This article first appeared in The Edge Malaysia Weekly on March 4, 2024 - March 10, 2024

IN response to global demand for green energy and desire to attain higher levels of economic growth, the Sarawak Economic Development Corporation (SEDC) is shifting its development focus from services and infrastructure to sophisticated, high-value manufacturing sectors powered by renewable energy.

This transition is among the steps being taken to ensure that low-carbon and resource-efficient manufacturing contributes to 30% of Sarawak’s gross domestic product (GDP) by 2030, SEDC chairman Tan Sri Datuk Amar Abdul Aziz Husain tells The Edge in a recent interview.

“The goal is to propel the manufacturing sector up the value chain to be able to create high-value products and generate opportunities for higher incomes.

“The state wants to be [like a] developed nation by 2030, to double our GDP by then. To me, it is not possible to achieve [that status] unless we invest heavily in the manufacturing sector and the services that support manufacturing.

“All the other sectors are supporting sectors; we still have to do tourism and agriculture but manufacturing is the one that can help the state leapfrog. Of course, we have mining and, as we discover more oil and gas, that will also contribute; that will be done by Petros (Petroleum Sarawak Bhd).”

SEDC is a statutory body set up in 1972, tasked with stimulating Sarawak’s economic development by pioneering and strategic industries. Petros is the state-owned oil and gas exploration firm.

Efforts are already underway to execute action plans set out in SEDC’s blueprint for the manufacturing sector, in particular the downstream methanol and ammonia production facilities.

SEDC’s methanol plant is slated to be operational by June this year. In February, it signed a preliminary agreement with Petronas Chemicals Group Bhd to jointly study the feasibility of setting up a world-scale blue ammonia plant.

According to Aziz, the shift in strategy means Sarawak is not just exporting raw materials, but is manufacturing value-added products for export, thus moving up the value chain to secure a robust, sustainable economic future.

“SEDC is looking at the manufacturing sector’s contribution to GDP by developing our industries in Bintulu. The idea was to produce methanol and ammonia and get Sarawak to develop the downstream [sectors] of these industries. For example, siloxane plants and the downstream silicone products … This will provide higher value to our product and provide high-level, higher-paying opportunities for the people. Of course, we need to get the people ready for the jobs,” he says.

SEDC, and the state at large, have made significant strides in high-value sectors, Aziz says, due to the emphasis on renewable energy more than a decade ago, which saw the establishment of the Baleh and Murum dams as well as the taking over of the Bakun dam from the federal government.

The decision to harness Sarawak’s cheap hydropower led to a boost in energy-intensive industries and provided a springboard for future green energy projects. Notably, SEDC’s subsidiary, SEDC Energy Sdn Bhd, has been tasked with kick-starting the state’s hydrogen ecosystem. The corporation is involved in projects set to produce 240,000 tonnes per annum of green hydrogen, making it one of the largest producers of clean energy globally.

“We can produce much cheaper green hydrogen than anyone in the region. With sun or wind, you need to invest double the amount in order to produce the same amount of hydrogen we can,” says Aziz.

Notably, SEDC Energy oversees two hydrogen-related projects — the first being H2ornbill, with oil firm Eneos and trading house Sumitomo Corp; and the second, H2biscus, with three South Korean companies: Samsung Engineering, Posco and Lotte Chemical.

This shift in SEDC’s strategy has been a boon for employment opportunities, enticing skilled Sarawakians who have settled overseas to return home. SEDC, Aziz says, is keen to offer more job opportunities that align with their professional capacities.

“When we advertised the posts for our methanol plant, for example, we got over 1,000 applications, but we only needed 200 people.

“So, when we have other plants, we can train more people. And, as you can see, we don’t have a shortage [of talent. It is] just that we do not have a place for them at the moment. We have so many talented Sarawakians overseas waiting to come back.”

The hospitality and services sector still accounted for the largest portion of SEDC’s investment portfolio in 2023, at 63%, followed by the consultancy and engineering works sector. This is a stark contrast to the energy sector, which accounts for only 2%.

With a progressive shift towards high-value manufacturing and green energy, Aziz says the focus of its portfolio would only change over time.

That said, infrastructure continues to play an important role in SEDC’s development strategy.

“[Investments in] infrastructure will still be there, as we need to develop the state. Our investment in Innocement Sdn Bhd, for example, is important to stabilise cement prices.

“We have small shares in CMS (Cahya Mata Sarawak) and KKB (Engineering Bhd) and other [companies, and] will remain [invested as] those are investments for us to get returns,” Aziz says.

Overall, the asset value of SEDC and its 35 subsidiaries stood at RM2.96 billion at end-2023 (from RM830.34 million in 2020), with reserves standing at RM791 million.

Aziz says SEDC also has its eye on other sectors such as electrical vehicles (EVs) and pharmaceuticals, having established a medical glove manufacturing plant at its Sarawak Medical Innovation Technology Hub.

“To develop EVs, we need batteries. The basic materials are sodium and graphite. So, SEDC has recently tied up with Gallois (New Energy Materials (M) Sdn Bhd) to produce graphite in Sarawak.

“By having a joint venture with Petronas’ (Petroliam Nasional Bhd’s clean energy outfit) Gentari, we can later use this technology to produce fuel cells. With the fuel cells and batteries, we can develop our own EV industry,” says Aziz.

Apart from commercial profitability, SEDC is also tasked with taking on socially beneficial projects.

One example is Sarawak Metro Sdn Bhd, a wholly-owned subsidiary of SEDC set up to develop the Kuching Urban Transportation System, a project not expected to be profitable in itself but considered vital for the development of the state’s economy.

While the government fully funds the capital expenditure of such projects, SEDC handles the operational costs, reiterating its commitment to corporate social responsibility. The corporation is also focusing on food sufficiency as plans are in place to increase protein production essential for childhood development, thereby enhancing public nutrition, Aziz explains.

As SEDC strides towards achieving its ambitious targets, it acknowledges potential challenges. While Sarawak’s gross national income per capita exceeded the World Bank’s US$13,205 (RM62,500) high-income threshold in 2023, Aziz says the state is more concerned about wealth distribution.

“We can get there in terms of GDP [per capita]. The bigger challenge will be the distribution of wealth, raising everyone’s income to RM15,000 per month by 2030. We want higher-paying jobs; we need higher-value products. We are in a hurry to get there.”

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