KUALA LUMPUR - Malaysia has granted a substantial tax break to a zone in a showpiece investment project near Singapore, a move likely to provide crucial support to a US$800 million (S$1 billion) initial public offering of the area's developer next year.
The Medini area in the southern state of Johor is the only section of the US$30 billion Iskandar Development Region to get an exemption from a 30 per cent property gains tax announced in October to cool soaring property prices, government officials said.
The area is being developed by Medini Iskandar Malaysia, a company that is 60 per cent owned byIskandar Investment, a corporation controlled by sovereign fund Khazanah Nasional Bhd . Japanese conglomerate Mitsui & Co Ltd and Dubai-based realtor United World Infrastructure each own 20 per cent.
"Medini in 2006 and 2007 was a sparsely populated area and not a preferred investment location," Ismail Ibrahim, chief executive of Iskandar Regional Development Authority (IRDA), told Reuters when asked why the area received an exemption.
"The objective is to provide the catalyst to drive investments into Medini," he said. Since its inception in 2006, Medini was exempt from property gains taxes.
Medini Iskandar declined to comment about the latest tax exemption.
The tax break, however, means the company should be able to attract more funds into the Medini area, helping the prospects for its IPO as well as the government, which is seeking to lure more investors, especially from cash-rich Singapore, into the Iskandar region without inflating a broader property bubble.