By The Borneo Post onSabah
Dr Raymond Alfred
KOTA KINABALU (April 12): The recent imposition of higher tariffs by the United States (US) may have a significant ripple effect on global trade, with challenges facing regions such as Sabah and the broader BIMP-EAGA (Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area).
In response to these challenges, Dr Raymond Alfred, chairman of the Sabah (Malaysian) BIMP-EAGA Business Council (BEBC), has called for strategic adaptation to safeguard economic growth and explore new opportunities for collaboration within Southeast Asia.
“The imposition of tariffs by the US has the potential to disrupt the trade flows and will create uncertainties for exporters across Southeast Asia, including Sabah (North Borneo, East Malaysian),” said Dr Alfred. “While this presents challenges, it also offers an opportunity for us to reassess our trade strategies, deepen regional integration, and diversify our markets to ensure long-term economic stability.”
Impact on Sabah’s Key Sectors
The new US tariffs have directly affected Sabah’s core industries, particularly palm oil, timber and seafood exports. Sabah, known for its significant contributions to these sectors, faces increasing competition in global markets as tariffs make it more expensive for US businesses to purchase these products from Malaysia.
Oil Palm Industry
Palm Oil: The increase in tariffs on palm oil products could lead to a slowdown in Sabah’s export growth. However, Sabah could mitigate this by focusing on value-added products such as biofuels and oleochemicals that are less affected by tariffs.
Impact of US Tariffs on Sabah’s Oil Palm Industry Growth includes
1. Weakening Global Demand Indirectly. US tariffs on manufacturing-heavy countries (e.g., China, Vietnam) can cause ripple effects in the global economy. Slower global growth = reduced demand for palm oil in processed goods, cosmetics, biodiesel and food exports.
2. Disrupted Supply Chains and Logistics. With the US reshaping global trade routes and shifting toward domestic production, freight costs and insurance premiums in Southeast Asia may rise. Higher costs in logistics reduce Sabah’s export competitiveness.
3. ESG and Sustainability Pressures. The US and allied economies increasingly tie trade to environmental compliance (e.g., deforestation-free supply chains). This forces smallholders in Sabah to comply with costly certification processes (like MSPO/RSPO), slowing their ability to expand or modernize.
4. Decline in Investment and Financing. Economic uncertainty driven by global trade wars may make international investors more cautious. Sabah’s oil palm sector, especially smallholder projects, may struggle to secure foreign funding or loans.
5. Tech/IP Dependence. Precision farming, AI analytics, and automated plantation tools often rely on US-based software or hardware. Tariff-induced IP restrictions may limit access or increase costs of agricultural tech, slowing modernization.
6. Labor & Cost Pressures. Any economic shift that affects exchange rates, trade balance, or input prices (e.g., fertilizers, machinery) could make Sabah’s oil palm production less profitable, especially for smallholders.
Strategic Response Recommendations to address Sabah’s Oil Palm Industry Growth includes
1. Localize Agri-Tech Development. Invest in homegrown R&D to reduce reliance on foreign precision farming tools.
2. Strengthen Certification Support. Provide subsidies and technical assistance to help smallholders achieve MSPO/RSPO compliance faster.
3. Expand Trade Partnerships Beyond US Allies. Strengthen ties with India, China, MENA, and Africa to diversify palm oil export markets.
4. Promote Palm-Based Downstream Industries in Sabah. Shift from raw exports to value-added products — oleochemicals, eco-friendly packaging, biodiesel, etc.
5. Attract Green Investment Through Carbon Offset Schemes. Position certified plantations as part of Sabah’s climate contribution to attract ESG-aligned investors Timber and Forest Products: Sabah’s timber sector, a major contributor to the state’s economy, is also vulnerable to the impact of tariffs on wood-based products. Developing sustainable and value-added timber products, such as eco-friendly furniture, will be crucial to maintaining competitiveness in international markets.
Seafood & Marine Resources: With tariffs on seafood imports increasing in several countries, Sabah’s fisheries industry faces the risk of losing access to high-demand markets. Sabah must focus on increasing eco-certified seafood exports to capitalize on global sustainability trends.
