (2nd left) briefing Datuk Raymond Tan.

The Ministry of Industrial Development has given its support to the one-day Business in the Cloud 2.0 (BITC) conference to be held later this year to further innovate local small and medium enterprises (SMEs) into the new business world.

The event scheduled for October 16, will also see the launching of the Sabah Business Gateway Hub serving as a one-stop business centre to answer the needs of local and foreign investors interested to start up SMIs or SMEs in the state.

Eric Cheng, managing director of Core System Integration SdnBhd, the chief organiser of the event, disclosed that BITC 2.0 is a sequel to a similar event held in July last year.

He called on Industrial Development Minister Datuk Raymond Tan Shu Kiah to brief him on the event.

Tan expressed the support of his ministry to the event, pointing out that this private sector initiative would directly support the ministry’s efforts to promote the development of SMEs in Sabah.

The proposed business gateway hub to be set up in the state capital would also serve as a gateway to provide rapid business deployment or start-up of SMEs and SMIs in the state.

It would become a centre for business communication, collaboration, supply chain

and an access to latest information on SME/SMI development in Sabah.

“It shall be a hub for investors and entrepreneurs to share, discuss and exchange views via an interactive platform, like blogs, forums, discussion groups, live chats and polls,” Cheng said.

The development of a business hub in Kota Kinabalu is part of a transformation programme of a news portal known as www. sabahtoday.com.my established in August 2009 that provides local news with focus on industries in Sabah, he added.

“The SabahToday is managed by a local firm, Sync Max, featuring news on government, industries, tourism and other topics and thus far had 420,000 visitors with an average of between 800 to 3,500 visitors daily,” he said.

Cheng explained that the main objective of the conference is to assist participants in optimising their business process with highly effective solutions.

“We shall introduce and promote cost effective mobile and cloud solutions to local SMIs and SMEs,” he added.

The event partners are expected to include corporate bodies like CelcomAxiata Malaysia (Sabah), Avet Azure Malaysia, IBM Malaysia, EcentrixSdnBhd and Sync Max Sdn. Bhd.

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ON THE SIDELINES

PEAT LAND FOR OIL PALM IS ‘TIP OF THE BORNEON BOG’ From 1990 to 2010, Indonesia’s area of oil palm (Elaeis guineensis) plantations increased 600%, to 7.8 million ha. Land-use change is the main source of the nation’s greenhouse-gas emissions and the country is one of the top ten emitters worldwide. But many oil palm leases have not yet been converted to the crop, as a detailed study of Ketapang District in the West Kalimantan province of Indonesian Borneo has revealed.

“Our work is the first to explore the lag between land allocation and oil palm development,” Kim Carlson of Yale University, Woods Institute for the Environment, and Stanford University, US, told environmentalresearchweb.

“By compiling governmental lease records, we show that oil palm plantation extent in 2012 is only the ‘tip of the Bornean bog’.”

According to Carlson, roughly 80% of oil palm leases in the study region have yet to be cleared and planted; the majority of these leases are located on carbon-rich peat land.

“Thus, while oil palm has been a relatively minor direct contributor to deforestation and carbon emissions through 2008, future oil palm expansion will become a significant source of regional carbon emissions if all allocated leases are developed,” she said.

Between 1989 and 2008, fire was responsible for 93% of deforestation. But by 2007–2008 oil palm directly caused 27% of total deforestation and 40% of peat land deforestation in the study area.

Carlson says that draining of peat lands for oil palm agriculture generates ‘committed’ long-term carbon emissions. “Protecting peat lands and forests from all forms of landcover change, including oil palm plantation expansion but also wildfires, especially during El Niño-related droughts, is critical to reduce regional carbon emissions,” she said.

Carlson, and her team found that more than half of the new oil palm from 2001–2008 was planted in converted agro-forests and

agricultural fallows. Such community-managed lands have not been included in previous examinations of sources for agricultural expansion in Indonesia. Carlson believes that their conversion “may have unexpected implications for resident rural farmers”.

What’s more, by modelling future scenarios the team concluded that carbon conservation does not automatically generate benefits for local communities. Their results suggested that while a moratorium on oil palm expansion into forests and peat lands, combined with effective protection of remaining forests, can reduce regional carbon emissions below projected business-as-usual levels, around 30% of community landholdings will still be converted to oil palm.

