Winding-up speech of Premier Datuk Patinggi Tan Sri Abang Johari Tun Openg on the last day of the May 16 to 26 sitting of the 19th State Legislative Assembly. – Part 1
‘Our focus is on restructuring and diversifying our economy into high value downstream industry…. build physical and digital infrastructure to … link Sarawak to global market … to grow … and create a thriving society … economic prosperity, social inclusivity and sustainable environment.’
ECONOMIES around the world have experienced immense stress for the past two years. COVID-19 pandemic took the world by surprise and affected the healthcare system, livelihood of the people and brought many economies into recession. We know Sarawak shared the same experience.
Throughout this challenging journey, we have seen how economies shifted away from the usual way of doing things prior to COVID-19 and quickly made adjustments to new methods to unlock new growth prospects.
We are grateful to see a brighter outlook with recovery in progress and businesses start to operate near to normal as Sarawak transitions into the endemic phase of the pandemic this year.
Nonetheless, we are mindful that while the pandemic-induced crisis subsides, the geopolitical tensions caused by Russia’s invasion of Ukraine have led to greater uncertainty that carries a huge threat to the currently fragile global economic recovery process.
Against all these challenging backdrops, Sarawak government is glad that we have formulated and is now implementing the Post-COVID-19 Development Strategy (PCDS) 2030. The plan is to address reforms of the economy as Sarawak pursues high income and a developed state status by 2030.
Under the PCDS 2030, our economy is targeted to grow at an average of between six and eight percent per annum. I am confident we will be able to take this leap of faith in achieving the target and Sarawak’s aspiration through new economic model. Although to some, the target is high, I am certain that with new growth areas and promising prospects, the average of six to eight percent growth per annum is achievable.
We are aware that Sarawak’s current economic model is easily influenced by the fluctuation of commodity prices, particularly the crude palm oil, oil and gas. Based on the past trend, our economy is concentrated on these primary commodities as our main source of revenue.
Thus, to emerge as a stronger region, we must embark on a full-fledged transformation and capitalise on mega-trends around the world. Our focus is on restructuring and diversifying our economy into high value downstream industry.
We need to be innovative, productive and resilient, in the global business environment that are dynamic and volatile. Therefore, with small domestic market, we need to scale up productions and develop more export-oriented activities while ensuring clean and healthy environment through adoption of innovation and digitalisation to spur productivity growth.
This will broaden our economic supply chain. Sarawak’s economy will be more sustainable to shocks in spite of the many unprecedented crises that may arise in the future. It will also create more high paying jobs and entrepreneurship opportunities as well as generate more private sector investments.
The spill over from all these new economic activities will translate to produce higher household income. This is important because we want to ensure our economic prosperity is equitably distributed and shared by all rakyat.
Our top priority now is to build both physical and digital infrastructure to increase efficiency and link Sarawak to global market. This will become the platform for Sarawak’s economy to grow in the coming years, and create a thriving society that enjoys economic prosperity, social inclusivity and sustainable environment.
Hydrogen economy
I would like to quote the European Commission President, Ursula von der Leyen in her speech on 8th March 2022, “The quicker we switch to renewables and hydrogen, combined with more energy efficiency, the quicker we will be truly independent and master our energy system.”
Hydrogen is an essential component of a net zero energy system for deep decarbonisation that is required to meet the current climate targets and limit the temperature increase below 2°C.
The global hydrogen market is picking up speed. Recently, the Hydrogen Council estimated that approximately 520 projects are gaining momentum around the world. Clean hydrogen production capacity has increased more than doubled since January 2021.
Globally, USD160 billion of direct private investments have been created until 2030, and more than USD400 billion additional private investment have been made to realise government targets and commitments.
We must now actively shape Sarawak hydrogen market throughout the entire value chain, if not we will be left behind. Sarawak shall create an ideal ecosystem for hydrogen economy to be pioneer in Asia Pacific to explore, innovate and produce green hydrogen.
Therefore, we must spur investments in integrated hydrogen facilities and infrastructure. I believe this may bring down hydrogen production costs and will stimulate demand for hydrogen.
For the information of this august House, Sarawak Economic Development Corporation (SEDC) has partnered with Samsung Engineering, POSCO and Lotte Chemical from South Korea to develop an environmentally friendly hydrogen and green ammonia plant in Bintulu.
Once completed, the plant will produce 630,000 metric tonnes of green ammonia, 600,000 metric tonnes of blue ammonia, 220,000 metric tonnes of green hydrogen, of which 7,000 metric tonnes will be for domestic use and the rest will be exported to South Korea. This new development will further diversify Sarawak’s export, besides the traditional oil and gas exports.
