With waning interests from Singaporeans, will it be boom or bust for the special economic zone?
By Khalil Adis
The history between Singapore and Johor is a long and interesting one spanning centuries and one that is often intertwined.
With a history spanning back since the 14th century when Singapore was once the seat of governance for the Johor Sultanate to the signing of the treaty with the British in 18th century, our history and economy are often inextricably linked although we are now a sovereign state.
What changed the course of history was the signing of a treaty that Sultan Ali had signed in 1855 with the British to transfer his power in Johor to Temenggung Daeng Ibrahim.
Temenggung Daeng Ibrahim subsequently moved his seat of governance from its old capital in Teluk Blangah in Singapore to Tanjung Puteri which is now known as Johor Bahru.
While the imposing palace in Singapore still remains today, it has been converted to a mosque housing the Johor Royal Mosouleum and where members of the royal household are laid to rest at a nearby cemetery – a reminder of its glorious past.
Over the other side of the causeway, however, is where Johor’s exciting future lies – Iskandar Malaysia.
Home to the current Sultan of Johor, it appears our history is set to intertwine yet again with Iskandar Malaysia as a sort of hinterland for Singapore, as the Sultan admits.
“The future is in Johor because Singaporeans, not just Chinese, will be buying homes in Johor. Homes are already beyond the reach of ordinary Singaporeans over there. It is a political issue when the middle-class find themselves squeezed,” Sultan Ibrahim Ibni Almarhum Sultan Iskandar told a paper recently
From sceptism to optimism – the Singapore factor
When Iskandar Malaysia was first mooted in 2006 by former Malaysian Prime Minister Abdullah Badawi, Singaporeans were very skeptical about it.
It was only after the land swop deal was concluded in 2010, did sentiment turned positive.
Led by both the Singapore and Malaysian government, both countries had agreed to jointly develop two iconic projects in Medini via Temasek Holdings and Khazanah Nasional.
Subsequently, Temasek Hodings via CapitaLand entered into a joint-venture agreement with Iskandar Watefront Holdings to develop a land parcel at A2 Danga Island.
These factors gave Iskandar Malaysia the much needed confidence booster among Singaporeans to snap up properties just across the causeway.
At the peak of the market in 2013, almost 74 per cent of non-Malaysian property buyers were from Singapore, according to data from UEM Sunrise.
Figures from Iskandar Regional Development Authority (IRDA) also showed that Iskandar Malaysia has secured RM24.87billion in new investments from January 2014 to October 2014.
From 2006 to October 2014, Iskandar Malaysia has recorded RM156.51 billion in total cumulative committed investments.
Of this total, 51 per cent or RM79.17 billion represent investments that have been realised.
Singapore remains the top foreign investor.
Has Iskandar Malaysia lost its appeal among Singaporeans?
While Singaporeans will still look to Iskandar Malaysia to buy a property, buying activity is admittedly, not as robust as before.
Anecdotal evidence on the ground shows some developers are having problems moving units while property launches are not as well-received as before.
Various factors such as property cooling measures announced during Budget 2014, the flurry of project launches by Chinese developers and the recent toll hikes on both sides of the causeway are causing some to stay away.
One Singapore-based investor who has a home in Iskandar Malaysia said the toll hikes in particular will impact investment sentiment.
“This news will be good and bad news to different people. It will be good news to real business owners (such as factory owners) as it will mean faster travelling time even with the higher tolls, as those business owners value their time more than the toll paid. However, it will be bad news for regular visitors to petrol kiosks, cheap car washing facilities and so on,” said William Liong.
With Singapore as the top foreign investors, will this spell the end for Iskandar Malaysia?
Singapore investments include Ascott Somerset Puteri Harbour, Puteri Cove, Motorsports City and Vantage Bay, just to name a few.
Already, AsiaOne Business is reporting that CapitaLand’s investment in Danga Bay as well as other developers had hit a snag.
CapitaLand has said it is “waiting for the relevant regulatory approval for (its) Danga Bay project’s masterplan”.
Iskandar Malaysia too big to fail
While the Singapore factor may have given Iskandar Malaysia a boost on the international stage due to Singapore being a global city, it is unlikely Iskandar Malaysia will fail.
While Singapore may be the top foreign investor, majority of the investment are still driven by the domestic market.
Data from IRDA showed that RM99 billion or 63 per cent of the total cumulative investment were from Malaysia while the rest – RM57.5 billion (or 37 per cent) – were contributed by foreign investors.
In addition, the residential property sector forms only RM38.59 billion of the total cumulative investments.
Majority of the investments were driven by the manufacturing sector at RM50.97 billion.
This includes investment from the sectors of Electrical & Electronics, Petrochemical & Oleo-chemical and Food- & Agro-processing.
Perhaps the biggest catalyst will be the cross-border rail link service linking Singapore’s MRT to Johor Bahru’s RTS system.
Once completed in 2019, it will result in more investments in Iskandar Malaysia and this is something the current Sultan of Johor had noted.
“Once the links are in place, it will become the norm for Singaporeans to live in Johor and work in Singapore. That is the future,” he told a paper.
Likewise, investors are looking forward to the link.
“The RTS will impact my investment decision, but only within Johor Bahru or Zone A of Iskandar Malaysia,” said Liong
This has spurred him to look at other developments which are within a one km radius area from the RTS station.
Like siblings, blood is thicker than water and is what best describes the relationship between Singapore and Johor.
Both has had its fair of ups and downs with its history of rivalry and on-and-off close relationship.
As the RTS-MRT link shows, even as we brace towards the future, our history and economies remain inextricably intertwined.
Like it or not, Singapore still needs Iskandar Malaysia as much as it needs Singapore.
This article was first published by iProperty.com Malaysia in its May 2015 issue.