Is Sabah Quietly Emerging out of Sarawak’s Shadow?

 

For years, Sarawak has been the economic success story of East Malaysia. Its commanding lead in oil and gas (O&G), infrastructure and state autonomy often made it the benchmark others aspired to. But that narrative is beginning to shift. Quietly but steadily, Sabah is emerging as a serious contender. 

 In 1Q2025, about 61% of these investments were foreign direct investment (FDI), indicating strong global confidence in Sabah’s economic trajectory. By contrast, Sarawak’s investment momentum has slowed with over 65% of its 2023 capital inflows coming from domestic sources.

 

Sabah topped Malaysia’s manufacturing investments during 1Q 2025 at RM7.3 bil. This is on the back of major investments prior led by major players such as China’s Kibing Group which pumped in RM950 mil to expand its glass production facility in Kota Kinabalu Industrial Park. A massive RM31 billion green steel project by Esteel Enterprise is also underway in the Sipitang Oil and Gas Industrial Park. These moves signal Sabah’s transition from raw commodity dependency to higher-value industrial activities, a transition that Sarawak began earlier but one Sabah is now accelerating with notable speed. 

In terms of tourism, Sabah welcomed 3.1 million tourists in 2024, surpassing its own target and building on its post-pandemic rebound. While Sarawak registered higher total arrivals, Sabah’s aggressive international marketing, direct flight connectivity and nature-based appeal are helping it capture a broader and more resilient tourist mix. 

Crucially, Sabah’s appeal lies in its diversity – from Mount Kinabalu and Sipadan Island to cultural trails and rural homestays. These offerings have been packaged with a more modern marketing push, including social media-driven campaigns, ecotourism showcases and strategic airline partnerships. 

In just over a year, Sabah reduced its number of hardcore poor households from over 22,000 in mid-2023 to just 1,464 by early 2025. By comparison, Sarawak still had over 17,000 such households as of May 2024. Sabah’s targeted aid programmes, affordable housing roll-out and student support schemes have helped deliver tangible results. 

Under the Hajiji administration, Sabah has streamlined investor approvals, set performance timelines and enforced implementation deadlines, even warning civil servants to act swiftly or face removal. However, corruption is still endemic as witnessed in a recent video-based scandal where MACC has not moved speedily as in other cases. Once that can be addressed, Sabah can aspire to be a developed state. 

Reference: 

Sabah’s quiet surge: How the Land Below the Wind is stepping out of Sarawak’s shadow, Focus Malaysia, 29 July 2025