EXCLUSIVE: Iskandar Malaysia is often considered to be a love-hate topic. Naysayers will predict its doom at every whiff of bad news while stakeholders remain committed towards the vision of an international metropolis. After a slew of bad news, the question on the stakeholders’ (and fence-sitters) mind is, “So what’s next?”
One way to predict what will happen next is to look at key economic indicators. A revised 2015 budget places Malaysia’s GDP growth forecast at between 4.5% percent and 5.5 percent. This is based on a revised oil price assumption of US$55 per barrel. Interestingly, Malaysia was named by Fortune Magazine in February this year as one of the seven emerging markets worth putting your money in.
The Pengerang Integrated Complex in Johor will proceed as planned despite the oil rout. This will be a major catalytic project that will spur Iskandar Malaysia’s growth. At the peak of its construction, the project is expected to have a workforce of 70,000 people.
Johor retained its top position as the most preferred investment destination in the country in the manufacturing sector. Johor received 179 projects with investments worth around RM21.2 billion. This exceeded the previous year’s figure of RM14 billion.
Malaysia retained its third position (just behind India and China) in the 2014 A.T. Kearney’s Global Services Location Index (GSLI). The GSLI ranks the top countries worldwide as the best destinations for providing outsourcing activities, including IT services and support, contact centers and back-office support.
Business services will be a key focus in 2015. The idea is for companies to locate their back-office operations in Iskandar Malaysia while maintaining their front office operations in Singapore. This will ensure occupancy for commercial and residential developments.
Medini Iskandar Malaysia for example, has attracted global players like ICT solutions provider, Huawei and growth consulting firm, Frost & Sullivan. The Central Business District (CBD) is slowly taking shape in Medini. The latest addition is Medini 7, a 140,000 sq ft building that has been fully taken up and soon to be operational. It has a tenant mix of companies in the business services and technology sector.
The upcoming Medini 9, a 24-storey twin office towers will be designated as a MSC Malaysia Cybercentre Building. MSC Malaysia is a national initiative to support the growth of ICT and ICT-enabled industries in Malaysia. This will facilitate the clustering of technology companies in Medini. Currently, the only designated building in Iskandar Malaysia is Menara MSC Cyberport in Johor Bahru.
Another important indicator for Iskandar Malaysia is the prevailing sentiment. Most property buyers are adopting a wait-and-see approach. Major announcements that are expected to rekindle interest in the property market is the Kuala Lumpur-Singapore high speed rail (HSR) and the Rapid Transit System (RTS) linking Johor Bahru and Singapore’s Thompson-East Coast Line (TEL).
Singapore is expected to announce their HSR terminus this year. The three shortlisted sites are Tuas West, Jurong East and the city centre. The HSR will have a transit station at Nusajaya, Iskandar Malaysia. On the RTS Link, the second phase of the Joint Engineering Study will begin after the terminus location in Johor Bahru is determined.
Other major announcements expected this year include development plans in Gerbang Nusajaya by UEM Sunrise, the proposed world-class theme park in Sunway Iskandar and the launch of Vantage Bay which will include the Thompson Iskandar medical hub. These projects are expected to inject excitement back into the market.
In order for Iskandar Malaysia to continue to flourish, there are critical issues that need to be resolved such as traffic congestion at the border and the mismatch in housing supply. If unresolved, it could choke the flow of investment into Iskandar Malaysia.
In order to facilitate the cross-border movement of people, the quota for cross-border bus services has recently been increased from 16 to 20 services with a review of new landing points. To increase Singapore users’ take-up rate for the new Malaysian Automated Clearance System (MACS) which was developed for fast-track immigration clearance, a new MACS application centre was established in January 2015.
There has been a freeze on new applications to build serviced apartments in Johor. While this is welcomed news, how developers restrategise their product offering is crucial. All eyes will be on the affordable housing segment this year. On the other end of the market, the Chinese developers need to play an important role in attracting new groups of property buyers to their high-end residential projects. In other words, they have to enlarge the market pie and not fight over the existing market pie.
IRDA (Iskandar Regional Development Authority) Chief Executive Officer Datuk Ismail Ibrahim said in a recent interview: “Moving forward, the most important agenda for Iskandar Malaysia would be to ensure that the economic growth in Iskandar Malaysia is sustainable. This is not limited to just ensuring a steady flow of new investments into the economic region, but more critical is the development of an ecosystem that allows businesses to grow and prosper, communities to participate in and benefit from the progress without causing damage to the natural environment.”
Iskandar Malaysia is still fundamentally strong as an investment destination. At a strategic location with proximity to Singapore, it remains a viable option for many MNCs as a gateway to ASEAN. The working population here is set to increase over time. While there are critical issues to resolve in the short-term, the long-term prospects of Iskandar Malaysia remains bright.
This article was written by David Chong, the founder of InsideIskandar.my, an online magazine which helps investors navigate the property maze of Iskandar Malaysia. Andrew Batt, International Group Editor of PropertyGuru Group, edited this piece. To contact him about this or other stories email andrew@propertyguru.com.sg