FOREWORD

EDITORIALTEAM

Our focus this issue is on small and medium enterprises (SMEs) in

Sabah. We have to bring into awareness the growth of SMEs in Malaysia, particularly in Sabah, in order to re-energize the private sector and encourage more SME players in the state.

By promoting the SME Masterplan, our readers would be better informed of SME initiatives set by the 10th Malaysia Plan, in line with Malaysia’s objective to achieve the target of becoming a high income nation by 2020.

There are many opportunities for SMEs to grow in Sabah. In order to give impetus to this, we feature the work of a few specialized agencies that are ready to provide assistance, advisory services, finance and other support programmes, for those already engaged in SMEs and others planning

to do so. Agencies like MIDA, SME Corp, MATRADE and SME Bank are among those that will provide such support for SMEs to ensure their success and they are among those highlighted in this issue of SIQ.

You would have noticed from our previous issue that this magazine has taken great strides of improvement by taking on a new look.

There is even a new pull-up section called the UpBeat. It gives focus to interesting topics on Sabah’s Industry for the benefit of our readers.

This year, MID continues to ensure that its agencies are ready to take on the challenge to reach higher levels of excellence and to exceed expectations in all their endeavours.

Datuk Haji Hashim Paijan

Datuk Haji Hashim Paijan

Irene Joibi

Andrew Goh

Joanne Leejoanne.lee@sabahtoday.my

Maria Leongmaria.leong@sabahtoday.my

Nancy Chinnancy.chin@sabahtoday.my

Published byMinistry of Industrial

DevelopmentTingkat 9, 10, 11, Blok C,

Wisma Tun Fuad Stephens,Karamunsing,

Beg Berkunci No.2037,88622 Kota Kinabalu,

Sabah, Malaysia.

Design and Artwork bySync Max Sdn. Bhd.

Lot 5, 2nd Floor, Block B,Wisma CTF, Jalan Damai,

88300 Kota Kinabalu,Sabah.

Printed byJC Printer Sdn. Bhd

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CONTENTCOVERSTORY

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124WHAT IS SME?

SMES IN SABAH

FINANCIAL ASSISTANCEFOR SMES

SOGIP PROVIDES INFRASTRUCTURE FOR INVESTORS

ON THE GLORY AND GROWTH OF SABAH PALM OIL INDUSTRY

AGRO CHEMICALMANUFACTURING

UNIMEKAR,A PIONEER COMPANYIN KKIP

MY SAYSEDCO PRECAST MOVES IN RIGHT DIRECTION

THE FUTURE OFENERGY IN SABAH

A NEW BEGINNING FOR THE SME MASTERPLAN

SALEH TRUCK AND TRAILER LAUNCHESNEW PRODUCT

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“Be a part of this growth.”Malaysia SMEs contribute to 32% of the country’s GDP and is expected to reach 41% by the year 2020.

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The days when small businesses are bound to fail are over.

Small and medium enterprises (SMEs), including microenterprises are to assume a big role, becoming the country’s engine of growth and backbone of the economy.

More attention are given to them now that they are viewed as the country’s game changer into a high-income nation by 2020.

But what is an SME?

During the 14th National SME Development Council Meeting in July 2013, a new definition has been given on the term “SME”

after consideration was made on the changes and development of the nation’s economic landscape.

Effective Jan 1, 2014, a manufacturing firm with an overall sales turnover, including from other sources, not exceeding RM50 million or not having more than 200 full-time workers is deemed an SME.

While in the services and other sectors, the overall sales turnover must not exceed RM20 million or not more than 75 workers.

Other sector refers to firm, which are in the primary agriculture, construction and mining and quarrying activities.

Any firm, which meets either one of the two criteria described, is considered in the SME definition bracket.

Furthermore in terms of employment, workers, no matter local, migrants or contract, who are employed full-time working at least six hours a day or 20 hours a month; or 120 hours a month.

The employment criteria exclude owners, active business partner and unpaid family members or friends.

This definition also cover firms that has scaled down its business, which output meeting the same descriptions, for two years, as well as foreign business establishments.

“Given that there had been manydevelopments in the economy since 2005 such as price inflation, structural changes and a change in business trends led to a new definition of the term ‘SME’.

”WHAT ISSME?

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The Small and Medium Enterprises (SME) Masterplan, which was

launched in July 2013, is aim to boost the contribution of small businesses to the economy from 32 per cent to 41 per cent by 2020.

SMEs and microenterprises are known to play a role in fostering growth, employment and income to the nation.

Based on these potentials that they are to assume a much greater role and become the backbone of Malaysia’s economy.

The masterplan was formulated to nurture SMEs, right from start-ups to facilitating expansion, ensuring their growth and the game changer into attaining a high-income nation by the same period.

They will catalyze the creation of high-potential firms and will be home grown champions at par against competitors in the regional and global scale.

A look into the present progress, local SMEs are churning low productivity

levels than large firms as their outputs are nor better than their counterparts from developed nations.

The productivity per worker averaged around RM47,000, which is a third of the productivity of big companies, while their American and Singaporean counterparts are earning seven and four times more, respectively.

Malaysia’s low business formations also further reflected the lack of dynamism and spirit of entrepreneurship.

And although business

formations are relatively robust, they are less firms of limited liability forming, compared to sole proprietorship and partnership.

As a result the country’s economic growth depended highly on the high-performance firms, although their numbers are minute.

From 2000 to 2005, high-performance firms are accounted 70 per cent to the addtion of the country’s Gross Domestic Product and 46 per cent of additional employment.

A NEW BEGINNING WITH THE SMALL AND MEDIUM ENTERPRISES (SME) MASTERPLAN

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To stimulate the growth of local SMEs, the SME Masterplan will adopt new approaches to develop them and evaluate their performance based on their outcome.

For this, a monitoring and evaluation system are set up to ensure the effectiveness of programmes will stimulate SMEs, where it is done via collaborations and public-

private partnerships.

According to the Masterplan, six factors have been identified which can influence the SME’s technical performance namely innovation, human capital development, access to financing, market access, legal and regulatory environment and infrastructure.

