Plans for regional development are fundamental to Malaysia’s drive to become a high income economy by 2020 and the Government has invested heavily in the country’s five economic corridors. But it is private-sector investment, particularly foreign investment, that the corridors must attract to succeed in creating jobs, spurring business activities and improving the quality of life of the communities that live there.
Malaysia has established five economic corridors, each specialising in a particular area of economic activity in which it is intended to emerge as a regional and global hub.
Since 2006, the Government has spent £50 billion to get the corridors off the ground, and it is committed to substantial further investment under the 10th Malaysian Plan. Investment from the private sector – from Europe, the Middle East, Asia, the United States and Australia – has mostly been channelled into sectors such as energy supply, the paper and pulp industry, heavy industries like steel, metal, zinc and aluminium, and port operations, real estate, and housing and hotels.
All five of the corridors have been gearing up to meet their various short and long-term targets, according to Muhammed Kassim, group chairman of the Corridor Development Corporation, an investment promotion agency set up to complement the Government’s efforts to draw in private capital.
He says the primary aim of the corridors is to generate investment from private sector driven initiatives.
“All (the) corridors share one common goal: that is to contribute towards the growth of the Malaysian economy,” he explains. “Specifically, each is poised to become a platform to bring in more FDIs (foreign direct investments) and PFIs (private financing initiatives) – two significant generators that should propel the nation’s economic growth in the next 10 years.”
In a bid to further stimulate investment, the regional development authorities have recently been told to draw up “transformational programmes” to move development of the corridors and their associated major cities up a gear.
“It will take the development achieved to date to the next level to build out regional and global hubs in their economic areas of specialisation,” said the Government’s Performance Management and Delivery Unit (Pemandu) in a statement issued last month.
Iskandar Malaysia, at the southern tip of the country, was the first of the corridors to be established under the 9th Malaysia Plan in 2006,and is dedicated particularly to knowledge-intensive and service industries, as well as real estate.
This was followed by the manufacturing and industrial-oriented Northern Corridor, which includes the states of Penang, Perak, Kedah and Perlis, and was formed as a magnet to attract investment particularly into the electrical and electronic industries.
The Eastern Economic Corridor – the largest of the five, extending over half of the Malaysian Peninsula and including northeast states of Kelantan, Terengganu, Pahang and northern Johor – was established to attract oil and gas companies and petrochemical industries.
The Sabah Corridor is being promoted as a hub for agriculture and tourism, while the focus of the Sarawak Corridor of Renewable Energy is reflected in its name.
“We have purposely built the corridors to concentrate and champion industry sectors for which certain regions already possess a corresponding strength,” explains Datuk Jalilah Baba, director general of the Malaysian Investment Development Authority (MIDA), which now centralises the approval of all investments in the corridors through a National Committee on Investment (NCI) established last year.
“Previously, corridors could approve investment on their own,” says Mrs Jalilah. “However, as of May last year, all these projects have to be approved by the NCI. The corridors can go out and negotiate on their own, but the final decision rests with us.”
Having started at different times, the corridors are at varying stages in their development. As the first to be set up, Iskandar Malaysia leads the others in attracting investment. By the first quarter of this year, the corridor had attracted cumulative investments totalling almost RM72.5 billion (around £15 billion) since 2006.
“This year is crucial for us,” says Ismail bin Ibrahim, chief executive of the Iskandar Regional Development Authority. “This is when people will begin to see what the buzz is all about. We need to show that we mean business.”
“Five years ago, we had nothing to show – it was all theory,” he adds. “Now, it is a different story. There is tangible proof that we have aligned ourselves towards the country’s overall economic development plan.”
He says 2012 will be the tipping point. “By then, several of our strategic projects will already be starting to deliver.”
Iskandar Malaysia’s gross domestic product is forecast to rise to £58.5 billion by 2025, from £12.5 billion in 2005. The population is expected to increase to three million from 1.4 million.
One of the corridor’s strongest advantages is its proximity to Singapore, which allows the two areas to complement each other. In terms of the cost of doing business, Iskandar Malaysia is three times as large as the republic, giving it ample space for businesses to expand. Business costs are much lower too and Singaporean firms have been showing an interest in relocating there.
Iskandar Malaysia’s strategic location is another strong selling point. “It allows us to serve a population between 600 million to 800 million,” says Mr Ismail. “We are looking beyond Singapore and our other neighbours within the ASEAN region. Iskandar is within reach of the global market, especially the rising economies of China, India and even Indonesia to a certain extent.”
This is combined with excellent transportation links. “You can get to us by land, sea, rail and air; we have three ports and an airport,” he adds. “Iskandar’s strategic location, combined with higher connectivity, gives it the kind of catchment that sets it apart from the rest of the players within the region.”
An outstanding new feature of the corridor will be EduCity, an educational enclave that has already attracted education institutions from the UK. The University of Newcastle and Marlborough College have both set up campuses there and the Univer-sity of Southampton will follow next year. The Management Develop-ment Institute of Singa-pore and the Netherlands Maritime Institute of Technology are also on site.
“In terms of sectors that I would highlight for British investors, one would be education, either at secondary or university level,” says Mr Ismail. “They can also look into higher education and education in specialised skills through training centres. This is an area where we strongly feel that UK investors should participate further.”
Prominent among British investors in the corridor is Pinewood Studios, which will be investing £81.8 million in a 32-acre studio project up to 2013 that is expected to generate a profit of £189 million over a period of eight years.
Legoland is building a 70-acre theme park – its first in Asia – at Nusajaya, Johor, and expects to attract around 1.5 million visitors annually once it is completed towards the end of next year. Up to four million visitors are expected to shop at the soon-to-be-completed Johor Premium Outlet during its first year of operations.
The maturity date for development of the Iskandar Malaysia corridor is 2025. “At that point, we should be able to position it as a strong and sustainable metropolis of international standing,” says Mr Ismail. “That is our vision.”
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