Sunday 28 October 2012

Interest in Iskandar grows

S'pore firms form majority setting up factories in Malaysian economic zone
The Straits Times, 27 Oct 2012

SHARES of Malaysian builder UEM Land have gained about 15 per cent in the past week after the company announced a joint venture with Ascendas Land International on a $1.5 billion project in Iskandar Malaysia.

The two announced last week that they will develop a 210ha site within the economic region to cater to businesses in electronics, pharmaceuticals, medical devices, food processing and precision engineering.

The proposed tech park will be located in Nusajaya and will be the nearest industrial site to the Second Link checkpoint. UEM Land shares closed at RM2.13 (86 Singapore cents) on Thursday.

The proposed venture is just the latest sign of increasing interest from Singapore in Iskandar with its low-cost freehold land and ready supply of workers.

A report by Reuters last week quoted Tastyfood Industries, the maker of Mr Cafe instant coffee and Vitamax cereal, which has plans to expand to meet demand in Africa and the Middle East.

It will close its Singapore plant next year and move to Iskandar.

"New-generation Singaporeans do not like production positions as they are more educated now," Tastyfood founder and managing director Joseph Lim told Reuters.

"It's not easy to manage a manufacturing company in Singapore unless you are in high-tech, high value-added businesses like pharmaceuticals."

Tastyfood's marketing and product development operations will be kept in Singapore.

According to the Iskandar Regional Development Authority (IRDA), Singapore firms form the majority of those setting up factories in Iskandar.

They account for around 15 per cent of the RM32.7 billion committed as of June.

Firms from Spain, Japan, the Netherlands and Germany are other large manufacturers in the zone while those from the United Arab Emirates are involved in housing and other property projects.

Mr Lim could have opted to expand his Xiamen plant but Iskandar was attractive due to its proximity to Singapore.

The new factory will be only a 30-minute drive away.

Awfully Chocolate is another example of a company that has moved some operations across the Causeway.

It makes some of the items for the 10 stores in Singapore in Malaysia.

The Association of Small and Medium Enterprises recently surveyed members to gauge their interest in Iskandar and found that several had concerns about crime and the potential for costs to rise rapidly due to the zone's proximity to Singapore.

However, Iskandar's pluses are that electricity costs are about half of Singapore's rates.

Tastyfood paid RM6.5 million for its freehold site in Iskandar that is the size of two football fields - about US$15 (S$18.40) per sq ft.

In Singapore, depending on the lease, recent land tenders have seen industrial land go at around $100 psf per plot ratio.

Interest in Iskandar has been increasing since the Singapore and Malaysia governments inked a landmark agreement in 2010 that covered a variety of areas.

There have been reports of more Singaporeans buying homes in Iskandar.

Just last month, Raffles Education inked a deal with Iskandar Investment to buy a land plot for Raffles American School as it expands into pre-tertiary education.

Raffles Education is paying about RM75 million for the 18.5ha land in EduCity, in Iskandar's Nusajaya area.

The many changes "gave us the extra encouragement", Reuters quoted businessman Ricky Tan, whose KinderWorld group is building a private school with boarding facilities in Iskandar.

IRDA head Ismail Ibrahim said the Singapore companies in Iskandar are mostly small and medium-sized enterprises, but he is confident the larger firms will follow.

"We have the space, we have the geographical position and we have all the necessary infrastructure," he said. "With the right signals from both governments, big players from Singapore will be definitely coming in."

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