The Impact of US tariffs to Our Oil and Gas Industry (Petronas)
The US tariffs, especially under a potential Trump 2.0 administration, could indirectly affect Malaysia’s oil and gas (O&G) sector, including Petronas, in several keyways – even though energy commodities like crude oil and natural gas aren’t always the direct targets of tariffs. Here’s how the impact could unfold:
1. Indirect Supply Chain Pressures
Many components used in upstream and downstream oil and gas activities — such as specialty steel, high-tech drilling equipment, control systems, and refinery machinery — are imported from or influenced by US tech/IP. If the US imposes tariffs or export restrictions on these, Petronas and Malaysia’s O&G sector may face:
· Higher costs for critical equipment and maintenance
· Delays in project development due to limited access to advanced tools or technologies
· Increased reliance on non-US suppliers, which may not offer the same quality or lead times.
2. Intellectual Property & Technology Lockout
Much of the software and IP used in modern O&G operations (e.g., reservoir modelling, seismic data processing, drilling automation) is developed by US companies (Schlumberger, Halliburton, Baker Hughes). If access to this proprietary tech is restricted, it could:
· Slow down exploration and production (E&P) activities
· Force Petronas to find alternative (possibly less effective) tech providers
· Increase costs related to licensing, R&D, or developing in-house capabilities
3. Impact on Liquefied Natural Gas (LNG) Market
Petronas is a major global player in LNG exports, and the US is one of its competitors. If the US uses tariffs to protect its own LNG market, this could:
· Distort LNG pricing globally, making it harder for Malaysia to compete in price-sensitive markets
· Affect LNG trade routes and customer preferences if the US starts undercutting prices to gain market share
·Force Petronas to secure longer-term contracts or shift focus to Asian and Middle Eastern markets
4. Financing & Capital Market Risks – If US economic policies trigger global market volatility, it can:
· Affect oil prices, which are already sensitive to geopolitical shifts and investor sentiment
· Make financing for upstream projects more expensive or harder to secure
· Cause fluctuations in the ringgit, which impacts Petronas’ dollar-based contracts and income
5. Regional Supply Chain Reconfiguration – If global energy players move supply chains away from Asia and
toward the US or friendlier trade blocs, Malaysia might lose its competitive edge as a regional O&G services hub. This could result in:
· Reduced activity for Malaysian-based support services (offshore logistics, fabrication yards, maintenance contractors)
·Job losses or reduced investment in local talent and infrastructure
Wider Regional Impact on BIMP-EAGA
The broader BIMP-EAGA region, which includes Brunei, Indonesia, Malaysia and the Philippines, also faces challenges. The US tariffs affect trade flows between member states and the larger global market, especially as BIMP-EAGA countries are heavily reliant on exports.
Cross-Border Trade: Increased tariffs discourage cross-border trade within the subregion. There is a need for stronger regional collaboration to streamline trade agreements and facilitate smoother market access.
Investment Uncertainty: The rising costs due to tariffs make it harder for businesses within BIMP-EAGA to compete globally, affecting foreign direct investment (FDI). Regional governments must work together to offer more attractive investment incentives to counterbalance the tariff impacts.
Opportunities for Sabah and BIMP-EAGA
Despite the challenges posed by the US tariffs, Dr Alfred believes that Sabah and the entire BIMP-EAGA region can leverage their geographical advantages, natural resources, and regional cooperation to emerge stronger in the global economy.
Regional Trade Integration: Deepening ties within BIMP-EAGA can reduce reliance on distant markets like the US expanding intra-regional trade will provide alternative markets for Sabah and the BIMP-EAGA states to bolster their economic resilience.
Diversification of Export Markets: Sabah must actively explore markets in South Asia, the Middle East and Africa, where demand for agricultural products and value-added goods is rising. Regional trade agreements within ASEAN will also help open new trade channels.
Sustainability as a Competitive Edge: By focusing on sustainability, Sabah and BIMP-EAGA states can appeal to environmentally conscious consumers and industries. This includes expanding eco-tourism, sustainable fisheries and green energy initiatives.
Investment in Innovation: Sabah should promote sectors such as agri-tech, eco-tourism and renewable energy to attract new investments. Regional policies encouraging green technologies and sustainable practices will strengthen the region’s economic resilience.
