Malaysia’s first economic growth corridor, Iskandar Malaysia, has been attracting foreign investor interests from around the region as well as the US
Malaysia’s first economic growth corridor, Iskandar Malaysia, has been attracting foreign investor interests from around the region as well as the US

Iskandar Malaysia (IM), a special economic zone in Johor Bahru, has been in the media spotlight in recent months. With the completion of certain key catalytic projects in 2012 and the signing of new economic agreement between Malaysia and Singapore in 2013, investor interest for IM is at an all-time high. Considering the proximity and relevance of the project to Singapore, it is not surprising that Singapore is one of the largest investor and leading contributor to IM. In addition, other foreign investors are also rushing in to have a share of the pie, including those from Taiwan, Hong Kong, Japan, and the US.

The proximity of Iskandar to Singapore and the rising costs of owning a house and living in Singapore have also triggered much of Singaporeans’ interest in investing their residential properties there. With investors’ interests fast heating up, let us take the opportunity to delve into the opportunities in Iskandar.

First Economic Growth Corridor

Conceptualised under the 9th Malaysia Plan (2006-2010), Iskandar Malaysia was the first economic growth corridor launched in the country. It is expected to attract the highest investment amongst the five economic corridors (the other four being the Northern Corridor Economic Region, East Coast Economic Region, Sabah Development Corridor and Sarawak Corridor of Renewable Energy).

It comprises five flagship zones with the dual-focus of strengthening current existing economic clusters and diversifying and developing targeted growth sectors.

Since its launch in 2006, Iskandar Malaysia has witnessed rapid progress, with several key developments completed and more nearing completion. Progress is being achieved across multiple sectors including education, healthcare, leisure and tourism, property, creative and retail.

2012 marked the year of tipping point with the completion of key catalytic projects. Among the notable projects are the Johor State New Administrative Centre in Kota Iskandar, Legoland Malaysia Theme Park, Hello Kitty Town, Johor Premium Outlets, Newcastle Medicine University Malaysia and Marlborough College. The completion of the new highways such as the New Coastal Highway, the Eastern Dispersal Link Expressway and the Senai-Pasir Gudang-Desaru Highway also proved to be a major influence in gaining investors’ confidence.

Singapore’s Involvement in IM

In 2010, Singapore and Malaysia signed a broad agreement to address longstanding issues and settled on major joint ventures such as the Urban Wellness Township (between Khazanah Nasional Berhad and Temasek Holdings Pte Ltd). With the two countries signing another economic agreement in 2013 (which includes the promise of a high-speed rail link and a Rapid Transit System) and many catalytic projects completed in 2012, investors’ interest is at its peak compared to the lukewarm reception Iskandar Malaysia first got when it launched in 2006.

Other large-scale Singaporean investors are also sharing the governments’ optimism in the economic corridor. Ascendas Land International Pte Ltd, a Singapore government-linked company, will be collaborating with Malaysia’s UEM Land Berhad to develop an integrated eco-friendly technology park in Nusajaya. Singapore billionaire, Peter Lim, is one of the newest player in the Iskandar buzz with his proposed RM 3.5 billion Motorsports City joint venture project with UEM Land. The project is expected to be up and running by 2016.

CapitaLand Group also announced two prominent projects in Iskandar in February 2013. One project is the joint development of a S$3.2 billion waterfront township on the island of Danga Bay with Temasek Holdings and Malaysia’s Iskandar Waterfront Holdings (IWSB). The Ascott Limited having been given the green light to manage Somerset Medini Iskandar, marks the other project.

The Danga Bay premier waterfront project will be a hub likely to comprise high-rise and landed homes as well as a marina, shopping mall, restaurants, serviced residences, offices and recreational facilities. Somerset Medini Iskandar is part of the ‘Urban Wellness’ integrated development by Pulau Indah Ventures Sdn Bhd, a joint venture between Khazanah Nasional Berhad and Temasek Holdings. The 310-unit serviced residence will be Ascott’s largest property in Malaysia when it opens in late 2015, allowing Ascott to strengthen its presence in the burgeoning region, as well as to further enhance Ascott’s position as the largest international owner and operator of serviced residences in Malaysia.

Looking ahead…

2012 has been touted as the tipping point for Iskandar Malaysia. Many analysts believe that critical mass has been achieved through the completion of major infrastructure and real estate projects. Reflecting the confidence, the cumulative investments have reached RM 105.1 billion, 36 percent of which is accounted for by the foreign investors. Another point worth noting is that real estate (33 percent) has overtaken manufacturing (32 percent) as the dominant sector for investment in 2012.

There are a couple of future projects that are expected to further enhance the investor confidence in the Iskandar Region. First is the proposed high-speed rail link between Singapore and Kuala Lumpur, which is likely to have a stop in Iskandar. Secondly, the RTS link which will be operational by 2018, will have a co-located customs, immigration and quarantine (CIQ) facility in Singapore and another in JB so that commuters need only clear immigration once for each way of travel.

With the critical momentum established and major agreements between the two cities signed, Iskandar is riding high on the radar of international investors.

Article is contributed by Jun Shin Jung, Management Executive of Market & Strategy Insight and Corporate Planning Unit, CapitaLand Limited.