While there are five elements in its framework that can ensure the country will achieve its goals for SMEs by 2020.

They are vision, goals, focus areas, action plan and institutional support.

Each of them has its own specific targets to ensure a national goal is attained in the aspects of Gross Domestic Product, employment and exports in the same timeframe.

Another 32 initiatives, including six high-impact programmes and themetic measures are also proposed by the Masterplan.

They are Integration of Business Registration and Licensing, Technology C o m m e r c i a l i s a t i o n Platform, SME Investment Programmes, Going Export (GoEx) Programme, Catalyst Programme and Inclusive Programme.

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development and progress of Sabah. Smes in particular can be an effective tool to alleviate rural poverty, empower local entrepreneurs and raise their levels of income and standard of living. Through SMEs, the people can participate in the business mainstream with assistance from the government. The advent of technology can now make these SMEs (particularly the micro and small enterprises) compete on a level playing field with large enterprises especially where marketing and advertising is concerned. So with increasing number of people participating in SME, the government can achieve and realize their objectives much more effectively.

Whether enough of not, I think this is a matter of perception. Being a pragmatist, I would say it is still not enough. I would like to think that the efforts are sufficient enough when the day comes if every SME would be earning income in the high income bracket as envisioned in the Malaysian New Economic Model. As far as the performance of our various division in assisting SMEs, I can say that in the context

responsibilities are dedicated and largely focused in developing the SMEs in Sabah. From the processing of SGA and FML licenses, promotion of investments into Sabah to conducting niched technology courses to the promoting of SME products and goods at the district, state, regional, national and international level through exhibitions and trade expo’s, the major target group is the SMEs. These initiatives are carried out by our operating units namely the SME/SDSI/Regional Co-operation Division, the Investments Promotion Division and the Industry Services Section. The focus of DIDR in promoting SME’s would be to encourage more people to go into business. We will assist and nurture them in terms of upgrading their capacity and capability and promoting their products which they produced. For the foreseeable future, we would be using this model to assist the Sabah SMEs. I would like to say it is a dynamic and ever changing environment. Changes and adaptations to the operation model may be in order in the future.

I mentioned earlier on that SMEs have huge potential to contribute to the

SME has form an important component of a country’s economy and business. However, while SME’s constitute a large proportion of the business establishment, this is not translated into significant contribution to GDP, exports or employment. This is because close to 76% of these SMEs are micro enterprises employing less than 5 workers and having an annual turnover of not more than RM 300,000. Thus the contribution of these SMEs are not very large as compared to the not so many LSI’s (Large Scale Industries) but contribute significantly in terms of GDP, exports, employment and income to the State.

It can be said that DIDR’s functions and

SMEs IN SABAH -CONTRIBUTINGTO THE STATE’S ECONOMIC GROWTHIn Sabah, figures show the share of SME business establishments is around 98% of total business establishments. The latest census of SME’s in Malaysia conducted by DOSM shows Sabah has around 41,000 SMEs and ranked 6th nationally in terms of numbers of SME’s in Malaysia. We talk with Mr Stephen Sampil, the Deputy Director of the Department of Industrial Development and Research regarding the contribution of SMEs to the economic growth in Sabah.

For a start, would you give us the situation of the growth of SMEs in Sabah? How are the SMEs contributing to the domestic Gross Domestic Product (GDP)?

What are the ways DIDR has helped to promote SMEs in the State? Can you elaborate on what has been done and what other plans you have in mind?

From your own experiences, can you give us a statement on your hopes for what the SMEs can do for the State?

Do you the agencies within DIDR are doing enough in actively promoting SMEs? If not, what other areas they can be engaged in?

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Man competition and a concert for visitors. To cap these competition, visitors would also have the opportunity to win attractive prizes whose names are drawn on a daily basis. On a more serious note, exhibitors also have the opportunity to participate in the best booths and innovative product competition as well as the closed karaoke competition to win attractive prizes.

SMEs in Sabah has a great potential due to assistance from the government, the array of natural resources in which can be value-added as well as the demand for services created by the tourism, trade and oil and gas sectors. However, the obstacles also seem to be formdable, particularly, SMEs compliance to government rules, laws and regulations. Attitudes, mindsets and business culture of bumiputra entreprenuers also need to be effectively addressed.

participant would have increased their market contacts for their products, but at the same time they have increased their understanding and knowledge of the business world, which they could use to further develop their business. We would like to point out that this carnival would be one of the largest carnival event to be organized at the Sabah Trade Centre with 260 booths covering an area of approximately 100,000 sq. ft. It would be a 4 day event commencing 25 June and ending 28 June 2014. Exhibition time would be from 9.00am to 9.00pm.

As the name indicates, we are inviting SMEs and Micro enterprise (Under the SDSI Programme) all over Sabah to participate as the anchors of the event. Apart from that, we are also inviting selected SMEs from other parts of Malaysia. The aim of inviting these selected participants is made in the spirit of 1Malaysia and to add depth and variety to the carnival. On the sidelines, we have also line up events designed to draw more visitors to the event so as to make the event more attractive and meaningful to various stakeholders. These events include colouring competition and traditional dress competition for school children, Mr. Strong

of our resources, manpower and our quality objectives, we are on track.

This SME/SDSI Carnival 2014 is actually an annual event held in the middle of each year in conjunction with the National SME week. Formerly known as the Showcase SDSI, we rebranded the event since 2011 in order to provide more prominence to small and medium enterprises along with the micro enterprises from the various districts in Sabah. This carnival is spearheaded by the Ministry of Industrial Development and DIDR as the main anchor along with SME Corp Sabah and other state and federal government agencies. Basically, the carnival’s bottom line is to promote and introduce products and services produced by Sabah SMEs to the market. Apart from that, we also aim to upgrade the capacity of Sabah SMEs in terms of raising their level of knowledge, awareness and business networking through organizing business matching sessions, seminars and talks by various government linked agencies. It is our hope and wish that at the close of the carnival, not only each and every

We understand that in June, DIDR is going to organize the SME carnival in Sabah Trade Centre, Kota Kinabalu. Can you tell us what that carnival is all about?

