Sabah needs to re-strategise its economic direction, Look North to China


KOTA KINABALU, Tuesday, 4 December 2018 : The drop in crude palm oil price from RM2,400 per tonne (as assumed in the 2019 Sabah budget) to RM1,800 and the fall in global crude oil prices from USD70 (stated in the budget) to USD50/USD60 per barrel could deprive the Sabah government of RM500 million in revenues (RM200 million in oil palm sales tax plus RM300 million in oil royalties).

This could drive the Sabah treasury into serious deficit.

Federal leaders have used their own financial constraints as an excuse to deny Sabah’s 40% nett revenue and the 20% oil royalties.

This is wrong because Sabah is only asking for PART of whatever revenues and oil collected from Sabah to be returned to Sabah.

The taxes and oil come from Sabah in the first place. The federal government still gets to keep the big bulk of the revenues and oil sourced from Sabah.

Now that the federal government has refused to honour its constitutional duty to reimburse the 40% nett revenues to Sabah and had reneged on its own 20% oil royalties pledge, the Sabah government needs to re-look its own economic direction.

If not because of the accumulated balance of RM3.80 billion in the State Treasury in 2017 (as published in the 2017 Auditor General Report today), the Sabah government would have bankrupted itself by now.

This is because Ministers have shot themselves in their feet by declaring bans on legitimate economic activities. One minister banned export of certain sea food. And then seized imports of sea food from Indonesia.

This is not only illogical. This is outright stupid.

The official reason to impose the 5% export tax on sea food is that to have sufficient sea food for local people and tourists. But, the fact that much of Sabah’s sea food are exported shows that there is surplus of sea food for exports.

Inbound tourism has dropped drastically. Oil palm prices keep falling. Logs cannot be exported. Sand mining is banned in some areas. So, construction costs shot up.

Bank lendings are slow. Prices are not coming down. Families have to set aside money for their school children. The worse is yet to come. Let me ask, do people have the money to pay for sea food?

The solution to Sabah’s “shortage” of sea food without causing a spike in prices is to increase its supply – by encouraging sea food farmers to expand their farms and thereby creating wealth. This is the basic principle of economics – supply and demand and prices.

But instead of increasing production, the government has imposed a new tax on sea food that discourages production.

Furthermore, export of sea food of Indonesian and Philippines origin that would have otherwise been exported via Sabah would now skip Sabah so as to avoid Sabah’s export tax.

A strong economy creates wealth and removes social injustice. Economic growth reduces poverty and increases government revenues.

In short, good economy brings happiness by having a bigger piece of cake for everyone.

This is the development path of developing countries, the most well known of which is modern China. China in the last 20 years has lifted 60 million people out of poverty and created a huge, happy middle class, some of whom are our tourists you see daily at the streets of Kota Kinabalu and Semporna.

Sabah should look North to China, a civilisation of 5,000 years with its own periods of ups and downs. China is actively playing a positive role in the economic prosperity of other countries.

The Belt and Road Initiative of China has seen Brunei and Philippines benefiting in a big way.
It is notable that China President Xi Jinping spent 2 days and 2 nights in Brunei last month.

Trade, tourism and infrastructure are key contributions of China to Asia. A closer look at the bigger picture of co-operation with China will show that Sabah too can benefit without having to compromise our sovereignty. A “small” (by China standards) purchase of our palm oil and an extra 200,000 China tourists to Sabah would help to boost our economy, create jobs and Sabah coffers, such as tourism tax. Hence, Sabah should look north to China for our economic prosperity.

Datuk Yong Teck Lee
President SAPP, ex-Chief Minister 1996 – 1998

Author: webmaster