A Middle East group agreed on Wednesday to invest about $1.2 billion in Malaysia’s Iskandar development zone, the first big foreign investment in an ambitious government plan to transform the country’s south. Mainly Muslim Malaysia is counting on Middle East investors to help fund its plan to turn an area three times the size of neighbouring Singapore into an Asian boomtown.
The group of investors include Abu Dhabi state investment agency Mubadala Development, Gulf lender Kuwait Finance House and Dubai-based property developer Saraya Holdings. “This is a historic and strategic landmark transaction between our two regions,” the Malaysian state agency tasked with managing the Iskandar zone said in a statement.
The group will partner the agency, the South Johor Investment Corporation (SJIC), to develop 2,230 acres into an “international city”, a global hub for trade, commerce and education, SJIC said. SJIC would hold 30% of the venture. The southern state of Johor lies about a kilometre away from Singapore, one of Asia’s richest capitals with $147 billion in foreign reserves, but remains a relative backwater, with a reputation among Singaporeans for street crime and cheap goods.
The Johor plan implies heavy investment from neighbouring Singapore, but the island’s Prime Minister Lee Hsien Loong said in December there were “mixed signals” from Malaysia about how welcome Singapore investors would be. Malaysian politicians at federal and Johor level do not want to rely too heavily on Singapore money because of decades of suspicion and strained ties between the two nations.
Instead, the government has marketed the project heavily to Middle East investors who are flush with petrodollars and are looking for investments that comply with Islamic law. “In the past, there’s been a focus on the West. We’ve been very keen on looking at opportunities in Asia, and this is one of many transactions you will see us do in the near future,” said Mubadala chief executive Khaldoon Khalifa Al Mubarak.
“There’s tremendous potential here. It’s an area that we’re comfortable investing in, so it’s logical for us to invest here.” The SJIC, which is controlled by state investment arm Khazanah, said the Middle East group would spend the roughly $1.2 billion to acquire land and develop infrastructure.
The SJIC said the Middle East investors would make “further development investments of several multiples over the initial investment of $1.2 billion over a 20-year period”. Abu Dhabi-based Aldar Properties said it would be master development manager for the international city project.
Late last year, Prime Minister Abdullah Ahmad Badawi said that roughly $105 billion of mostly private investment would be needed over 20 years to develop Iskandar into a regional centre for industry, tourism, entertainment and luxury accommodation. Overall, the 2,200-square-kilometre development area is to boast a high-tech park, logistics and industrial precincts, educational park, regional hospitals, marina, waterside villas, theme parks and exclusive, gated residential communities.
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