Vast reserves aid Sarawak in economic devt — RAM
KUCHING: Sarawak’s vast reserves, strong balance sheet and economic plans are among the key factors in RAM Rating Services Bhd (RAM) maintaining its optimistic stance on the state.
Sarawak’s key assets are its wealth of natural resources such as O&G and palm oil; SCORE’s selling point is premised on inexpensive renewable energy, affirmed Esther Lai, head of soverign ratings for RAM Ratings.
Lai told The Borneo Post that Sarawak’s strong balance sheet allows room for government support and development spending if needed.
“On a related note, companies in Sarawak still largely depend on the banking sector for their funding needs,” she said during an online interview.
“We believe that more Sarawakbased companies could explore the bond market as an alternative for their financing needs to meet Sarawak’s 2030 aspirations.”
Notably, the bond market allows companies to secure long term financing at fixed rates. The bond market is also a more suitable fund- ing option for long term projects and larger funding amounts – which is typically required for infrastructure projects.
Lai also said the Sarawak Corridor of Renewable Energy (SCORE) will help stimulate and diversify the economy away from commodities, and elevate Sarawak to developed status.
Moreover, the corridor targets growth in rural areas, with the aim of achieving a balanced and inclusive growth throughout Sarawak.
“Drawing examples from other countries, the United Arab Emirates
On a related note, companies in Sarawak still largely depend on the banking sector for their funding needs. Esther Lai, RAM Ratings head of soverign ratings
( UAE) has established a number of thriving special economic zones (SEZs) such as the Jebel Ali Economic Zone,” she gave as an example.
“This has helped prompt economic diversification, reduce its reliance on commodities and bolster growth.
“The UAE economy is expected to expand 2.4 per cent in 2016, such as the higher than the GCC’s average, which lags in terms of diversification.
“The allure of SEZs in this region is highlighted by the sprouting of special economic zones in countries such as Myanmar and Laos. While some of these hinge on competitive energy prices as well, Sarawak stands to benefit from better infrastructure, corporate governance and overall business environment.”
The key challenges for Sarawak, she said, are commodity prices, availability of infrastructure and labour policies.
“As SCORE relies on economical, renewable energy, low energy prices will affect its attractiveness to large energy-intensive manufacturers,” she added.
“Besides, the reliance on resource-related industries, as depicted by contribution to GDP, will inevitably affect the economy given its large exposure to this sector.”
The key challenge is to ensure the availability of infrastructure to provide a competitive edge, in a bid to entice investors. This is seen in the upgrading works to the Pan-Borneo highway which will help improve connectivity.
“Despite the headwinds, Sarawak’s plans to diversify away from commodity-related industries and its strategic importance to the Federal Government will help drive growth. Sarawak’s GDP per capita of RM44,012 in 2015 is higher than the national average of RM37,104. We believe that with an annual real GDP growth of 4.4 per cent, Sarawak’s goals for 2030 will be achievable. We would like to again highlight that Sarawak’s massive reserves allow room for economic development and to counter external headwinds.”