Strategic Review

Inclusive Prosperity and a Sustainable Future


Realising the Iskandar Malaysia Vision


Nor Mohamed Yakcop
Khazanah Nasional Berhad (Khazanah)

Welcome to the first International Investor: Iskandar Malaysia Thought Leadership Roundtable, which has been convened to mark the ten-year anniversary of the development project. While a great deal has been achieved over the past decade, much remains to be done and this ten-year milestone provides a perfect point at which to pause and reassess the progress made and the lessons learned.

With that in mind, the main objective of this meeting is twofold: to establish consensus on industry-wide priorities and actions in support of existing strategic plans and common goals; and to jointly identify ways in which all stakeholders can bolster sustainable growth and talent development to 2025, and beyond.

The first part of the debate will focus on defining the position and role of Iskandar Malaysia in the global economy. Let’s get the ball rolling with a brief overview of the economic region, from its origins, to its value proposition and perspectives on how to consolidate progress moving forward. Ismail, I would like to start with you.

Ismail Ibrahim
Iskandar Regional Development Authority (IRDA)

Iskandar Malaysia was initially conceived as the South Johor Economic Region, as part of a wider plan devised by former Prime Minister Abdullah Ahmad Badawi to develop five regional economic corridors under the Ninth Malaysia Plan (2006-2010). The goal was to promote balanced regional development and accelerate growth in these five geographic areas.

Under the 2010 Economic Transformation Programme, which aims to ensure the country reaches developed-nation status by 2020, Iskandar Malaysia was identified as a key driver of future growth. Consequently, it was envisioned to become a high-income economic corridor to provide impetus to this wider national goal.

In terms of where Iskandar Malaysia stands at the ten-year mark, much of the focus since 2006 has been on attracting foreign and domestic investment. However, state and federal authorities have also prioritised the generation of sustainable wealth from within, in order to ensure inclusive development for all inhabitants of the economic region, not just the few.

Clearly, investment and inclusiveness are interlinked. For example, the development of the economic region’s nine promoted economic sectors is helping to create distinct clusters that are, in turn, giving rise to new employment opportunities for local people. Furthermore, this is generating an improved quality of life by enriching economic as well as physical and mental wellbeing opportunities for everyone in the economic region.

The idea is that dialogues, such as this roundtable, will help to facilitate the consolidation of IRDA’s efforts in this direction by enabling thought leaders to identify common priorities and put them into practice going forward.

Azman Mokhtar
Khazanah

One of the priorities of the Ninth Malaysia Plan was for the private sector to take the lead in the development of the five regional corridors mentioned by Ismail. In particular, emphasis was given to government-linked companies (GLCs), as part of the efforts to overcome traditional reliance on conventional command and control structures of the State. Accordingly, the government entrusted Khazanah to drive the development of what was to become Iskandar Malaysia, together with IRDA, while other selected GLCs were tasked with performing similar functions in the four remaining corridors.

The initial brief was to position Iskandar Malaysia as a strong and sustainable metropolis of international standing and this remains the mission at its ten-year anniversary. The vision was based on three key tenets: wealth generation, wealth sharing and inclusiveness, plus ensuring sustainability via resource optimisation.

Over the course of the first ten years, Iskandar Malaysia has successfully withstood significant global changes, including decreased investment following the 2008 Financial Crisis and slow growth in China and India. This robustness has been a critical factor in the impressive growth achieved to date in relation to initial investment targets, catalytic developments and social endeavours. Despite ongoing challenges, the outlook remains promising and Khazanah is confident that Iskandar Malaysia will continue to meet its goals and targets over the next ten years.

Shahrull Allam Shah Abdul Halim
Johor Port

From the perspective of logistics services and related areas, Iskandar Malaysia has made steady progress during its first ten years. However, greater advancements are required over the next decade if this sector is to maximise its potential by 2025.

For example, Azman mentioned China and India and it is certain that these two markets present a number of opportunities for Malaysia. For example, the Chinese are actively seeking new maritime routes for the movement of their goods and this includes a desire to expand their strategic landing points in Malaysia. As a consequence, a comprehensive plan of action is needed to ensure that the economic region continues to grow and attract additional investment in the logistics sector, not only from China, but also other countries. It is essential that part of this plan focuses specifically on the continued development of Johor Port, in line with the wider goal to boost wealth generation and inclusivity in Iskandar Malaysia and rival Singapore in terms of logistical infrastructure expansion.