Call for Collective Action
In conclusion, Dr Alfred emphasizes the need for collaborative action between BIMP-EAGA governments, the private sector, and regional organizations to navigate the challenges of US tariffs and to build a more sustainable and diversified economy for Sabah and the wider region.
“While the imposition of tariffs by the US presents short-term challenges, it is a catalyst for long-term transformation,” Dr Alfred said. “We must use this moment to accelerate our efforts in regional integration, market diversification, and the adoption of sustainable business practices to ensure the future prosperity of Sabah and the BIMP-EAGA region.”
For the oil and gas Industry, the long-term solution for Petronas and Malaysia is to invest in energy innovation, secure alternative technology partners (e.g., Europe, China, Japan), and diversify its energy portfolio — including renewables and green hydrogen — to future-proof against geopolitical shifts.
Dr Alfred also emphasizes that in order to address the wide-ranging impacts of US tariffs and global economic shifts like Trump’s IP-centred economic nationalism, multiple ministries in Sabah must coordinate and must take the lead proactively.
1. Ministry of Industrial Development and Entrepreneurship – Lead Ministry
Strategic Adaptation: (i) Spearhead efforts to diversify Sabah’s economy beyond commodities and manufacturing, (ii) Promote local R&D, tech innovation, IP development, and investment in new industries, (iii) Drive the creation of industrial zones, innovation hubs, and startup ecosystems.
This ministry is best positioned to push Sabah from being just a “factory” to a technology-based, innovation-driven economy.
2. Ministry of Science, Technology and Innovation (KSTI) – Strategic Enabler
Strategic Adaptation: (i) Boost STEM education, digital infrastructure, and technological capability, (ii) Facilitate collaboration between universities, research institutions and industry, (iii) Support IP creation and digital transformation initiatives.
KSTI must ensure Sabah to start to build the skills and tech base needed to develop homegrown IP and tech talent.
3. Ministry of Finance (Sabah) – Resource Mobilizer
Strategic Adaptation: (i) Allocate funding for R&D, infrastructure and innovation grants, (ii) Offer incentives for investors (within ASEAN) in tech, renewable energy and advanced manufacturing, (iii) Strengthen public-private partnerships, and (iv) Allocation based on the agreed MA63 is a crucial for Sabah to progress.
Without financial tools and policy support, innovation and industrial transition won’t be sustainable.
4. Ministry of Agriculture, Fisheries and Food Industry – Sectoral Pivot
Strategic Adaptation: (i) Transform traditional sectors (palm oil, aquaculture, timber) into value-added, tech-enabled industries, increase number of or promote sustainable practices, certifications, and bio-based product innovation, (ii) Support agri-tech startups and precision farming.
These are Sabah’s backbone industries — if they don’t evolve, Sabah risks economic regression in the next 5-10 years.
5. Ministry of Education and Innovation (collaboration with Federal Ministry of Higher Education)
Strategic Adaptation: (i) Reform strategy to immediate adapting curriculum to focus on future skills: coding, data science, engineering, automation, (ii) Support technical and vocational education (TVET), and (iii) Partner with local institutions for IP generation and commercialization.
6. Chief Minister’s Department – High-Level Policy Direction
Strategic Adaptation: (i) Provide political leadership and cross-ministry coordination, (ii) Set statewide goals for economic transformation, IP creation, and resilience building, and (iii) Champion interstate and international cooperation through BIMP-EAGA and ASEAN. Sabah must voice out
Ministry-Specific Recommendation Document is Vital for the CM’s Department to develop, and the document must tailor to address the impact of the US tariff policy on Sabah’s oil palm, tourism sectors and oil and gas sectors, with targeted action plans for relevant state ministries:
Dr Alfred emphasizes the need to develop action plan with the purpose of safeguarding Sabah’s oil palm, oil and gas and tourism sectors in response to US tariff policy and global trade shifts Sabah must urgently respond to the structural shifts in global trade, especially those impacting technology, IP and market access.
A multi-ministry, innovation-led strategy is vital to ensure that local industries like oil palm, oil and gas and tourism do not become collateral damage in a realigned global economy
