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Sabah could have done better income-wise with more O&G refineries — World Bank economist

Sabah could have done better income-wise with more O&G refineries — World Bank economist

16 Jun 2022

Sabah, one of the lagging states in the country, could have performed better in terms of income if more oil and gas (O&G) refineries have been made available in the state, according to the World Bank Group’s economist of macroeconomics, trade and investment Dr Mahama Samir Bandaogo. 

‘Today, the structure of the national economy has changed. Income is mainly generated by the manufacturing sector like oil and gas. The manufacturing sector in Sabah did not expand due to limited human capital and limited adequate physical infrastructure. 

“O&G refineries are very capital-intensive, which need labour-intensive processes. 

“So if more [O&G] refineries were to be placed in Sabah, it has to be accompanied with an aggressive social programme so that we will see a decline in the poverty rate that comes with it,” Bandaogo said at a virtual briefing on the World Bank’s Malaysia Economic Monitor report in Kota Kinabalu, Sabah on Thursday (June 16). 

According to him, Sabah is one of the backward states along with Kelantan, Sarawak and Kedah. The state’s poverty rate is three times the national average, and there is a high degree of inequality across districts. 

News reports quoted Minister in the Prime Minister’s Department (Economic Affairs) Datuk Seri Mustapa Mohamed in March as saying that Sabah lags behind with a poverty rate of 19.5%, compared with the national average of 5.6%, and a gross domestic product per capita of RM5,745, compared with the national average of RM7,901.

In its recent report, the World Bank noted that lagging states such as Sabah typically have limited access to markets, limiting their growth potential, and that the country is peripheral, making it difficult to access markets in major economic centres such as Kuala Lumpur. 

In addition, education outcomes need to be improved, both in terms of access to schooling and the quality of education, which require investments in basic infrastructure such as road systems to provide geographic access to schools, according to the World Bank in its report titled “Catching Up: Inclusive Recovery & Growth for Lagging States”.

“This should be done alongside investments to facilitate improved Internet access, an increase in financial allocations for educational resources, particularly in poorer districts, and the formulation of a clear education strategy with well-defined targets.”

The World Bank also said social protection systems provide a supportive ecosystem that enables low-income families to achieve better education and health outcomes, breaking the intergenerational transmission of poverty that can have pervasive negative impacts on human capital formation and poverty reduction. 

“In the case of Sabah, for example, social assistance programmes that are intended to achieve higher rates of enrolment and attendance in schools, focusing on areas where schools are located a significant distance away from households, have the potential to boost educational outcomes, particularly among poorer households,” the World Bank added. 

Source: The Edge Markets