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Iskandar Malaysia, (Part 1- Iskandar Development Region)

The 2,217 sq km Iskandar Development Region or IDR, about 48 times that of Putrajaya (46.19 sq km) and about 3 times the size of Singapore (739 sq km), was launched on 4th November 2006. Recently the Prime Minister Datuk Seri Abdullah Ahmad Badawi has launched a book detailing the incentive packages for the IDR. The incentives include the following:

  • a 10-year income tax exemption on income from the disposal of any right in or over land within the approved node,

  • income tax exemption up to 2020 on income from rental or sale of buildings within the node,

  • tax exemption on payments made to non-residents for services, interest and royalties up to 31st December 2015,

  • free access to human capital for certain qualified investors.

The Prime Minister has also reassured that managers working with approved developers would be entitled to income tax exemption for management, supervisory and marketing services until 2020 and would also be given exemption from withholding tax on payments made to non-residents for services until 31st December 2015. He also mentioned a total of RM40billion will be needed over the next five years from 2007 to fully develop the IDR and to-date, the region has attracted RM4.1billion worth of investments. The planning for Node 1 is going on well and by Q1 2008, some of the projects can be implemented. Locals who are investing in 6 key service sectors, viz.,

  1. creative,

  2. educational,

  3. financial advisory and consulting,

  4. healthcare,

  5. logistics and

  6. tourism have been assured they will be permitted to enjoy incentive and support packages.

The government hopes to create 800,000 new jobs by 2025 (47,060 jobs per annum) through the development of the Iskandar Development Region. It was reported that in August 2007, three Middle Eastern consortiums, led by Kuwait Finance House, announced they would jointly develop a 902.4ha tract of land in the IDR with Mubadala Development Co and Millenium Development International Co for RM4.2billion. This involved the construction of three clusters, viz., a) a lifestyle & leisure cluster, b) a cultural cluster, and c) a financial district in Nusajaya which was earmarked as Node 1. Some of the prominent local developers involved in the development of the IDR include Central Malaysian Properties Sdn Bhd, UEM Land Bhd, Gamuda Bhd, SP Setia Bhd and Mah Sing Bhd.

When senior executives from an infrastructure and utilities group from the Middle East, Dubai World, visited South Johor during July, August and September 2007, they were convinced of the tremendous economic potential of the IDR (Iskandar Development Region) and were interested in that particular 2,255-acre landbank belonging to MMC Corp Bhd (Malaysia Mining Corporation) at Tanjung Bin as well as the 500 acres next to the port of Tanjung Pelepas (PTP) which had been earmarked for industrial development. It was reported that MMC was considering the possibility of having a joint-venture with Dubai World to develop these lands and an MOU was recently signed between MMC and Dubai World and the joint-venture partners are working on developing a maritime centre masterplan for the land that will comprise oil terminals, drydocks, shipyards, conventional cargo handling facilities, logistics parks and real estate development. This development will create a new petrochemical and maritime industry with an estimated gross development value of RM16.0billion, which MMC hopes will be the engine of growth for the South Johor region.

However, there are some pertinent issues to be addressed by the local authorities before the IDR can go off full-steam due to the existence of abandoned housing projects within the city centre of Johor Bahru as these are an eyesore to the IDR and on the government’s plan to develop the region into a world-class city. Based on a list provided to the Iskandar Regional Development Authority (IRDA) by the Johor Economic Planning Unit (JEPU) in early 2007, there are 17 abandoned projects in JB city centre, which make up Zone A of the IDR. Two projects have since been revived by private concerns, but the fate of the other 15 projects remains unclear.

These projects are located along major roads, within a 5km to 15km radius of the city centre. Almost 80% of these stalled projects were initially planned for retail, commercial and mixed development. They are located along Jalan Tampoi, Jalan Wong Ah Fook, Jalan Storey, Jalan Skudai, Jalan Harimau, Jalan Tun Abdul Razak, Jalan Rebong, Jalan Kuning, Jalan Kempas Baru, Jalan Langkasuka, Jalan Segget, Taman Suria, Taman Permas Jaya and Kg Dato Sulaiman Menteri. Some of these projects are abandoned at foundation levels, while others up to 80% completion.

The IRDA is currently working hard to find a solution to this abandoned project problem before the contracts for various projects in Node 1 of the IDR are tendered in Q1 2008. Node 1 is an area covering 2,230 acres in Nusajaya, between the new Johor State Administrative Centre and the 2nd Crossing to Singapore. According to IRDA vice-president Noor Azwa, several parties had expressed interest in taking over the abandoned projects, including foreign investors.

Information from the Economic Planning Unit (EPU) reveals that Kemayan City is the largest abandoned project in the JB city centre. The project, which started work in the mid 1990s, sits on a 12.4 acre site alongside Jalan Skudai, which has since been abandoned. When the main block was 90% complete in the mid 1990s, work on Kemayan City suddenly stopped. However, two other projects which suffered the same fate as Kemayan City, Danga City Mall (formerly Best World Plaza) and Pandan City (formerly Pandan Wholesale City), have since been revived.

The Federal Government’s allocation under the 9th Malaysia Plan (2006-2010) for the South Johor Economic Region, including Danga Bay, was RM12 billion. Convinced of the project’s commercial viability, Danga Bay Sdn Bhd (DBSB) and the Johor government’s development arm, Kumpulan Prasarana Rakyat Johor (KPRJ), have invested a substantial sum in the bay and its surrounding areas. Danga Bay, with about 25km of waterfront and spread over 1,850 acres, was a perfect setting that could be turned into a commercial precinct to rival Singapore’s development across the Causeway and attract the island’s residents to invest in the bay. Since the 9th MP announcement on the South Johor development, there had been a flood of foreign investors and established developers eyeing a slice of the planned mega projects in the area. Ekovest Bhd, the project manager of Danga Bay, said they are in talks with several world-class developers for the development of some of the mega projects here. Danga Bay is situated between the Second Link in the west and the North South Expressway in the east.

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