Is Iskandar finally taking off?

Iskandar Malaysia in Johor has been attracting wide media attention of late, with interest peaking in the middle of last month, when the Prime Ministers of Singapore and Malaysia officiated at the launch of several joint projects undertaken by the private sector of both countries.

After seven long years and several false starts since it was launched in 2006, is Iskandar finally taking off?

Many Singapore investors — especially those interested in the commercial and housing projects in Iskandar — are probably asking themselves whether they should jump in now if they have not already done so.

Seasoned investors remember how ambitious plans have previously failed to take off and some are still holding on to properties they bought in Johor, getting little in terms of returns despite a host of heartaches.

Will it be different this time? Nobody can really tell but one thing is certain: The prospects for success have never looked better for Iskandar in its seven-year history.

The goodwill between the governments on both sides of the Causeway with the settlement of the railway land means Singapore is now actively “engaged” in the development of the region — it is not just talk, but action.

The announcement of increased rail, road and sea links between the two countries over the next seven years will herald a new era of enhanced connectivity like never before.

Unlike in some cities, Singapore lacks a hinterland. The growing congestion and high land costs in the city-state make it natural for some economic activities to spill over into nearby areas like Iskandar.

If it is just economics at play, Johor would have taken off many years ago. But it is not all about economics, is it? In assessing the investment potential of Iskandar, or for that matter any location in another country, the political dimension needs to be considered.

It is no coincidence that the bright prospects for Iskandar today coincides with the vast improvement in bilateral relations between Singapore and Malaysia. The question investors need to ask themselves is: Will this good relationship last? Those of us old enough will remember the several highs and lows in the relationship between the two countries.

I am not saying that the decision should be between whether to invest or not, but investors need to be reminded to be circumspect with the expected or promised returns.

The locational and cost advantages of the Iskandar region will remain — chief of which is its close proximity to Singapore — even if the relationship subsequently turns rocky.

For now, with bilateral relations having improved greatly, massive investments committed and transport plans unveiled, what could go wrong?

If Johoreans as a whole do not enjoy the benefits arising from the development of Iskandar, you can expect some politicians to exploit this unhappiness to their advantage.

This is because if Iskandar turns out to be a huge success, it will not only attract Singaporean and other foreign workers and investors but also workers and investors from other parts of Malaysia.

Even if Singaporeans and other foreigners do not dominate the local economy, will other Malaysians displace Johoreans?

And even if such problems are anticipated, and policies and guidelines are put in place to mitigate them, will the success of Iskandar eventually mean that it will be a worthy rival to the Malaysian capital in the Federal Territory at some point in the future?

What are the implications? Will obstacles be thrown in the path of Iskandar? If I recall correctly, there are already guidelines regarding the transfer of government staff between the capital and Iskandar.

I am not saying that this is likely to happen but I am highlighting some of the potential risks.

The problem I have is with some marketers promising the sky and some sellers factoring in years of capital appreciation well in advance.

But even as I pour some cold water on the high expectations, I also acknowledge that he who dares, wins, and he who dares big, wins big.

By Colin Tan – Head of Research and Consultancy at Chesterton Suntec International

Source : Today – 8 Mar 2013

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