Khairil Anwar Ahmad
Iskandar Investment Bhd (IIB)

I see two notable achievements of Iskandar Malaysia over the last ten years. The first has been the joint implementation of what was, in 2006, a highly ambitious development initiative. The coming together of different parties, including the federal government, the Johor state government, His Royal Highness The Sultan of Johor and a number of private and local stakeholders, can serve as an edifying example to other regions that plan to undertake something similar. Significantly, the maintenance of open channels of communication, such as this roundtable event for example, has been a key contributor to this success. In fact, I contend that the public-private partnership (PPP) model adopted could be used as a case study for business schools as an example of successful stakeholder management in action.

The second achievement that will contribute to the long-term success of the economic region is the focus on nurturing talent. Initially, it was necessary to bring in talent from further afield, including Kuala Lumpur, in order to provide professional and technical expertise to the Iskandar Malaysia initiative. However, the presence of prominent universities such as Universiti Teknologi Malaysia and, subsequently in 2012 onwards, the various Institutions at EduCity, has resulted in the creation of a deep and expanding local talent pool. The creation of this local talent cannot be overestimated in terms of ensuring the sustainability of the entire project; it is simply unfeasible to bring people in from the outside, whether Kuala Lumpur or further afield, on a continual basis. Thus, efforts to continue to nurture talent in this way are something that must be prioritised.

Prof. Tony Downes
University of Reading Malaysia (UoRM)

The first reason for the success of Iskandar Malaysia to date has been the people involved. Generally, individuals who choose to become part of a large-scale project such as this have two traits in common: they are optimists and they are not unduly risk averse. From my experience, start-ups and successful businesses need optimists at the helm, in order to take the necessary risks. This is precisely what has happened with Iskandar Malaysia.

Second, the bilateral relationship with Singapore has been, and will continue to be, crucial, although it needs to be clarified somewhat, in terms of business, economics and other respects. There are a number of issues that remain outstanding, particularly the need to improve the negative perception of the economic region in Singapore and, specifically, about Johor Bahru. This kind of perception is incredibly detrimental since it indirectly informs a range of opinions about the relationship from the Singapore side by portraying Johor in an inaccurate light.

Third, to follow up on the point made by Azman about the private sector driving Iskandar Malaysia, it is vital to find ways of making market forces work if this approach is to be successful in the long term. This requires collaboration with the government in thinking about how market forces operate. This will help to avoid a situation in which, for example, one part of the government is trying to use market forces to boost development via the encouragement of inward investment, while a second branch is focusing on tighter regulations and closed markets.

Sarena Cheah
Sunway Group

From a property development standpoint, Sunway Group became part of Iskandar Malaysia in 2011 when it entered into a joint venture with Medini Iskandar Malaysia to oversee the construction of the Sunway Iskandar township development. One of the crucial factors leading to our initial involvement was the potential shown by Iskandar Malaysia, in particular, the prospect of developing a township of international standing at the heart of one of the country’s largest economic corridors.

Sunway continues to see the huge potential of this economic region moving forward, which is why we are placing a sharp focus on the Sunway Iskandar initiative, having entered into a further joint venture with Khazanah and Iskandar Investment Berhad to that end. This takes the total land area under development by Sunway to 1,800 acres; testament to our belief in the continuing promise shown by Iskandar Malaysia.

In terms of consolidating the success of Iskandar Malaysia moving forward, I would like to raise a number of points. First, to pick up from what Tony said about image perception, it is essential that all stakeholders identify ways to understand and rectify the negative light in which the Johor region is seen in Singapore. Second, on talent development, Sunway has experienced difficulties in attracting human capital to the economic for a number of reasons, including the Johor-attractiveness factor. As Khairil commented, amplifying the talent pool in Iskandar Malaysia is one of the most pressing challenges to 2025.

In addition, in order to develop Iskandar Malaysia into a township of international standing, we expect to see more catalytic project developments in the next ten years; from housing, to schools, to entertainment destinations, such as theme parks. It is important to note that these types of developments depend on a positive economic performance at the national level. Therefore, in agreement with previous remarks, State engagement of the private sector is crucial. This could include the introduction of certain new incentives, for example, additional exemptions for businesses and individuals from the entertainment tax, as defined under the Income Tax Act, as an incentive to boost tourism. Since tourism is a core sector under the Comprehensive Development Plan ii (CDPii) devised in 2014, it is crucial that this kind of policy shift is considered.

Prof. Dr Wahid bin Omar
Universiti Teknologi Malaysia (UTM)

As highlighted previously, the ten-year presence of Iskandar Malaysia in Johor has been notable, with significant outcomes. Nevertheless, very few people are probably aware of the achievements made. It is thus essential for stakeholders to continue communicating to the local community, especially in a more effective and widespread manner, the impact of the projects on their livelihoods, including the improved opportunities, rising income growth and enhanced socio-economic development. This process could be facilitated, for example, by conducting additional investigations, including more in-depth qualitative and quantitative analyses. Measuring the real impact of the large quantities of new investment and infrastructure development for local inhabitants is an integral part of consolidating the initiative as it moves forward.