Who will be participating in such a carnival?

Finally, do you have any views or comments on SMEs in Sabah? For instance, are bumiputera entrepreneurs taking the opportunities to venture into SMEs?

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FOR SMALL AND MEDIUM ENTERPRISES (SMES)

BUSINESS ACCELERATORPROGRAMME

This programme enables SMEs to be assisted through an integrated approach with guidance, including strengthening their core business, building capacity and capability, and facilitating access to financing. Applicants will receive business and technical advisory services, aimed at enhancing their business potential.

Sector Coverage Manufacturing and Manufacturing Related Services

Services

Agriculture (Agro-based Products)

Eligibility Criteria of BAP SMEs incorporated under the Companies Act, 1965

At least 60% Malaysian equity

The Government provides an enabling environment for the growth and development of globally competitive and resilient SMEs. Financial assistance in the form of grants and soft loans is provided by the Ministry of International Trade and Industry (MITI) and its agencies.There are 3 types of financial schemes available for SMEs:

Valid business/premises license

Must undergo SME Competitiveness Rating for Enhancemen (SCORE) assessment

Framework of BAP(i) DiagnosticSME Competitiveness Rating for Enhancement (SCORE) Programme - A diagnostic tool used to rate and enhance competitiveness of SMEs based on their performance and capabilities.

(ii) Capacity Building (a) Skills Upgrading - Short term courses are provided by the 40 training centres that have been appointed by SME Corporation Malaysia

-Entrepreneurship Training

(b) Brand Awareness -Provide awareness on the importance of branding and packaging as well as training to SMEs across the country

(iii) Advisory & Technical Support

One Referral Centre (ORC) - Provide advisory services for strat-up as well as established business by Business Counsellors and SME Expert Advisory Panel (SEAP)*

*SME Expert Advisory Panel (SEAP)This programmes provides advisory services by experts in various fields such as:

-Technology Improvement -Production capacity -Engineering -Automobile -Machinery equipment -Materials technology -Process improvement -Designing -Financial management -International standards -Productivity improvement -Maintenance -Label & Packaging -Quality Asssurance -ICT and Computerisation -Business system e.g. Logistics, Inventory -Lean Production System Management

(iv) Facilitating Access to Financing - Providing advisory services to obtain to financing provided by various financial institutions - Beneficiaries of previous grant schemes of SME Corporation Malaysia are not eligible for such facilties

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ENRICHMENT ANDENHANCEMENT

PROGRAMME (E2)

This programme enables Micro Enterprises (MEs) to be assisted through an integrated approach with guidance, including strengthening their core business, building capacity and capability, and facilitating access to financing. Applicants will receive business and technical advisory services, aimed at enhancing their business potential.

Sector Coverage Manufacturing and Manufacturing Related Services

Services

Agriculture (Agro-based Products)

Eligibility Criteria of BAP MEs incorporated under the Companies Act, 1965

Continue to next page >>

as training to SMEs across the country

(iii) Advisory & Technical SupportOne Referral Centre (ORC) - Provide advisory services for strat-up as well as established business by Business Counsellors and SME Expert Advisory Panel (SEAP)*

*SME Expert Advisory Panel (SEAP)This programmes provides advisory services by experts in various fields such as:

-Technology Improvement -Production capacity -Engineering -Automobile -Machinery equipment -Materials technology -Process improvement -Designing -Financial management -International standards -Productivity improvement -Maintenance -Label & Packaging -Quality Asssurance -ICT and Computerisation -Business system e.g. Logistics, Inventory -Lean Production System Management

(iv) Facilitating Access to Financing - Providing advisory services to obtain to financing provided by various financial institutions

Fulfil the definition of Micro Enterprises (MEs)

At least six (6) months in operation

Valid business/premises license

Must undergo Micro enterprise Competitiveness Rating for Enhancement (M-CORE) assessment

Framework of E2(i) DiagnosticME Competitiveness Rating for Enhancement (M-CORE) Programme - A diagnostic tool used to rate and enhance competitiveness of MEs based on their performance and capabilities.

(ii) Capacity Building (a) Skills Upgrading - Short term courses are provided by the 40 training centres that have been appointed by SME Corporation Malaysia

-Entrepreneurship Training

(b) Brand Awareness -Provide awareness on the importance of branding and packaging as well

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SOFT LOAN SCHEME FOR SMALL AND MEDIUM ENTERPRISES

(SLSME)

The SLSME was launched in December 2001 to promote the development of small and medium enterprises in Malaysia. This Scheme assists existing as well as newly start-up enterprises in project, fixed assets and working capital financing.

The fund for this Scheme is channelled by the Government of Malaysia via SME Corporation Malaysia to MIDF for the implementation of the Scheme.

Eligibility Criteria and Main Features1. Eligibility: SMEs incorporated under the Companies Act 1965 or Registration of Business Ordinance 1956;

At least 60% equity held by Malaysians;

Possesses a valid premises licence ; and,

SMEs with shareholdings not exceeding 20% held by public-listed companies (only if applicable).

2. Sectors: Manufacturing.

Manufacturing- related services.

Services (excluding insurance and financial services).

3. Financing Amount: Minimum: RM50,000.

Project Financing - Maximum RM5 million. Fixed Assets Financing - Maximum RM5 million.

Working Capital Financing - Maximum RM3 million. IT Hardware/Software - Maximum RM500,000.

4. Items Eligible For Financing: Industrial/Commercial land and factory business premises construction, ready built factories business premises, plant, machinery equipment and IT hardware/software.

Costs incurred for initial store renovation and upgrade of store display for retail trade.

Working capital.

5. Percentage Financing:Fixed Assets/IT Hardware/Software:-

Up to 90% of the cost of new assets.

Up to 65% for used/ reconditioned machinery equipment which are not more than 5 years old.

Working Capital:- Up to 100% for Purchase Revolving Credit. Up to 80% for Sales Revolving Credit. Up to 90% for Term Financing.

