Just across the bridge from Singapore, a dynamic region of Malaysia is undergoing a transformation. Iskandar Malaysia is fast becoming a regional hub for manufacturing and service sectors and a destination where Malaysians, Singaporeans and expatriates are increasingly looking to invest, work, live and play.

At more than 2217 square kilometres, this special economic zone is three times the size of its neighbour Singapore and is at the heart of the Association of South-east Asian Nations market of nearly six billion people. It is spearheading the growth of the Malaysian economy and, despite the global economic crisis, Iskandar has already attracted a record FDI of $14.42bn since its inception just three years ago. This year alone, $2.76bn has been committed.

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Boyd McCleary, British High Commissioner to Malaysia says: “Iskandar is the most important development project for Malaysia – perhaps the most important for south-east Asia.”

Sustainable metropolis

Iskandar’s vision is to create a ‘sustainable metropolis of international standing.’ For investors, this means short-term ‘flippers’ need not apply. Iskandar is targeting long-term investors who will play a role in the region for the next 10 to 15 years or more.

“Iskandar has developed a long-term, holistic strategy that plays to its strengths and leverages its location next to Singapore and the Straits of Malacca – the world’s busiest shipping lane,” says Abdul Ghani Othman, chief minister of Johor and co-chairman of the board of the Iskandar Regional Development Authority (IRDA).

Pinpointing growth sectors

When Iskandar was first planned, the IRDA identified specific industry sectors for development. It has continued to focus on its existing strengths in logistics and manufacturing, while diversifying into services sectors such as education, health, tourism and creative and financial services.

Focusing on services sectors takes advantage of Iskandar’s proximity to Singapore and the potential spill-over from Singapore’s own service industries. This will reap rewards for Singapore too. For example, Iskandar’s planned financial district will specialise in Islamic finance and will enhance Singapore’s role as the fourth biggest financial centre in the world.

The strategy is working, with Iskandar attracting big brands to the region, ranging from Legoland to Maersk to the UK’s Marlborough College. The largest single foreign investment to date is a $1.5bn joint venture between Spain’s Acerinox and Japan’s Nisshin Steel to develop a stainless steel manufacturing plant that will produce one million tonnes of stainless steel a year. The largest real estate investment comes from a consortium of Gulf investors led by Abu Dhabi’s Mubadala, which has invested $1.2bn in a flagship mixed-use development called Medini.

Small and medium-sized enterprises (SMEs) are seeing the advantages as well, Singaporean SMEs have invested an estimated $140m and are moving their operations across the border, attracted by cost, space and labour advantages.

“We know of contract manufacturers who have based their operations in that vicinity and found it to be one of the most cost-effective places in the world to locate contract manufacturing,” says Manu Bhaskaran, an analyst with Centennial Asia Advisors in Singapore.

Proven success

Three years in, Iskandar Malaysia has a proven track record of delivery. More than 35% of investment to date has been spent on the ground, and catalyst projects such as Medini, Legoland, Acerinox, EduCity and Puteri Harbour Marina are being constructed or are already in place.

“We are well on track to creating a leading economic growth area, home to some three million people who will enjoy the highest standards of living in the region,” says Abdul Ghani Othman.