What are the main tenants of the IRDA Act 2007? How has progress been measured to date?
IBRAHIM: The Iskandar Regional Development Authority Act of 2007 was formulated with the view to do 3 very important things. Number one is to determine and establish an economic region, hence it is called Iskandar Malaysia. Second it to outline the role and responsibility of an agency that is to be created under this act of Parliament, which is now called the Iskandar Regional Development Authority. Third is to determine the way forward for economic growth for this region. By outlining the three basic foundations or objectives that will facilitate the economic growth of this region, we can then to plan for the economic growth of this region. Then we can promote the economic growth of this region as an attractive location for investment. Beyond that would be to set the structure and the governance to ensure that when Parliament gives approval to this particular legislation, the authority, in this case IRDA, would be able to launch itself and carry out the main tasks that have been set upon them.
The growth of this region, Iskandar Malaysia, was set out very early under the comprehensive development plan. Under this plan we have stated our aims for economic growth coupled with the social as well as physical development that has been laid out. This plan was later approved by both the federal government and the state government of Johor. Since then, the way we have been developing this region has been based upon the framework and the policies that were laid out in this plan. We have been fortunate that both the federal government and the state government have been supportive of this effort to the extent that not only has the government been working hard to realize this plan, but this has been well welcomed by the business community, and more importantly by the people who live and work in Iskandar Malaysia. Since 2007, when this plan was laid out, approved, and executed, we have been able to bring in the necessary infrastructure, both soft and hard infrastructure, to ensure that we will be able to offer the business community an attractive opportunity in Iskandar Malaysia. You can already see the activity that has happened over the past 5 years since the inception of this region. We have been able to demonstrate that the private and public sectors have been working together to create this region, which is now experiencing very high economic growth.
Which initiatives are most important to you looking forward?
IBRAHIM: When we look at the area of initiatives and incentives, we would like to ensure that the economic growth of Iskandar Malaysia will be one of inclusiveness. Inclusiveness here means that as we create the larger cake, we want to ensure the benefits will be gained not only by the investors, but also by the members of the community that will be living and working in Iskandar Malaysia. That is why in our effort to make this region one that is prosperous in growth, we have to ensure that we will only be focusing on the type of economic sectors that will create the type of impact that we want. This is to ensure that this region will grow from one that is middle income to a high income region. We need to create the type of business activity that will generate talent and demand knowledge and highly skilled workers. In order to realize that plan we need to give focus to certain types of economic sectors. In this case, under our comprehensive development plan, we have been able to identify 9 economic sectors that we believe will enable us to quantum jump this region into one that is of a high income economy.
Which sectors particularly are you focusing on?
IBRAHIM: The 9 sectors that we identified back in 2007 are both in manufacturing and in service. In manufacturing it will be electronics, oil and gas, food and agro processing; whereas in service they will include healthcare, tourism, education, and logistics. We need to focus on the sectors, out of the 9 we have identified, that will give early benefit and impact especially to the economy of this region. Today, in this particular year, the fifth year of establishment, we are focusing on 4 areas: tourism, creative, education, as well as oil and gas. We believe that in some of those sectors we are beginning to be able to demonstrate that we are actually able to bring in the benefits not only for the business in Iskandar Malaysia, but also for the people of Iskandar Malaysia.
What kind of investment does Iskandar Malaysia represent?
IBRAHIM: From an investment point of view, we have been monitoring investment figures since we first started in 2006 and 2007. Iskandar Malaysia is a long-term plan which involves a long term journey divided into 3 phases, which are each between 5-7 years. Over the years, as we look into our comprehensive plan, we look at this figure of about RM383bn ($123bn) of total committed investment from 2006 to 2025. We believe this will be able to generate and create the right economic impact as far as investment is concerned. Over the years, we have been monitoring investment figures. In the early years, investment was in the region of about RM8bn ($2.6bn) to RM10bn ($3.2bn) per annum. Over the last 2 or 3 years, it has gone up from anywhere from RM13bn ($4.2bn) to RM15bn ($4.8bn) per annum. In fact, last year in 2011 we managed to hit a stretch target of RM15.3bn ($4.9bn) of investment. This year, we are talking about having a stretch target of about RM20bn ($6.4bn) of investment. Those figures are indicators that would enable us to set certain targets and forecasts for growth. But really what is more important is the reasons and justifications behind those figures. Those figures also, if you look from year to year, show that there is an equal contribution from both foreign direct investment as well as domestic investment. What really is very interesting is the shift from foreign direct investment representing about 55% of total investment to now, where we have domestic investment representing about 60% of total investment. So this is a good indication that domestic investment is also becoming a very strong and significant player in the development of Iskandar Malaysia. On the same note, it has also been observed that although the manufacturing sector remains a significant contributor, the service sector is also making an increasing contribution. We would like to see the service sector contributing 70% of the economy of Iskandar Malaysia because that will indicate that the region has reached high income.
In what ways are you working within the greater national framework with regard to Malaysia’s New Economic Model (NEM) and Economic Transformation Programme (ETP)?
