The South Johor Economic Region (or Iskandar) project û the first of four grand development schemes planned throughout Malaysia û was launched in late 2006 by Prime Minister Abdullah Badawi with the stirring manifesto: ôOur vision is to make South Johor the new international address for business, investment, leisure and cultureàIt will showcase all that Malaysia can be.ö
The idea is that Iskandar will become southern peninsular MalaysiaÆs most developed region, ôwhere living, entertainment, environment and business seamlessly converge within a bustling and vibrant metropolisö.
Building clusters
There are five existing ôclustersö within the region: electrical and electronics (E&E); petrochemicals; food and agro-processing; logistics; and tourism. In addition, there are plans to create a medical park, an area dedicated to education and facilities for promoting both conventional and Islamic finance. But so far, only the low-value E&E cluster has had much traction, although even that is actually an integral part of the Singapore E&E industry. So now, in the words of the Iskandar marketing spiel, the ômain thrust is the transformation of truncated and embryonic clusters into a dynamic set of clusters able to generate its own innovation and increase productivityö. Whatever that means.
With an area of 2,217 square kilometres, Iskandar is almost three times the size of Singapore ôwith vast land banks primed with ready transportation and telecommunications infrastructureö, according to its website. Other advantages include a much lower cost of living than in other Asian hubs and a central location within the so-called Indonesia-Malaysia-Singapore growth triangle, supported by sea and air links.
Incentives announced by the government last year include a 10-year tax holiday, unrestricted freedom to hire foreign workers and exemption from the Foreign Investment Committee rules. Government funding will provide M$4.3 billion ($1.3 billion), public companies a further M$3.4 billion, while the private sector is expected to follow enthusiastically by pumping in more than M$10 billion, rapidly pursued by overseas investment. So far, the scheme seems to be little more than a marketing vision.
But Choong Wai Kee, head of research at Citi, is optimistic. He reckons that ôin a yearÆs time many new blocks will be built and several grand scale projects will be underway, with Khazanah [the main government-linked investment company] playing an important roleö. Already, he points out, half of a light industrial park covering 150 acres has been sold to Singapore developers, primarily electronics firms. Tourism is likely to be significant too, he says, but perhaps most settlement will be by Malaysian workers returning across the causeway from Singapore to buy homes.
But the Iskandar project is already courting controversy. SingaporeÆs elder statesman, Lee Kuan Yew, warned Singaporean investors not to expect the same welcome they received at Shenzhen, which is not surprising after former Malaysian prime minister Mahathir dubbed Iskandar ôthe northern Singaporean development corridor û nominally controlled by Malaysia, but administered in fact by Singaporeansö. The youth wing of MalaysiaÆs UMNO party routinely calls for the Malaysian government to cancel any bilateral contracts that would benefit Singaporeans ôdisproportionatelyö.
This story was first published in the June issue of FinanceAsia magazine.
¬ Haymarket Media Limited. All rights reserved.
