Local firms move operations to Iskandar Malaysia to save cost

Published in Channelnewsasia on 24th September 2012

SINGAPORE: More than 3,500 Singapore businesses have set up shop across the causeway in Iskandar Malaysia over the past six years, with a cumulative investment of more than RM5 billion as at June 2012.

Iskandar Malaysia is a special economic zone in Johor, Malaysia that was launched in 2006. It covers an area of 2,217 square kilometers and is administered by the Iskandar Regional Development Authority, a Malaysian Federal government statutory body.

Over 70 per cent of the businesses are small and medium enterprises.

Fishing equipment supplier Hong Guan started operations in its Iskandar warehouse in May.

Twice as large as its warehouse in Singapore, Hong Guan's 14,800 square feet freehold space cost about S$900,000.

Its local warehouse will shut down next month.

Hong Guan's managing director, Lee Seng Shoy, said: "Singapore will always be our HQ and the brain centre but from a business point of view, we need to be competitive and cost is always a factor. We foresee Iskandar helping us contain our costs and that is something we're leveraging on so we hope that by moving to Iskandar on the logistics side, we are actually enjoying the best of both worlds."

Similarly, Global Capital & Development wants to replicate on a larger scale in Medini, a core development zone in the Iskandar Development Region.

Global Capital & Development, the developer of Medini, is supported by a consortium which includes the Khazanah-backed Iskandar Investment Berhad.

It hopes companies in Singapore and Medini can work together as a single entity to bid for projects.

Global Capital & Development's CEO, Keith Martin, said: "We have Pinewood Malaysia Studios, Medini Media Village and straightaway we went and spoke to the Media Development Authority of Singapore and Mediapolis in Singapore. If you now add up the sum of those parts, it's a much greater proposition. And within a one hour driving radius, we have everything we need to take a TV or film production from a draft script to a full finished product."

With increasing business activity in Iskandar, other firms are moving in with the aim of gaining first-mover advantage.

Shanker Iyer, Chairman, The Iyer Practice's chairman, Shanker Iyer, said: "We think it could be two or three years before this place really starts to get up and running. Initially our main activity would be to offshore some of our less important activities from Singapore to Iskandar. That is actually becoming a need now, because the rising cost of doing business in Singapore, the immigration challenges now, the reduction in S-passes - it's beginning to affect firms like us."

But most acknowledged that concerns remain, such as crime, and the lack of a critical mass of human capital and supporting businesses.
But the authorities are confident the situation will improve.

Iskandar Regional Development Authority's chief executive, Datuk Ismail Ibrahim, said: "As we have seen today, there has been increased bilateral ties between Malaysia and Singapore, and from which the greatest beneficiary is definitely going to be Iskandar Malaysia. We would like to create an environment where both Singapore and Iskandar will see themselves as one destination, not only for investment but for people to work as well as other offerings."

Into its sixth year of development, the Iskandar region in Johor, Malaysia has seen annual investment growth of 8 per cent with Singapore firms accounting for 5 per cent of total foreign investment.

- CNA/ck