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Iskandar – For the mutual benefit of Singapore and Malaysia

11 December 2012
The Straits Times 

Iskandar – For the mutual benefit of Singapore and Malaysia?

Would the Iskandar Development Region in Johor Bahru enhance or compete with the Singapore economy? Were the IDR to take off, how would this impact the Singapore economy in the long run? Spire Research and Consulting commented on this topic in The Straits Times.

With a total land size that is three times the size of Singapore, the Iskandar Development Region (IDR) is separated into five zones – each focusing on distinct economic areas such as creative media, residential and industrial developments.

Since the inception of the IDR, Singapore companies have set up more than 300 manufacturing projects, and have invested more than SGD 2 billion (13% of the total sum invested in the region).

Iskandar has positioned itself to complement, rather than compete with, established industries in Singapore. On the other hand, although it has won a number of major projects in key sectors like education and tourism, the IDR is still finding its footing in other areas.

Analysts have discerned two main factors behind the influx of Singapore investments into Iskandar:

Improvements in Singapore-Malaysia bilateral ties. According to Malaysian Prime Minister Najib Razak, “Singapore can continue as the hub for commercial and financial development, whereas southern Johor can be an area of high-quality living for Singaporeans.” Cost pressures in Singapore, drawing companies to consider locating complementary activities in the IDR to leverage its plentiful land, cheaper raw materials and a cheaper labor pool. Leon Perera, Chief Executive Officer of Spire Research and Consulting, opined that the IDR’s proximity to Singapore and access to land, labor and raw materials would help anchor some economic activities in Singapore. Iskandar is a good bet for Singapore-based companies grappling with rising domestics costs and aspiring to compete with the best in the region. But investors entering Iskandar should not ignore the risks entailed.

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