Gulf Investment on the Rise

Malaysia

Economic News

22 Jul 2010
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In the past month, Malaysia has witnessed two high-profile announcements of Gulf-based consortia each investing in excess of $1bn into the country.



As Malaysia embarks on a number of major projects for which international investment is being sought, and Middle East investors are becoming increasingly familiar and comfortable with the country as a business destination, the government and corporate sector are optimistic this could be the beginning of an investment wave for years to come.



In late August, a consortium that includes the Millennium Development International Company (MDIC), Kuwait Finance House (KFH) and Mudabala Development Company announced an injection of $1.2bn into Malaysia's Iskandar Development Region (IDR), situated in the southern state of Johor. The consortium will partner with the South Johor Investment Corporation (SJIC), through its subsidiary Rim City, to develop an integrated city project, for which SJIC will have a 30% stake.



SJIC was established by Khazanah Nasional, the government's investment arm. It is tasked with overseeing and attracting serviced-based industry and eventually developing the area into an urban metropolis. Its target is to attract over $100bn in investments into the IDR in the next 20 years.



MDIC is the urban development management arm of Saraya Holdings, a Dubai-based real estate company with projects in the Middle East and North Africa (MENA) region. KFH is a Kuwaiti Islamic bank and one of the three Islamic banks granted licences to open in Malaysia two years ago. Mudabala is the Abu Dhabi government's investment arm, with wide-ranging investments in real estate, utilities, basic industries, energy, health and services, and significant stakes in world-renowned companies such as Italians sports car maker Ferrari.



The investment marks the largest in the IDR since its inception in November 2006 and is expected to be used for land and infrastructure development within the next six months. The deal includes a memorandum of understanding with Aldar Properties PJSC, an Abu Dhabi-based developer that will act as the master developer for the first phase of the project.



A second major announcement was made on September 15th by a consortium led by Qatar General Insurance and Reinsurance Company (QGIR) and Gulf Petroleum, to invest over $1.4bn into Malaysia's oil and gas, property and Islamic banking industries. QGIR has interests in finance, energy and properties throughout the MENA region, and is a major shareholder in Gulf Petroleum, an integrated oil and gas group with networks in West Asia, North Africa and Europe. Sheikh Nasser bin Ali bin Saud Al Thani, chairman of QGIR, said the consortium intends to make Malaysia its regional hub for its Asia Pacific operations.



In addition these announcements, there are two others that help indicate the beginning of an investment trend in the country. In June Saudi Telecom Company bought a 25% stake in Malaysian mobile phone operator Maxis Communications for $3bn. Last month, Swan Symphony, a consortium owned by the Abu Dhabi-Kuwait-Malaysia Investment Corporation purchased a 50.6% stake in Malaysian developer Putrajaya Perdana for $112m, with the intention of transforming the company into a global construction company.



With a rush of high-profile Gulf investments into the country, analysts are optimistic these investors, who have traditionally invested in the US and Europe, will continue to direct their attention towards Malaysia.
Khalid Bhaimia, managing director of Hong Leong Islamic Bank, told OBG, "Gulf investors tend to come in large numbers. Investment will come when we have a story to tell, and now we do."



Ismail Shahudin, chairman of Bank Muamalat, a Malaysian stand-alone Islamic bank, echoed this sentiment when he told OBG, "In the past, the investment direction of Gulf funds was being driven by fund managers based in the US, Singapore and Hong Kong. Today, the fund managers are operating in the GCC [Gulf Co-operation Council region] and investors are more interested in where their money goes. The Maxis and IDR investments are very high profile and this will create a knock-on effect."



With Malaysia being very strong in Islamic finance and having a significant Muslim population, there is considered to be a strong fit and comfort level between Malaysia and the GCC region. Over the past few years, Malaysia has seen huge growth in tourist and foreign student arrivals from the Middle East and all this encourages familiarity with and affinity for the country.

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