By Ts Dr. Hj Ramli Amir, former President of the Chartered Institute of Logistics and Transport (CILT) Malaysia and Vice-President of CILT International for Southeast Asia
KOTA KINABALU: The Malaysian state of Sabah has emerged as a formidable logistics powerhouse, with a record-breaking RM10.9 billion investment performance in the first quarter of 2025 fundamentally reshaping the region’s supply chain landscape.
This unprecedented investment surge, which surpassed the entire previous year’s total, positions Sabah as the third-highest investment destination nationally and the undisputed leader in manufacturing sector investments.
The transformation extends far beyond mere numbers, representing a strategic shift that is establishing Sabah as the primary logistics gateway for Southeast Asia and the broader BIMP-EAGA region.
The Infrastructure Foundation: Ports and Maritime Excellence
At the heart of Sabah’s logistics transformation lies the ambitious Sapangar Bay Container Port expansion project, valued at nearly RM1 billion. This strategic investment will dramatically increase capacity from 500,000 TEUs to 1.25 million TEUs by 2026, supported by a partnership between Sabah Ports Sdn Bhd and DP World that brings global expertise to the region.
The expansion includes nine Industrial Collaboration Programme initiatives worth RM253.89 million, directly benefiting local maritime companies whilst building regional capacity.
The Palm Oil Industrial Cluster in Lahad Datu represents another cornerstone of the logistics infrastructure development. This comprehensive facility features the most advanced port facilities in the Lombok-Makassar Straits, with dedicated terminals for container, liquid bulk, dry bulk cargo, and barge operations.
The deep seaport’s 20-metre depth capability accommodates Panamax vessels up to 65,000 deadweight tonnage, earning it recognition as the “Rotterdam of the East”.
These maritime investments are strategically positioned to leverage Sabah’s location at the crossroads of major international shipping routes in the South China Sea.
The enhanced connectivity enables efficient links between ASEAN markets and global trade partners, attracting multinational logistics companies to establish regional distribution centres throughout the state.
Modern Distribution Networks and Warehousing Excellence
The logistics revolution encompasses sophisticated distribution and warehousing facilities that are redefining regional supply chain efficiency. The KTC Industrial Park, built on a newly acquired 15-acre site worth RM100 million within the Kota Kinabalu Industrial Park, will function as the largest fast-moving consumer goods distribution centre in the region.
This facility is designed to serve markets across Sabah, Sarawak, Brunei, and Indonesia, with the capacity to increase operational efficiency by 40% whilst creating at least 500 new employment opportunities.
The development includes state-of-the-art warehousing facilities with advanced security systems, featuring 24-hour CCTV monitoring and dedicated container depot storage yards spanning up to 800,000 square feet.
These facilities are strategically located near seaports to optimise supply chain operations and reduce logistics costs, creating a seamless integration between maritime and terrestrial distribution networks.
The warehousing infrastructure supports the broader economic transformation by connecting Sabah’s primary industries with downstream manufacturing and export markets. This integration model, exemplified by the POIC Lahad Datu development, combines processing facilities with dedicated port infrastructure and comprehensive logistics services.
Cold Chain Innovation and Specialised Logistics
Malaysia’s cold chain logistics market, growing at a compound annual growth rate of 6.9%, represents a crucial component of Sabah’s logistics investment strategy.
The state is developing temperature-controlled warehousing and distribution capabilities to serve the growing demand for perishable goods, pharmaceuticals, and agricultural products.
These facilities include specialised refrigerated storage points and transportation systems capable of maintaining temperature ranges from 0-10°C for refrigerated goods and below -18°C for frozen products.
This cold chain development is particularly significant for Sabah’s agricultural sector, enabling local producers to access wider markets whilst maintaining product quality and extending shelf life. The infrastructure also supports the state’s pharmaceutical and medical device industries, which experienced increased demand during the COVID-19 pandemic.
The capability positions Sabah as a regional hub for perishable goods distribution throughout Southeast Asia.
