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===Japanese occupation===
===Japanese occupation===
While the [[Japanese occupation of British Borneo|Japanese occupation of Sarawak]] from 1941 to 1945 brought many negative [[Socioeconomics|socio-economic]] developments, Sarawak achieved food self-sufficiency through coercive measures.<ref name="Fumitaka 2014"/>
While the [[Japanese occupation of British Borneo|Japanese occupation of Sarawak]] from 1941 to 1945 brought many negative [[Socioeconomics|socio-economic]] developments, Sarawak achieved food self-sufficiency through coercive measures.<ref name="Fumitaka 2014"/> The Japanese immediately sought to export raw materials to Japan especially timber and oil to resupply their arm forces. This was achieved by issuing Japanese currencies and put banks under exclusive control of the Japanse. Chinese businesses were merged into few centralised stores for ease of control. The Chinese community in Sarawak were obliged to contribute a total of 1.9 million dollars to fund Japanese war efforts.<ref name="Kratoska 1998">{{cite book |last1=Kratoska |first1=Paul H |last2=Nolan |first2=Peter |last3=Falkus |first3=Malcom |title=Food supplies and the Japanese occupation in South-east Asia |publisher=Palgrave Macmillan |location=London |pages=135-160|date=1998 |url=https://link.springer.com/chapter/10.1007/978-1-349-26937-2_6?noAccess=true |chapter=Agriculture and Food Supplies in Sarawak during the Japanese Occupation}}</ref>


===Federation of Malaysia===
===Federation of Malaysia===

Revision as of 01:20, 3 March 2022

An LNG port at Bintulu, Sarawak

The economy of Sarawak is the third-largest of the states of Malaysia, making up 9.5% of the Malaysian gross domestic product (GDP) in 2020.[1] It has traditionally heavily depended on natural resource extraction and exports, including oil, gas and palm oil. These commodities still produce a significant proportion of Sarawak's gross domestic product.

History

Brooke era

The first Rajah of Sarawak, James Brooke, who ruled from 1841 to 1868, did not engage in noticeable commercial or financial activities during his rule. Economic development began to progress slowly during the reign of his successor, Charles Brooke, from 1868 to 1917. Agriculture was the main focus of economic development, and international trade of local agricultural produce increased; for example the export of sago products to Singapore. Charles Brooke introduced a liberal land policy and encouraged the introduction of new cash crops. He also promoted the immigration of Chinese as peasant farmers. During the era of Charles Vyner Brooke (1917–1946), he continued his predecessor's policy of promoting land cultivation and food self-sufficiency. However, he opposed opening up the state for western capitalist economies and Chinese immigration.[2]

During this period, the five main ethnic groups in Sarawak engaged in different economic activities based on their geographical location. The Malays lived near the rivers of Kuching, Samarahan, and Sri Aman, thus allowing them to trade. They brought goods such as salt, iron, and clothes to inland areas in exchange for rice and jungle products. The Iban people were engaged in shifting cultivation, while the Bidayuhs, who lived on hills, were engaged in hill padi cultivation. The Melanaus stayed in Mukah where they produced sago for trade with Brunei Malay traders.[2] The Chinese settlers were mainly from Guangdong and Fujian provinces. They became involved in various economic activities such as mining, trading, and cash crop plantations. For example, the Hakka people were involved in gold mining at Bau during the early days of Brooke rule.[2] The Brooke government had encouraged the planting of cash crops such as rubber, pepper, gambier, sago, sugar cane, tea, coffee, tobacco, and rice. However, only rubber, sago, pepper and gambier planting were successful. These products were then exported to Singapore.[3]

In 1900s, Sarawak's total exports was only 6.1% of Malaya's; 38 years later, the total exports stood at 7.1% of Malaya's. The amount of trade was relatively small when compared to its vast territorial expense. The Sarawak government's revenue in 1900 and 1938 were 5.9% and 6.8% respectively of its Malaya counterparts in Federated Malay States.[4] On the whole, the Sarawak economy was mostly stagnant during the Brooke era, especially compared to nearby British colonies such as the Federated Malay States, Straits Settlements, and Lower Myanmar. On the other hand, the lack of economic development led to an absence of social problems associated elsewhere with economic growth.[2]

