Real windfall for Sabah, Sarawak not from Nusantara

 

In Malaysia, Sabah and Sarawak stand to gain the most from the shifting of Indonesia’s capital to East Kalimantan, which is part of Borneo – the world’s third largest island. Sabah, Sarawak and Brunei also share space on this island, although Indonesia owns the largest area.

Even if Sabah and Sarawak can’t or don’t actively invest or engage in projects or services catering to the construction of Indonesia’s new capital – to be called Nusantara – their proximity to East Kalimantan should allow them to taste some spillover effects.

We should not, however, expect too much.

Direct benefits accruing from the construction of Nusantara will be small. However, I expect the indirect benefits – such as the projects being undertaken by the Sabah and Sarawak governments to take advantage of Indonesia shifting its administrative capital from Jakarta to East Kalimantan – to have a greater impact on locals.

The first phase of Nusantara is expected to be completed in 2024 but the entire project may be completed only in 2045. As Nusantara expands and its population grows, more economic opportunities will open up.

Sabah and Sarawak have always complained that the federal government has been unkind to them, especially in the dispensation of allocations and the push for investments. Now that they have won the battle for recognition of their rights and special status under the Malaysia Agreement 1963 when they joined Malaya to form the Federation of Malaysia, they should take the lead, rather than wait upon Putrajaya.

One area in which Sarawak knows it has an edge is in the provision of electricity. Construction of the new capital city will need plenty of electricity, and even after the city is built, Nusantara will need unimpeded, cheap power supply.

Already Indonesia is importing electricity from Sarawak. Last year Indonesia imported more than 100 megawatts of electricity from Sarawak for border areas in West Kalimantan.

Indonesian President Joko Widodo has given notice that emphasis will be laid on making Nusantara a green city and that they would want to use green energy. Sarawak has just that, as it produces energy using hydro-power.

The sale of electrical power will directly benefit the Sarawak Electricity Supply Corporation, a subsidiary of Sarawak Energy Bhd, and indirectly the people in the state. Sarawak and Sabah should explore their hydro-energy sources to come up with electricity prices that Indonesia will find attractive.

Another area where opportunities await is the building and construction industry. Such a massive project will require everything from building materials to machinery and labour. The construction phase alone will require all manner of goods and services, but the lack of connectivity, and the distance, will be an obstacle for businesses in Sabah and Sarawak.

In order to enjoy any spillover effect, there must be good transportation links to Kalimantan, if not to the proposed Nusantara area itself. Sabah, which is nearer to East Kalimantan, and Sarawak, do not have any proper highway link to East Kalimantan and this is going to be disadvantageous.

But there are plans to improve road connectivity between Sabah and Sarawak and also to Kalimantan – work on some of which has started.

For instance, a road project connecting Serudong in Tawau to Kalimanta’s Simanggaris was approved by the federal government last year.

Sabah chief minister Hajiji Noor said last March that the Sabah Economic and Investment Authority would take charge of the project costing RM600 million. It will include a customs, immigration, quarantine and security complex at the Serudong-Simanggaris border checkpoint.

Last month, Sabah deputy chief minister Bung Moktar Radin revealed a plan to construct a 39km road linking Kalabakan to Serudong. This will certainly boost the border economy although I don’t share his optimism that it will “be a game changer” for Sabah’s economy and that it might even lift Sabah out of poverty.

Other connectivity projects, such as the 425 km Sarawak-Sabah Link Road, which is expected to be completed in 2026, should be expedited. It will bypass Brunei in connecting Miri in Sarawak to Sabah.

The under-construction Pan Borneo Highway project covering both Sarawak and Sabah will further improve connectivity, boosting the economies of both states.

All these linkages will be part of the circular Trans-Borneo Highway, which is expected to be completed in the next 10 years or so. It is envisaged that when the Trans-Borneo Highway is completed, it will connect almost every coastal town and city in Sabah, Sarawak, Indonesia and Brunei.

Now, that will certainly spur development and trade in Sabah and Sarawak.

Indonesia too can be expected to construct road linkages from the proposed Nusantara to other parts of Kalimantan, if not to the border with Sabah and Sarawak. The Sabah and Sarawak governments should talk to Indonesian planners to see how they can coordinate efforts to have better connectivity to facilitate trade and people-to-people exchanges.

Air links to East Kalimantan also need to be established or re-established if they have been halted. For instance, according to a report, MASwings stopped operating flights between Kota Kinabalu and Balikpapan after 2014. This is a good time to restart it.

Sabah and Sarawak should prevail upon the federal government to pump in money to expand airports in the two states. Putrajaya should also allocate money to upgrade seaports, such as those at Tawau and Lahad Datu.

Last December, Hajiji said that in preparation for the construction of Nusantara, the Sabah government had allocated RM2 million to develop four new border towns – in Kalabakan, Bum-Bum, Merotai and Sg Melayu Sebatik. That is a good move.

Not to be outdone, Sarawak has devised strategic master plans for the towns of Kapit, the nearest town in Sarawak to the proposed Nusantara, and Bakun. Also, Sarawak is looking at how to protect the 1,000km Sarawak-Kalimantan border.

Corporations in Peninsular Malaysia should consider setting up a presence in either Sabah or Sarawak to tap into the market that Nusantara will offer. For instance, with the Covid-19 pandemic, more attention is being given to the healthcare industry. So, there is scope for major private healthcare providers in Peninsular Malaysia to expand into Sabah and Sarawak.

Educational institutions from the peninsula should also consider establishing branches in Sabah and Sarawak, if they don’t already have them, as they can in future draw on a larger student base. This would probably be better than establishing a presence in Nusantara as they would be directly helping the economies of Sabah and Sarawak.

One important benefit for Sabah and Sarawak will likely be a drop in the number of Indonesians trying to enter illegally, as Nusantara should offer them enough jobs. This means the vexing and troublesome problem of illegal migrants, at least from Indonesia, may be reduced.

Also, cross-border crime may decline because of the expected tightening of border patrols by both Indonesia and Malaysia. Hopefully, there will no longer be “lorong tikus” (illegal routes) through which people and goods are smuggled into Sabah and Sarawak or vice-versa.

But the greatest benefit will come from projects being lined up locally to take advantage of the creation of Nusantara.

Building or upgrading infrastructure and putting systems in place to tap into Nusantara’s development will directly lift the economies of the two states and improve the lives of at least some Sabahans and Sarawakians.

The money pumped into the system to carry out the projects, for instance, will boost incomes and create jobs. The projects themselves, such as road and air connectivity or upgraded ports, will benefit not just local traders and businessmen but ordinary people too in the long run.

The windfall will come not from Nusantara but from the projects undertaken in Sabah and Sarawak and this is what the two state governments should concentrate on and push for. The trickle of direct benefits from the building of Nusantara can be considered a bonus. - FMT

The views expressed are those of the writer and do not necessarily reflect those of MMKtT.