With a centuries-long history between Singapore and Johor/Malaysia that continues today, Singaporean investors are among the top targets for Iskandar Malaysia. This month, we look at how successful the efforts have been, to woo the Singapore dollar.

The global credit crunch has left many companies in its wake. Thankfully for Iskandar Malaysia, investment may have slowed slightly but not enough to impact its progress much. According to Arlida Ariff, managing director of Iskandar Investment Bhd (IIB), the promoter and coordinator of Iskandar Malaysia, there is sound investor interest in the Johor economic zone.
With RM43.1 billion in investments at end-2008, “we already have an excellent head start and are on track to achieving the RM47 billion target by 2010," she told the Business Times last month.

Stepping up the pace in wooing investors and partners for the region’s six strategic sectors (education, health and wellness, tourism, creative industries, logistics and financial services), IIB is now marketing Iskandar Malaysia aggressively through strategic product marketing and investor roadshows.

Investor-friendly Incentives

As a way to kick-start investment in Iskandar Malaysia, the Government has already announced an Incentive and Support Package (ISP) with measures such as corporate tax exemption for 10 years, exemption from FIC (Foreign Investment Committee) rulings, permission to source capital globally, and permission to employ foreign workers without restrictions.

In practical terms, however, infrastructure development has also been deemed another crucial component. Under the Ninth Malaysia Plan, a total of RM6.83 billion has been planned for Iskandar Malaysia. In the past six months, the Iskandar Regional Development Authority (the Federal statutory body responsible for realising the vision and objectives of Iskandar Malaysia) awarded RM1.62bil tenders comprising 18 projects, including road packages, drainage projects and river-cleaning jobs.

Meanwhile, logistics investments are also being planned to streamline the flow of domestic and international cargo. Other “software and hardware upgrades” include training the workforce in the area, enhancing telecommunications facilities and upgrading the local traffic management system to enhance road safety and facilitate the flow of business.

“But most importantly, IIB needs to ensure its product development timelines are met to launch new products to investors,” underscores Ms Arlida.

The Singaporean connection

Among the chief targets for investment dollars for Iskandar Malaysia is Singapore. Given the historically “seamless” flow of goods and people between Singapore and Johor/Malaysia, this would make sense. With 8.6 percent of its investments flowing into Malaysia, Singapore is the top investor in Malaysia, and the two countries (especially Malaysia’s state of Johor) are to an extent intertwined economically.

Singaporean companies have already invested nearly S$1 billion (RM2.5 billion), encompassing some 220 projects in Iskandar Malaysia, says Malaysia’s new High Commissioner to Singapore, Hussin Nayan, adding that they should now also take a look at other development programmes in Malaysia.

According to Manu Bhaskaran, director and CEO of Centennial Asia Advisors, there are huge benefits and synergies which can be gained through closer integration between Singapore and Iskandar Malaysia.

“For Singapore to attain its desired status as a global city, it needs to grow bigger as the mass within the Singapore territory is insufficient,” he said in a speech given at Singapore’s Institute of Policy Studies last year. “Any global city needs a dynamic hinterland which will provide it with the necessary economies of scale and critical mass.”

Changing Mindsets

Despite the intertwined destinies of Malaysia and Singapore, there are still obstacles to overcome. IIB, IRDA and the local authorities are working to address common concerns among Singaporean investors, such as whether they would be politically welcome in Malaysia, as well as the crime rate in Johor. In addition, the two countries have some significant bridging to do, between divergent economic policies and philosophies. However, there is a large incentive for a mindset change, as this would enable both parties to flourish.

“Singapore cannot attain its desired status as a global city without the IDR (as Iskandar Malaysia was formerly known), while on Malaysia’s part, the IDR can become a success only with substantial integration with Singapore,” Mr Manu pointed out.

Wooing the Southern Dollar

Mr Manu said seamless connectivity was “vital” to make Iskandar Malaysia beneficial to both countries. Among measures he urged the governments to consider were increased transport links and easy immigration; seamless business operations, including inter-operable company registration, easy works visas and standardisation of licensing; and lower taxes and tariffs for movement of goods and capital between the two borders.

Meanwhile, Ms Arlida and her team have been working to show Singaporean investors they are committed to the project, including by securing investors from other parts of the world, such as Britain, Spain and the Gulf states.
“We really needed to … strengthen the case before approaching Singapore investors to show that there's interest, that it's strong and coming from various parts of the world and it's not just a normal property play that has been initiated in Iskandar,” she said.