Leaders 'to discuss cooperation in IDR'

The Straits Times, May 14, 2007


KUALA LUMPUR - THE Malaysia-Singapore bilateral meet which begins today may accelerate economic cooperation between the two neighbours and jumpstart a massive development plan to benefit both countries, Dow Jones reported last Friday.

Among other things, the report added, the two will discuss the Iskandar Development Region (IDR), the multi-billion dollar plan to develop Malaysia's southern state of Johor, which is just 1km from Singapore. The area is already a centre for oleochemical production, logistics services and tourism.

Politically, Johor is Malaysia's most important state because it is Umno's birthplace and biggest stronghold. But it is also often a point of friction between the two neighbours because of Singaporeans' perception that it is lawless and crime-ridden, the report added.

The IDR is three times the size of Singapore and a key feature of Malaysia's long-term goal to be a developed nation by 2020.

But while Singapore emerged in the past decade as one of Asia's most aggressive investors, its presence in Malaysia has been almost undetectable. In fact, it was only the fifth-largest investor in Malaysia last year, with US$513.5 million (S$775 million) in commitments, down 50 per cent from 2005.

Still, Dow Jones quoted a senior official involved in planning the summit as saying that the two sides were seeking zones of cooperation. 'We have a lot of outstanding bilateral issues, but we really want to focus on how we can work together on this project,' he said.

Economists told Dow Jones that Singapore's support was crucial for the Iskandar zone to succeed, as it would send a positive message to international investors and the country had strengths Malaysia could work with and tap on.

Mr Nasser Ismail, the chief spokesman for the Iskandar Regional Development Authority, which helps market IDR and draw in investors, told Dow Jones that Malaysia was bent on drawing US$6 billion of private-sector investments into the region over the next seven years.

Mr Nasser added that Malaysia will announce a second package of tax incentives to sweeten already-announced tax breaks.

In March, the government said companies investing in IDR would not have to pay corporate income tax for 10 years and were free to source capital offshore.

They also did not have to reserve jobs for Malays, as is usual government policy.

Dow Jones added that, so far, the IDR has drawn US$2 billion in foreign direct investment commitments.