Iskandar Malaysia

Explainer: What is Iskandar Malaysia?

Iskandar Malaysia

Iskandar Malaysia is the most sustainable economic corridor in Malaysia. Discover how it will spur the economic growth of Malaysia and Singapore.

Photo Credit: IRDA

Iskandar Malaysia is an economic corridor that is set to compete in the global economy. In the face of global competition, Southeast Asian nations are pooling resources like land, labour, and capital. Malaysia is no different.

An area three times the size of Singapore was earmarked as an economic corridor. Located in the state of Johor, the site was chosen due to its proximity to Singapore. A 20-year development masterplan was created to form Iskandar Malaysia.

The plan is for Iskandar Malaysia to be an international metropolis, leveraging on its proximity to Singapore. Much like the Shenzhen-Hong Kong model.

NOTE: Download the Iskandar Malaysia Explainer Guide as a handy reference in future.

The Explainer

Iskandar Malaysia is connected to Singapore via two land links (Causeway and Second Link bridge). This is one of the world’s busiest international border. Approximately half a million people cross the border daily for work, study, and leisure.

Singapore is one of the top global cities. But Singapore faces increasing competition from Hong Kong (financial centre), Shanghai (cargo port), and other regional players. Malaysia itself is aiming to become a high-income nation. Both countries can benefit from working together.

Economic growth in Singapore is hampered by a lack of space and an ageing population that does not replace itself. In comes Iskandar Malaysia, offering affordable land and labour (both about one-third the cost in Singapore).

Iskandar Malaysia and Singapore have much to gain from economic cooperation and integration. It is a symbiotic relationship ala Shenzhen-Hong Kong.

Back in 1980, the small town of Shenzhen was designated as the first Special Economic Zone (SEZ) in China. This was the era of economic reforms under Deng Xiaoping – the father of modern China.

Since Shenzhen is next to Hong Kong, the SEZ was an experimental ground for development. Shenzhen would provide cheaper land and labour to companies that are seeking to expand their Hong Kong operations.

Today, Shenzhen is the face of modern China with a population of 14 million. 37 years ago it was a town of less than 30,000. The Shenzhen-Hong Kong model proved extremely successful.

Iskandar Malaysia seeks to follow Shenzhen’s example by encouraging investments. From November 2006 till September 2016, RM218.84 billion worth of investments has been committed to Iskandar Malaysia. Over 50% of the investments have been realised.

While Singaporean investors committed RM20.01 billion, they are not the only interested party. The Chinese, having seen the transformation of Shenzhen, sees an opportunity to invest in the “Shenzhen of Southeast Asia”. Recently, China overtook Singapore as the top foreign investor in Iskandar Malaysia with RM23.78 billion.

There is much room for growth as Iskandar Malaysia is only in the 11th year of its 20-year masterplan.

The Background

Iskandar Malaysia was conceptualised under the Ninth Malaysia Plan (2006-2010) by the then Prime Minister, Tun Abdullah Badawi. The plan was unveiled at a time when Malaysia was starting to recover from the Asian financial crisis.

Prior to 2006, Malaysia’s strategic investment fund – Khazanah, had inherited large tracts of land in southern Johor. This was the result of past corporate restructuring and de-gearing exercises after the crisis.

Khazanah was then assigned by the government to undertake a feasibility study on southern Johor. After presenting their findings, they were tasked with developing a sustainable approach to development in the region. The result was the launch of Iskandar Malaysia in November 2006 (then known as the South Johor Economic Region).

In 2008, the South Johor Economic Region was rebranded as Iskandar Malaysia in honour of the late Sultan of Johor, Almarhum Sultan Iskandar ibni Sultan Ismail.

The Impact

Iskandar Malaysia will prosper in the “Asian Century”. The centre of gravity in the world economy is shifting to Asia with China playing a major role. It is predicted that China will soon be the largest economy in the world (currently second). In the midst of this shift, Iskandar Malaysia is well positioned to be a hub for Asia.

Singapore is already a global and Asian hub. One of Iskandar Malaysia’s greatest advantage is that it is next to Singapore. Economic linkages focusing on tourism, healthcare, education and business services will ensure Iskandar Malaysia-Singapore’s competitiveness into the future.

The key is economic cooperation and integration. Done right, Iskandar Malaysia will be an economic growth engine for Malaysia and Singapore.

While there are areas of cooperation with Singapore, there are also areas of competition. Iskandar Malaysia will compete with the Port of Singapore, through the Port of Tanjung Pelepas.

Singapore and Tanjung Pelepas serves ships passing through the Strait of Malacca. The strait is the shortest waterway between the West (Europe, Middle East, Africa, and India) and East Asian markets. The majority of China’s oil supplies goes through the Strait of Malacca. Therefore, demand for shipping is heavily dominated by China.

Singapore’s relations with China have taken a plunge in recent years. This is due to Singapore’s support of US policies in Asia. Will any geopolitical shift in the future cause China to favour Malaysia and bypass Singapore? Only time will tell. Singapore’s loss can be Iskandar Malaysia’s gain.

Iskandar Malaysia will be the nation’s most important economic corridor for years to come. It will both complement and compete with Singapore in the global economy.

BONUS: Don't forget to grab the Iskandar Malaysia Explainer Guide for bonus tips.

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