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IskandarMalaysia Full
IskandarMalaysia Full
I S K A N D A R M A L AY S I A S P E C I A L R E P O R T
BECOMING
REGIONALLY
RELEVANT
special report
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I S K A N DA R M A L AY S I A S P EC I A L R E PORT
THE EDGE
CONTENTS
10
BECOMING A
REGIONAL
ECONOMIC HUB
12
A DECADE OF
RAPID GROWTH
16
PROMISING SIGNS
OF ISKANDARS
LONG-TERM
VIABILITY
18
ISKANDAR PROPERTY
MARKET TO PICK UP
IN 2018
20
BANKING ON
LIVEABILITY
22
ISKANDAR MALAYSIA
IN PICTURES
24
NOTABLE ECONOMIC
HUBS IN ASIA
FOREWORD
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I S K A N DA R M A L AY S I A S P EC I A L R E PORT
Becoming a regional
economic hub
The next 10 years are critical if Iskandar Malaysia is to realise its ambition of
becoming a metropolis of international standing. Property developers and
corporate leaders in the region say it is possible if a number of factors are
put in place and delivered as expected.
The promoted
sectors in
Iskandar
require talent
with certain
skills as we are
targeting the
high-technology
manufacturing
industry,
among others.
> Ismail
PROMISING TRENDS
Alpha Marketings Khoo says Iskandars manufacturing industry hints at its ability to become a regional
economic hub. Most of the news on Iskandar centres
on its property market and of late, it has painted a negative picture of this region. But look at other economic
indicators. Since 2013, Johors manufacturing industry
has attracted more investments than the other states
in the country. In the past, Selangor and Penang used
to see the most inows.
There is a growing concentration of manufacturing companies in Iskandar as companies relocate from
Singapore. By being in Iskandar, these manufacturers
can access the Port of Tanjung Pelepas and the port
of Singapore.
Furthermore, despite all the negative sentiments
surrounding the Malaysian economy last year, Iskandar
managed a record year in terms of total new investments. Many economic indicators actually look quite
rosy and I believe that Iskandar is well on its way to
becoming a regional economic hub.
As shopping malls play an important role in the
I S K A N DA R M A L AY S I A S P EC I A L R E PORT
economy and society, it is important for more high-quality commercial real estate to be completed quickly, says
Khoo. Unlike in Kuala Lumpur, there arent enough
shopping malls in Iskandar. The retail and service industry is a dark horse in its outlook, so it is quite important that WCTs Paradigm South opens early next
year. Ikea in Tebrau will open later in the year while
Midvalley Southkey will open in late 2018.
Eco World Development Group Bhd president and
CEO Datuk Chang Khim Wah points to talent and
a highly skilled workforce as factors that will allow
Iskandar to achieve its goals. We hope to see this economic corridor thriving on the back of consistent and
transparent foreign investment policies, a high-quality
workforce, an increase in productivity, efficient public
transport, more talent and a transfer of technology
from developed countries, he says
United Malayan Land Bhd (UM Land) group managing director Dennis Ng Yew Khim says the entry of
mobile and high-tech companies would greatly enhance Iskandars appeal.
ENHANCING COMPETITIVENESS
Economists have often pointed to labour as well as
land and capital as key features that shape economic
growth.The strength of a citys knowledge-based economy drives its competitiveness and many regulatory
authorities have been looking at ways to encourage
more talented and ambitious employees in a bid to
foster innovation.
IRDA CEO Datuk Ismail Ibrahim says Iskandar
will have created 817,500 job opportunities by 2025.
The promoted sectors in Iskandar require talent with
certain skills as we are targeting the high-technology
manufacturing industry, among others. This initiative will also help Iskandar achieve its target of 45%
highly skilled knowledge workers by 2025. This will
exceed the national average of 35% as outlined in the
11th Malaysia Plan.
For this goal to be achieved, Iskandar needs to attract talent from other parts of the world and from
other states in the country. Most MNCs in Iskandar
are regional subsidiaries and their employees follow
the policies set by their headquarters in other countries. So, it is quite hard to nd talent with international exposure who are able to design new policies
or strategies for a company. Nevertheless, it is possible
to nd talent in Johor to ll the general roles, says
Pinewoods Rezal, who moved to Iskandar from Kuala
Lumpur three years ago.
