Malaysia’s ECER eyes $971m ME investment

Malaysia’s ECER eyes $971m ME investment Muzaffar Rizvi

6 November 2010 KUALA LUMPUR - Malaysia’s East Coast Economic Region, or ECER, has set an ambitious investment target of RM5 billion ($1.6 billion) in five economic clusters and it expects to attract up to RM3 billion ($971 milion) investment from the Middle East, a top official said.

“The Middle Eastern investors are very comfortable with Malaysia as there are many similarities in culture and customs. They can also explore five economic clusters namely tourism, oil, gas and petrochemical, manufacturing, agriculture and education for investment in the region,” Jebasingam Issace John, CEO of the East Coast Economic Region Development Council, told Khaleej Times in an interview.

He said ECER is in talks with Saudi Arabia, UAE and Qatar to identify potential projects for investment in the region and some of these deals may be concluded as soon as early next year.

Issace John said the ground-breaking ceremony for RM620 million project involving Dubai-based Oilfields Supply Center Limited to set up a multifunctional common user supply base at ECER Special Economic Zone is scheduled for end of November and the facility is expected to be ready for operations by 2013.

He said ECER has abundant land, which could fulfill the needs of Middle East countries that are looking for their food security programme. He said investments in agriculture and tourism are in various stages of development. These will be announced with the conclusion of discussions when more details are available. Excerpts from the interview:

What is the ECER’s role in promoting the Malaysian economy?
The ECER is a focused economic development in Malaysia which began under the country’s 9th Malaysia Plan (2006-2010), and will continue into the 10th Malaysia Plan (2011-2015) and beyond.

In line with Malaysia’s goal to become a developed country by 2020, the East Coast Economic Region Master Plan seeks to balance economic development between the West Coast states and the less developed Eastern region.

The ECER will move the economy up the value chain, raise the capacity for knowledge and innovation, address socio-economic inequalities, improve the standards and sustainability of quality of life, as well as strengthen the region’s infrastructure. The ECER also addresses the income disparity between the rural and urban areas, reduces high incidences of hard core poverty, improves accessibility to the region and enhances basic infrastructure. The main thing for us now is to strengthen the infrastructure development so that the region will be ready to receive investments, from both domestic and foreign.

ECER forms 51 per cent of the total land area of Peninsular Malaysia, hence, there are vast opportunities available here for resource-based industries. While achieving growth, the ECER also emphasises on green technology, eco-friendly solutions and sustainability which makes this region very unique. Investments within the ECER are generated domestically as well as from abroad.

The ECER is resource rich. As an example, the region has great tourism potential because of its pristine beaches, beautiful islands and eco-tourism activities. In agriculture, the ECER offers opportunities in crops, livestock and fisheries while in manufacturing investments can be made in resource base industries such as the halal parks, palm oil clusters and the Kertih Polymer Park.

The strategy is to transform the ECER into a dynamic region via five clusters, namely tourism, oil and gas, manufacturing, agriculture and education. Our vision is to become a developed region by 2020, as we move the economy up the value chain.

What is the latest progress on the ECER’s target to achieve poverty eradication with zero hardcore poor by 2010?
The ECER’s target is to minimise the existence of poverty and be financially independent. This will be attained via agropolitan projects which primarily involve agricultural activities but are also accompanied with downstream activities. Under agropolitan projects, participants will be involved in core economic activities, as well as secondary and support economic activities.

The ECER has three agropolitan projects, which are in the states of Kelantan, Terengganu and Pahang. Through the support activities, not just head of the families will benefit, but also their spouses and other members of the family.

South Kelantan agropolitan is primarily oil palm-based, while North Kelantan agropolitan is more oriented to trade and business-based activities.

For Besut-Setiu agropolitan in Terengganu, the emphasis is on agriculture and goat farming. For agropolitan Pahang, the core activities are oil palm plantation and sheep farming. The idea is that these activities will help increase the hardcore poor’s income from RM400 per month to RM1,000 per month within the first year and to RM5,000 per month within the next 10 years.

What benefits and facilities is the ECER offering to attract Middle Eastern investors?
ECER is offering an integrated package to them, comprising both fiscal and non-fiscal incentives. These incentives are specially tailored to investors who are venturing into the key ECER clusters namely tourism, oil, gas and petrochemical, manufacturing, agriculture and education.

Among others, ECER fiscal incentives include income tax exemption of up to 10 years, Investment Tax Allowance of 100 per cent on qualifying expenditure, and sales tax exemption. Customised incentives are also given to companies based on the merit of each case. Non-fiscal incentives include competitive land pricing encompassing discount rate for land premium, quit rent and land assessment, guaranteed land lease periods for a specific time period and flexibility in the employment of expatriates.

