Looking ahead to a new era of growth
Malaysia’s largest state is one of the world’s largest timber exporters. However, the focus of its new economic development corridor will be on industries powered by renewable energy

Fly over the eastern Malaysian state of Sarawak and below you will see thousands of miles of lush deep green rainforest carpeting an undulating terrain crossed by wide rivers. Situated on the island of Borneo, Sarawak is the largest of the Malaysian states and, at 48,000 square miles, is almost as large as Peninsula Malaysia itself.

Sarawak is rich in natural resources, from agricultural land and tropical timber to coal, crude oil and natural gas. Mining, farming and forestry make up about 40 per cent of its gross domestic product – indeed the timber industry provides employment for around 40 per cent of the state’s working population.

However, like the rest of Malaysia, Sarawak has set itself the goal of becoming a fully developed industrialised state by 2020. The focus now is on promoting manufacturing, commercial agriculture, construction and the services sector, including tourism, all of which offer opportunities for local and foreign businesses.

Sarawak is one of the world’s largest timber producers and exporters, earning up to RM9 billion (£1.4 billion) a year from logs, sawn timber and wood panel products like plywood. As the forests are the state’s most important resource, strict log-production quotas have been put in force to protect them and ensure sustainability. Forest management is based on selective logging, reforestation and increased downstream activities.

Given its abundance of productive land, Sarawak also has the potential to become the largest producer in Malaysia of palm oil – and also of pulp and paper. Oil palm estates already complement the timber industry, with 70 per cent of the state’s target of one million hectares devoted to cultivation achieved. At the same time, large areas of land have been set aside for plantation to kick-start the pulp and paper industry.

Sarawak has undergone significant socio-economic development over the last 25 years, as an essentially rural society gives way to steady urbanisation and industrial development. Manufacturing, which as recently as the early 1990s was mainly limited to semi-processing of raw materials, has moved up a gear into extensive downstream production of value-added products.

Abdul Taib Mahmud Chief Minister of Sarawak

Kutching, the state capital and fourth largest city in Malaysia (pictured above), has become one of the most attractive cities in southeast Asia, and has been recognised by the World Health Organisation as among the world’s healthiest cities to live in. The former oil town of Miri was officially declared a resort city in 2005, while Sibu has become Sarawak’s second largest city.

The petrochemicals industry has transformed Bintulu from a lowly fishing village to the state’s industrial centre, attracting billions of ringgit in foreign direct investment. The LNG plant, opened 25 years ago, has made Malaysia the third largest gas exporter in the world, after Indonesia and Algeria, and is reckoned to be the largest LNG production facility on a single site. Bintulu Deep Sea Port is one of the most modern and efficient in the region, and the new airport means that Bintulu can now be served by bigger aircraft such as the Boeing 737.

“Sarawak has emerged not only as a thriving state but as one that plays an important contributory role for the whole nation,” says Abdul Taib Mahmud, the state’s Chief Minister.

“GDP has increased by six times over the last 25 years, and the poverty rate has gone down from 38 per cent to under 6 per cent. Over time, we have managed to diversify the economy and we have shown good discipline in terms of management to gain credibility in the financial world.

“We have been able to achieve a balance between the environment, social health and the economy in the course of our development. We have championed demonstrations to protect the environment. We spent a long time trying to convince people that their futures lay in preserving their native land and not in exploiting it.”

In its 45th anniversary year, Sarawak continues to expand its infrastructure. Major ongoing state-funded projects include the Bakun Dam and coastal roads, which will open up a new era of development for areas adjacent to the state’s long coastline.

Due to start this month and to be completed by 2010, construction of a RM16 billion Sabah-Sarawak gas pipeline by Petronas will transport the gas from the Sabah Oil and Gas Terminal in Kimanis, Sabah, to the Petronas Liquefied Natural Gas Complex in Bintulu. The project is expected to create substantial economic spin-offs for Sarawak, giving a boost to the local construction industry and ultimately increasing revenue for Bintulu Port.

The state government gives high priority to transforming Sarawak into a knowledge society. Strong emphasis is being placed on developing information technology, using research and development to boost production and strengthening links between centres of learning and industry. Given that it possesses some of the richest natural resources on earth in terms of fauna and flora, biotechnology is seen as a sector with huge investment potential.

“We have to change the type of human resources that we develop,” says Mr Taib. “We are putting more emphasis on technical qualifications. This is the biggest challenge, not only for Sarawak but for Malaysia itself, to upgrade the skills of its population, turning them into knowledge workers.”