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I S K A N DA R M A L AY S I A S P EC I A L R E PORT
2010
Columbia Asia opened a full-service community hospital in Aat Healthpark, which is the designated area
for healthcare services in Iskandar. Later that year, hospital operator Pantai Holdings Bhd signed an agreement with Global Capital & Development Sdn Bhd to
build Gleneagles Medini Hospital.
The country also launched its rst dedicated biotechnology park Bio-XCell in SiLC Nusajaya. The
park is a joint venture between Malaysian Biotechnology Corp Sdn Bhd and UEM Sunrise Bhd.
WCT Bhd continued to expand its presence in the
region by developing a 10.3-acre site in Medini, while
Sunway City Bhd acquired parcels of land near Ponderasa Golf and Country Club and UM Land acquired
a tract in Puteri Harbour.
2011
2012
2013
Iskandar
Malaysias
goals to
achieve by
2025
To become a strong and
sustainable metropolis
of international
standing
To reduce greenhouse
gas emissions by 50%
To reach a population of
three million
To create 817,500 jobs
To have a talent pool
with 45% high-skilled
and knowledge
workers
To reach a GDP per
capita of US$31,100
To achieve a total
investment target of
RM383 billion
2014
2015
Iskandar continued to see investments owing in despite economic challenges on the global and local fronts.
Some 682,169 jobs were said to have been created in Johor from 2007 to 2015. Gleneagles Medini commenced
operations with 300 beds and 162 medical suites.
The property market was much quieter than in
the previous years and there were signicantly fewer
launches of high-rise residences. In view of the slower absorption of such units, a number of developers
shifted their focus to landed residential units and
commercial and industrial real estate.
One of the developments most anticipated to affect
the region is the Kuala Lumpur-Singapore high-speed
rail and the rail transit system that will connect Iskandar to Singapores mass rapid transit system. Property
observers say this will offer much-needed condence,
especially to prospective investors from Singapore.
2016
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I S K A N DA R M A L AY S I A S P EC I A L R E PORT
GAME-CHANGER IN CROSS-BORDER
CONNECTIVITY
Catalyst projects spearheaded by infrastructure developments such as the high-speed rail (HSR) and rapid
transit system (RTS) are expected to reinvigorate condence in the property market. The HSR will connect
Kuala Lumpur to Singapore while the RTS will link
Iskandar to the city state. The RTS link, which will
connect Johor Baru to the Thomson-East Coast MRT
line,is expected to be completed by 2018. Progress,
however, is reported to have been delayed.
These two mass transit links will undoubtedly
bring a fresh injection of interest and development
to Johor Baru and they do not have to be operational
to have an impact. I expect condence will return to
the market once actual progress can be seen, says
KGVs Tan.
Alphas Khoo agrees, saying the physical construction of the HSR and RTS will spur interest in the property market although a full recovery will only take
place when the issues of oversupply and nancing
have been addressed. Iskandar is very near Singapore
and the HSR and RTS make this region even easier to
access. The journey is only 15 minutes and the price
is relatively cheap. I expect these two mass transit
systems to be the game-changer for Iskandars lacklustre property market.
Iskandar Puteri (formerly known as Nusajaya) continues to attract investors, observes Glen Chan, president and CEO of Pacic Star Development Pte Ltd. He
attributes its appeal to its connectivity to Singapore.
This year, South Korean beauty conglomerate
AmorePacic announced a US$170 million investment in Iskandar Puteri; ONE15 announced its latest
project, a private marina and club; and a joint venture
between UEM Sunrise Bhd and Ascendas Nusajaya
Techpark announced a collaboration with Mitsui & Co
to bring in industrial companies from Japan, he says.
I expect population growth in Iskandar Puteri to
take off in the next few years.The completion of the international and domestic HSR routes, as well as shuttle
buses from Singapore, will converge at Iskandar Puteri.
Meanwhile, ferry services will eventually operate between Singapores HarbourFront Ferry Terminal and
Puteri Harbour International Ferry Terminal.This will
contribute to a surge in the population as people will
head to Puteri Harbour for employment opportunities
and leisure in the coming years.