6. Repayment:Fixed Assets/IT Hardware/Software:-

Land & building – up to 25 years including grace period of up to 2 years.

Plant & machinery & equipment – up to 7 years including grace period of up to 1 year.

IT hardware/software – up to 4 years including grace period of up to 1 year.

Working Capital:-

Purchase Revolving Credit & Sale Revolving Credit – up to 150 days for each drawdown including an option to rollover for a period not exceeding 60 days for eligible borrowers.

Term Financing - up to 3 years including grace period of up to 6 months.

7. Interest / Profit Rate:4% per annum on yearly rest.

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For this edition, we provide much information on the development

of SMEs or rather small businesses in Sabah. By the definition of SMEs, it requires businesses that have a minimum of trade turnover of RM300 000 a year and they are registered following prevailing regulations to obtain licenses and permits.

Many operators especially in district levels would not be able to fit into the definition at all. Businesses operating from homes in the villages like preparing food products and handicrafts are many. The State Government encourages these operators by providing appropriate market places and those able to produce bigger volumes are able to sell in Expositions or become suppliers. Only when they have grown to considerable size, they will need assistance to expand and especially access to finance. At the same time, they see the need to subscribe to rules and regulations that could properly record the activities of their businesses.

There is no lack of creativity, looking at the range of products they have on display. Efforts should be made to identify which one can be taken to “grow big”. Many State agencies are already tasked to provide the assistance and at the same time the agencies themselves are successful SMEs. There are opportunities for the private sector to be involved in many ways. They can help to improve product quality and do better packaging for export markets.

There is urgency for us to encourage business set-ups especially people here is not lacking in entrepreneur skills.

SMEs contribution to GDP

has been increasing, albeit gradually.

There is a target for SMEs in the nation to contribute 41% to GDP

by 2020. SMEs has been growing at the rate of 6.2% a year but need a new growth path of 9.3% a year to achieve our target. For this reason, the Prime Minister Dato Seri Najib Tun Razak has announced some “high impact programmes”** starting 2015. Sabah and Sarawak are identified as strategic areas of growth. Breakout strategies for microenterprises in Sabah would be of significant importance.(**News reports on 5.7.14)

Sound business regulations are important for a thriving private sector and a thriving private sector is important for overall development. In the developing world, the private sector is the largest employer, providing an estimated 90% of jobs. Having the right business regulations and related institutions is therefore essential for the health of the economy. The government has a fundamental role in private sector development.

A key premise is economic activity requires good rules. The objective is to have regulations designed to be efficient, accessible to all who use them and simple in their implementation. Where regulation is burdensome

and competition limited, success tends to depend on whom one knows. But where regulation is transparent, efficient and implemented in a simple way, it becomes easier for aspiring entrepreneurs to compete on equal footing and to innovate

and expand. Enabling growth – and ensuring that all people, regardless of income level, can participate in its benefits – requires an environment where new entrants with drive and good ideas can get started in business and where good

firms can invest and grow, thereby creating more jobs.

Starting a business in Malaysia has improved significantly over the years.

Malaysia rank #6 overall and #16 Starting a Business over 189 economies in the World, World Bank Doing Business Report 2014.

The number of steps needed to start a business and the time taken to approve and issue the license or permit will reflect the efficiency of the State delivery system. If the procedures are set by law, the submission of the applications are to record the details. Many could be done online where the system can ensure accurate information is provided. World Bank Report shows as follows:-

Table 1

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Table 3

MySay

Saleh Truck & Trailer Manufacturer Sdn Bhd was established in 2002 and specializes in manufacturing commercial vehicles such as new petrol, diesel, water and palm oil tanker trailers, opentop trailer, cargo trailer, pole trailer, tipping trailer and many more.

On the 5th of May 2014, Saleh Truck & Trailer launched a new product namely the “Side-tipping Semi Trailer” at the company’s ground at Kota Kinabalu Industrial Park (KKIP).

Launched by the Ministry of Industrial Development’s Assistant Minister Datuk Bolkiah Haji Ismail, the side-tipping semi trailer will harvest more meaning for the company to achieve more success.

The Managing Director of Saleh Truck & Trailer Manufacturer, Mohamad Saleh Bin Siri said that they have been trying to diversify their products and this side-tipping semi trailer is the first of it’s kind in Sabah. He hopes that this product can help various plantation companies in Sabah so as to promote the economic growth of the state as well.

The Side-tipping semi trailer will be marketed locally here in Sabah as well as in Sarawak. Mohammed Saleh Bin Siri hopes that this new product, along with the company’s list of 1,800 units of locally produced trailers, would appeal to our local industry players for its unique features.

According to him, the new product is a multipurpose trailer that enables loading and unloading work to be done easily because it’s main purpose is to be able to tipped from the sides of the trailer.

Datuk Bolkiah Haji Ismail, who represented Industrial Development Minister Datuk Raymond Tan Shu Kiah mentioned that Saleh Truck and Trailer has taken the initiatives to produce safer trailers. By having lower gravitational traction when doing unloading work, it is guaranteed to be more safe than the normal trucks that has to slant upwards when unloading. According to Datuk Bolkiah Haji Ismail, there are many accidents that occur due to uneven surfaces, inconsistent weather and the load factor at times.

To boast of a few achievements of Saleh Truck and Trailer, they are exporting a number of tanker trailer units to Congo, South Africa. They have also sealed agreements with three companies from China.

The first company, Sinotruck is to assemble brand new lorries for Saleh Truck and Trailers. The second company, which has the job to market wheel loaders and forklifts in Sabah and Sarawak, is called Yineng. Shin Tai Group, which is the third company will be supplying tyres to Saleh Truck and Trailers.

Saleh Truck and Trailer launchesNEW PRODUCT Born and bred in Pahang,

Mohamad Saleh Bin Siri transfered to Kota Kinabalu, Sabah with his family in 1995 to work as the Managing Director for Ho Wah Genting Coach Manufacture Sdn Bhd.

