Malaysian PM Najib launches plan to boost East Malaysia's financial hub

Malaysian Prime Minister Najib Razak at the launch of the Labuan Development Blueprint on Jan 18, 2018.
Malaysian Prime Minister Najib Razak at the launch of the Labuan Development Blueprint on Jan 18, 2018. ST PHOTO: SHANNON TEOH

LABUAN - Malaysian leader Najib Razak unveiled on Thursday (Jan 18) a "manifesto" to diversify the economy of the financial hub of East Malaysia, in a bid to consolidate support in the area ahead of the general election this year.

Prime Minister Najib gave details of the 12-year Labuan Development Blueprint (LDB) for the federal territory of Labuan, which is made up of islands located near Sabah and Sarawak, the two key states for his ruling Barisan Nasional (BN) coalition.

It is the latest initiative by Kuala Lumpur geared towards Sabah and Sarawak, where grumbles over unfair treatment compared with Peninsular Malaysia threaten what are known as "fixed deposits" for BN - the two states account for more than a third of its strength in Parliament. Malaysia's general election is expected by May.

An ambitious project - the 5,324km Pan-Borneo Highway - is already being built across infrastructure-starved East Malaysia, and the Najib administration has begun handing back some autonomy to their state governments.

The LDB is expected to diversify the economy of Labuan, a former sleepy territory that had grown steadily for a quarter of a century thanks to the oil and gas industry.

But Labuan, whose main island is one-eighth the size of Singapore, was badly hit by the oil and gas downturn from 2014 to 2015.

The blueprint aims to integrate Labuan, which has a low-tax regime for industries such as banking, insurance and finance, into the economies of Sabah and Sarawak.

"Nobody can control the global price of oil. But as a government, we cannot leave this be. We must intervene and create new ideas for Labuan. The blueprint for 2030 will create a better future, and if you make the right decision later, we will deliver real change for Labuan," Datuk Seri Najib told thousands attending the launch event.

Analysts say that while concessions to Sarawak will likely maintain BN's grip on Malaysia's largest state, the coalition may face a sterner test in Sabah, where former Umno vice-president Shafie Apdal is leading a fierce campaign against his former colleagues.

Key to the LDB is a proposed 11km bridge that will connect the island to Sabah in the north-east of Borneo, a project that the Prime Minister called "an extension to the Pan-Borneo Highway".

The local community has long pushed for the bridge, with various proposals mooted over the last decade. Mr Najib officially announced the connection to Sabah - which will result in a 2½ hour drive to state capital Kota Kinabalu - in October when presenting Budget 2018.

Tour guide Jerry Teo told The Straits Times that the bridge "is a dream come true" as it will allow tourists from Sabah - which has seen huge growth in arrivals from China - to make a stop in Labuan.

The blueprint also pushes for the transformation of financial services through measures including further tax incentives and encouraging tourism, especially through water sports events such as a new leg of the P1, the world's premier powerboat series.

Labuan MP Rozman Isli told reporters that the territory needs to diversify after more than 10,000 - or 10 per cent - of its residents moved away as a result of the crash of the oil and gas sectors. According to official data, unemployment hit 7.8 per cent in 2016, more than double the national average.

Datuk Chin Chee Kee, who heads the Labuan association of trust companies - firms which manage Labuan subsidiaries for others - told The Straits Times the LDB will make Labuan more attractive to skilled workers, helping investors to maintain a larger presence in the district.