If you knew Sarawak – the East Malaysian state on the island of Borneo – only as a land of tropical rain forests, oil palm and orang-utans, it’s time you changed your view. For, this laidback place of 2.3 million people, which receives some 3.5 million adventure tourists a year, has forcefully emerged, in just a couple of years, as Malaysia’s next major heavy industry base and foreign investment destination.
Of course, Sarawak’s flirting with industry isn’t new. Its first step towards an industrial future was taken a little over 20 years ago, in 1991, when a free industrial zone, called Sama Jaya, was set up to capture foreign electronics companies. But it was only a light footstep and while Sama Jaya is still drawing investments, the state’s rain forest-oil palm-adventure tourism image has remained largely unchanged over the years.
What’s happening now is a game-changer. Confident that the state’s power potential is huge (some 28,000 Mw) and as much as 71 per cent of it can be had from its rivers, the government has taken a decisive second step and created a 70,000-hectare industrial park, called Samalaju, solely for heavy, mainly energy-intensive, industries. All the indications are that Sarawak, the biggest of Malaysia’s 13 states, is going to pull it off big.
Two years ago, there was nothing on ground where Samalaju now stands, not too far from Kuching, the state capital, and the port of Bintulu. Today, the industrial park claims to have received some $8.5-billion worth of proposals and several big factories are already under construction.
A $500-million manganese and ferrosilicon alloy smelter is being built by OM Materials (Sarawak), in which Japan’s JFE Shoji Trade Corporation has agreed to have a stake. The plant will have the capacity to produce 300,000 tonnes a year each of manganese ferroalloys and ferrosilicon alloys.
Japan’s Tokuyama Corporation is investing $1.2 billion in a plant to produce 13,000 tonnes a year of polycrystalline silicon used in photovoltaic cells. Asia Minerals, a Hong Kong-registered private company, which owns smelters in Mongolia and Liaoning, China, is also building a manganese ferroalloy plant with an investment of some $677 million. The first phase of the three-phase facility is to begin operation in June 2013, producing 240,000 tonnes a year initially.
Press Metal, Malaysia’s largest aluminium company, which already has a smelter in Sarawak, is building a $1.6 billion second one at Samalaju, to go into operation later this year. The group will then have a total capacity of 360,000 tonnes of ingots and billets a year, taking Malaysia closer to becoming the aluminium hub for South-East Asia. By 2015, says Sarawak’s Chief Minister Abdul Taib bin Mahmud, more than $6.5 billion worth of investments will likely be on the ground at Samalaju.
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Behind all this is a huge public-private development exercise called SCORE that stands for Sarawak Corridor of Renewable Energy. The idea is to tap the state’s rivers for electricity in earnest and lure big-ticket investments in areas like heavy industries, agro-industries, rural development and tourism.
The government’s job is to develop things like roads, ports, and institutional infrastructure, which form only 20 per cent of SCORE’s total package. The rest is left open for the private sector — setting up industries (priorities are aluminium, steel, glass, and natural gas in view of increasing demand for LNG from Japan) and, very interestingly, generating electricity. Chief Minister Taib is betting on this arrangement to double the state’s GDP growth rate from about five per cent now to 10 per cent by 2015 and create 1.5 million jobs by 2030.
The key player in the exercise is privately-owned Sarawak Energy Bhd. (SEB), which has set aside some $7.2 billion to expand its power footprint over the next 10 years. Last June, it signed an agreement with government-owned Sarawak Hidro, which operates a huge hydroelectric dam at Bakun, on a tributary of Rajang River, to buy its entire output for the next 30 years. Bakun, reputedly the second-tallest, concrete-faced rock-fill dam in the world (after the Shuibuya Dam in China), with a 70,000 hectare reservoir surface that’s almost as large as Singapore, currently produces 900 Mw of electricity. When all its eight turbines are in operation, expectedly by 2013, Bakun will have 2,400 Mw of installed capacity and 1,770 Mw of firm power.
SEB itself is building a 944 Mw dam on Murum River, also in the Rajang Basin that is expected to start producing electricity in 2014. Together, SEB will have 3,344 Mw of hydroelectric capacity at its disposal. Its goal is 7,000 Mw by 2020 and that may require building at least five more river dams in the state. Does it sound like too much? With 70 per cent of Bakun’s firm capacity already committed to 25 potential clients, SEB doesn’t think so and investor interest in Sarawak is only beginning to gather momentum.