Prime Minister Tun Dr. Mahathir Mohamad has said that Sabah has the capability for rapid development having gone through much progress over the years.

He believed the state had strong potentials to be a developed state, he said.

"I have not been to Sabah for a long, long time ... the town is now quite clean.

"What I think should be done (to develop Sabah further) is to identify assets of Sabah, which can be exploited. You have land, mountain, seas, beaches and low temperatures, which may be good for vegetable-growing," he told reporters. Sabah could establish an automotive industry where car makers could assemble their products in the state, he suggested.

"Industries can come here because, in the future, Sabah is going to be a petrochemical producer as deepwater production will begin any time soon," he said.

When asked by reporters how long it would take the Federal government to decide to increase Sabah's oil and gas royalty from 5% to 20%, Dr. Mahathir said there was a need to maintain Petroliam Nasional Bhd's (Petronas) strength first before deciding to pay Sabah a 20% royalty.

"We don't want to kill Petronas. Petronas is a unique company in the world because it is the only national company that goes into exploration, development, production and petrochemical, and people all over the world are asking Petronas to do work in their country.

"So, (if) we reduce Petronas to just collecting royalty, then, we will lose a lot of things (opportunities)," he said.