“Focusing on carbon alone may actually redirect oil palm plantations onto community lands because shifting agricultural mosaics tend to have lower carbon stocks than peat lands or intact forests,” said Carlson. “Palm oil sustainability assessments should include not only quantification of land sources for and carbon emissions from plantations, but must also consider the means of land acquisition from local land users. For example, local landholders should be equitably compensated for their landholdings.”

Since little information on land cover, demography or administrative boundaries was available for West Kalimantan in the early 2000s, the researchers conducted extensive field surveys. “We chose to work at high spatial and temporal resolution but in a relatively small region so that we could develop a truly robust research project,” explained Carlson.

The team also used satellite data.

“Because the major causes of land-cover change, such as fires and logging, in Kalimantan occur on an annual basis but can ‘disappear’ to satellite detection as vegetation re-grows, compiling an almost-annual time series of satellite imagery was critical,” said Carlson.

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“We went as far back in time as possible given the limitation of Landsat satellite imagery (1989) because current carbon stocks are dependent on past land-use transitions. With this satellite data, a key breakthrough was the ability to discriminate shifting agricultural or ‘swidden’ lands – crucial for local agrarian livelihoods – from other land cover types such as logged forests or oil palm plantations.”

Now the researchers plan to apply what they learned in Ketapang to the wider Kalimantan region. “Our Indonesian collaborator, Living Landscapes Indonesia, will assist by collecting province- and district-level data we’ll need to ensure our work remains

realistic and locally informed,” said Carlson.

“We also hope to explore how indirect landuse change from oil palm plantations – such as displaced smallholder agriculture or escaping fires – contributes to regional deforestation and carbon emissions.”

The team, who reported the study in PNAS, would also like to assess how oil palm development affects freshwater stream ecosystems.

By Liz Kalaugher (Editor of environmental research web)

A typical peat marsh... Carbon Sink.

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ON THE SIDELINES 2

MALAYSIA JOINS HANDS WITH INDONESIA TO COUNTER US RULING ON PALM BIODIESEL The palm oil industry has hired lobbying powerhouse Holland & Knight to help overturn the Environmental Protection Agency’s finding that palm oil-based biodiesel fails to meet greenhouse gas emissions targets under the country’s Renewable Fuels Standard, according to the website mongabay.com.

“Lobbying disclosure records show that the Malaysian Palm Oil Council, the Indonesian Palm Oil Board and Neste Oil have brought on Holland & Knight, which is among K Street’s highest revenue lobby shops,” Mongabay reports, quoting Ben Geman of The Hill’s Energy and Environment Blog. Holland & Knight is a law firm.

The move comes after Singapore-based Wilmar International, the world’s largest palm oil producer and trader, hired lobbying firm Van Ness Feldman on the same issue.

The EPA based its January (2012) decision on analysis of lifecycle emissions from palm oil production, which at times occurs at the expense of carbon-dense rainforests and peat land.

The palm oil industry rejects the findings, which indicate palm oil-based biodiesel reduces emissions 11-17 percent compared with conventional diesel. The Renewable Fuels Standard requires fuels to meet a 20 percent emissions reduction threshold. Under the ruling, palm oil biodiesel can still be used in the U.S., but it won’t count as a low carbon fuel.

Environmentalists say the EPA’s ruling is actually conservative, noting that a larger area of rainforest and peat land has been converted for oil palm plantations than assumed by the EPA. Clearing of these ecosystems produces substantial emission of greenhouse gases especially methane, which outweigh the climate benefits of oil palm plantations established in their place.

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The renewable fuels standard targets 7.5 billion gallons of ‘renewable’ fuels to be blended into gasoline by the end of 2012. The initiative aims to reduce dependence on foreign oil and cut emissions from transportation, but some analysts have questioned the effectiveness of the program, since the bulk of ‘renewable’ fuel is expected to come from corn ethanol, which environmentalists say has mixed climate benefits.

(Source:Mongabay)

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www.sabah.gov.my/mid For further information, kindly contact POIC Sabah Sdn Bhd Tel: (6088) 272 261 / 230 196 Printed by: Joztudio Advertising Sdn Bhd (855924-D)

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