Japanese occupation

While the Japanese occupation of Sarawak from 1941 to 1945 brought many negative socio-economic developments, Sarawak achieved food self-sufficiency through coercive measures.[2] The Japanese immediately sought to export raw materials to Japan especially timber and oil to resupply their arm forces. This was achieved by issuing Japanese currencies and put banks under exclusive control of the Japanse. Chinese businesses were merged into few centralised stores for ease of control. The Chinese community in Sarawak were obliged to contribute a total of 1.9 million dollars to fund Japanese war efforts.[5]

Federation of Malaysia

During its first few decades as part of Malaysia, the economy was dominated almost entirely by natural resources and commodities such as oil and gas, timber and palm oil. This resulted in rapid but volatile growth.[6] Between 1967 and 1973, a boom in petroleum exports and price led to "mining and quarrying" going from less than 1% to almost a fifth of the economy. This expansion in value was not reflected in an expansion in employment, with the industry continuing to employ less than 1% of the population during this time.[2]

From 1981 to 2000, Sarawak chief minister Abdul Taib Mahmud engaged in a policy called "Politics of Development", focusing on agriculture and manufacturing economy such as fisheries, farming, logging, oil and gas, setting up industrial parks, and promote high tech industries at Sama Jaya Free Industrial Zone.[7] Some shifts towards industry and services began during this time in line with increasing urbanisation.[6] In 1990, just over half of economic value was generated by the primary section.[2] In 2008, Sarawak Corridor of Renewable Energy (SCORE) was started. It is an economic plan focusing on heavy industries and knowledge-based economy.[7] By 2010, services made up 32% of the economy, and manufacturing 25%.[6] As of 2011, primary commodities made up 50% of the state's total exports. In 2011, export of crude palm oil in Sarawak exceeded 2 million tonnes with main export partners being China and India.[8] The expansion in plantations often occurred through new logging of old-growth forests.[9] In 2016, Sarawak government started "Sarawak Socio-Economic Transformation Plan", aiming to achieve better economic growth and improve the quality of life for the rural populace.[7] In 2017, Sarawak government introduced 2018-2022 digital economy strategy, hoping to digitise all sectors of economy. As a result of this initiative, Sarawak Multimedia Authority and Sarawak Digital Economy Corporation were set up to promote this effort.[10] In July 2021, Sarawak government introduced "Post Covid-19 development strategy" through better economic structure, facilitate foreign and domestic investments, and expand physical and digital infrastructures. This strategy aims to achieve GDP growth of 8% per annum, thus reaching total GDP size of RM 282 billion in 2030, create 195,000 new job opportunities, and raise household income to RM 15,047.[11]

Macroeconomic trends

From 1962 to 1974, the average growth of GDP was 8.7 percent per annum while average per capita GDP growth from 1963 to 1997 stood at 7.8 percent per annum.[2] From 1970 to 1975, Sarawak saw an average of 20% growth rate of yearly GDP due to a steep increase of oil prices during that time.[12] In 1970, the Sarawak GDP per capita ranked 8th out of 13 states in Malaysia, but in 1980, the Sarawak GDP per capita deteriorated to 10th. In 1990, the Sarawak GDP per capita improved to 6th. From 1991 to 1995, the Sarawak average GDP growth rate was at eight percent per annum. Poverty also reduced from 56.5% in 1976 to 17% in 1995. From 1980 to 1995, Sarawak attracted RM 7 billion in foreign direct investment (FDI), which was 7.5% of the total FDI approved in Malaysia. This pushed Sarawak to the 5th spot amongst other states in Malaysia in terms of FDI attractiveness.[2] In the last forty years until 2013, Sarawak had shown remarkable catchup with Selangor (the richest state in Malaysia) in terms of nominal GDP and GDP per capita. Sarawak would require an annual economic growth rate of 6% to catch up with Selangor in 6 years or catch up in 3 years with annual growth rate of 7%.[13]

