How Khazanah masterminded Iskandar
Developing Iskandar Malaysia (IM) is a multi-agency effort, but government investment arm Khazanah Nasional Bhd is the mastermind and prime mover behind the project. In an email interview, managing director Tan Sri Azman Mokhtar (pic) shares his views on IM. Excerpts:
SBW: How did Khazanah get involved in developing IM?
Azman: The Government had tasked Khazanah with conducting a feasibility study for the development of a special economic zone in south Johor in late 2005. Given the air, land, rail and sea linkages there, the Government saw the importance and potential of the region. Our involvement was to conceptualise and realise the master plan. This was completed with the presentation of the Comprehensive Development Plan and the launch of IM in November 2006. The plan was adopted in 2007.
The execution of a development of this magnitude would need the close coordination and collaboration of all parties. A Bill was enacted by Parliament in February 2007 to form the Iskandar Regional Development Authority (IRDA).
In our catalytic role, we supported the initial set up of IRDA. We also established Iskandar Investment Bhd (IIB), a 60% subsidiary, as a catalyst investor focusing on greenfield developments.
How has Khazanah’s role changed since 2006? And five years from now, what would Khazanah like to see in IM?
Following the three stages of involvement, Khazanah is essentially an investor.Besides our 60% stake in IIB, we also have a 77.14% interest in UEM Land Bhd, via our wholly-owned subsidiary UEM Group. Both are active in Nusajaya, one of the five flagship zones and host of most of the new economy initiatives. We also invest directly via other subsidiaries or investee companies. Examples include the recent RM400mil Pinewood Iskandar Malaysia Studios and the RM350mil Puteri Harbour mixed hotel, retail and entertainment complex via Themed Attractions and Resorts Sdn Bhd.
The year 2012 is expected to be a major “tipping point” for the area, with a number of developments expected to complete including the Johor Premium Outlets by Genting/ Chelsea, Senai Airport renovations, the Coastal Highway between Nusajaya and Johor Baru, several key manufacturing investments in Tanjung Langsat, Legoland Malaysia theme park, Puteri Harbour Lifestyle Retail and family entertainment centre, Marlborough College Malaysia, Newcastle Medical University and other faculties in EduCity among others.
Over and above the RM750mil and RM350mil for Legoland and Puteri Harbour, what will Khazanah’s estimated total investment in IM be this year?
Khazanah and related investee companies have committed about RM7.6bil for the first five years. These investments are at various stages of implementation. IIB and its group of companies are undertaking projects with a total investment of up to RM3.05bil (which include the catalyst projects like Legoland, Educity, its 30% portion of Medini amongst others).
UEM Land is expected to invest about RM1.2bil in the same period. Telekom Malaysia Bhd (e.g. High Speed Broadband project) and Tenaga Nasional Bhd (e.g. electrical infrastructure) have also committed themselves.
Khazanah, through its Creative and Themed Attractions subsidiaries, are committed to invest about RM750mil in Pinewood Iskandar Malaysia Studios and the Puteri Harbour Hotel, Retail and Family Entertainment Centre.
In addition, we also have significant existing investments consisting of the landbanks and infrastructure of UEM Land and IIB,such as highways, utilities and the second link into Singapore.
Although we are still in early days, how has Khazanah created value for those who have invested in IM thus far?
Most investors who have invested since 2006 would have seen respectable value creation. What’s more important though is the long-term, sustainable value creation and equitable distribution to the local community. I don’t think it is right to attribute value creation for those who have invested in IM to purely Khazanah, or any other single investor’s efforts.
With Asia going through a fragile recovery, the West still in doldrums, and considering the Dubai fallout, will Khazanah embark on road shows to seek investors this year?
Johor has had a history of attracting foreign and domestic investors in manufacturing, petrochemical and agro related sectors. With IM, we made a conscious effort to attract investors from a new segment.
The Middle East was selected, given its companies and investors were largely liquid and keen on greenfield real estate development as an asset class.
As the development progresses, the aim is to widen the target investor market. Other regions, including North Asia, China and India, will be key targets for 2010-2012. We will continue to target the Malaysia, Singapore and Indonesian markets, which are closest to IM and an important target retail market too.
With Singapore’s integrated resorts (IRs) coming onstream in 2010 and setting such a high benchmark for the region, is Khazanah taking a leaf out of what is happening over there?
Leisure and tourism attractions are among the sectors identified to invest in due to the large constituent of young families in the country and increasing tourist arrivals from Asia. Average tourist spend and length of stay is currently lower in Malaysia when compared to neighbouring countries like Thailand and Singapore.
There is a considerable room for Malaysia to enhance tourism receipts by increasing length of stay and average spending by offering enhanced tourism products. IM’s proximity to Singapore enables it to plan strategically to complement the developments over there. The initial theme parks are targeting families with young children which complement the adult and young adult target segment that Singapore’s IRs will attract.
Will UEM Land be the main property arm of Khazanah?
Khazanah has several real estate investments although UEM Land and IIB are the main exposures to the real estate sector currently. IIB’s role is as a long-term catalyst investor focused purely in IM. UEM Land is our main real-estate development vehicle which will expand over time.
The company is already undertaking developments in Cyberjaya. As its developments in Nusajaya mature, the company’s balance sheet will include investment properties in the area and land bank for development and investment properties in other parts of Malaysia as well.
Since we are in the early part of 2010, what would you like to see when you go down to IM by the end of this year?
We will be monitoring the progress of those projects which are expected to be completed in 2012 and beyond. You will see visible physical progress in this regard. In 2010, we hope to sign up further investments from all over, including Malaysian investors, and these are likely to be completed around 2015.
How will IM be different from Putrajaya and Cyberjaya? How will Khazanah help to rejuvenate Johor Baru once the government departments have all moved out?
IM involves the development of both greenfield and brownfield areas, while Putrajaya and Cyberjaya have achieved a lot as greenfield developments.
Johor Baru remains an attractive commercial destination and is one of Malaysia’s largest tourist gateways through arrivals from the Causeway. The Danga Bay development in Johor Baru, which was first opened to the public in 2003, is already attracting large crowds of locals and tourists over the weekends and holidays.
The developments around Nusajaya are themselves varied. There are expected to be high-traffic areas around Kota Iskandar, Puteri Harbour and Legoland Malaysia Resort, student-populated areas within the EduCity and more quiet residential neighbourhoods around East Ledang, Horizon Hills. The distances between them are short, so there should be quite a bit of lively activity in the area. When the coastal highway is completed by 2012, travelling between Johor Baru and Nusajaya will be a 15 to 20-minute drive.
The renovation of Senai Airport and the development of the Johor Premium Outlets, with the Genting Group announcing significant mixed development plans in the Kulai area, should attract considerable traffic to those destinations too.
- The Star
