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Malaysia’s IDR Project under the spotlight

Updated On: Jul 06, 2007

Malaysia’s Iskandar Development Region (IDR) project came under the spotlight this week with Malaysian politicians criticising Singapore’s Minister Mentor Lee Kuan Yew’s remarks that Singapore’s businessmen would not be welcomed in the same way as Hong Kong businessmen in Shenzhen.

Lee pointed to comments made by PAS and UMNO Johor politicians who warned that Singapore might have an ulterior motive in investing in Johor.

However, Lee concluded, “But we believe that, from a broader perspective, it is better for both countries that Malaysia benefits from Singapore's economic growth, and vice versa….. Hence Singaporesupports the IDR, on a win-win basis.”

Lee’s remarks were given prominence in the Malaysian media with responses from several local (Johor) and national politicians. Umno Youth chief Datuk Seri Hishammuddin Hussein said, “To accuse that we (Johor Umno leaders) do not welcome (Singapore's investment in WPI), I feel is purely his personal perception and his (Lee's) perception is influenced by history.”

Foreign Minister Syed Hamid responded similarly saying, “We want foreign investors in Iskandar. We acknowledge the need for foreign investment but we cannot give preference to any particular country.”

Deputy Prime Minister Datuk Seri Najib Tun Razak refuted Lee’s comments by pointing out that an assurance was given personally by the Johor Menteri Besar who is also the Johor Umno Liaison head, Datuk Abdul Ghani Othman, that Johor UMNO would support Singaporean investments. Najib pointed out, “I just spoke to Johor Menteri Besar Datuk Ghani and he said that Johor Umno fully supports Iskandar and will give its full co-operation to ensure its success….It's not true that Johor Umno is against it. I do not know how this came about as Abdul Ghani told me that they had indicated their support in two previous meetings. This, you must ask Lee Kuan Yew.”

To show that the IDR project has the highest political support (and therefore must succeed), Prime Minister Badawi has been visiting Johor regularly. He visited Johor again on 5th July to oversee the groundbreaking and naming ceremony of the Asia Petroleum Hub, an offshore oil storage and bunkering facility, but also taking the opportunity to make a sales pitch of the IDR to Chinese investors.  

A delegation of Chinese businessmen led by Yu Ping, the Vice-chairman of the China Council for the Promotion of International Trade is visiting Johor this week to find out about the IDR as well as to attend the Malaysia-China Business Council (MCBC) annual general meeting.  In a key-note speech at the meeting, Prime Minister Badawi called on Chinese businessmen to use the IDR as a base for the ASEAN market.  After the meeting, he also held an hour-long closed door meeting with the Chinese businessmen to understand their concerns and elaborate on how Malaysia is doing all it can to position itself as a premier investment destination in the region.

Interest from the Middle East on the IDR is also likely to increase (and investments facilitated) with opening of a branch of the world's biggest Islamic banking group, Al-Rajhi Bank in Johor. Its chief executive officer (CEO), Ahmed Rehman said “Al-Rajhi's presence in IDR will facilitate investors from Middle East as Arab investors are already familiar with our syariah banking products and procedures.”

However, Malaysia’s IDR project faces the prospect of increased competition from neighbouring countries particularly Indonesia. The publicity generated by the IDR has startled the Indonesians into moving ahead with its own much delayed project to convert the whole Bantam island into a free trade zone (FTZ) as well as expanding the special economic zones within the Riau Islands. If these Indonesian projects work out, they will in turn create competitive pressure on Malaysia.

Moreover, Malaysia’s own domestic policies might be a hindrance to more investment. For instance, Thierry Rommel, the European Commission’s envoy to Malaysia called Malaysia’s affirmative-action policy in favour of ethnic Malays, a form of trade protectionism. This sparked off a strong response from the Malaysian government. In contrast, even though the United States called for ‘more transparency’ in the bumiputra policy, it has been careful in not criticising the bumiputra policy. Even so, there is no denying that some relaxation of the policy is needed to secure more investment.  (6 July 2007)

Sources:

Abdullah makes IDR sales pitch to China investors (Straits Times, 6 July 2007)

Al-Rajhi aims to be gateway to Iskandar (Business Times [Malaysia], 5 July 2007)

RM1.3b petroleum facility on man-made island (New Straits Times, 5 July 2007)

Analysis Protectionism(ManilaBulletin, 4 July 2007

Malaysia's IDR A 'Win-Win' Arrangement For S'pore: MM Lee (Business Times Singapore2 July 2007)

Najib: Johor Umno Fully Backs Iskandar Project(New Straits Times, 2 July 2007)

M'sia Welcomes All Foreign Investors In IDR, Says Syed Hamid(Bernama, 1 July 2007)

Hishammuddin Hits Out At LKY For Statement On WPI (Bernama, 1 July 2007)

Full Cooperation From Johor Umno For WPI, Says Najib(Bernama, 1 July 2007)

Johor's IDR Puts Pressure on S'pore(Straits Times, 1 July 2007)

54-Member China Trade Team Heads For Johor (Bernama, 30 June 2007)