SINGAPORE - Singapore companies are relocating to Iskandar Malaysia at such a rapid pace that OCBC Bank expects a threefold surge in loans resulting from these moves over the next two years.
OCBC's loans to small and medium-sized enterprises (SMEs) from Singapore either setting up operations in Iskandar or already operating there doubled last year from the year before.
Local firms are seeking new pastures amid rising business costs and labour shortages.
Loans to such firms will likely rise by another RM500 million (S$203 million) this year and by three times over the next two years, said OCBC's head of emerging business, Mr Tan Chor Sen.
Although Iskandar has been in development since 2006, local firms began paying close attention to the region only from 2010, he added.
"It coincided with the availability and readiness of infrastructure there, and also during that time, China had become a pretty expensive place to do business, so Iskandar began to attract interest."
Firms that have moved some of their operations to Iskandar are making overall cost savings of about 30 per cent, Mr Tan noted.
Many are also relocating because they can get more space for the same amount of money.
A factory space at Ubi Techpark here of 8,998 sq ft, for example, would cost between $460 and $505 per sq ft on a 60-year lease.
In Iskandar's Zone B - where much of the economic activity and development is taking place today - a freehold 7,488 sq ft industrial space would cost just RM350 per sq ft. In Zone E, which includes areas such as Senai and Skudai, a freehold industrial space would cost even less, at RM250 to RM300 per sq ft.
But relocation to Iskandar is not without its challenges. Mr Tan noted that high-skilled labour can be difficult to come by there, and many companies are unsure about what kind of financing they should opt for or what type of corporate and capital structures they should form.