AS A growth proposition for Iskandar Malaysia, it is natural to leverage its proximity to Singapore and the city-state's readiness to trade with all for mutual benefit. Supported by ample space and relatively lower costs across the Causeway, that strategy has seen much development taking place in Johor over the years - to the point that analysts have lately flagged the prospect of a glut in certain sectors. For example, Maybank Investment Bank warned that the pro-perty oversupply in Iskandar is "likely to get worse before it gets better".
Given Singapore's close ties with its neighbour, it's in the nation's interest to see Iskandar Malaysia - formerly known as Iskandar Development Region and South Johor Economic Region - succeed over the long term. Singapore is the largest foreign investor in Iskandar at RM11 billion (S$4.07 billion) as of June last year, primarily in the areas of manufacturing, education, healthcare and property development. Singaporeans are building, among other things, a medical hub, an international school and factories in the sprawling economic zone about three times the size of Singapore.
A number of small and medium-sized enterprises are looking to locate there to take advantage of lower labour and land costs. And Singaporeans with money to buy a second residential property have been wooed by developers of condominiums and landed property in Johor.
Investors might find it less complicated and precarious to start and monitor enterprises based in Malaysia than in other South-east Asian countries offering cost advantages and various incentives. The closeness of cultures and the common languages spoken are also persuasive reasons to choose Iskandar over others.
Nonetheless, Singaporeans cannot afford to ignore emerging risks like an oversupply of properties by aggressive developers that can erode the value of and return on investment. Policy changes are another hazard, especially when levies, tolls and assorted rules both ratchet up overall costs and make it inconvenient for people to do business and travel smoothly across the border. A lack of transparency has also been a bugbear. For example, data on sales or rentals is not disclosed by Iskandar developers; and macroeconomic information on, say, job creation and population growth is hard to come by.
Like other growth corridors, Iskandar must not lose sight of the competitive advantages it aims to offer, mindful of the important roles played by infrastructure, skilled labour, productivity, governance, green initiatives and the management of overall business and living costs. The capacity to ensure the fundamentals underpinning Iskandar's strategy are strong will help to ensure sustainable growth over the long term.
The Straits Times / Money Published on Thursday, 21 May 2015