Let fair play prevail in Sabah Forest Industries deal

Sabah Forest Industries is Malaysia’s largest integrated pulp and paper manufacturer. (Facebook pic)

We refer to your report on June 8, 2019, “Let proper experts run Sabah Forest Industries, says ex-banker”.

We beg to differ from John’s Lo comments on Sabah Forest Industries (SFI) because the perception that is created serves to favour the state’s viewpoints and not the changing business landscape and facts of law.

It must be made clear that the “two” points central to the case, as raised by John Lo (state’s insistence to have pulp and paper expertise as a prerequisite and decision to reject the issuance of the licence) were a mere after-thought by the government to disrupt the sale and purchase between Pelangi Prestasi and Ballarpur Industries.

First, about the notion that the investor should have “pulp and paper” experience as a “pre-requisite” for the takeover of SFI.

The future for Sabah cannot be just about pulp and paper. If this is a prerequisite, then industry will suffer moving forward. The days of pulp and paper as the primary revenue earner of the timber industry are numbered, especially in this present day and age of digitalisation and eco-friendly sustainable packaging.

The undeniable fact is the future plans for SFI would turn Sabah into a major industrial bio-hub over the next 10 years.

Such information is readily available from the news and business archives of the company.

Our research shows that the strategies adopted by Pelangi Prestasi in emerging technologies from Nordic countries would ultimately position Sabah as the regional leader in forest bio-economy and the bio-hub industry.

It would put Sabah on the global map for sustainable and profitable management of its forest economy.

Today, business is driven by evolving and new technologies and economies. Forest bio-economies and bio-industries are the future in forest sustainable management. New industries create multiple job opportunities.

It only makes sense for the chief minister of Sabah to issue timber licences to companies with the foresight and vision to transform Sabah into a regional hub.

It is not just the vision but also credentials and capabilities of the company that will augur well for the state in the long term, and not to look at foreign investors who are inclined to “exploit” the state for their own gains, as we have seen thus far.

Why should we look at a new investor from abroad when the country already has available local investors who have the capacity, inclination and financial muscle to transform companies like SFI into a leading conglomerate, not only in sustainable forest management but also the forest bio-hub industry, that would ultimately create tens and thousands of new jobs in various capacities in the downstream sector over the next 10 years?

Second, if there was anything amiss in the previous sale of SFI in 2018, then the necessary reports must be lodged with the relevant agencies.

Otherwise, there may be a perception that the current state leadership is blocking the deal for other reasons.

In the case of the Sabah government, to include new conditions after the fulfilment of the terms and conditions and signing of the sale and purchase agreement, more so when the state government was involved from the very beginning in the transaction, breaches the rule of natural justice and is unethical.

Although the state government owns 2% of SFI, it is improper for any party or state to interfere in a business transaction that has been duly agreed upon and the terms and conditions consented between the authorised parties.

When the state government involves itself in such a manner, it would indeed be a major concern for investors wanting to invest in the state.

We agree that the Sabah government did not benefit from SFI previously and this could be due to a number of reasons — inefficiencies of the business operations, lack of expertise, political interference or even due to its minimal 2% equity in SFI.

This then cannot be used as a basis to pre-judge Pelangi Prestasi on its acquisition of SFI.

If the state government is serious about getting the best for the people of Sabah, then it should work to seek an amicable and “win-win” solution, that could possibly include an increase in the state’s equity in SFI —despite the chief minister being quoted that Sabah does not have RM2 billion, let alone RM1 billion to invest in SFI.

We serve the interests of the people of Sabah through fair play.

Sabah Forest Alliance is a grouping that serves to promote sustainable practices in forest management and development.

The views expressed are those of the author and do not necessarily reflect those of FMT.