Who is
buying?
While Singaporeans are
still the biggest group of
foreign property buyers
in Iskandar Malaysia,
investors from other
countries continue to
acquire real estate in the
economic region. Knight
Frank Malaysia executive
director Ricky Lee says
new projects in Iskandar
have attracted buyers from
Indonesia, China, Hong
Kong, Taiwan, South Korea,
Japan, the Middle East, the
UK and the US. Most of
the Chinese buyers in the
market are taking up the
properties developed by
Chinese developers, he
adds.
Glen Chan, president
and CEO of Pacific Star
Development Ltd, says
units in Puteri Cove
Residences and Quayside
in Puteri Harbour have
been sold to buyers from
28 countries. Puteri
Harbour, Iskandars
prestigious international
township, mirrors
Monacos successful
top-notch waterfront
city. All the developers in
that area must comply
with a set of urban design
guidelines, which makes it
an extremely well-planned
waterfront locale. Buyers
are attracted to Puteri
Harbour and recognise its
potential because it is welldeveloped and offers an
enviable lifestyle of luxury
and leisure at an affordable
price.
First-time homebuyers
are making their presence
felt in Iskandar. Developers
have responded to this
group of buyers with
affordable homes.
Prices in the
secondary market have
risen tremendously in
tandem with the per
sq ft price increase of
new developments. So,
first-time homebuyers
are probably looking for
new developments that
are more affordable, says
Lee, adding that the new
projects, if any, would be
more realistically priced.
We have observed
more enquiries and
Residential property
prices have generally reached
their upper limit for now.
> Lee
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I S K A N DA R M A L AY S I A S P EC I A L R E PORT
n the past 12 months, developers have been looking at ways to mitigate the slowdown in Iskandar
Malaysias property market. They include deferring
launches, working harder to reach potential buyers,
marketing their products to more foreign countries
and offering more affordable products to appeal to
the broader market.
However, the developers remain optimistic about
Iskandars long-term prospects and attribute the current
situation to global economic headwinds and domestic factors such as a difficulty in securing nancing,
the governments property cooling measures and the
Goods and Services Tax (GST).
Additional challenges specic to Iskandar have
compounded the slowdown. It has been a challenging property market in Malaysia over the past year.The
negative sentiment has been amplied by the introduction of a higher levy on foreign buyers by the state
government, the entry of numerous new developers
into the market in recent years and concerns about
an oversupply, particularly in the high-rise residential
segment, says UEM Sunrise Bhd managing director
and CEO Anwar Syahrin Abdul Ajib.
The master developer of Iskandar Puteri says while
buyers do not pay GST for residential properties, developers are affected as raw materials and construction
cost incur this tax. Our margins are denitely affected
by GST.There is a lot of uncertainty in Iskandar and the
buying momentum for our Iskandar Puteri projects
has noticeably slowed down. Given the environment,
we made a conscious decision to defer the launches of
several high-rise residential projects in our pipeline.
AFFECTED BY PERCEIVED
AND ACTUAL RISK
Concerns about oversupply in the high-rise residential segment have affected condence in this region
in recent years. There are generally two views on this
topic those who say the excess supply of residential
units is a real risk arising from a number of new de-
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I S K A N DA R M A L AY S I A S P EC I A L R E PORT
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ket. I do not see property prices coming down. However, I do see more developers addressing the current
challenges in the property market by offering smaller
units. This will probably occur across all property segments, not just high-rise residential units.
Eco World did not defer its planned launches and,
according to Chang, it has been business as usual
despite the weak property market. As at Aug 31, our
projects in Iskandar have already contributed about
RM935 million in sales. In such an environment, it is
very important to attract potential buyers. We have already organised more than 400 events, big and small, to
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I S K A N DA R M A L AY S I A S P EC I A L R E PORT
Banking on liveability
Comprehensive planning and sustainable development put Medini on solid ground
Ultimately, the
aim is to foster
a healthier,
more social and
economically
viable community.
Once the
community starts
to connect, a
strong community
spirit can be
cultivated.