IBRAHIM: The plan for the growth of Iskandar Malaysia has always been formulated along the lines and framework as set out within the policies of the national and state government. When we formulated our comprehensive plan, this was well worked out within those frameworks. Prime Minister Najib introduced the Government Transformation Programme and the Economic Transformation Programme. We have found that a lot, if not all, of the policies and programs and activities that were organized under the comprehensive development plan are very much in tune with the transformation programme that has been laid out by the current Prime Minister. So we are happy to note that the way forward for Iskandar Malaysia is very much in sync with the plans established by the current leadership. We are happy to note that as we progress and further discuss with the government in terms of the provision of hard and soft infrastructure, the government has always seen us as very much in line with the policies that they have laid out – even the policies that were laid out a year or two ago.
If you are in for new things, the areas of creative industries, logistics, food and agro-processing, are areas that will be more challenging for any investor because they are new and they require huge investment. Definitely by making a huge investment, you are bound to receive huge rewards. This is perhaps the blue ocean for Iskandar Malaysia that investors would really like to see.
Many of Malaysia’s different states and regions are pursuing aggressive growth and development plans. What are IRDA’s competitive advantages? What incentives does IRDA offer to investors?
IBRAHIM: The setting up of the economic region by the government of Malaysia is a very good effort to ensure that Malaysia is a country that remains competitive in the global economy. With the establishment of the 5 economic regions, this will definitely put Malaysia in a better position on the world map as a competitor. With the establishment of Iskandar Malaysia, we definitely need to work together with the other 4 economic regions but at the same time we need to create our own niche to ensure that as a region we will be able to compete globally. Now having said that, if you look at Iskandar Malaysia, we believe that there are several good points that will put Iskandar Malaysia in a better position. One being its geographical position which is not only within the reach of the capital Kuala Lumpur, but also within a stones’ throw away from our neighbours in the South in Singapore. Singapore has developed as a nation in leaps and bounds. They have progressed from an economic standpoint and have become a strong financial centre in this part of the world. For Iskandar Malaysia, this is a factor that is important to us. We are not only going in to work closely with Singapore, but at the same we want to make sure that Singapore and Iskandar Malaysia can both take advantage of each other’s presence. Again, Iskandar’s geographic location is very important. We need to ensure that we will have the best infrastructure, the best connectivity, the best talent. At the same time, we also need to ensure that we are at all times able to create a better living environment for the people who want to do business, who want to work, and who want to live here in Iskandar Malaysia. Secondly, we need to work very hard in creating the right talent so that these people can participate and enter into the right level of employment that will demand highly skilled people and knowledge workers. In order to create that, we need to work very closely with institutions of higher learning, both at the vocational level as well as universities, to ensure that as investment comes in, we are able to supply the right kind of people when they are needed. This is not and cannot be carried out over a short period of time. We need to have a very clear plan. That is why at Iskandar Malaysia, we have developed a human capital blueprint that outlines how we can create the correct equilibrium between demand and supply for human capital development over a period of anywhere between 10 to 20 years. The third factor is definitely strong political support. This has been the pillar behind the strength of the growth of Iskandar Malaysia. Over the years both the federal government as well as the state government have been very supportive in ensuring that we are able to deliver our part of the obligation to make this region as attractive as possible for investment.
Which foreign markets are you targeting?
IBRAHIM: Over the years, the pattern of investment in Iskandar Malaysia very much reflects the pattern of investment that Malaysia is experiencing. However, over the years there may have been a slight deviation, which is a reflection of the way we have been focusing on specific economic sectors that we want to bring into Iskandar Malaysia. The areas of education, tourism, and oil and gas have been a significant contributor to economic growth as far as investment is concerned. As far as contribution from countries, again, they vary from year to year. What we can say is that although manufacturing continues to be a strong contributor, as I mentioned, service has seen more significant growth. Countries in the Far East, like Korea and Japan and even China, are showing a strong presence and it is only a matter of time before they bring in their dollars to invest in Iskandar Malaysia. Traditional trade partners in Europe, such as the UK, and North America continue to be strong investors here in Iskandar Malaysia. For example in the area of education, Britain has been a very strong investor here and the various colleges and the university are now making very good progress.
What remain the best investment opportunities within Iskandar Malaysia?
IBRAHIM: It actually all depends at what level of entry you want to make as an investor. Having said that, I would come back to the 9 economic sectors that we are promoting. If you are involved in any of these sectors, you are never wrong in terms of making things happen in Iskandar Malaysia. But of course if you ask me today, definitely the areas of tourism, education, healthcare, and oil and gas are 4 of the biggest economic sectors that are really happening in Iskandar Malaysia. If you are in for new things, the areas of creative industries, logistics, food and agro-processing, are areas that will be more challenging for any investor because they are new and they require huge investment. Definitely by making a huge investment, you are bound to receive huge rewards. This is perhaps the blue ocean for Iskandar Malaysia that investors would really like to see. So there you are, it depends on your level of entry; whether you want to be with the investors who are already here in the sectors I have just mentioned or you are more of the high risk group that would like to venture into new areas, the stage is already set for you. At the end of the day, the role of the government is to create and to facilitate the environment for investment and it is a business decision that has to be made by the respective investor. After all, the Iskandar Malaysia initiative is a private sector led growth initiative, it is not government led growth.