Sustainable aviation fuel
As a step forward, Sarawak is exploring the production of alternative aviation fuels such as Sustainable Aviation Fuel (SAF). SAF could be the key to sustainable air travel in the transition for low carbon fuel in the industry.
Our SEDC is collaborating with Airbus and Rolls Royce through Aerospace Malaysia Innovation Centre (AMIC) is undertaking research and development on green hydrogen and fuel cell as future aviation fuel in Demak, Kuching.
Meanwhile, Sarawak Energy Berhad and Sarawak Biodiversity Centre are undertaking proof of concept (POC) on the utilisation of algae as biofuels to complement our quest in the hydrogen economy.
Environmental sustainability
The world is focusing on policies and actions to achieve the goals of Paris Agreement to reach global net-zero emissions.
In the Paris Agreement, particularly on Article 6, the high-level principles were intended as a basis for countries to develop detailed rules for how countries can “pursue voluntary cooperation” to reach their climate targets.
At Conference of Parties (COP) 26 in Glasgow in 2021, countries agreed on a package of rules to govern and implement international carbon market mechanisms under the United Nations Framework Convention on Climate Change (UNFCCC). At the same conference, nearly 200 countries agreed to increase their national pledges this year to align with a target of capping global warming at 1.5oC above pre-industrial levels.
Carbon market is another solution to reduce carbon emissions. A well-designed and well-connected market, particularly the carbon market, can prove that Sarawak can grow her economy and protect the environment at the same time.
I am determined to establish such markets that support cooperation, with consistent and robust rules underpinned by environmental integrity in line with sustainable development objectives for Sarawak.
A price on carbon promotes investments in cost-effective emissions reduction today while allowing innovation in low-carbon technologies for the future. Energy efficiency earns its full return and forest protection has clear economic value.
Carbon market is gaining momentum around the world. It plays a key role as one of the most effective measures available to reduce climate pollution at the scale and pace of science demands.
Rest assured, Sarawak will be embarking on all necessary best practices benchmarked against internationally acceptable practice including the verification of carbon credit trading from internationally acknowledged verification entities.
I envision that our new economy towards carbon market will provide an ambitious signal to future generation and building deep, transformative change we urgently need.
I am convinced our efforts to deploy Carbon Capture Utilisation and Storage (CCUS) in Sarawak is timely with the passing of the Land Code (Amendment) Bill, 2022. We are in a much better position with some of the important policy tools in place.
I know we have all the tools to do so. Our models consistently show that CCUS are very powerful mitigation technology and that, without them, our transition to low-carbon will be very difficult.
I envisioned the creation of ideal ecosystem for CO2 storage hubs to emerge and linking them with industrial hubs and the international carbon market.
I believe with the newly established Ministry of Energy and Environmental Sustainability, we will intensively embark on this initiative collaborating with expertise internationally as well as recruiting our own Sarawakian talents, both locally and abroad.
Hence, we all need to be well versed and updated with climate change agenda, mitigation and adaptation measures as well as understanding the concept of carbon market mechanism.
Oil and gas development
Sarawak Government has successfully signed the Commercial Settlement Agreement (CSA) with PETRONAS on 7th December 2020, which provided PETROS the role to regulate and monitor oil, mining and exploration in all the onshore areas of Sarawak.
For the information of this august House, among the achievements that PETROS has made are to secure:
A 29-year contract for Sarawak Onshore Block SK433, Adong Kechil in Miri-Marudi area;
Carried interests in all four new Exploration Blocks offshore Sarawak in the Malaysia Bid Round 2021 (MBR 2021) namely SK427, SK439/SK440 and SK437; and
1,200 mmscf/d natural gas resources volumes to drive the growth of the downstream industries, power generation and petrochemical hub in Bintulu as well as supporting downstream industries across Sarawak in the long term.
We have achieved greater share of revenues from oil and gas produced in Sarawak through State Sales Tax (SST). As mentioned by the Second Minister for Finance and New Economy in his winding up speech, the SST collected from crude oil and liquefied natural gas since 1st January 2019 has become the major contributor to our revenue, amounting to RM8.52 billion to date from the RM11.01 billion of the overall SST collected thus far.
We are able to control the distribution of gas, including LPG, under the Distribution of Gas Ordinance. For information of this august House, LPG is a controlled item and the price of LNG is fixed for the whole Malaysia under the Control of Supplies Act 1961. (IN CASE: My Cabinet members and I may consider giving discount on household price of LPG by negotiating with the cylinder manufacturer for a lower cylinder cost price).
