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South Johor Economic Region: Abdullah’s magic cure?

Updated On: Nov 07, 2006

As promised, following the recent weeks of renewed attacks from Mahathir, the Abdullah administration is battling back by focusing instead on rolling out Malaysia’s development agenda.

Prime Minister Abdullah Badawi on Saturday (4 November) officially launched the much-touted jewel of his Ninth Malaysia Plan (9MP), the South Johor Economic Region (SJER), now officially called the Iskandar Development Region, amidst glittering fanfare that was broadcast live on national television.

Launching this, a mega legacy-leaving project and Abdullah’s personal brainchild, he called the SJER “the single largest development project ever to be undertaken in the region”, adding that, “It is one of the most important and ambitious initiatives not only in the 9MP but also in the history of our development.”  That the project is being dubbed so is perhaps to counter accusations by Abdullah’s critics that he lacks big ideas and shies away from mega projects similar to the ones his predecessor spearheaded that pushed Malaysian economic growth during the past two decades.  If the SJER takes off, it is expected to boost Malaysia’s slowing economy and Abdullah’s political support.  

Malaysia’s intentions to turn sleepy Johor into a hub for business, tourism and education to complement and, eventually, rival Singapore, were first announced last year.  The US$105 billion blueprint aims to turn Johor and its surrounds into a prosperous Asian metropolis.  The area is planned to be nearly three times the size ofSingapore.  Under the masterplan, the SJER will be transformed into a logistical hub by leveraging the ports at Tanjung Pelepas, Johor Port and Senai Airport.  In all, four new growth sectors have been identified: Health services, educational services, financial services and ICT and creative industries.  The plan includes two designated free access zones (FAZ) that are expected to be an important magnet for businessmen and industrialists from Singapore.  According to the SJER’s Comprehensive Development Plan, the passport- free zones for foreigners are “based on the concept of providing a ‘seamless’ work and living environment between Johor and Singapore”. 

The SJER is expected to generate an average rate of growth of eight per cent for Johor and create some 800,000 jobs over 20 years.  To kick-start these and other initiatives, the Abdullah government has allocated RM4.3 billion for infrastructure development under the 9MP.  Government-linked entities such as Khazanah Nasional and the Employees’ Provident Fund (EPF) will invest an additional RM3.4 billion.

Government-linked The Star newspaper on Sunday (5 November) published a selection of comments from foreigners, mostly concluding that while the plan for the SJER is impressive, concrete execution will prove crucial.  It seems many in Singapore are adopting a wait-and-see attitude.  Indeed, Singapore’s Today newspaper essentially argued that Malaysia’s ambition to turn Johor into a modern metropolis is not a new one, but rather, an old idea that has so far seen only abandoned buildings, vestiges of an older, now abandoned project, marring the skyline and serving as a warning to investors that despite the big talk, other new projects in the state could suffer a similar fate.

Given Abdullah’s statement that US$13 billion in investment would be needed in the first five years from 2006 to 2010 to build roads and other infrastructure required to set the stage for an influx of private investment, an amount of which is expected to come largely from Singapore and its investors, the success of the development plan appears to hang much in the balance of nervous Singapore investors who have been bitten once before.  While the SJER blueprint acknowledgesSingapore's role in the plans, noting that “a principal strategic thrust is to complement and leverage on Singapore's strength”, “a lot depends on how Malaysia tackles the Singapore factor,” said Wan Abdullah Wan Ibrahim, one of the main developers involved in SJER projects.  He added that, “Somehow the two countries will have to learn to work together for mutual benefit.”

The New Straits Times however reported Khazanah as saying it had already received letters of intent or indications of interest to invest about RM10 billion to spearhead development over the next five years, including several mixed development projects involving partnerships between SJIC and foreign investors from the Middle East and Asia-Pacific.

Adding to the uncertainty however, Johor Sultan Iskandar Ibni Almarhum Sultan Ismail caused a stir during his address at the launch of the SJER project when he said Johor could only develop with the demolition of the Causeway to allow ships to pass.  Singapore’s Foreign Ministry described the Sultan’s remark as "curious" but said it did not believe the call represented the Malaysian government’s position.  Shortly after, Abdullah spoke to the Malaysian press from Islamabad, shrugging off the Sultan’s remarks, assuring that the Causeway would remain, and reaffirming that the government’s focus is on developing South Johor into a quality trade and investment centre. Deputy Prime Minister Najib further defended the decision to keep the Causeway saying that “we cannot do something unilaterally because we’re bound by international laws and the water supply agreement that we’ve signed with Singapore”.  He added that the Causeway was a symbol of good relations between Malaysia and Singapore.

Causeway aside, much still hangs in the balance for the success of Abdullah’s magic pill, the SJER, to shore up political support.

Sources:

The South will rise again: The making of a world-class metropolis (New Straits Times, 5 November 2006)

RM20b boost for Iskandar (New Straits Times, 5 November 2006)

Giant step to boost growth (The Star, 5 November 2006)

M'sia in $164b plan to transform Johor (The Straits Times/Reuters, 4 November 2006)

Hassle-free living zone in Johor (The Star, 5 November 2006)

Johor state mulling passport-free zone (Today/AFP, 6 November 2006)

Johor to open up passport-free zones for foreigners (The Straits Times, 6 November 2006)

Passport-free zones proposed for parts of Johor (The Straits Times/AFP/Reuters/New Straits Times, 4 November 2006)

What some foreigners say (The Star, 5 November 2006)

The hitch is in Johor's plan (Today/AFP, 6 November 2006)

$160b needed to turn Johor into a Metropolis (The Straits Times, 5 November 2006)

'Govt focused on developing south Johor' (New Straits Times, 6 November 2006)

Sultan’s Causeway remark causes a stir (The Star, 5 November 2006)

Causeway to stay, says Abdullah (The Star, 6 November 2006)

Najib defends decision to keep Causeway (The Straits Times, 7 November 2006)