SDB can play bigger role in Sabah’s growth
Published on: Saturday, September 22, 2018

By Datuk John Lo
FOREMOST, I apologise to the Board of Directors and management of SDB [Sabah Development Bank] if my article or any parts hereof is out of turn or SDB is already doing what I am about to say.

My intention is to contribute some ideas which, hopefully, will expand SDB’s effective role in the acceleration of Sabah’s economic development.

Loss of Sabah’s financial institutions – Sabah Bank and Sabah Finance

It was Tan Sri Harris who, as Chief Minister in the Berjaya Government, had the vision and managed to get approval from then Finance Minister, Tun Tan Siew Sin and BNM Governor Tun Ismail Ali to give Sabah 3 financial institutions, Sabah Bank, Sabah Finance and Sabah Development Bank. More exceptional is that they also approved for these institutions to have “Sabah” on their names. No other States have gotten this or so many financial licences at one time before or since. Most saddening, Sabah has lost Sabah Bank and Sabah Finance, now leaving only Sabah Development Bank. It is most regrettable that CMs after Tan Sri Harris have not fought for their retention or reinstatement.

Will another CM fight to reinstate Sabah Bank and Sabah Finance for the sake of our state and future generations?

Critical role of financial institutions in economic development.

Tan Sri Harris, being quite a visionary in economic development, has seen the critical roles of financial institutions. Hence the birth of Sabah Bank, Sabah Finance and Sabah Development Bank.

Had these 3 institutions survived in their entirety, properly managed, Sabah would have developed much faster.

Well managed financial institutions can mobilise funds,savings and channel them to finance economic/businesses in Sabah. One reason, among others, for Sabah to have lagged behind badly in the private sector is the relatively inadequate availability and accessibility to loans for Sabahan businessmen from financial institutions.

Sabah’s disadvantaged businessmen

Sabah’s businessmen are as good as any in W Malaysia. However they face the daunting task of securing finance for their business. This has never been recognised seriously by the Sabah government leaders since from Berjaya days that Sabah businessmen have and are still suffering the very acute disadvantages of getting finance for their business in the present banking environment. Much worse for the small and medium businessmen.

Reasons are

[a] All banks have managers in Sabah who are not much better than post boxes due to over centralizations of authority at head offices in KL.

[b] Because of this over centralizations, small and medium businessmen are facing time delays and difficulties in getting approvals if and when they do get them in the end.

Good example is tourism which is a booming industry in Sabah. Loans are not easy to get even for this industry.

Starting a new type of business? Forget it! Young entrepreneurs wishing to venture into business with no capital?

Dream on!

[c] Not many bank bosses in KL understand or appreciate the business environment or potentials in Sabah.

Their perception of risks in Sabah,to say the least, is out of sync with reality.

[d] Hence their pricing of interest rate for Sabahan businessmen can be more than for their counterparts in W Malaysia. [e] Most domestic and foreign investors’ first contacts are with bank bosses are in KL, the consequence of which is that due to their “detachments” or lack of interest for Sabah, we do not feature high in the priority of investors.

SDB’s role can be very important for Sabah’s economic development

Thanks be to God that of the 3 financial institutions initiated by Tan Sri Harris, SDB has survived to this day.

For Sabah’s present and future economic well-being, I hope Sabah government leaders will treasure SDB like the crown jewel and use it to the fullest to power our economic development.

For SDB to play its more meaningful role in the economic development of Sabah, a review of its role and responsibility may be appropriate at this juncture. Please see hereunder.

SDB as Sabah’s premier financial institution for economic development

For this purpose, the Sabah government can give a more prominent role than presently being accorded to SDB.

As Sabah’s premier financial institution, SDB shall formulate policies and their implementation in sync with Sabah government’s policies, directions and priorities of economic development. In line with these objectives, SDB should perhaps adopt a higher profile in the national financial scene so as to command the right type of attention to enable it to source finance for Sabah’s economic development especially for Sabah’s private sector.

SDB should have a major role to create and to show case Sabah’s economic potential to domestic and foreign investors.

SDB as Sabah’s mobiliser of funds for economic activities

The Sabah government, like other states, can mobilise funds from two major sources for economic development.

First from the traditional government’s revenue/tax base which is used for the management of the government administration and development agenda. Not many political leaders in Sabah realise that the more important source of development fund is from financial institutions such as SDB and banks.

Hence there is scarce political or official attention on this issue. For the private sector to become the engine of economic growth, the most important facilitator is financial institutions and their degree of readiness to provide loans to the private sector. This is where Sabah has some very serious setbacks.

And SDB, with Sabah government giving it an expanded scope is ideal to address this with urgency.

SDB’s license may or may not allow it to take in deposits. Nevertheless, SDB can, as a lead bank for loan consortia, mobile funds from other banks to fund Sabah’s businessmen especially those who have major projects, big business plans or new business, subject always to sound principles of lending.

SDB can assist Sabah government to identify priority areas for economic development.

There is always competition in the various sectors of the economy for government’s attention.

More often than not, political considerations dominate. SDB can provide non-political, professional/financial inputs on priority areas for Sabah government to formulate objective economic policies and decisions.

SDB as anchor finance provider for priority economic sectors pre-determined by Sabah Government.

Frequent comments on Sabah’s lack of business opportunities or economic vibrancy is understandable.

Most don’t realise the lack of focused attention and lack of finance/loans for Sabahan businessmen to develop their business ideas. Sad but true that many Sabahans’ business ideas cannot see the light of day!

To rectify this, the Sabah government can determine the priority areas to be developed.

Then SDB can play a leading role as finance provider or consortium-leader to implement the government policy of “Sabah for Sabahans”. Plenty of areas of priority can be found in

[a] tourism, MICE tourism, especially now that SICC is about to be completed and spin-off-effect industries from tourism.

[b] Rearing of seafood for exports like high value crab, live fish, shell fish, sea cumbers.

This will provide opportunities for coastal Sabahans to have better lives.

[c] Growing of high value cash crops and fruits for exports, like durians, mangos, mangosteens.

[d] high value, international design standard handicrafts.

[d] Oil and gas downstream manufacturing, bearing in mind that the future of oil is in downstream and not in fuel for vehicles. [e] Sabah’s geographical position is eminently advantaged for entrepot trade with southern Philippines and Kaliminantan. While there is some already on-going, it is far from it’s optimum.

SDB, Sabah’s very own bank, can spearhead and facilitate expansion of this lucrative entrepot trade.

Sandakan, Semporna, Lahad Datu will benefit greatly from entrepot trade.

SDB must remain profitable and have a balanced loan portfolio

Avoid granting of loans to established industries like real estate development and politically inspired but financially unsound projects. Let the commercial banks do these.

Focus on financing new/priority business [in accordance to Sabah government’s economic directions] within Sabah will make better economic and political sense.

Having said all that, it is most important for SDB to stay profitable and adhere to sound lending and commercial principles. Only then it can gain more respectability and continue to play its role as Sabah’s leading provider of finance for Sabah government’s priority areas of development.

Datuk Shafie’s decision NOT to appoint YBs to head GLCs and government agencies is appropriate.

I believe present SDB Board has no politician/YB too. To maximise benefits out of SDB for Sabah, the Sabah government can consider initiating a policy of none political interference or “phone calls” from politicians for “favours”. Make SDB Board of Directors answerable to the Chief Minister or Minister of Finance

I do believe there are exciting prospects for Sabah’s economy if SDB is given the right government support and approval for an expanded scope from the Sabah Government.

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