EDB wants MNCs to invest in Johor's Iskandar region

PHOTO: EDB wants MNCs to invest in Johor's Iskandar region
Above photo is Deputy Prime Minister Tharman Shanmugaratnam.

The Economic Development Board (EDB), long synonymous with bringing foreign investments into Singapore, is telling multinational corporations (MNCs) to go north of the border.

They are being encouraged actively to invest in Johor's Iskandar region.

The EDB is adopting this new approach to Iskandar, as land and labour costs rise in Singapore, and interest in the region grows.

It envisions Singapore playing a complementary role, its chairman Leo Yip said in an interview with The Straits Times this week.

He sees companies siting their higher-value and more skilled operations as well as headquarters in Singapore, while their factories operate in the neighbouring countries, where land and labour are relatively abundant.

The strategy is similar to its partnership with the Indonesian islands of Batam, Bintan and Karimun (BBK).

Mr Yip said the new tack is necessary for Singapore to get a slice of the business as more MNCs look at moving their production to South-east Asia, with its market of 600 million people, good growth and more stable business environment.

"Some MNCs are looking quite seriously at how this might work to their advantage. And we are actively encouraging, and in fact pointing, many of the MNCs in that direction," Mr Yip said.

The EDB is now in preliminary discussions with companies to facilitate "the twinning of manufacturing activities between Singapore and Iskandar Malaysia".

Companies that have shown interest include those in the transport engineering, electronics, precision engineering and energy and chemicals sectors.

"In the last 18 months, a lot of MNCs have been asking us about the growth in South-east Asia," Mr Yip said.

Countries they are eyeing include Indonesia, the Philippines, Thailand and more recently, Myanmar.

On the partner-our-neighbour strategy, Mr Yip said: "Let's say an MNC, driven by market decisions, wants to set up a new production chain in South-east Asia."

"Why not work with the Malaysians to have that in Iskandar? Or with the Indonesians to have that in BBK? So that us and Malaysia, or us and Indonesia, are able to best harness the value that opportunity presents?"

So, he added, the EDB is not just asking companies that are already here.

"It is also us looking at companies that are moving activities into the region to see how we can capture part of that," said Mr Yip.

The EDB's urging of MNCs to look at Iskandar follows recent upbeat comments from leaders of both countries.

Last week, Deputy Prime Minister Tharman Shanmugaratnam said Iskandar Malaysia is developing into a "nice complementary space" between Singapore and Johor for businesses, and is a "logical hop away" as the squeeze on businesses here intensifies.

With rising land and labour costs, companies are being forced to seek cheaper locations or move up the value chain.

Since 2006, Singapore companies have set up over 300 manufacturing projects in Iskandar, according to Malaysian Investment Development Authority figures.

OCBC economist Selena Ling said that looking to Iskandar is "a pragmatic approach to ensure a value-added role for Singapore".

But SIM Global Education senior lecturer Tan Khay Boon warned that there must be incentives for companies to stay here and not move out completely.

"Singapore still has advantages in terms of connectivity, efficiency and tax incentives. So hopefully, the higher value-added functions stay in Singapore."