Archive for February, 2013


The coming state assembly elections for Sabah may be a pivotal moment in determining the future trajectory of the state’s political economy and indeed progress, in the near term. Pitted against each other are two contesting visions of Sabah: the incumbent coalition government comprising the Umno-led BN in a coalition with local parties Party Bersatu Sabah (PBS), United Pasok Momogun Kadazan Organisation (UPKO),Party Bersatu Rayat Sabah (PBRS) and Liberal Democratic Party (LDP), are campaigning on a platform of good governance which is supported by the arithmetic of rapid economic growth — approximately 7 per cent on average — in the last ten years of Musa Aman’s government.

On the other side is the Pakatan Rakyat combine shepherded by Anwar Ibrahim and Bumburing’s Angkatan Perubahan Sabah (APS) and Lajim Ukin’s Pertubuhan Pakatan Perubahan Sabah (PPPS), which still believes that it can acquire power in Kota Kinabalu by manipulating the state’s race and religious arithmetic in its favour. The Sabah Progressive Party (SAPP) and Sabah STAR is the third front in this contest — trying to take on the incumbent government on a Borneo agenda-Sabah autonomy, rather than governance plank — but not yet powerful enough to be a credible alternative in government, leaving many to believe that both the SAPP and Star Sabah have been planted by Barisan National to split the opposition votes. After all, President Yong Teck Lee himself will have plenty explaining to do on what he did during his tenure as chief minister when SAPP was in the BN.

It would be in the larger interest of the state of Sabah and its people if this election puts to rest the notion that power can still be captured based on old social divisions and grievances. It is important for Sabah’s political economy to move on to a politics of aspiration, where people vote for a party or coalition that delivers governance. This will force all serious political parties (including the SAPP and Sabah Star if they want to remain relevant) to contest future elections on a forward looking governance plank in the spirit of the Malaysia Agreement within the framework of the Federal Constitution, rather than a backward looking social engineering plank. This time round, such reasoning undoubtedly favours the UMNO-PBS combination which is the main pillar of Barisan National Sabah, and a majority of opinion polls, for what they are worth, suggest an easy victory for the Musa Aman-led coalition.

But a political economy which puts governance at its centre may not favour the incumbent government for all times to come, such are the huge challenges facing any government that is elected to power in Sabah. To what extent can Musa Aman’s government claim credit for Sabah’s apparent turnaround, powered by a growth rate higher than Malaysia’s average over the last five years? A dissection of the growth figures shows both the contribution of the government and the challenges that remain. Most of Sabah’s growth these past five years has been powered by agriculture, construction, tourism and services, particularly hotels, restaurants, shopping malls, trade and, to an extent, oil and gas. The impressive growth in these sectors isn’t matched by the lethargic performance in manufacturing — those are challenges that still face the next government.

The state government can claim credit for fuelling the growth in agriculture, fisheries, tourism and construction, since much of this has come through rural development projects, water supply, electrification, bridges and roads funded through the federal and state’s exchequer. In fact, the government’s public spending record has been good, and a massive improvement on the poor spending record of the previous governments before Musa Aman that preceded it. Planned spending was tripled within ten years of the Musa Aman government taking office. This has spillover effects, in a Keynesian “stimulus” sense. Apart from increasing spending, the government has also taken huge strides in improving the law and order situation especially in the east coast of Sabah where bulk of the illegals with fake or questionable Malaysian identity have outnumbered the locals. That has helped boost not just agriculture and the construction activity but has also given a fillip to service industries in the tourism sector like hotels and restaurants which have registered impressive growth.

In short, the government has effected the turnaround in the state’s economic fortunes by simply doing the two things any good government ought to: implementing law and order as well as spending on infrastructure. In doing so, it has reversed the long decline in the state’s fortunes that took place before Musa Aman took over the chief ministers in 2003. It is also important to remember that a lot of this impressive growth in the last five years has plenty to do with Sabah starting from a very low base — and that there is a limit to the sustainability of a growth rate that is powered largely by government spending and a small section of services industries and not forgetting that Sabah is the 2nd largest state in Malaysia with an area of 74,500 sq. km which is 260 times bigger than Penang, which is only 293 sq. km in size even, smaller than Sabah Forest Industries (SFI). Therefore for growth to be sustainable it needs to be more broad-based into manufacturing and agriculture.

Here, the task gets a lot harder, and will involve massive policy reform in land, labour and product markets. What makes Sabah’s task of industrialisation harder than that of some other states is the fact that goods are more expensive in Sabah due to the federal government’s cabotage rules a policy set in the early 1980s, making sure that all the domestic transport of foreign goods could only be done by Malaysian vessels, reducing Sabah’s attractiveness as an investment destination. This protectionist policy has led to excessive shipping costs, importers and exporters in Sabah had to pay more than RM1 billion for shipping services as a result, causing prices everywhere in East Malaysia to go up and ultimately a higher cost of living and higher price of goods as producers hike up prices to compensate the increase in cost of production. Further more, Sabah lost a lion’s share of its industries after Labuan became a Federal Territory.

What may also turn out to be an unforeseen advantage is the rather shambolic state of governance in surrounding states — Sarawak, Brunei, The Sulu States, and even Kalimantan. If Sabah can consistently outperform these states on governance, it could easily become the industrial hub of East Malaysia — a region which still trails Penang and Selangor on most economic parameters by some distance.

But to capitalise on these potential advantages, the Musa Aman government will have to do much more than maintain law and order and actively engage in spending which has been done of late with a huge budget approval of over RM4 billion this year. It will also need to take bold policy steps to liberalise rules that deter investment. In doing so it may have to go further than other states which already have a head start in attracting investment. The government will, for example, need to ease labour laws and better wages, so that Sabahans can be gainfully employed within the state. It will need to take aggressive steps to ease land acquisition so that it can have an advantage over neighbouring Sarawak. If the government fails to do this and more, growth will begin to slow, giving the opposition plenty of ammunition. At any rate, Sabah’s future elections ought to be fought on these issues of the future rather than the outdated legacies of the past. This leaves Musa Aman still the best man for the job.

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