At UTM, we work in close collaboration with IRDA in relation to research, consultation services, community engagement and human capital development in Iskandar Malaysia, and we are looking to expand alliances in these areas over the coming years. In particular, we have identified tremendous potential in the area of talent management, in which we operate both direct and indirect leadership and support roles, to ensure that future talent in the economic region continues to be vibrant and promising. This aspect, in conjunction with communicating the Iskandar Malaysia message, is a fundamental part of boosting the development of the economic region into its second ten-year period.

Michael Lake
Rhizophora Ventures

Growth in Iskandar Malaysia has been exponential since 2006. Nevertheless, it is important that new industries are developed as we move into the second half of the project lifecycle. This will involve job creation, which, in turn, is directly related to talent development.

Accordingly, the initial focus of Rhizophora Ventures was on attracting international production talent to Johor. However, it has been evident for the past few years that greater emphasis needs to be placed on the development of local skills. That is why Multimedia University (MMU) opened its third national campus in EduCity in January 2016. The Johor campus offers a cinematic arts degree course run in collaboration with the world-renowned film school, the School of Cinematic Arts at the University of Southern California (USC). This has resulted in increasing numbers of Johorian students signing up for courses at the MMU, with expectations that a job will be available at the end of their programme. Thus, it is vital that these jobs are actually created.

The overall aim of these kinds of initiatives is to reduce film studio dependency on international talent and foster the creation of local production and, in the long term, transform Johor into an entertainment hub in ASEAN. Given MMU’s collaborative relationship with USC, as well as the presence of Pinewood Iskandar Malaysia Studios and our growing experience at Rhizophora Ventures, the Johor creative arts industry is in a strong position and making solid progress towards that goal.

Akmal Ahmad
IIB

When IIB first became involved in the Iskandar Malaysia story in November 2006, the economic region was simply an idea and its success was based on selling a dream. Over the years, all relevant stakeholders have come together and turned that dream into a tangible reality, and that must not be forgotten moving forward.

Part of IIB’s mission is to ensure Iskandar Malaysia embodies an attractive investment destination with a focus on developing catalytic or high impact projects in the education, tourism and leisure, creative, and health and wellness sectors. An interrelated goal is to transform the economic region into a vibrant and liveable area in which a healthy population is fully engaged with a dynamic and sustainable ecosystem. Consequently, as we look ahead to 2025, it is time for stakeholders to consider building a new dream. To use an information technology metaphor, it is vital this new dream is based not on the hardware, which is largely already in place in terms of the large-scale infrastructure development; but rather on the software. This includes looking beyond job creations to encourage the growth of social enterprises and the emergence of communities in harmony with the environment.

Community initiatives, such as the recently initiated urban farm in southern Johor, which involves dozens of volunteers who grow and trade organic produce with local businesses, are helping to create a holistic community linked in a mutually supportive framework. This is precisely the type of scheme Iskandar Malaysia should focus on as we move forward. These communities help to engage people, promote social inclusiveness and encourage innovative and sustainable social enterprises. Creation of such communities also becomes a foundation on which to build distinct lifestyle options, which are invaluable in stimulating the local population and attracting increasing numbers of people to relocate to the area.

Christian Rojkjaer
IKEA Southeast Asia

The IKEA perspective of Iskandar Malaysia is very positive in terms of what has been achieved so far. One of the crucial factors in its success to date has been the clarity and transparency of decision-making. From our point of view, this has helped IKEA to understand what is required of us in relation to the logistics and regulations involved in opening a new store in Johor. In fact, it would be nice if the process were this straightforward everywhere!

For any new initiative or project in any country, attracting capital and investors is difficult, although it is always possible. Clearly, Iskandar Malaysia has been very successful in this regard and is set to experience a prosperous second ten-year period as a result. Nevertheless, in order for the economic region to truly succeed in the long term it is now vital that stakeholders switch their attention to focus on elements such as better living standards and quality of life.

Akmal mentioned seeking out a new dream or vision for Iskandar Malaysia, and this is important. It is essential that any such move places people at the heart of its strategy; a vibrant and diversified society will help to generate long-term, sustainable success because people will choose to either return home to southern Johor or to make it their new home, precisely due to the benefits provided by this type of environment.

Furthermore, it is important for this new vision to emphasise a diverse range of issues, I call them hygiene and attractiveness factors, related to safety concerns, to health and education opportunities, and transport links, including alternatives to car travel. This is now happening in Iskandar Malaysia, which is why, after buying a piece of land in the economic region many years ago, we will be opening our first store in Iskandar Malaysia in 2017 in Tebrau, Johor Bahru.