In 1997, he decided to resign from the job to start his own small business at a rented factory at Jalan Kionsom.Only in 2002 did he purchased the land in K.K.I.P to start Saleh Truck and Trailer Manufacturer Sdn Bhd.

His interest in the vehicle and transportation industry has been his motivation and inspiration to start up all his companies.

So far, they are the only Malay company in Malaysia that is managing this kind of truck and trailer manufacturing business. In a working environment that is Malaysian-Chinese dominated, many hardships were faced including gaining trust from not only their chinese clients but more so from their bumiputera clients.

However, Saleh Truck and Trailer Manufacturer Sdn Bhd is now an established company with about 60 staff members, and is the only one in Kota Kinabalu that produces truck and trailers for various industrial companies.

According to his wife, Puan Roziah, who is the Director of Saleh Truck and Trailer, her husband is a risk taker and if he sets his heart unto something, he is determined to succeed.

Brief Information

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The following images are some of the truck and trailers that are produced by Saleh Truck and Trailer Manufacturer Sdn Bhd.

1. Crude Palm Oil Tanker Semi Trailer2. Diesel/ Petrol/ Jet A1 Tanker Semi Trailer3. Bitumen Semi Trailer4. Side Tipping Semi Trailer5. Water Tanker Semi Trailer6. Rear Dump Tipping Semi Trailer7. Opentop Platform Railing Semi Trailer8. 30-55FT Low Loader Semi Trailer9. Opentop Platform LPG Trailer Semi Trailer10. 40-45FT Port Terminal Container Semi Trailer

Semi TrailerProducTS

1 2 3

4 6

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8 9 10

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Sabah, which is currently the largest producer of crude palm oil (CPO) in

Malaysia, needs to look ahead and continue to evolve and improve amid continuing challenges.

POIC Sabah Sdn Bhd director and chief executive officer Datuk Dr Pang Teck Wai said these include the development of further mechanisation to address the growing challenges of labour shortages. Increasing fresh fruit bunch yields as well as the oil extraction rate and the introduction of higher yielding clones.

“At the same time, the

industry needs to be cognisant of the growing environmental dynamics that, fairly or unfairly, will likely remain an integral industry reality in the foreseeable future,” Pang said in an email interview.

As the country’s largest CPO producer, Sabah will ocntinue to play an important role in contributing to the country’s export earnings in the future, he added.

Sabah accounts for over 30 percent, or 5.8 million tonnes, of the total national CPO production of 19.2 million tonnes last year. “The state is also the leading producer of palm

kernel totalling 1.3 million tonnes, with Sarawak and Peninsular Malaysia producing 700,000 tonnes and 2.0 million tonnes, respectively, last year.

He added that Sabah also has the most number of palm oil mills, totalling 124, which accounts for 29 per cent of the total fresh fruit bunch mills in the country.

Sabah also has 14 palm oil refineires compared with 27 in Peninsular Malaysia and five in Sarawak in 2012.

In 2012, for example, the palm oil ector held the largest share, or about 39 per cent, of the state’s total export value of

On the glory and growthof Sabah palm oil industryROOM FOR IMPROVEMENT: As the largest producer of CPO in Malaysia, Sabah needs to address some challenges in order to improve further, POIC Sabah director Dr Pang Teck Wait tells Zaidi Isham Ismail.

The palm oil sector needs to be cognisant of the growing environmental dynamics that will likely remain an integral industry reality in the foreseeable future, says Dr Pang Teck Wai.

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RM47.7 billion.

“This underlines the palm oil industry’s position as one of the key contributors to the state’s gross domestic product, “ Pang said.

In terms of revenue, the CPO sales tax is the largest contributor to the state’s coffers with an average of between 26 and 33 per cent since its implementation. He said sales tax on CPO contributed about RM709 million, RM820 million and RM1 billion to the state’s total revenuw for 2010, 2011 and 2012, respectively.

Question: How has the Sabah palm oil industry evolved?

Answer: The oil palm was first introduced in Sabah in 1957 at the Mostyn Plantation in Kunak.

The plantation has since been taken over by Sime Darby Plantations Bhd and renamed OP57.

Located not far from the Tasik Impian Golf Club, OP57 remains a symbol of strength to the oil palm industry in the district in particular, and Sabah as a whole.

About two hectares of the original oil palm are still standing although the trees are now well into their fifth decade.

From its humble beginning, oil palm trees rapidly spread out throughout the fertile soils of the East Coast of Sabah.

They soon replaced cocoa as the leading plantation crop in Sabah. Oil palm plantations started spreading to the rest of

the state in the 1990s.

Today, Sabah is a leading player in the national palm oil industry with a total oil palm planted area of 1.48 million ha.

This accounts for about 28 per cent of the 5.23 million total oil palm area in Malaysia.

The palm oil sector accounts for the largest portion of the total state ands suitable for agricultural purposes.

Question: How has the rakyat benefited?

Answer: As a key economic sector, the oil palm industry is a major source of livelihood for thousands of smallholders, an employment generator and a vital source of revenues for the state.

For example, while smallholding only accounts for around 12 per cent of the total oil planted area in the state, the numbers are fairly large at 29,400.

It is a major source of livelihood in the rural areas and the industry has helped improve the lives of thousands of smallholders in the fight against poverty.

In terms of employment, while the manial labourers are mostly migrant workers, key supervisorial and managerial posts are occupied by locals.

Finally, the oil palm industry is a major source of revenue for the state.

In short, it is readily apparent that a major downturn in the industry will have a direct impact on the people and economy of Sabah.

Question: What more can be done?

Answer: One important area is the development of further down-stream and value-adding activities in the local oil palm industry. This is an ongoing effort and POIC Lahad Datu is taking an active role in this agenda.

A key area where Sabah is particularly suited to play an important role is the development of the palm biomass industry.

The vast potentials of this sector have been underlined by the National Biomass Strategy.

For example, Agensi Inovasi Malaysia (AIM) has estimated that Malaysia currently produces about 80 million tonnes of oil palm biomass and this is expected to reach 100 million tonnes by 2020.