The GDP growth of Sarawak is strongly correlated to the total amount of exports.[8] During the period of high GDP growth from 2002 to 2006, the export activities of Sarawak also increased rapidly, where the value of exports rose from RM 27.4 billion in 2002 to RM 61.9 billion in 2006. On the other hand, imports increased only moderately during the same period, from RM 15.3 bullion to RM 22.4 billion in 2006. Therefore, net exports recorded a value of RM 12.9 billion in 2002, growing to RM 40 billion in 2006.[2]

Sarawak's labour force participation rate (65.6%) was higher than the national average (63.1%) in 2007. However, this was attributable to labour force participation with a low educational level.[2]

The following table shows macroeconomic indicators from 1970 to 2020:[2][14][15][16][17][18][19][20][21][22][23][24][25][26][27][28][29][30][31][32][33][34][35][36][37][38][39]

Year GDP
(in RM million)
GDP per capita
(in RM)
GDP growth
(nominal/real)
Unemployment rate
(in percent)
Account surplus/deficit
(in ±% of GDP)
Share of national GDP
(in percent)
1970 820[12] 881[2]
1971 Increase959[12] Increase962[12] 14.1[12] -6.5[32]
1972 Increase1,055[12] Increase1,032[12] Decrease7.3[12] Decrease-10.0[32]
1973 Increase1,370[12] Increase1,307[12] Increase26.6[12] Increase-7.0[32]
1974 Increase1,884[12] Increase1,753[12] Increase34.1[12] Decrease-7.5[32]
1975 Increase2,034[12] Increase1,844[12] Decrease5.2[12] Decrease-8.0[32]
1976 Increase-1.5[32]
1977 Decrease-2.0[32]
1978 Decrease-4.5[32]
1979 Increase-3.0[32]
1980 5,317[8] 2,292[2] Increase1.0[32]
1981 Increase2,972[2] Decrease-2.0[32]
1982 2.8[31] Increase-1.5[32]
1983 Negative increase5.2[31] Decrease-0.5[32]
1984 8,897[8] Negative increase6.7[31] Decrease-2.0[32]
1985 5.3[8] Negative increase7.1[31] Increase-1.5[32]
1986 Negative increase9.0[31] Decrease-2.5[32]
1987 10,388[8] Negative increase9.8[31] Increase-0.5[32]
1988 Decrease10,271[8] Decrease-1.2[8] Negative increase10.3[31] Decrease-3.5[32]
1989 Increase11,377[8] Increase10.8[8] Positive decrease9.6[31] Decrease-4.0[32]
1990 Increase12,314[8] 3,883[2] Negative increase9.9[31] Decrease-4.5[32]
1991 Increase13,951[8] 13.3[8] Decrease-6.0[32]
1992 7.8[31] Decrease-14.0[32]
1993 13,203[8] Positive decrease7.0[31] Increase-10.0[32]
1994 Decrease-12.0[32]
1995 9,287[39] Positive decrease4.8[31] Increase-10.0[32]
1996 Positive decrease4.4[31] Increase-9.5[32]
1997 22,097[8] Positive decrease3.9[31] Increase-9.0[32]
1998 1.93[8] Negative increase5.0[31] Decrease-11.0[32]
1999 25,475[8] Positive decrease4.6[31] Increase-6.5[32]
2000 Increase30,700[2] 12,755[39] Positive decrease4.3[31] Decrease-8.5[32] 8.9[2]
2001 Decrease28,000[2] Negative increase4.4[31] Increase-8.0[32]
2002 Increase30,800[2] Positive decrease4.0[31] Increase-6.0[32]
2003 Increase35,000[2] 13.6[2] Positive decrease3.9[31] Increase-5.0[32]
2004 Increase40,000[2] Increase19.8[2] Positive decrease3.8[31] Increase-3.0[32]
2005 Increase43,878[35] 24,224[36] Negative increase4.1[31] Increase4.1[37] 10.4[2]
2006 Increase45,560[34] Increase26,912[33] 4.0[18] Steady4.1[31] Increase4.7[37] Decrease9.6[33]
2007 Increase48,540[26] Increase29,562[23] Increase8.0[18] Negative increase4.3[31] Decrease4.5[37] Increase9.7[25]
2008 Increase49,484[38] Increase34,855[23] Decrease0.3[18] Negative increase5.3[31] Decrease2.3[18] Decrease9.3[25]
2009 Decrease48,848[24] Decrease30,318[23] Decrease-2.0[18] Positive decrease4.6[31] Decrease1.2[18] Increase9.4[22]
2010 Increase87,131[15] Increase35,034[16] Increase4.3[18] Positive decrease4.4[31] Increase2.6[18] 10.6[15]
2011 Increase92,700[15] Increase40,632[16] Increase6.4[15] Positive decrease4.1[31] Steady2.6[18] Increase10.7[15]
2012 Increase94,013[15] Increase41,493[16] Decrease1.4[15] Positive decrease3.5[31] Decrease2.5[18] Decrease10.3[15]
2013 Increase98,089[15] Increase41,766[16] Increase4.3[15] Steady3.5[30] Decrease2.0[18] Steady10.3[15]
2014 Increase102,359[15] Increase44,596[16] Increase4.4[15] Positive decrease2.3[28] Decrease10.1[15]
2015 Increase106,307[15] Decrease44,012[16] Decrease3.9[15] Negative increase3.1[27] Decrease10.0[15]
2016 Increase108,778[15] Increase44,379[17] Decrease2.3[15] Negative increase3.3[29] Decrease9.8[15]
2017 Increase130,169[14] Increase50,177[14] Increase4.5[14] Positive decrease3.0[14] Decrease9.7[19]
2018 Increase 133,010[14] Increase 52,387[14] Decrease 2.2[14] Negative increase3.2[14] Steady9.7[20]
2019 Increase 136,758[14] Increase 53,552[14] Increase 2.8[14] Positive decrease3.1[14] Decrease9.6[21]
2020 Decrease 127,116[14] Decrease 48,657[14] Decrease -7.1[14] Negative increase4.3[14] Decrease9.5[1]