Digital Transformation and Smart Logistics
The investment programme includes comprehensive implementation of Smart Logistics Complex initiatives that integrate Internet of Things, artificial intelligence, and automation technologies. These facilities require integration of at least three advanced technologies and qualify for 60% income tax exemption for complexes exceeding 30,000 square metres.
The smart logistics infrastructure incorporates real-time tracking systems, automated guided vehicles, and predictive analytics to optimise warehouse operations and supply chain efficiency.
Companies are implementing IoT sensors for real-time cargo tracking, automated sorting systems, and AI-driven predictive analytics to optimise operations. This technological transformation is reducing operational costs by up to 15% whilst improving service quality and customer satisfaction. The digital transformation extends to small and medium enterprises in the logistics sector, supported by RM3.8 billion in government funding for digitalisation initiatives.
The Integrated Logistics Services incentive programme has facilitated the growth of local logistics companies, with MIDA approving 112 ILS projects worth RM13.36 billion and granting 303 companies International Integrated Logistics Services status.
Employment Generation and Economic Impact
The logistics components of Sabah’s investment are creating substantial employment opportunities across multiple skill levels. The immediate impact includes over 500 new jobs from the KTC Industrial Park alone, with priority given to local hires from underprivileged backgrounds.
The broader logistics sector development is expected to generate thousands of additional positions in warehousing, distribution, port operations, and logistics management.
Employment creation extends beyond direct logistics roles to include specialised positions in maritime operations, cold chain management, and smart logistics technology operations. Companies like SPX Express, Flash Express, and major shipping lines are actively recruiting logistics supervisors, distribution centre officers, and warehouse managers across Sabah.
The human capital development addresses the historical challenge of talent outflow from Sabah to other states, creating attractive career opportunities that retain local talent whilst building specialised expertise.
Market Expansion and Revenue Growth
The logistics infrastructure investments are enabling significant market expansion for both local and international logistics operators. Kim Teck Cheong Consolidated Bhd projects annual earnings growth of 50%, reaching RM1.6 billion, with Sabah expected to contribute 40% of regional revenue growth over the next two to three years.
The company’s total workforce is expected to reach 2,000 across Malaysia and Brunei within a year.
The broader logistics market impact is reflected in Malaysia’s freight and logistics market valuation of USD 28.12 billion in 2024, projected to reach USD 38.28 billion by 2030 at a compound annual growth rate of 5.28%. Sabah’s strategic investments position the state to capture a significant share of this market growth, particularly in serving the ASEAN region’s logistics demand projected to reach USD 572.81 billion by 2032.
Regional Integration and Strategic Positioning
Sabah’s logistics investments are strategically positioned to serve as the primary logistics hub for the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area. The state’s enhanced infrastructure provides crucial connectivity for this resource-rich region, facilitating trade in palm oil, cocoa, rubber, timber, minerals, coal, and petroleum.
The enhanced port facilities are attracting larger vessels and increasing cargo throughput, with POIC Lahad Datu celebrating milestone achievements including the first container vessel docking in 2019. The port’s ability to handle both inbound and outbound cargo efficiently is reducing shipping costs and improving service reliability for regional trade.
Regular container shipping services connecting Peninsular Malaysia to East Malaysia are expanding, with companies like AML Shipping offering seven weekly services to Sarawak, Sabah, and Brunei.
Future Prospects and Sustainable Growth
The logistics transformation positions Sabah to compete with established regional logistics hubs whilst offering unique advantages including lower operational costs, strategic location, and government support. The state’s proximity to major ASEAN economies and deep-water port capabilities provide competitive advantages for transshipment operations and regional distribution.
The comprehensive nature of the logistics investments – encompassing port expansion, integrated distribution facilities, cold chain development, and smart logistics technology implementation – collectively positions Sabah as a major regional logistics hub.
The impact extends beyond infrastructure development to include substantial employment creation, technology adoption, market expansion, and regional supply chain integration that will benefit the broader logistics industry for years to come.
These strategic investments establish Sabah as a critical node in Southeast Asian logistics networks whilst creating sustainable economic opportunities for local communities and businesses, fundamentally transforming the state’s economic landscape and regional significance.
