Source : Business Times - 7 Apr 2009
IT was launched two and a half years ago amid fanfare and great expectations of kick-starting the economy of southern Johor state.
The Iskandar Malaysia development in the state was, as investments go, slated to be one of Malaysia’s largest - RM398 billion (S$168.5 billion), with RM46 billion coming in the first five years and the remainder over the next fifteen.
As a concept, Iskandar looked as if it would fly. It envisaged the development of education, health care, manufacturing, leisure, service and residential facilities - mostly on a greenfield basis over 4,450ha of land situated next to a land-starved country with one of the highest per capita incomes in Asia. It had worked in other places with similar proximities - Hong Kong and Shanzen, for example - and had succeeded.
Malaysia was hoping to create an ‘instant’ growth centre much like it tried to do with its Multimedia Super-Corridor (MSC) - its version of the Silicon Valley - to emulate other places where growth had evolved naturally and over time.
For this to happen, it had to attract foreign investors and for that to happen, Kuala Lumpur suspended affirmative action policy requirements - where investors have to satisfy ethnic quota conditions, for example - for a raft of sectors from services to logistics. It had happened at the MSC under former prime minister Mahathir Mohamad and it happened for the Iskandar region through his successor, Abdullah Ahmad Badawi.
The MSC has not been a runaway success as many had originally anticipated, but it hasn’t been a failure either with quite a few big international names setting up shop there. In Iskandar’s case, the global financial crisis may be impeding its takeoff where foreign investors are concerned, but Kuala Lumpur is stepping into the breach.
Arlida Ariff, managing director of Iskandar Investment, the agency tasked with implementation of the various projects in the region, says that ‘year 2009 will be our year of implementation’.
Already RM1 billion is being spent for various projects - mostly road and highway projects - in the region under the Ninth Malaysia Plan, and Ms Arlida says that a further RM1 billion will be disbursed later this month for several projects under the Medini area of Iskandar. In addition, the Nusajaya portion of the project - which includes Johor’s administrative capital - has been completed and the few government offices remaining in Johor Baru will move there later this month.
All the monies come from Iskandar Investment, which is 60 per cent owned by Khazanah, the federal government’s investment arm; 20 per cent by the Employees Provident Fund and 20 per cent by the Johor state government. The company is capitalised at about RM1 billion and has the 4,450ha in assets to boot.
At least three Middle East companies - Mudabala, Millennium and Kuwait Finance House - have announced gigantic infrastructure projects in Iskandar but it isn’t clear if those developments will proceed amid the financial crisis. Ms Arlida says RM500 million has already been spent and she is confident that they will, indeed, go on.
She describes herself as a ’simple civil engineer’ and thinks that the current infrastructure work will set the stage for future investment flows, along the lines of build-and-they-will-come. In any case, she thinks the time is right to do it now. ‘Costs have gone down significantly,’ she says. ‘We estimate 10-20 per cent cost reductions and it could become greater.’
But for Iskandar to really take off, ‘the 3,000-pound gorilla in the whole equation’, in the words of one international investor, had to get involved. He was referring to Singapore and its government-linked companies, which have all paid visits and been briefed but have yet to invest in any significant way.
Singaporeans, however, continue to comprise the largest number of tourists and small-scale investors in Johor.
Ms Arlida acknowledges all this but says, enigmatically, that she could have some good news to announce ‘in the coming months’.
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