Infrastructure and incentives

The Pan-Borneo Highway is the major federal trunk road network that connects Sarawak to Sabah and Brunei with a total length of 1,060 kilometres (660 mi). Of its total length, only 144 kilometres (89 mi) was four-lane dual carriageway (JKR R5 standard) while the remaining was two-lane single carriageway (JKR R3 standard). This made the trunk road congested, with 19 hours required to travel from the southern zone to the northern zone.[40] In addition, road conditions were poor, with potholes, uneven surfaces, too many bends, a lack of safety rail guards, and a lack of street lighting.[41] This is partly due to high amount of soft peat soils in coastal regions (where the roads are constructed), inadequate planning,[42][43] and a lack of funding.[44][45] Therefore, a project was started in 2015 to upgrade all sections of the trunk road into toll-free four-lane dual carriageway.[40]

Rural road access brought variable benefits to rural communities, depending on the size of the urban centre that the community that has access to and the distance of the remote communities to road access.[46] Road and hydroelectric dam projects are expected to have significant impacts both on biodiversity and on local communities near the construction sites.[47]

Cabotage policy was implemented in Malaysia on 1 January 1980. This policy designated Port Klang as the main container hub in Malaysia, where all the international cargo ships must make a stop. The distributions of goods from Port Klang to other ports in the country will handled by domestic shipping companies.[48] In 2017, liberation was introduced to exempt East Malaysia from this policy so as to enable foreign ships to transport cargo from ports in Peninsular Malaysia to Sarawak and Sabah so as to lower the price of import items in these two states.[49][50] However, the Sarawak government wanted the cabotage policy to be reinstated so as to protect the local shipbuilding and shipping industry.[51][52][53]

