Basic Needs Are Not Basic Business: Rural Electrification in East Malaysia

February 1, 2019

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Basic Needs Are Not Basic Business: Rural Electrification in East Malaysia

In April, GIFT ASEAN will run the third Malaysia Young Leaders Programme (YLP) in Sabah, which will include an experiential learning component focused on providing a basic need: electricity. GIFT will be partnering with Tonibung, an ASEAN Energy Award-winning social enterprise that makes and distributes micro-hydropower generators to the 600 off-grid rural communities in Sabah. Using the momentum of river water, these generators grant communities access to all the benefits of reliable power, such as extended working and social hours, easier access to education and entertainment, as well as increased productivity and powered healthcare equipment. Tonibung is ambitiously looking to provide these benefits at a larger scale by connecting multiple villages together with a network of micro-grids.

As part of their experiential learning, participants will produce a business plan with a view to attract investment for Tonibung’s microgrids, including recommendations on how best to manage this capital in a sustainable and transparent manner. This will be no small task: understanding investment opportunities in electrification for rural Sabah requires navigation of the economic, political and geographical complexities of the region. It would also bring about changes to village life that must be managed to foster community growth.

Using their soft skills, participants will manage various stakeholder interests and create a viable commercial model. This is part of our leadership learning objectives and the core of our experiential methodology. After all, what works in a more developed or an urban economy will be unfeasible in much of the developing world, including a place like rural Sabah. Working on a project like Tonibung’s reveals different opportunities and constraints, and so require different, “outside-the-box” business models.

As an example of these complexities, the rural power sector does not operate in the same way as it does in urban markets. The national grid can only extend so far: using kilometres of transformer cables to connect rural areas with urban hubs is not cost-effective. Additionally, villagers do not use electric-powered goods in large numbers, which means the demand for electricity is currently not large enough to make conventional grid operation economically viable. Thus, the key issue to be tackled when it comes to community-based models like Tonibung’s is financial sustainability: how can the organisation continue to receive sufficient income so it can continue its work and expand to new areas?

Tonibung’s efforts will need to be helped by encouraging a cultural shift amongst villagers. The demand for electricity may rise naturally as villagers become more aware of the social and economic benefits of electricity, but Tonibung may need to incubate demand among villages to ensure adequate returns on its investments. We cannot expect villagers to be aware of all the opportunities that electricity presents. By demonstrating these opportunities, Tonibung can expand the market for electricity in a way that still aligns with their social mandate. They have begun this process already: Tonibung’s Founder, Adrian Lasimbang, is a Federal Senator who represents Sabah in the national senate, and has explained to villagers the importance of electric lighting for security at night, and fridges to keep gathered food fresh for longer. Together with Tonibung, Adrian has secured funding from the government as a pioneer in rural electrification, which he intends to use for the micro-grids in question.

GIFT reached a similar conclusion on its 2014 Global Leaders Programme in Laos, facilitated in partnership with the United Nations Economic and Social Commission for Asia and the Pacifc. We realised that most rural electrification programmes assumed that electricity would spur entrepreneurship, when instead the opposite was true: programmes needed to foster local businesses, which in turn would increase demand for electricity to the point where rural electrification would be more viable. The ESCAP project was, in turn, inspired from GIFT’s 2013 Global Leaders Programme in Indonesia. Like the upcoming Malaysia programme, the 2013 GLP also focused on micro-hydropower. 2013 participants suggested a system where local communities could eventually gain ownership of microgenerators, allowing these communities to start receiving a return from managing these generators.

However, any rapid socio-economic change presents the risk of poor implementation, or even exploitation by others. Hence, Adrian stresses the importance of a community-based model in which villagers co-own the micro-grids so they have a say in the rate and scale of electricity-based change. Tonibung will remain involved by providing advice, education, and transparent business opportunities that encourage the growth and integration of rural communities in Sabah.

Adrian is excited about the opportunity to work with GIFT, and believes the participants of the Malaysia YLP can work together to make Tonibung’s goal a reality: “The business plan is essential for the whole ecosystem to work – but we’re not a business organisation, so how the micro-grids can be funded and sustained is something we need help to achieve”.

If you’re interested to find out more about the Malaysia YLP, visit the programme page here or please get in touch with Synna Ong, the Programme Manager for this Malaysia YLP, at song@global-inst.com.

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