Transforming Sabah Into A Logistics Hub: Leveraging Strategic Location and Infrastructure Development

Nestled on the island of Borneo, Sabah, one of Malaysia’s picturesque states, is set to become a prominent logistics hub in Southeast Asia. With its strategic geographical position, rapidly advancing infrastructure, and strong government backing, Sabah is primed for growth, offering investors unparalleled opportunities to capitalise on the region’s burgeoning logistics market.

Sabah’s advantageous location at the northern tip of Borneo places it at the crossroads of major international shipping routes in the South China Sea. This makes it a prime transhipment hub, linking the ASEAN region with global markets. With its proximity to key ASEAN economies, Sabah stands as an indispensable gateway for goods moving between Asia and the wider world. The state’s deep-water ports, including the strategically located Sapangar Bay Container Port (SBCP), play a central role in Sabah’s logistics network, enabling efficient import and export activities.

The Sabah State Government, in close collaboration with federal agencies, has committed to a series of bold infrastructure projects that will shape the future of the state’s logistics sector. These investments in modern port facilities, roads, and airports are designed to enhance Sabah’s connectivity and streamline the movement of goods, reduce transit times, and lower costs. Key developments include:

• Sapangar Bay Container Port (SBCP): One of the state’s flagship projects, SBCP is undergoing significant upgrades to increase its capacity and operational efficiency. With a target capacity increase from 500,000 to 875,000 twenty-foot equivalent units (TEUs), this expansion will solidify the port’s position as a pivotal logistics hub in Southeast Asia.
• Sabah Ports Sdn. Bhd. (SPSB) has formally entrusted the management and operations of Sapangar Bay Container Port (SBCP) to DP World, a global leader in supply chain logistics, with the aim of transforming SBCP into a premier regional trade hub. This strategic partnership aims to transform SBCP into a premier regional trade hub, enhancing Sabah’s connectivity within the global supply chain and reinforcing its position within the Brunei-Indonesia-Malaysia-Philippines East ASEAN Growth Area (BIMP-EAGA).
• Pan Borneo Highway: The completion of the Pan Borneo Highway—spanning 5,324 kilometers—will further enhance Sabah’s connectivity within the ASEAN region. This vital infrastructure project links Sabah to Sarawak, Indonesia’s Kalimantan, and Brunei, while improving road networks within Sabah. The first phase of the Sabah Pan Borneo Highway (LPB) covers an impressive 706 kilometers, with 78% of the work already completed and an expected finish by the first quarter of 2026. This connectivity boost will reduce transit times, lower logistics costs, and increase the ease of moving goods across borders.
• Kota Kinabalu International Airport (KKIA): As part of its commitment to enhancing logistics capabilities, Sabah is expanding the Kota Kinabalu International Airport (KKIA), particularly its air cargo handling capacity. Malaysia Airports Holdings Berhad (MAHB) is spearheading efforts to increase capacity while diversifying its revenue streams through enhanced retail and commercial offerings. The expansion reflects a strategic approach to airport management, drawing inspiration from successful frameworks in countries like Singapore, Australia, and Canada.

In line with its vision to establish Sabah as a logistics hub, the state government, in collaboration with federal agencies, has implemented several key initiatives to attract investments in the sector. These include:

• Tax Incentives: To promote growth in logistics, particularly cold chain logistics, the state and federal governments offer various tax incentives and financial breaks, helping reduce operational costs for investors.
• Free Trade Zones and Industrial Parks: Sabah is home to several industrial parks strategically located near key logistics infrastructure, such as the Kota Kinabalu Industrial Park (KKIP), Sawit Kinabalu Sandakan Industrial Park, and POIC Lahad Datu. These parks offer ready-to-use industrial areas, complete with utilities and access to transportation networks, making it easier for businesses to set up operations.
• Streamlined Business Processes: Through the Sabah Economic Development and Investment Authority (SEDIA), the state offers simplified regulatory processes, helping businesses navigate the setup and operational stages with ease.

Sabah is at the forefront of integrating cutting-edge technologies to enhance its logistics sector. The adoption of digital tools, such as blockchain for secure supply chain management, the Internet-of-Things (IoT) for real-time tracking, and artificial intelligence (AI) for predictive analytics, is revolutionising the logistics landscape. These technologies are driving operational efficiency, reducing costs, and providing businesses with a competitive edge in the increasingly complex global supply chain.

Sabah’s logistics sector is further supported by its diverse and vibrant economic ecosystem. The state’s rich natural resources—palm oil, rubber, timber, and oil and gas—generate significant trade volumes, creating a strong demand for efficient logistics solutions. Additionally, Sabah’s growing tourism sector, coupled with its status as an educational and healthcare hub, further propels the need for seamless logistics and supply chain services.

Sabah is on the cusp of transformation, poised to become a leading logistics hub in Southeast Asia. With its strategic location, robust infrastructure development, government incentives, and adoption of technological innovations, the state offers investors a wealth of opportunities in the logistics sector. The proactive approach to enhancing logistics capabilities makes Sabah an attractive destination for those looking to tap into the dynamic ASEAN market.

Now is the ideal moment to invest in Sabah and become an integral part of its exciting transformation into the logistics hub of Southeast Asia. Together, we can create a future of seamless connectivity, robust growth, and lasting prosperity.

For any investment-related inquiries, please contact SEDIA for assistance. To learn more about SEDIA and explore other investment opportunities, visit our website at www.sedia.com.my.