With 1.4 million ha of oil palm plantation, Sabah is estimated to contribute about 30 percent of that volume.

Based on the utilisation of just 20 million tonnes of biomass for downstream value-adding activities, AIM estimates that this will contribute about RM30 billion to the gross national income.

Among the biomass downstream high-value products are solid and liquid bio-fuels in the form of pellets ot ethanol and biobased chemicals such as bioplastic.

Biomas pellet is estimated to generate a worldwide market demand to the tune of some 10 million tonnes a year by 2020.

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AGROCHEMICAL (FERTILIZER) MANUFACTURINGSOGIP is the first Oil and Gas

development in Sabah focussing on Petrochemical-Agrochemical. It will be the catalyst for the development of Sabah’s west coast.

The State of Sabah and PETRONAS are partners in developing natural gas into primary products like ammonia and urea.

Using these primary feed stocks, development of downstream value added products like ammonium sulphate, ammonium nitrate, diammonium phosphate, caprolactam and others are encouraged.

Fertiliser is a key industry that will support the world wide challenge in food production.

The need for improvement in food production and quality will create higher demand in fertilisers. Demand for food production is expected to grow rapidly for the next 20 years in line with the growth of the population.

SOGIP aspires to provide total fertiliser solutions to the agriculture industry, supporting Sabah as the largest producers of Palm Oil in Malaysia.

Currently undergoing construction is a PETRONAS’

Ammonia-Urea plant. This project will cost approximately RM 4.6 billion and will produce about 1.2 million tonnes per annum of granulated urea.

Once completed, this facility will be the largest single train granular urea facility in South East Asia, transforming Sabah into one of the region’s largest

producers of fertilizer. Construction has started in the second quarter of 2012 with completion targeted in 2015.

Fertilizers from this facility will be exported to lucrative oversea markets. However, a sizeable volume will still be made available to serve the State’s rapidly growing agricultural sector.

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A new ammonia plant is also being planned in SOGIP to further add value to the supply chain.

Using ammonia as feedstock, seven value added products has been identified for investment within this cluster namely Ammonia, Urea, NPK, Ammonium Nitrate, Caprolactam, Ammonium Sulfate, and Diammonium Phosphates.

The investment of new Ammonia plant is expected to bring GNI of more than RM 646 million by year 2020 to support the fertilizers and petrochemical industries.

The products will be used for cash crops, tubers, paddy and palm oil. The investment will also grow the p e t r o c h e m i c a l industry in Sabah with production of Nylon 6 which being use in textile and engineering plastic industry.

The fertilizer industry future investment opportunities will be in the higher value fertilizers products such as Agrochemicals and Enhance Efficiency Fertilisers.

A g r o c h e m i c a l products such as herbicide and pesticide and Enhance

Efficiency Fertilizers such as coated fertilizers will provide further solution to the agriculture industry in Sabah.

Reference : PETRONAS write for the Sabah Oil and Gas Lab review in November 2013.

Ammonia is synthesised from hydrogen (from natural gas) and nitrogen (from the air). Natural gas contains some sulfurous compounds which damage the catalysts used in this process. These are removed by reacting them with zinc oxide. The methane from the natural gas is then converted to hydrogen. Air is mixed in with the gas stream to give a hydrogen:nitrogen ratio of 3:1. Water, carbon monoxide and carbon dioxide (all of which poison the iron catalyst used in the ammonia synthesis) are removed. The carbon monoxide is converted to carbon dioxide for use in urea production, and the carbon dioxide removed. The remaining traces of CO and CO2 are converted to methane and then the gases cooled until the water becomes liquid and can be easily removed. The nitrogen and hydrogen are then reacted at high temperature and pressure using an iron catalyst to form ammonia. Urea is made from ammonia and carbon dioxide. The ammonia and carbon dioxide are fed into the reactor at high pressure and temperature, and the urea is formed in a two step reaction.The urea contains unreacted NH3 and CO2 and ammonium carbamate. As the pressure is reduced and heat applied the NH2COONH4 decomposes to NH3 and CO2. The ammonia and carbon dioxide are recycled. The urea solution is then concentrated to give 99.6% w/w molten urea, and granulated for use as fertiliser and chemical feedstock.

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Associated Concrete Products (Sabah) Sdn

Bhd (ACPS), a majority-owned subsidiary of SEDCO, was incorporated under The Company Act, 1965 on 13th December 1994. The company operation began on 2nd Jan 2003 and for the last 10 years, it only manufactured reinforced concrete square piles and reinforce concrete box culvert. The market however has become very saturated lately.

In March 2013, Sinajasa Sdn Bhd, a subsidiary of Gabungan AQRS Bhd became the new

shareholder in ACPS when it acquired 49% stake in the company. The equity was previously held by Associated Concrete Products (M) Sdn Bhd. With the required exercise completed in February 2014, the company was finally renamed as SEDCO Precast Sdn Bhd. During the transition period, a new management team with a business expansion plan which includes various upgrading and improvements was formed.

After months of hard work together with support from SEDCO and Sinajasa, the business plan has finally

borne fruits when it secured its 1st Industrial Building System (IBS) project through Vinci Construction Grands Projets Sdn. Bhd. for the construction of Menara Akal Megah (previous BFO cinema area) at Kampung Air, Kota Kinabalu. It is the company’s pride to be the preferred precast manufacturer in Sabah by Vinci Construction, a major global player in the construction business, over other more established players in the market. Their satisfaction towards the company’s commitment and facilities in precast planks production led to the supply of other precast

SEDCO PRECAST MOVES IN RIGHT DIRECTION

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components like beams and staircase with a total order worth RM1.5 million. It has also drastically improved the company’s reputation as a diversified and quality precast manufacturer in the market which was previously monopolized by few in the market.

What is IBS?

Industrial Building System or widely known as IBS is a construction system that utilizes pre-fabricated or precast components manufactured off site which will later be transported and installed on site. It consists of column, beam, slab (or plank), wall and staircase.