Sectors

Petroleum and natural gas, forestry, and logging have made limited contributions to local socio-economic development. This is because natural resource extraction is a capital-intensive industry that requires few skilled workers. These industries are also highly dependent on inputs from elsewhere, thus generating little benefits to the local economy.[54] Despite being a world-class supplier in resource-based products, Sarawak has no clear international competitive advantage due to a low standard of architecture of supply such as the structure of the natural resource market and relationships among firms that supply such resources.[2]

Japanese companies bought a significant amount of raw timber from Sarawak. Japan traditionally maintained discriminatory policies against processed wood products from developed countries. As the federal government took control of the offshore oil and gas resources of Sarawak, political elites in Sarawak turned to controlling timber concessionaires to maintain their influence, thus leading to large-scale timber extraction in the state in the 1980s and 1990s. Sarawak continued the traditional style of modernisation through large-scale agriculture, industrialisation, and urbanisation; with little room for the conservation of forests unless such conversation efforts are worthwhile in tourism development.[55]

Energy

Bakun Dam under construction in 2009. The dam is the main source for electric energy in Sarawak.

Sarawak has a vast amount of oil and gas reserves in seven geological provinces: West Baram Delta, Balingian, Central Luconia, Tinjar, Tatau, West Luconia, and North Luconia. Out of these geological provinces, oil was extracted only in West Baram Delta, Balingian, and Central Luconia. In 2017, Sarawak produced 26% of all total Malaysian oil production, compared with 42% from Sabah and 32% from Peninsular Malaysia. Meanwhile, Sarawak produced 61% of Malaysian natural gas, while Peninsular Malaysia's share stood at 26% and Sabah at 13%.[56]

In 1911, Royal Dutch Shell opened the first onshore cable tool drilling well in Miri. It paid to the Brooke government the equivalent of 0.05 to 0.14 Malaysian ringgit of royalty per tonne of oil produced from 1911 to 1940. From 1946 to 1956, Royal Dutch Shell paid to Crown Colony of Sarawak equivalent to 0.40 to 0.80 Malaysian ringgit per tonne in royalty fees. In 1958, the Sarawak Oil Mining Ordinance was proposed. Oil companies have to pay a ten percent oil royalty for onshore wells, 12.5 percent for offshore wells within three miles from the coast, eight percent from three miles to ten miles offshore, and five percent for greater than ten miles offshore. Royalties for natural gas was also defined. The oil companies were also subjected to a 40% general corporate income tax after other expenses and oil royalties were deducted from the profits. However, no oil royalty payment was recorded after 1956. Miri onshore oil field reserves was diminishing since 1968 and later shut down in 1973.[57]

In 1974, Petroleum Development Act was passed in Parliament of Malaysia. In this scheme, a production-sharing contract was signed between Petronas (national oil company) and other foreign oil companies. A ratio of 70:30 was agreed upon where for total amount of oil produced, other oil companies will take 20% of oil for cost recovery, and the remaining 10% will be taken as oil royalty and shared equally between federal and respective state governments. The remaining 70% of oil will be divided again according to 70:30 formula where Petronas will take 70% and 30% goes to respective oil companies. Both Petronas and other oil companies will be subjected to 45% income tax. Besides, 70% of any increase in oil price from the base price of US$12.72 will go to Petronas and the base price will increase by 5% each year so other oil companies will be able to cover for any cost inflation. In return, Petronas will not take over the equity of other oil companies. Each oil company will contribute 0.5% for a petroleum research fund.[57] Acknowledging that the Sarawak oil and gas industry was dependent on the Peninsular Malaysia, which caused loss of revenue, Sarawak chief minister Abang Abdul Rahman Johari Abang Openg announced the establishment of state-owned oil and gas company Petroleum Sarawak Berhad in 2017.[58][59]

High rainfall and availability of dam construction sites has enabled several hydroelectric dams to be built, such as Batang Ai Dam, Bakun Dam, and Murum Dam.[60][61][62] In February 2008, Sarawak Corridor of Renewable Energy (SCORE) was launched,[63] utilising electricity generated from hydroelectric dams and coal-fire power plants in Sarawak to develop ten priority industries in Sarawak, namely oil and gas, aluminium, steel, and glass manufacturing industries, timber and palm oil industries, livestock, aquaculture, and tourism industries.[64] As of 2018, a total of 22 projects invested RM 79.3 billion into the corridor, where ten of them were in operation. Majority of the investments went to Samalaju industrial park in Bintulu.[65]