> Khairil
I S K A N DA R M A L AY S I A S P EC I A L R E PORT
Top left:
Eastern & Oriental Bhds
Avira Garden Terraces
Left:
WCTs innity-edge lap pool
in Medini
Above:
Artists impression of The
Meridin@Medini
Bottom:
CI Medinis shoplots
this township are very close to the city state and offer
great value for money.
The government also encourages foreign buyers
with many incentives such as an exemption from the
minimum property purchase threshold of RM1 million
for foreign purchasers. Property transactions in Medini
are also exempted from the Real Property Gains Tax.
Mah Sings The Meridin@Medini is an integrated
commercial development with a gross development
value of RM1.5 billion. Spanning 8.19 acres, the development consists of Meridin Suites Residences, which
comprises three residential towers; Meridin Sovo; and
Meridin Suites, which are two blocks of serviced suites.
Mah Sing has procured the use of the Ramada hotel
brand from the worlds largest hotel company, Wyndham Hotels Group.Ramada Meridin and Ramada Encore
Meridin will be managed by leading hotel management
company Topotels. Both Ramada hotel-serviced suites
are scheduled to open in two years.
Bruyns says Medini is poised to act as the central
business district for Iskandar Puteri. Medini is already
the main destination for business, healthcare, education, industrial production and tourism. The plans
for the rapid transit system (RTS) and high-speed rail
(HSR) are taking shape. I expect Medini and the entire
Iskandar region to become one of the most prosperous
economic zones in Malaysia.
GREEN IS GOLD
The liveability of Medini has been enhanced
with green spaces and ample opportunities for residents to connect with nature.
The township has a green lung with 210
acres of parks and open spaces. Sustain-
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I S K A N DA R M A L AY S I A S P EC I A L R E PORT
SHENZHEN, CHINA
China is one of the most successful countries in terms of
leveraging economic zones to transform its economy.The
miracle of Shenzhen serves as beacon for other countries looking to attract FDI and boost economic growth.
AFP
REUTERS
The special economic zone in Shenzhen was established in 1980, along with three other economic zones:
Zhuhai, Shantou and Xiamen. Shenzhen, a fishing
village with about 30,000 inhabitants, was given the
most freedom to experiment with market-friendly
economic policies.
Strategically located across a river from Hong Kong,
Shenzhens business-friendly measures include an exemption from submitting tax revenues to the central
and provincial governments in the rst 10 years of operation and a xed 15% income tax rate applied to partly
foreign-owned enterprises as opposed to a 33% tax rate
in the rest of China and 17% in Hong Kong.
At the start, however, Shenzhen failed to attract investments from around the world. Unfamiliar with Chinas business culture,foreign companies were concerned
about wages and employment regulations and felt that
there was still too much red tape. Most of Shenzens
foreign investments came from neighbouring Hong
Kong and were directed towards its real estate assets.
In 1982, new regulations were implemented to reduce the red tape. These included guidelines for wages
as well as entry and exit procedures.This led to a surge
in condence and Shenzhen saw a sharp increase in FDI.
From 1980 to 1984, the average annual gross domestic
product (GDP) in China grew 10% per year. Shenzhen,
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I S K A N DA R M A L AY S I A S P EC I A L R E PORT
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REUTERS
Iskandar is the largest development project initiated by the federal and state governments in the region.
Like many successful special economic zones, it offers
excellent connectivity, with access to ve ports and
two international airports (one airport and two ports
of which are located in Singapore).
Established in 2006, Iskandar aims to be a strong
sustainable metropolis of international standing by
2025. Its goals include a total investment target of RM383
billion in 20 years and a per capita GDP of US$31,100
by that year. The Iskandar Regional Development
Authority (IRDA), the main facilitator, promoter and
planner of Iskandar, is expecting the population to
reach three million.
Iskandar offers a standard of living that is comparable to that of more developed nations but at a lower cost.
Companies are attracted to its educated, multi-lingual
and highly skilled workforce, business-friendly policies
and conducive business environment.