Among the benefits of IBS are:a) Less construction time as work are done concurrently at factory and worksiteb) Requires less workersc) Better Quality as quality are controlled in factory environment and concrete grade is higher for early handling purpose. d) As steel formwork is used instead of timber for durability, the finishing is better thus environmental friendly because less material especially timber will be used.e) Cleaner and manageable worksite as less formwork and scald folding will be required

Due to the various benefits of IBS, the Government established a policy to encourage the use of IBS in all Government

buildings because it is not only time and cost efficient but also less dependent on foreign workers. With that, it shall be the future for construction industry as well as the precast manufacturer like SEDCO Precast Sdn. Bhd.

Other Product Range

In line with the company’s business expansion plan, SEDCO Precast Sdn. Bhd. also invest extensively on facilities to expand its capacities as well as product range.

Among the products which will be introduced in 2014 are L-shapes (see picture) and Giant Segmental Box Culvert for infrastructure. These products will add to the coverage of the current product range in terms of drain width.

If everything goes well in the business expansion plan, SEDCO Precast Sdn. Bhd. shall emerge as one of the leading precast manufacturers in Sabah in the next few years.

Precast beams installed before installationof planks and final topping

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The focus of discussions at the third edition of this conference will centre

on the future of energy in this region and in particular in Sabah.

Policymakers all over the world are continuously faced with this question on the future of energy.

The scenario is the same – whether in developed countries or emerging economies, there is a need to find energy sources to meet demand and fuel development. And this must be done in a safe, secure and sustainable manner.

One effective way to achieve that is through innovation and technology. And the situation is no different in Sabah.

Over the last 10 years, Shell has almost tripled its level of annual investment in R&D. Last year we invested $1.3

billion in this cornerstone of our business, making us the top IOC investor when it comes to R&D, and among the top three in the global energy industry.

Our Prime Minister Datuk Seri Najib Tun Razak had said in an oil and gas conference last year that the oil and gas industry contributes more than 40 per cent of Malaysia’s national income.

He further said that in order to escape the middle income trap, the establishment of Malaysia as an energy hub for the region is a key strategic objective.

The energy needed to generate a unit of GDP has fallen significantly since 2010, and this trend is projected to continue to 2035 with energy intensity dropping by about 1/3. But this increase in efficiency will be outstripped by demand increases.

Fossil fuels will continue to provide the bulk of the world’s energy supply. But oil and gas resources are getting harder to find and to produce. We’re moving into more difficult locations, more complex geologies, and more challenging chemical mixes (sour gas, heavy oil, etc.).

Here in Malaysia, Shell is working with Petronas to help bring more value to the country from its natural resources.

We have been in Malaysia since 1891 when we were a small operation importing kerosene for sale. After 120 years, the country continues to be vital to our growth in the Asia Pacific region and Sabah is a major part of that growth as a key heartlands operation for Shell.

We are ramping up our presence here particularly in deepwater Sabah and also through the commencement

The Future of energy in SabahSiti Sulaiman, Sabah General Manager of Shell Malaysia gave a keynote address at the recent 3rd Sabah Oil and Gas Conference and Exhibition here at Magellan Sutera, Kota Kinabalu. The following article contains important and interesting excerpts from her keynote address.

Photo source from http://www.offshoreenergytoday.com

The semi-submersible floating production system (FPS) for Gumusut-Kakap being delivered to the project site. It has been successfully installed and will start production this year. (Inset) Siti Sulaiman.

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of Enhanced Oil Recovery related work in the North Sabah fields.

Shell aims to be the world’s most competitive and innovative energy company. We believe innovation will be critical to meeting the world’s rising energy needs in the future.

For that reason, Shell has been developing technology to help us explore and operate safely in challenging locations, and in increasingly deeper waters such as around Sabah.

D e e p w a t e r development heralds a new era in Malaysia’s booming oil and gas industry, and Sabah is firmly at the heart of that growth.

As many of you are aware, Kikeh, operated by Murphy Oil is the country’s first deepwater offshore development off Sabah. Since this 2008 kick-start, more deepwater fields have been discovered and developed off Sabah shores.

Gumusut-Kakap is Shell’s first deepwater project in this region. It is considered big on a world scale and is a real example of how Shell’s technical expertise will help Malaysia capitalise on its energy resources. The semi-submersible floating production system (FPS) for Gumusut-Kakap project was built in-country. It is the largest facility of its kind to be built on land, and the biggest structure ever undertaken by the Malaysia Marine and Heavy Engineering.

That’s not all! The project safely completed a record-breaking 23,000 tonne

superlift when the platform’s topsides were raised 45 metres to move the 17,500 tonne hull underneath them.

The Gumusut-Kakap floating production system (FPS) will start production this year. We are already producing 25,000 bbl/day from Gumusut-Kakap through simple subsea tie- back, but once the FPS starts up, production will ramp up progressively. At its peak, Gumusut-Kakap will produce 135,000 bbl/day – some 20-25% of Malaysia’s oil production.

We are developing another deepwater project offshore Sabah. The Malikai tension leg platform is currently in fabrication, and when deployed, it will add another 60,000bbl/day of oil production capacity.

Technology and innovation can also help us in getting the most out of existing assets/fields, like Enhanced Oil Recovery.

Here in Malaysia, Shell is partnering with PETRONAS to unlock the benefits of EOR on projects offshore Sabah and Sarawak.

These are the kind of innovative, engineering feats happening in Malaysia right now as part of the development of the oil and gas industry.

The continued success of the oil and gas industry also rests on the strong support given by the Government of Malaysia as well as the host government of Sabah. As one of Malaysia’s largest foreign investors, we are thankful that the government has introduced far sighted policies making large investments such as the ones I mentioned possible.

Prime Minister Yang Amat Berhormat Datuk Seri Najib Tun Razak also announced the extension of the Global Incentives for Trading (GIFT) programme under the Budget 2013 to further encourage petroleum trading companies to use Malaysia as their base for storage and trading operations.

