Competition for foreign direct investment is heating up in the region as Malaysia’s special economic zone has entered the fray to draw in global investors.
Iskandar Malaysia, a national project in South Johor, at the southern tip of the Malaysian peninsula that is twice the size of Hong Kong and three times that of Singapore, wants to tap mainland Chinese investors in sectors ranging from tourism, education, financial services, logistics, health care, manufacturing and creative industries.
Ismail Ibrahim, chief executive of the Iskandar Regional Development Authority, told the South China Morning Post on a recent visit to Hong Kong that the mainland was the sixth-biggest source of foreign investment with 2.76 billion ringgit (HK$6.5 billion) in accumulated investments in the special economic zone.
The Iskandar project positions itself as a springboard for foreign investors in Asean countries – Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.
China, on the other hand, is creating regional powerhouses within its borders by planning free-trade zones in the Pearl River Delta in the south and Shanghai in the east, and is mulling about a dozen other zones in the western and northern parts of the country.
“We looked around special economic zones around the world such as in Shenzhen and Dubai, and found that not one shares the same problems and solutions,” Ibrahim said. “Iskandar serves as a platform to Asean countries.”
Since its inception in 2006, the Iskandar project has pulled in 133 billion ringgit in investments. Of this, the Malaysian federal government accounts for about 6 per cent and the rest is foreign capital led by Singapore, the United States, Spain and Japan. One of the project’s most popular attractions is the Legoland theme park, while inbound investments have prompted a booming property market in Iskandar.
Ibrahim said “it’s only a matter of time” before mainland China emerges as one of its top investors.
Economic ties between China and Malaysia have, however, come under strain as a result of the disappearance of the MH370 airliner. China’s Deputy Foreign Minister Xie Hangsheng has told Malaysia’s ambassador to Beijing, Iskandar Sarudin, that China wants the precise data that prompted Malaysian Prime Minister Najib Razak to announce last Monday that the flight had ended in the southern Indian Ocean.
“It (the jet tragedy) is difficult not only for Malaysia and China but for the rest of the world as well; it’s unexpected,” Ibrahim said. “We need to face it. For the longer-term benefits of the economies of both countries, this should bring us a lot more closer than pull us apart.”
Over the longer term, Ibrahim anticipates a broader integration and economic collaboration in the region based on an agreement called the Asean Economic Community taking effect next year. It aims to transform the region into a single market and production base.