Iskandar is just over a decade old this year and has
undergone two phases of planned development under
the 20-year Comprehensive Development Plan launched
in 2006. During this time, the economic corridor has enjoyed a construction boom and a surge in FDI as local
and foreign property developers rushed in to capitalise
on its potential. Real estate development appears to be
its main activity instead of being complementary to
the industries identied by IRDA to drive the growth
of Iskandar.
Sentiment started changing in 2013 when the property market was affected by concerns of oversupply,
implementation of the Goods and Services Tax (GST),
cooling measures introduced by the government to stem
soaring property prices and slowing economic growth.
Since then, the developers in Iskandar have started to
defer launches or change their approach.Many,however,
are optimistic about its outlook and say it will achieve
its goals despite the headwinds.
According to IRDA CEO Datuk Ismail Ibrahim,
everything is on track with Iskandar starting its third
phase of development early this year.This phase ensures
that all the planning strategies for the economic region
remain relevant to the residents of Iskandar and Johor.
Cumulative investments for Iskandar from 2006 to
June 30, 2016 totalled RM207.99 billion. Of this amount,
51% or RM106.43 billion represents investments that
have been realised. These are projects on the ground
that you can touch and see. Our investors believe in the
long-term potential of Iskandar, says Ismail.
it cooperates with Hong Kong. Now, Shenzhen is banking on R&D to grow its economy to RMB2.6 trillion by
2020. Last year, its GDP was RMB1.75 trillion. Shanghai
recorded a GDP of RMB2.5 trillion.
More than 4% of Shenzhens GDP has been channelled
into R&D initiatives since 2013. Its international patent
lings account for almost half of the countrys lings
and surpassed those by the UK and France last year.
ISKANDAR MALAYSIA
Iskandar Malaysia is located in the heart of Southeast
Asia, making it highly suitable for rapid growth. The
2,217 sq km economic zone at the southern tip of Peninsular Malaysia is three times larger than Singapore.
A clear link to
an economys
development
strategy
increases the
likelihood that a
special economic
zone will have
broad nationwide
impact. These
zones can be a
major engine
for national
development
through
backward and
forward linkages
with the rest of
the domestic
economy.
> Wei
Jebel Ali Free Zone (Jafza) is the rst and most successful free trade zone in the Middle East and North Africa.
It is strategically located in Jebel Ali town, just 35km
from Dubai and next to the Jebel Ali Port the largest
container port in the Middle East and the ninth largest in the world.
Occupying 48 sq km, Jafza sits between two of the
largest logistics entities in the region the Jebel Ali
Port and Al Maktoum International Airport. This free
trade zone started with just 19 companies in 1985 and
has since grown by leaps and bounds.
Now, it is home to more than 7,000 local and foreign
companies, including the regional headquarters of the
worlds largest conglomerates. Here, free zone companies enjoy a tax-free environment, 100% foreign ownership, 100% repatriation of capital and minimal cost
of investment.
Over 400 US companies are based in Jafza, including Fortune 500 companies such as HP, Dow Chemicals,
General Electric, Caterpillar, FedEx, Schlumberger, P&G
and Johnson & Johnson. It is also home to more than
620 automotive companies, including global names
such as Honda, Nissan, Ford, General Motors, Daimler & Chrysler, Caterpillar, Mobis and Schaeffler. Its
automotive sector was estimated to have generated
US$5 billion worth of trade last year.
Other key industries in Jafza are manufacturing,
trading, services and distribution. Companies operating in these industries have access to land that can
be leased and business facilities such as warehouses,
showrooms, retail outlets, factories and workshops.
Purpose-built residential buildings have been built
with sports facilities, restaurants and cafs to meet
the needs of residents and customers. The premise
is that those living in Jafza would not have to go to
Dubai for their needs.
Jafza sustains more than half of Dubais exports
and accounts for 20% of FDI into the UAE. According
to some estimates, it contributes as much as 25% to
Dubais GDP every year. By comparison, Dubai Airport
Free Zone contributes 2.27% annually. Jafza is said to
have created more than 100,000 jobs and accounts for
8.7% of the workers in Dubai. It is also a catalyst for
the development of logistics zones in the UAE such
as the Sharjah International Airport Free Zone, Dubai Airport Free Zone, Dubai Maritime City and Dubai
Logistics City.