Wednesday, September 30, 2009

Financial Times Article On Nusajaya

It is always interesting to see how foreign media view Malaysia. This is the latest article from the influential FT paper:

More than $13bn has been committed to an ambitious plan to create a metropolis at the southern tip of Malaysia three times the size of Singapore, says the chief executive of the state agency set up to drive the project.

Arlida Ariff, chief of Iskandar Investments, told the Financial Times in an interview that a further $2bn was likely to be committed in the next two years, including nearly $300m in retail investment expected to be announced over the next few months. Ms Ariff said the 2,217sq km project, launched in 2006 by Abdullah Badawi, former prime minister, was beginning to make “real progress” as contractors drove highways and other basic infrastructure through thousands of hectares of jungle and abandoned palm-oil plantations in the state of Johor.

In the long-run, the biggest single source of investment is likely to be Singapore, whose central business district is not much more than half an hour’s drive from Iskandar’s proposed financial district. The attraction for Singapore is the low cost of land, office space and housing, which are currently about 80 per cent cheaper in the Iskandar economic zone. Lee Hsien Loong, Singapore’s prime minister, has joined Najib Razak, his Malaysian counterpart, in backing the project.

However, a surge of Singapore investment could raise nationalist hackles in Malaysia, which has had a prickly relationship with the island state since the two split in 1965 after a brief union.

Mahathir Mohamad, prime minister of Malaysia for 22 years until 2001, last year dismissed Iskandar as little more than a platform for Singapore to extend its sovereignty into Malaysia, warning that Malays would be “driven to live at the edge of the forest”. Ms Ariff said such fears were overblown, pointing out that Singapore had always been the largest investor in Johor because of its physical proximity and requirements for crucial goods from the state, including food and water supplies.

Much of the investment Iskandar is seeking would help Singapore companies by allowing them to expand locally at low cost, she said, suggesting that the initial ambitions of the financial centre were limited largely to attracting back-office activities such as data processing centres.

“This means we can work in collaboration with Singapore rather than competiting for the same brands and the same products to come across [to Malaysia]. Some of this [fear of Singaporean involvement in Iskandar] is to do with the traditional rivalry. Singapore used to be part of Malaysia and it’s like watching your kid brother grow up and become more successful than you.”

The project has attracted a clutch of Middle Eastern investors including Mubadala Development, Abu Dhabi’s state investment vehicle; Kuwait Finance House and the Kuwaiti Bank. Other investors include Newcastle University of the UK, which is setting up a medical school, and UK-based Merlin Entertainments, which is building a $220m Legoland theme park.

Ms Ariff said several other investors were in negotiations, with three more university campuses dedicated to engineering, logistics and leisure industries likely to be announced before the end of the year. Investors are being offered a raft of incentives, including a 10-year corporate tax holiday and exemption from rules requiring local participation in foreign-owned projects. However, the project remains well short of the target of M$383bn over 20 years that will be needed to finance the planned doubling of the local population to 3m, a 1.5sq km financial district, eight university campuses, theme parks, hospitals, schools, retirement homes and a resort.

p/s photo: Olivia Ong

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