The ECER also ensures that human capital requirements are met. Training is provided to manpower which can meet the investors’ human capital needs. In addition, funds can be repatriated back to the Middle East.

What additional incentives and facilities is the ECER offering to UAE companies for establishing projects?
Incentives can be customised and decided on case-to-case basis. In addition, 85 per cent of the ECER population are Muslims, so there is synergy here. The culture and way of life here in ECER will make it easy for UAE investors to adjust. In addition, we also have abundant land here which could fulfill the needs of Middle East countries that are looking for their food security programme.

In terms of potential investments from the Middle East, we are currently in various stages of discussion with three Middle East countries, namely Saudi Arabia, the United Arab Emirates and Qatar. Some of these deals may be concluded as soon as early next year.

What have been successful JV projects at the ECER?
Most recently, the Tanjong Agas Oil and Gas and Maritime Industrial Park, a project located in ECER Special Economic Zone, has received a total investment of RM620 million from the Middle East.

Tanjong Agas Supply Base and Marine Services Sdn Bhd and Dubai-based Oilfields Supply Center Ltd signed a joint venture agreement to build, own, manage and operate a multifunctional common user supply base in October 2010. The ground-breaking ceremony for the supply base is scheduled for end of November and it is expected to be ready for operations by 2013.

Investments in agriculture and tourism are in various stages of development. These will be announced with the conclusion of discussions when more details are available.

Do you expect any major project from UAE companies in near future?
Recently, Dubai-based Oilfields Supply Center Ltd and Tanjong Agas Supply Base and Marine Services Sdn Bhd signed a joint venture agreement to build, own, manage and operate a Multifunctional common User Supply Base within the Tanjong Agas Oil and Gas and Maritime Industrial Park.

Both companies have committed a total initial investment of RM620 million ($200 million) for the development of the supply base via a newly formed joint-venture company known as Tanjong Agas Oilfield Supply Centre Sdn Bhd.

Phase one usually is the expression of commitment. Dubai OSC has the funds and necessary experience and knowledge to set up its base within the ECER.

UAE companies may also be interested in other economic cluster namely oil and gas, tourism and agriculture. We expect more positive numbers by first quarter of next year.

ECER is working closely with the Ministry of International Trade and Industry (MITI), Malaysian Industrial Development Authority and Malaysia External Trade Development Corporation on investments. All approvals will be made by the National Committee for Investments under MIDA.

Which economic clusters are attractive to Middle Eastern investors?
The Middle East will find the ECER’s halal parks in Gambang (Pahang) and Pasir Mas (Kelantan) attractive.

Gambang Halal Park will be focusing on food and non-food based Halal products and it will also concentrate on high-value added industries, supplying ingredients to the cosmetics and personal health care industries.

Pasir Mas Halal Park will concentrate on crops, poultry and beef-based products. It will also focus on the production of high-value added additives and ingredients that have numerous applications, from food additives to raw materials for the pharmaceutical industry, to health care components.

The development of Halal Parks in ECER Malaysia is closely linked to the development of livestock, agriculture and manufacturing projects in the region. A combination of easy access to raw materials from nearby areas, solid supporting industries and good physical infrastructure in the region provides an integrated package for investors who are keen to participate in the fast expanding Halal industry. Gulf Cooperation Council countries are also very interested in our halal sector as the halal certification issued by the Department of Islamic Development Malaysia is very strongly recognised worldwide.

Middle Eastern investors are very comfortable with Malaysia as there are many similarities in culture and customs. They can also explore Shariah-compliant tourism as well as family-oriented tourism.

Education is another new area for investments. There are already many Middle Eastern students coming to Malaysia to study. The ECER offers a Knowledge Park in Terengganu which can cater to this need and we’d like to see colleges and international universities to set up their campus here.

In addition, medical tourism is an upcoming industry. Medical facilities and services are cheaper than in Europe and Middle Easterners can tap into this while enjoying quality healthcare.

What are the ECER’s investment targets?
Our annual target for investments is RM5 billion from all over the world, of which RM2-3 billion would come from the Middle East. That is a very humble estimate from our side.

Is the ECER seeking Middle Eastern investments in oil and gas?
The ECERDC is looking at working with Middle East investors in the oil, gas and petrochemical industry, particularly in the downstream activities. The ECERDC is looking forward to work with more companies currently there are over 20 companies that have expressed interest.

We have not finalised investment details, but what is important is that we already have engagement with these parties. The clusters in ECER are closely tied-up with the Middle Eastern needs.

muzaffarrizvi@khaleejtimes.com