However, this is just the beginning and more can be done to boost efforts in this people-centric direction in order to genuinely entrench long-term sustainability, to 2025 and beyond.

Nor Mohamed Yakcop
Khazanah

The arrival of a global brand like IKEA helps to validate the success and future prospects of Iskandar Malaysia. It is a very welcome development.

One aspect that has not been mentioned in great detail is the relationship with Singapore. One of the original ‘selling points’ of the Iskandar Malaysia project was its geographical proximity to that global hub, with emphasis placed on how the economic region could maximise opportunities from the price differential between the two. With that in mind, in what ways can this relationship be strengthened and what examples are there from other geographical regions that may be of use in this regard?

Christian Rojkjaer
IKEA Southeast Asia

One possible example is the model created between Copenhagen in Denmark and Malmo in Sweden, whereby the Oresund Bridge and tunnel that connect the Oresund Straight unify the two cities. The success of this relationship is due to the respective authorities’ identification of ways to reduce distance, break down existing barriers and increase the critical mass needed to forge a joint project between two separate administrative regions.

Moreover, the kind of thinking prevalent in bilateral relations between Denmark and Sweden go beyond just shared transportation infrastructure. They include not only the movement of goods and people, in line with European Union regulations, but also the deeper integration of their respective tax systems, in an effort to increase and facilitate cross-border employment. Similar moves by authorities in Malaysia and Singapore have the potential to be a tremendous fillip for the development of Iskandar Malaysia.

Azman Mokhtar
Khazanah

Another example is the Shenzhen-Hong Kong story. Although I am not too keen on the analogy between Iskandar Malaysia and Shenzhen, the latter has clearly benefitted from close proximity and open economic policies with an advanced economy. Instead, I would prefer to highlight the parallels between Iskandar Malaysia and the ‘historical Shenzhen’, which was able to produce a demonstrative effect for China as a whole to make the possibilities of reform and development a reality.

In that regard, I believe that we must position Iskandar Malaysia in terms of what it can do for Malaysia and how its success can demonstrate what this country can achieve. This involves finding the right balance between business and social development and showing the numerous advantages of collaboration.

Anwar Syahrin Abdul Ajib
UEM Sunrise

In general terms, the UEM Sunrise perspective is to view the metaphorical Iskandar Malaysia glass as half full at the ten-year mark. For example, we have launched approximately 14,000 units to date and delivered approximately 10,000 keys: a combination of residential, commercial and mixed-use developments. Significantly, the period between 2006 and 2016 saw greater market willingness to purchase more expensive products. In fact, demand for these kinds of units in Johor has been high and top-end townships have been very successful.

Therefore, people have been willing to engage with the development project and spend more for a better quality of life. In terms of the original question about Singapore, a large number of purchases have come from property buyers in the city-state, and so the bilateral relationship is of particular interest to us. At the Iskandar Malaysia level, challenges still exist in this relationship, and frustrations are evident in terms of cross-border accessibility between the two. In fact, our findings show that potential customers have been dissuaded due to this issue.

I know from personal experience that it takes a long time to cross from Malaysia to Singapore via car. Similarly, ferry travel is limited between the two, although UEM Sunrise is playing its part with its catalytic development of Puteri Harbour International Ferry Terminal, which offers international ferry services to Singapore. Nevertheless, if authorities are serious about wanting to attract more Singaporeans to Iskandar Malaysia, for work or residential purposes, both national governments need to jointly identify ways to improve accessibility, especially in regard to bottlenecks that form on the causeways across the Straits of Johor, particularly on the Malaysian side.

If we are able to resolve the issue it will certainly help to boost property demand. It can also help to augment development in other industries, such as the increased investment arising from Singaporean companies relocating their production plants in Iskandar Malaysia.

Indeed, something similar is already happening in our 1,300-acre Southern Industrial and Logistics Clusters (SiLC) Phase 1 and Phase 2 projects, where foreign companies are purchasing land to construct their industrial premises in the economic region. The potential to attract Singaporean companies to industrial parks, such as SiLC, is tremendous, given its close proximity.

However, the ability to address the outstanding issues between the two countries in regard to accessibility, among others, is vital to future long-term growth.

Azman Mokhtar
Khazanah

Improving accessibility between Johor and Singapore is crucial and the key is to break the existing mould. There are a number of possibilities, from improving ferry services between the two countries to ‘outside the box’ alternatives, for instance, by introducing innovative schemes such as a car sharing service on either side of the Straits of Johor to help ease congestion on the two causeways linking Iskandar Malaysia and Singapore. In fact, devising more innovative ideas to overcome all existing challenges is something the stakeholders must bear in mind over the next ten-year period.