Bridges to Singapore

Malaysia

Economic News

22 Jul 2010
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Malaysia is embarking upon a development programme as a key project under the 9th Malaysian plan and a catalyst for the economic advancement of the country.



The Iskandar Development Region (IDR), launched last year, is a special economic zone in South Johor that covers 634.1 hectares (2216.3 sq km) of land area within the state of Johor, Malaysia's southern-most state with 1km bridge connections to Singapore. The IDR will offer a range of incentives to attract investments, particularly in manufacturing and services, giving Singapore-based companies a chance to take advantage of the low costs in Malaysia while remaining close to their headquarters. The IDR is expected to include tourist attractions, luxury residential areas and industrial zones as well as education and medical hubs



Singapore was the fifth largest investor in Malaysia in 2006, and is Malaysia's largest trading partner after the US. Within the Association of South East Asian Nations trading region, Singapore accounts for 54.4% of Malaysia's total trade volume.



The IDR will cover a land mass that is three times the size of Singapore. The hope is it will follow a similar pattern to that of Shenzen, China's relationship with Hong Kong. Shenzen, which is the closest city on mainland China to Hong Kong, through being declared a special economic zone in 1980, has taken advantage of investment reforms, geographic proximity, available land and low cost arbitrage with Hong Kong to grow at an annual rate of 28%, attracting over $30bn in investment.



While Malaysia and Singapore stand to gain economically from the IDR, its development and success is dependent on them forging a strong working relationship.



Azman bin Haji Mokhtar, managing director of Khazanah Nasional, the Malaysian government's investment arm tasked with the blueprint and delivery of the IDR, told OBG, "Singapore is already the largest foreign investor in the region and given the space in which we each operate, it is pure economic logic that we co-operate. For example, Singapore has stated they want their population to grow from the 4.5m it is today to 6.5m, and if you arbitrage certain costs like land being a whopping 50 times higher in Singapore, it makes simple sense for them to buy property in the South Johor region."



In May this year, Malaysian Prime Minister Abdullah Ahmad Badawi and his Singapore counterpart Prime Minister Lee Hsien Loong met informally on the Malaysian island of Langkawi, an event considered a milestone in strengthening diplomacy and working relations.



Lee said, "We need to work together because our co-operative interest far outweighs our competitive concerns and one of the major areas we can work on together is the IDR as it is a major project for Malaysia."



One result of the meeting was the establishment of a joint ministerial committee of four working groups tasked with overseeing and improving cooperation in the areas of: immigration clearance, transportation, tourism co-operation and environmental co-operation.



Syed Hamid bin Syed Jaafar Albar, Malaysia's minister for foreign affairs, told OBG, "The joint committee was established at government level to look at and address bureaucratic issues that may impede the progress of the region. This is the kind of openness beginning to be practiced to fully take advantage of a mutually positive environment."



To improve immigration clearance, 'smart cards' in lieu of other travel documents are being proposed to reduce the time required to clear Customs, immigration and quarantine checkpoints.



In terms of transportation linkages, there is a proposal to extend Singapore's Mass Rapid Transit system to Johor, enabling seamless commuter travel between the two countries.



Singapore, which had 9.7m tourists last year, and Malaysia, which took in 1.3m, will look to collaborate further on joint promotions and work to develop complementary attractions, to help in the field of tourism development.



Azman told OBG, "We will be looking at how we can jointly go about promoting each other to mutual benefit, working together to segment the market and offer a complementary product."



Lastly, the two countries have agreed to work together to mitigate climate change, following meetings between respective environment ministers last week.



While enhanced Singapore-Malaysian co-operation is vital to the IDR's success, investment in the region is being sought on a global scale. Malaysia, through the ministry of international trade and industry, has sent trade missions to Korea, Japan and Hong Kong over the past few months to promote opportunities in the region while two foreign universities are currently in negotiations to set up branch campuses. The local media has reported that investors from the Middle East are expected to sign an agreement this week to commit billions of ringgit into the Iskandar Development Region, making them the pioneer investors. While government officials would not comment on the deal, it is believed as much as $862m will be invested in the IDR.

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