17/11/2008 (Bernama), Kota Kinabalu - Impact of the worsening global economic turmoil has yet to be felt and is expected not to severely affect investments in the Palm Oil Industrial Cluster (POIC) in Lahad Datu and Sandakan, the state legislature was told Monday.

State Industrial Development Minister Datuk Ewon Ebin said though the turbulent world economy is expected to inflict some damage, either directly or indirectly, on the inflow of fresh investments into POIC, investments in the Lahad Datu POIC are still encouraging and are on the rise.

"Since the Sandakan POIC is still in the initial stage and the project will only be completed in early 2011, even if there is an adverse impact due to the economic downturn, it will not be very serious," he said when replying to Datuk Mohd Arifin Mohd Arif (Membakut-BN) who asked on the impact of global economic and financial meltdown on efforts to woo investments to POIC in the state.

Ewon said the government was constantly monitoring the situation and among the possibilities that could jeopardise investments in POIC were investors adopting a "wait and see" stance until a more conducive investment climate emerged before going ahead with their investment plans and businesses.

Investors are also expected to face problems in securing financing from stock markets or financial institutions, he said, adding that investors would face difficulties implementing projects if palm oil prices remain unstable while prices of construction materials continue to spiral.

POIC, as an investment destination, might face competition from other better-equipped industrial zones in the peninsula, Sarawak or in foreign countries, he said.

"Nevertheless, the ministry is confident of enhancing POIC's position in the medium and long-term for reasons that the fall in palm oil prices is due to the sluggish global economy which is a natural phenomenon and a temporary setback," he said.

"Many economic analysts feel palm oil prices will surge to a more realistic level and higher than the current market prices," he said.

Ewon said investments in the food-based industry such as palm oil were long-term low-risk investments as demand for food is expected to rise in tandem with the world population growth.

"Palm oil is also the cheapest vegetable oil as compared to 17 other vegetable oils and fats," he said.

He said the government would continue to offer incentives to develop and enhance the palm oil industry in view of the industry's strategic importance to the nation's economy.

"The potential to derive environment-friendly biodiesel from palm oil as an alternative to petroleum is also expected to continue wooing investors, especially to invest in palm oil downstream industries," he added.