Arab Money Flows Into IDR

Source : TODAY, Thursday , August 30, 2007

Infusion of funds give the Johor project a boost

PUTRAJAYA — Malaysia’s close ties with the Arab world have produced their biggest dividend yet with the signing of a US$1.2-billion ($1.8 billion) deal to develop art of the Iskandar Development Region (IDR) in southern Johor.

Firms from Gulf Cooperation Council countries will initially invest the money in land and infrastructure development, in a deal signed with Malaysia’s South Johor Investment Corporation (SJIC).

SJIC chairman Azman Mokhtar hailed the agreement as a milestone for the IDR, which aims to turn southern Johor into a new Asian metropolis.

“This is a historic and strategic landmark transaction between our two regions,” Mr Azman said at the signing ceremony yesterday. “By far, this is the biggest single foreign investment ever made in Malaysia.”

The investors are led by Mubadala Development Company, the investment arm of Abu Dhabi, which committed US$520 million. The rest of the money is coming from Al-Nibras 2 Ltd, a subsidiary of Kuwait Finance House, and Abu Dhabi’s Millennium Development International Company. The project will be managed by Abu Dhabi-based developer, Aldar Properties PJSC.

“This will be a flagship development for the region, not just for Malaysia,” said Mubadala chief executive Khaldoon Khalifa Al Mubarak.

The Malaysian government hopes to attract RM50 billion ($21.7 million) to the IDR over five years.

However, some analysts said the ambitious plans to develop not only the IDR, but also the Northern Corridor Economic Region, have been clouded by problems involving the new trade zone at Port Klang outside Kuala Lumpur.

The trouble started when the Dubai partner — which had been granted a 15-year concession to manage and operate a new trade zone at Port Klang — suddenly pulled out amid reports of mounting debt problems, reported the Financial Times.

The Jebel Ali Free Trade Zone Authority had complained that state bureaucrats were hindering the zone’s operations, while the Malaysian government claimed that the Dubai group pulled out because officials had denied it permission to become a main shareholder.

It emerged that the state-run Port Klang Authority had amassed debts of RM4.6 illion because of cost overruns. The government said it would bail out Port Klang with a soft loan, to prevent its bankruptcy. Officials have also suggested starting a corruption probe into the project.

Analysts told the Financial Times that Port Klang’s troubles are likely to raise doubts as to whether the Kuala Lumpur can fulfil its promise to build and operate the development regions in Johor and the Northern Corridor, which covers Perlis, Kedah, Penang and northern Perak.

However, Mr Song Seng Wun, regional economist at CIMB-GK Research in Singapore, believes that the Abdullah administration has put so much of its prestige into the two projects that it would seek to avoid the problems it inherited from the Port Klang project, which the previous government started. — AGENCIES