Three times the size of neighbouring Singapore, Iskandar Malaysia is a monumental undertaking, and is transforming the southern region of Peninsular Malaysia. Take a closer look at this ambitious project.
In its July 2012 edition, Time magazine ran an article on Iskandar Malaysia that, amongst other things, called it “one of the most ambitious development projects in the world.”
Time magazine’s assertion is backed by the prestigious FIABCI Prix d’Excellence Award for Best Master Plan (2012), an award which went to Nusajaya, one of the five key nodes in Iskandar Malaysia.
What is Iskandar?
Iskandar Malaysia is a planned, mixed development project in a sprawling area three times the size of Singapore, and in the words of Prime Minister Najib Tun Razak, aims at “having three million people, 1.46 million jobs, cumulative investments of RM383 billion over 20 years, and a gross domestic product of US$93.3 billion” by 2025.
It is carved out in the area of Southern Johor state and encompasses five key nodes:
Flagship A – Johor Bahru
Flagship B – Nusajaya
Flagship C – Western Gate Development
Flagship D – Eastern Gate Development
Flagship E – Senai – Skudai
Since its inception in 2006, Iskandar Malaysia has attracted investment commitments of RM129.42 billion. Already, 44% of this committed investment has been realized.
Depending on who you talk to in Malaysia, you may be told that Iskandar Malaysia is the finest gift imaginable to the local property market or just another over-hyped fad that will fade away soon. Put your finger on the pulse of Iskandar Malaysia, though, and you’ll find that the signs favour the former opinion.
Let’s take a look at the signs.
Strong Government Backing
As recently as early December 2013, Prime Minister Najib Tun Razak reiterated the Malaysian government’s unwavering commitment towards Iskandar Malaysia. The government of Malaysia has been very sincere to this effect since the idea for this southern economic corridor was first introduced under the 9th Malaysia Plan.
Since then the government has been promoting Iskandar Malaysia quite aggressively and has initiated concrete bi-lateral initiatives with Singapore to ensure Iskandar’s success.
Of the total RM129.42 billion in investment commitments received thus far, 6.42%, or RM8.31 billion, is government spending. Roughly 35% is from foreign investment.
The government also founded the Iskandar Regional Development Authority (IRDA) to oversee the development of Iskandar Malaysia with no less than the Prime Minister of Malaysia himself as co-chairman. Government incentives like special tax rebates and government-backed initiatives like the High Speed Rail Link are further testament to the strong commitment from the Malaysian government.
In five years, Iskandar Malaysia has realized RM57 billion in investments or nearly 15% of its 2025 target. Current total investment commitments stand at 34% of the 2025 target. At this rate, reaching the 2025 target appears to be achievable.
The High Speed Rail Link
In February of this year, Prime Minister Najib and Singapore’s Prime Minister Lee Hsien Loong jointly announced the Malaysia–Singapore High Speed Rail Link (HSR). This is a government-to-government initiative that has the support of top leadership in both respective countries.
The travel time between Singapore to Kuala Lumpur is expected to take 55 minutes via the HSR. Prime Minister Lee called the HSR a “game changer” and he was not kidding. The first phase of this HSR is expected to be between Nusajaya and Singapore. This speedy journey tears down the existing time and space barriers between Singapore, Iskandar, and Kuala Lumpur. Imagine people moving at speeds of 500kph between Singapore and Kuala Lumpur. Iskandar will be just a suburb away from the Kuala Lumpur CBD, like Shah Alam or Subang Jaya today.
Some people have argued that the cost of travel will be prohibitive. Perhaps initially, but over time, like air travel in the past, costs are expected to come down.
Iskandar’s first theme park, Legoland Malaysia
Upturn in the Property Market
Until 2008, the property market in Johor Bahru was struggling to keep up with the rest of Malaysia’s fast-developing metropolises, namely the Klang Valley and Penang Island.
According to Ho Chin Soon’s research sourced from the Department of Valuation and Property Services, Johor had the slowest compound annuual growth between 1990-2012 at 3.06% when compared to KL (6.15%), Selangor (4.91%), Penang (5.28%), Sabah (5.78%), and Sarawak (4.25%).
In fact, some areas within the Johor Bahru city and suburban areas recorded a decline. According to the latest quarterly report on Iskandar Malaysia, two-storey terrace houses in Johor Bahru dropped by 6 to 19% between 2005-2008. A very unimpressive record at a time when prices in the rest of the metropolises were recording good growth.
However, all that is changing now… dramatically. Southern Johor, where the Iskandar Masterplan is located, is experiencing an unprecedented reversal with capital appreciations as high as 160% in 2011. Between 2008 and 2011, some developments in Nusajaya saw capital appreciations of 50%-60%.
This growth is driven by strong fundamentals. Firstly, Iskandar Malaysia has a comprehensive blueprint that spells out everything including infrastructure, market composition, economic activity, and leisure. Almost nothing will be developed by chance. Everything follows a systematic development plan that will make Iskandar Malaysia a haven for industry, commerce, and living.
Secondly, the Iskandar area has been recording one of the highest population growth rates, considerably above the national average, in the last 30 years.
Thirdly, as the borders between Singapore and Iskandar Malaysia become increasingly more seamless, more and more Singaporeans will look to Iskandar Malaysia. This fact will be further fuelled by exceptionally higher property prices in Singapore.
Finally, the number of jobs this mammoth development expects to create is huge – 1.46 million jobs by 2025. The increase in demand for housing as more new jobs are created in Iskandar is unmistakable.
World Class Facilities and Tourism Iskandar
Malaysia boasts a host of facilities with local and international appeal, some completed and others in the pipeline. One current favourite (including, apparently, Prime Minister Najib Tun Razak’s) is Legoland.
Other theme parks are slated for development, too. In a recent speech, Najib pointed out that Legoland has attracted 2 million visitors since its opening last year, and since opening in June, the Traders Hotel and Puteri Harbour Indoor Theme Park have attracted over 90,000 visitors.
In addition to this, consider the following:
•Iskandar Financial District in Medini, the largest single urban development to date in Malaysia;
• EduCity, a 305-acre education hub comprising world-class universities, higher institutes of learning, and R&D facilities;
• Afiat Health Park, dedicated to modern, traditional, and complementary medicine and wellness;
• Port of Tanjung Pelepas, a world-class port facility;
• Asia Pacific Trade & Expo City, which will be the world’s largest “round the year trade and distribution of massconsumer products directly sourced from manufacturers direct to buyers and retailers, for distribution of goods from the region particularly from China, Taiwan, Korea, India, and ASEAN countries” (Iskandar Malaysia Website, www.iskandarmalaysia.com.my);
• Motorsport City, which will facilitate the motoring industry and is expected to become “Asia’s Nürburgring ”
A Final Word
Many multinational corporations, as well as local and foreign individual billionaires, have put their seal of approval on Iskandar Malaysia via huge sums of investment dollars.
The area also has the right mix of key economic inputs, which include availability of a large and cheap land mass, relatively cheap labour, and encouraging investment commitments from both local and foreign sources.
According to some reports, Iskandar Malaysia’s RM129.46 billion investment commitments are well above the critical mass required for its success. In its research report earlier this year, CIMB Bank described Iskandar Malaysia as “Malaysia’s Shenzen,” a positive reference to one of China’s most successful Special Economic Zones and financial centres.
Relatively low property prices in Iskandar and exceptional capital appreciations, if nothing else, are indications that the party has just started in this dynamic development on the southern shores (and beyond) of Malaysia.
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