Najib tries to bridge divide with East Malaysia ahead of polls

Labuan bridge project seen as gift to region which voted in nine opposition MPs in 2013

The Labuan Development Blueprint 2030 unveiled this month is geared towards transforming Labuan (above) from just a finance hub to one deeply integrated to the real economy of Sabah and Sarawak in East Malaysia.
The Labuan Development Blueprint 2030 unveiled this month is geared towards transforming Labuan (above) from just a finance hub to one deeply integrated to the real economy of Sabah and Sarawak in East Malaysia. ST PHOTO: SHANNON TEOH

Construction of an 11km bridge will begin in 2020 - when the rest of Malaysia is slated to achieve "developed" status - linking one of the country's poorest states with a financial district that is one of the country's richest.

"It's a dream come true," tour guide Jerry Teo said, referring to the proposed land link between Sabah and Labuan. A dream because talk of the bridge has been among locals in Labuan as well as Sabahans for three decades, but has always been put on the back burner by the government since it was first mooted in the 1997-2015 development plan for Labuan.

Labuan, with its 100,000 residents, became a federal territory - administered directly by the government in Putrajaya - in 1984 before becoming a low-tax haven in 1990.

For some of the seven million people living in Sabah, Sarawak and Labuan - collectively known as East Malaysia - the refusal to proceed with the bridge project, while more expensive second links were constructed with Penang and Singapore, was symptomatic of what was deemed to be unfair treatment by the federal government.

Prime Minister Najib Razak's Umno-led Barisan Nasional (BN) coalition was punished in 2013, when East Malaysians voted in nine opposition MPs, more than double the previous tally. With surveys showing BN's popularity in peninsula Malaysia dipping to its lowest since Datuk Seri Najib came to power in 2009, he has moved to ensure East Malaysia - home to over a quarter of parliamentary seats - remains as "safe deposits".

The latest masterplan - the Labuan Development Blueprint 2030 (LDB) unveiled on Jan 18 in which construction of the bridge was confirmed - is an effort by Mr Najib to address the perceived slight felt by East Malaysians. It comes possibly weeks before a general election.

The Labuan bridge and new masterplan adds to what has been seen as a number of political gifts to East Malaysia. Among them is the RM29 billion (S$9.8 billion) Pan-Borneo Highway, stretching over 2,200km across Sabah and Sarawak. Construction began in 2015 and, unlike elsewhere in the country, the highway will be toll-free.

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Kuala Lumpur has also agreed to negotiations on handing more decision-making power to the two states, with Sarawak already gaining concessions in education. Another bugbear that needs to be resolved is the question of petroleum revenue that some East Malaysians say has been diverted for decades from their oil-rich seas. "If you make the right decision, we will deliver real change," said Mr Najib, when launching the 12-year LDB.

The blueprint is geared towards transforming Labuan from just a finance hub - largely catering to the oil and gas sector - to one that is deeply integrated to the real economy of Sabah and Sarawak.

Its architects foresee Labuan providing not just working capital but also labour and logistics to the manufacturing, agriculture, tourism, oil and gas industries across Borneo.

Association of Labuan Trust Companies chairman Chin Chee Kee believes the LDB will boost business flows across East Malaysia as "Labuan will be able to get talented people, and there will be a lot of movement".

But rushing through launches and ground-breaking ceremonies may not have the desired impact in the polls, according to an analyst.

Pacific Research Centre principal adviser Oh Ei Sun expects Sabahans and Sarawakians to return BN as their state governments, but "anger at the federal government is not so easily assuaged". He said: "These initiatives for Sabah and Sarawak are a direct response to complaints about unfair treatment. But with the elections just weeks away, your average voter may not feel they have benefited much from these promises."

Masterplan to make Labuan attractive for work and play

The Labuan International Business and Financial Centre (LIBFC) is the key driver of the district's economy, housing 13,260 registered companies that benefit from a 3 per cent tax rate.

For a group of islands only one-eighth the size of Singapore, and with a population of 100,000, this hub ensures the federal territory's per capita income of RM61,833 (S$19,651) is second only to Kuala Lumpur (RM101,420) and ahead of nearest rival Penang (RM47,322).

However, unemployment is the highest in Malaysia and poverty is nearly double the national average. These indicate a clear divide between those actively involved in financial services and the oil and gas industry it supports, and those outside this elite circle.

A key plank of the Labuan Development Blueprint 2030 (LDB) is to transform the LIBFC from just offering low-tax offshore products to a "midshore" hub where businesses do not just exist on paper but have employees and tangible activities on the ground.

Making Labuan an attractive place to live and work will be crucial, which means better connectivity, healthcare, education and recreational activities.

"There is a need for us to further enhance our integration into the economy of Labuan. Tourism, health, aviation and shipping are some sectors that can be developed further," said Labuan Financial Services Authority director-general Danial Mah Abdullah.

The LDB projects that by 2030, Labuan's population will grow by 50 per cent, supported by at least 50,000 jobs that will largely be taken up by locals and Malaysians from Sabah and Sarawak.

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A version of this article appeared in the print edition of The Straits Times on January 29, 2018, with the headline Najib tries to bridge divide with East Malaysia ahead of polls. Subscribe