While cost competitiveness and efficiencies are very important short to medium term success factors, the long-term key factor for Malaysia to be a successful oil and gas hub, will be the creation of a constant supply of highly-skilled and productive workforce that is grounded on a strong engineering foundation.

This workforce must be able to meet the requirements of this dynamic industry and more importantly, the technicians and engineers must possess the flexibility to step up and undertake new deepwater challenges.

We believe that the many deepwater projects as well as EOR initiatives will ensure this as we build our on operations capacity by training young operators.

The oil and gas sector is a challenging environment, and we thank PETRONAS for their continued confidence in us in this exciting journey.

With the cooperation of all, notably key stakeholders like the government and other industry partners and players, I am confident we can realise the full potential of the industry in Sabah which will in turn fuel the nation’s growth.

We believe that Shell has an important contribution in innovation, technology and project delivery.

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1122

Unimekar Group was first established in 1989. The Group commenced their

operation as a contractor specialising in electrical works. Their head office and factories in KKIP are mainly used for production, warehousing, repair workshops, utilities, logistics and administrative offices. In short, their facilities plants and machineries are now centralised in KKIP.

The Group’s business activities consist of 3 main components which are operated through Unimekar Sdn Bhd, Unimekar Metals Sdn Bhd and Unimekar Industries Sdn Bhd.

The main person at the helm of the group is Dr Kok Tiong Chee, from Keningau, Sabah. He was awarded with scholarships for his Degree and Ph.D studies overseas. Upon his return to Malaysia, Dr Kok served in various capacities as Electrical Engineer with Sabah Energy Corporation, Lead Engineer and progressed to Technical Services Manager in the Technical Services Division of Sabah Gas Industries Sdn Bhd before he ventured into the commercial sector some twenty odd years ago.

Unimekar Sdn Bhd was incorporated in 1989 to administer the contracting and distributions of projects. It plays the role of a turnkey contractor and has become a major electrical contractor and supplier in the country. With strong workforce, Unimekar Sdn Bhd has successfully completed many sizeable turnkey projects in power transmission and

distribution. In its effort to strengthen its resources, the company has further diversified into distribution of electrical poles of various sizes and related accessories.

Unimekar Metals Sdn Bhd was established in 1998 to handle the manufacturing side of the business. The company’s main businesses are structure and tower fabrication, steel poles and street lighting poles manufacturing, provision of galvanising services and iron and steel foundry.

Unimekar Industries Sdn Bhd was set up in 2011. It was established to undertake the manufacturing of steel billet.

With their expertise and stringent quality control, not surprisingly the group of companies was awarded with ISO accreditation in 2002 for their steel structures fabrication and galvanising services. They proceeded to win another ISO accredition award for their mechanical and electrical engineering works, civil and structural engineering works as

well as building construction a few years later.

The Group’s vision is to be the premier M&E contractor and manufacturing companies in the state by providing high quality products and services with a mission to continually improve their services to customers and deliver quality products.

Unimekar Group of companies manufacture various products ranging from tower, marine beacon, light houses and steel poles production to melting of metals in its foundry division for palm oil mills and general engineering industries. Apart from the manufacturing of metals and steel products, they also engage in tower erection and line stringing works.

To date, Unimekar group of companies have successfully established themselves as the market leader in their specialised fields and is rapidly expanding and increasing its production capabilities and capacity at a fast rate.

unimekar a Pioneer company in KKiP

Dr Kok Tiong Chee (left) at the opening of the new foundry a decade ago with Tan Sri Chong Kah Kiat (center) and YB Datuk Wences Angang, the KKIP Chairman at that time.

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The Sipitang Oil & Gas Industrial Park (SOGIP) is making good progress at its

4,065-acre site in the Sipitang district of Sabah, by continuing to provide investors with all the infrastructural requirements.

The General Manager Haji Abdul Kadir Haji Abdullah said SOGIP for instance, started to construct a new water treatment plant to answer the need of its anchor tenant, the Sabah Ammonia Urea Plant (SAMUR), a project undertaken by PETRONAS Chemical Group Bhd.

Speaking at the 3rd Sabah Oil & Gas Conference and Exhibition in Kota Kinabalu on May 26, 2014 (pictured above), Haji Kadir said the existing water treatment plant is found to be insufficient in supply of treated water for the project, hence the need to proceed with building a new one. “We employ a demand driven approach at SOGIP to ensure that its development matches the requirements and needs of its investors,” said Kadir who briefed participants

at the O&G conference on the current status of the park and its future direction.

SOGIP is an industrial park that is owned, managed and marketed by Sipitang Oil & Gas Development Corporation Sdn Bhd (SOGDC) that was established by the Sabah State Government in 2010.

SOGIP is an initiative of SOGDC to assist potential investors in various matters pertaining to participating in downstream O&G at the park.

Haji Kadir disclosed that among other infrastructural works undertaken by SOGIP are construction of access road, power supply through a 275-V transmission, street lights, drainage and ICT.

“Therefore, looking at SOGDC’s commitment for SAMUR, future investors can be rest assured that their requirements would be met,” he said.

Haji Kadir emphasised the importance of PETRONAS making its presence in SOGIP

SOGIP provides infrastructure for investors

to drive the growth of the petrochemical industry at the park.

He further stated that SOGIP’s journey with PETRONAS had been good and fruitful. Infact, he added, the design and preparation of SOGIP Master Plan was collaboration with PETRONAS, the Malaysia Petroleum Resources Corporation (MPRC) and SOGDC.

“We will continue to strengthen our relationship with PETRONAS,” he said. Haji Kadir also told the conference participants that SOGIP would develop in line with the specific structured manner in accordance with its masterplan.

“SOGDC is confident in providing the necessary deliverables for its investors and this has been proven with the SAMUR project. In addition with the master plan and the strong relationship with PETRONAS, SOGIP is set to be a force to be reckoned with,” he said.

Ministry of Industrial DevelopmentTingkat 9, 10, 11, Blok C,

Wisma Tun Fuad Stephens,Karamunsing,

Beg Berkunci No.2037,88622 Kota Kinabalu, Sabah, Malaysia.