SMEs want to supply parts to proposed Tan Chong plant

KOTA KINABALU: The state government has been urged to ensure that 70 per cent of the supply of auto parts to the proposed Tan Chong Motor assembly plant be reserved for local small and medium enterprises (SMEs).

President of SME Sabah, N K Foo, made the suggestion during a courtesy call on Trade and Industry Minister Datuk Seri Panglima Wilfred Madius Tangau on October 8.

Foo said this would provide business opportunities to local entrepreneurs and create thousands of jobs to reduce the high youth unemployment in Sabah as each car requires thousands of parts.

He further suggested that the government can help SMEs to start their factories by providing various incentives and financial assistance schemes specific for these SME manufacturers.

One very important scheme is the allocation of sufficient land within the allotted assembly plant parcel or adjacent to it in the Kota Kinabalu Industrial Park (KKIP) for the building of small factory lots with sizes suitable for such auto parts manufacturing.

Through KKIP, he said factories can be built for lease at preferential rentals to eligible SMEs with a five-year option to buy at a predetermined price.

Foo also said many SMEs lack start-up capital to purchase factory buildings as they have to buy equipment and need working capital too. Being sited within the auto assembly parcel would save transportation costs and warehousing costs since all manufactured parts can be delivered to Tan Chong Motor as soon as they are manufactured. This will greatly alleviate the working capital needs for local SMEs

“By having auto parts manufactured in Sabah and supplied to the assembly plant in Sabah, the cost of the parts will be cheaper and delivery more timely.

This will reduce the need to ship parts from Peninsular Malaysia which will be more expensive due to the high shipping cost,” he reasoned.

Foo further suggested that training institutions like vocational schools in Sabah can start providing training and design a course specific for the auto assembly manufacturing requirements while the plant is being built over a period of more than a year.

These students can be sent to Proton factories in Peninsular Malaysia for practical internship attachment. This will provide further employment opportunites for unemployed Sabahans to take up jobs that require some skills and enjoy a higher pay package.

When the assembly plant is ready, Tan Chong Motor can easily source local workers with the required skills and reduce its labour costs of sourcing workers from outside Sabah.

SME Sabah also explored with the minister on ways to increase frequency of ships to Sabah to facilitate the export of perishable fruits from Sabah to China.

Tangau said that this can only be achieved on a sustainable basis through industrialization where only manufacturing can create the consistent high freight cargo.

Once there is adequate cargo volume, many shipping companies had informed Tangau that they will send ships to Sabah ports. This will also push down the present high costs of shipping for exports from Sabah.

Apart from that, the efficiency of ports in Sabah also need to be improved to reduce the time (including waiting time) to discharge and load cargoes. Perhaps ports dedicated specifically to serve large industrial parks such as the KKIP, Palm Oil Industrial Cluster (POIC) and Sipitang Oil and Gas Park (SOGIP) can be built for better efficiency and flexibility that can allow for overnight loading and discharge when there is congestion during certain busy period.