In 2017, the state government authorised Sarawak Energy to conduct researches on commercial applications of hydrogen fuel technology.[66] In 2019, the first integrated hydrogen production and refueling plant in Southeast Asia was launched in Kuching with collaboration with Linde plc. Besides, several hydrogen buses were also launched.[67]

Agriculture and forestry

Agriculture, forestry, and fishing contributed to 30% of total employment in Sarawak from 2002 to 2006.[2] Major commodities produced are oil palm, rubber and cocoa. Food commodities are livestock, fisheries, rice (padi in Malay). Other food commodities include coconut, vegetables, fruits, tobacco and pepper.[68]

Sarawak was the world's largest exporter of tropical timber in the 1980s.[69] However, in 1992, the log export quota was imposed to promote local wood-processing industries such as logs, plywood, sawn timber, wood residue products, molding, pulp, and paper.[69] As of 1995, Sarawak is 69.8% forested, including dipterocarp forests, swamp forests, mangrove forests, and plantation forests.[69]

In November 2021, plant cloning laboratory was opened to cultivate Paulownia tree species as a source of lightweight timber.[70]

Manufacturing

Sarawak has a total of 21 industrial estates. Sama Jaya Free Industrial Zone is the only high-tech industrial estate while Similajau Indusrial Estate is the only heavy and energy-intensive industrial estate.[71]

Sarawak has 60 of 100 shipyards nationwide. 40 of them are operating inside Sibu. The shipyards in Sarawak focused on producing and repairing small to medium sized vessels such as tugboats, offshore support vessels (OSVs), barges, anchor handlers and passenger boats.[72][73] However, local shipyards often rely on foreign labour and designs for large and sophisticated ships and do not employ the latest technologies in shipbuilding. Several shipowners are to build yards in other countries where costs are cheaper and better incentives are offered.[74][75]

In 1973, the Sarawak state government set up Sarawak Motor Industries in Kuching to assemble Toyota and BMW models.[76][77] The plant closed down in 1986.[78] In 1986, DNC Asiatic Holdings Sdn Bhd started to assemble motorcycles in Kuching. In 2018, the debt-ridden company went into receivership.[79] In 2012, N B Heavy Industries Sdn Bhd opened the state's only truck assembly plant in Sibu. It employed 150 workers, and assembles about 6,000 JAC and BeiBen trucks annually.[80][81]

From 2002 to 2006, the manufacturing sector employed 12% of the total Sarawak labour force. Other secondary sectors such as electricity, gas, water supply, and construction employed approximately 10% of the total workforce.[2]

Services

Attempts to diversify from resource extraction include promotion of the tourism industry. Most international tourism flies into Kuching in the south, so the sector in the north of the state is more dependent on tourists from the rest of Malaysia and neighbouring Brunei.[82] Tourists arrivals increased steadily from 1990 to 2004 and had contributed significantly to the economic growth of Sarawak.[83]

From 2002 to 2006, the tertiary sector in Sarawak employed more than 55% of the workforce. Within the sector, wholesale and retail industries employed 14% of the workforce, hotels and restaurants employed 5% of the workers, and transport and communication industries employed 4% of the workforce.[2]

In 2017, the Development Bank of Sarawak (DBoS) was set up with a capital of RM 500 million from the state government to fund strategic infrastructure projects in the state such as a methanol plant in Bintulu, fixing of 1,020 dilapidated schools, and the Kuching Light Rail Transit (LRT) system.[84][85][86] In the same year, the Sarawak government launched "Sarawak Pay", an e-wallet that enable cashless payments of bills and retail transactions in the state. In 2021, Sarawak Pay was rebranded into "S Pay Global", following integration with Union Pay that enables international transaction.[87][88][89]

See also

References

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Further reading