Household price of LPG is already subsidised up to 50% by the Federal Government. The current controlled price for 14kg LPG-filled cylinder is at RM26.60 (RM1.90/kg as compared to market price of approximately RM4.20/kg or RM59.80/14kg).
GPS Government will continue to protect the interests of gas consumers through Ministry of Utilities and Telecommunications to ensure security of supply and equitable price throughout Sarawak.
Rising cost of living
Sarawak Government takes note of the rising prices of food and thereafter affecting the cost of living. All these are due to the current geopolitical tension that leads to imported inflation and the ringgit performance against USD that had declined 0.7 percent in the first quarter of 2022.
Malaysia’s weakening currency will increase import prices, burdening both consumers and importers. As Malaysia is a net importer of food, the imported inflation has caused higher food price domestically. Therefore, most of this is beyond Sarawak Government’s control.
For this reason, Sarawak Government will intervene within our power and means to cushion the impact of rising cost of living especially on food prices, on to the rakyat.
For this, I will introduce discount on electricity tariff to our food producers and retailers, including coffee shops, restaurants, and other food and beverages industry in order to reduce their cost of doing business. Therefore, I expect it will mitigate market price of food.
Against this backdrop, Sarawak Government’s efforts to transform our agriculture sector to become net food exporter under PCDS 2030, will eventually provide “farm-to-table” food security and self-sufficiency level (SSL) for Sarawak.
Regional development
With Indonesia confirmed plan to relocate their capital city to Nusantara in East Kalimantan, Sarawak stands to gain benefits from the rapid development as we share long borderline and has established bilateral cooperation with Indonesia. Nonetheless, Sarawak needs to position herself and develop our competitive advantages.
Cross-border accessibility will be improved through the opening of more border exit and entry points, road access and integrated CIQS facilities.
There are plans to upgrade strategic exit and entry points in the Northern and Central regions of Sarawak into international gateways to facilitate better movement of people and enhance our border trade. Nevertheless, border security must be our utmost priority. Therefore, we are working closely with Federal Government to strengthen our border control.
Reviving cross border trade with Indonesia, particularly with West Kalimantan will be our main priority. We need to develop our resources in complementing with Indonesia on a win-win situation.
Sarawak will strengthen our position as the powerhouse of ASEAN and contribute to the ASEAN Power Grid initiative. We will continue to supply our surplus electricity regionally, but not at the expense of our own power needs.
Given our track records in hydropower development, Sarawak will strengthen her profile within the ASEAN through active involvement in North Kalimantan hydroelectric project.
To facilitate our initiatives and collaboration with Indonesia, Sarawak Government is currently moving forward with our plan to establish Trade and Tourism Office in Pontianak.
Sarawak will also strengthen economic collaboration with Brunei Darussalam. We have been working closely with Brunei in several economic sectors including telecommunication, energy, trade, tourism and agriculture.
With the establishment of Sarawak Trade and Tourism Office in Bandar Seri Begawan soon, we should be able to move forward in a more efficient manner to capture the economic opportunities and take advantage of the Brunei’s strategic connectivity and accessibility to other parts of the world.
Sovereign Investment Fund
Through the various transformational programme and revenue re-engineering initiatives, Sarawak has promising future to set up our own sovereign investment funds.
By establishing the sovereign investment funds, we will build up our financial reserves for the young Sarawakians. Sarawak will be able to strengthen our future financial capacity to compensate the potential loss of future revenue from our depleting oil and gas resources.
However, the idea of our sovereign fund is still work in progress, where more studies need to be carried out to ensure the best model and robust international standards be adopted.
I would like to emphasise that, the key principles for our very own sovereign fund, moving forward, must be of good governance with well-defined regulatory framework, and greater transparency and accountability.
Malaysia Agreement 1963 (MA63)
Negotiation on the Malaysia Agreement (MA63) is always close to our heart in the GPS Government. We have been actively negotiating with the Federal Government to restore Sarawak’s rights as stipulated in the MA63.
As of today, we have witnessed significant progress where we have several accomplishments particularly on the amendment to Article 1(2) of the Federal Constitution which has restored the status of Sarawak and Sabah as before the amendment to the Federal Constitution in 1976.
Despite the accomplishments, we should not rest on our laurels. We must continue to fight to preserve our interests and rights from Putrajaya to develop our beloved Sarawak to be on par with the rest of Malaysia in terms of development.
