ISKANDAR CASE CHALLENGE 2013 Iskandar Malaysia—The Next Frontier
© 2013 Frost & Sullivan
1
“We Accelerate Growth”
PROBLEM STATEMENT As
the
newly
appointed
strategic
planning
advisor
for
Iskandar
Malaysia, you are entrusted with the responsibility of designing the next phase of
Iskandar’s growth. In this regard, you will be preparing the
Iskandar Malaysia Development Framework (IMDF). An outline of the framework is provided to you in Annex 3. You have identified that for Iskandar Malaysia to become a high-technology knowledge economy (a critical goal set by the Prime Minister of Malaysia, Dato’
Sri
Najib
Tun
Razak)
investments
in
innovation
are
necessary. Specifically, you have been asked to look at the IMDF through three key lenses: Demand Side: How do we further intensify growth in good quality investments? Are we in a position to pick and choose these investments? Supply Side: How do we ensure that the inherent eco-system (supply chain, human capital, business services, infrastructure etc) evolves to support such investments? Inclusive growth: What is the best way to ensure that the growth in Iskandar Malaysia is seen to be equitable? Including domestic and foreign investors; SMEs and large firms; economic development and social sustainability
© 2013 Frost & Sullivan
2
“We Accelerate Growth”
You realise that while this is a coveted job, it brings with it high expectations and the pressure of following through with a successful start to the agenda set out for Iskandar Malaysia. What are the strategies you would include in the IMDF for the development of the Iskandar region?
a.
Create some quick-win strategies which can be implemented and realised in the next 1 year
b.
Develop critical recommendations that can drive Iskandar Malaysia’s development over the next 10 years
c.
The strategies must be able to fulfill the KPIs listed in Annex 4
d.
Guiding questions, which will help you to develop the IMDF are listed in Annex 4
NOTES FOR PARTICIPANTS Guidance for developing case solution
Judging criteria
Your case solution must be in Microsoft PowerPoint and should be not more than 15 slides You must also submit a 5-min audio or video summary of your case solution recording
Quality of Analysis
Clarity of the presentation and solution flow
Language
Creativity in developing an out of the box solution
You can refer and quote any additional information available on Iskandar Malaysia in the public domain. You can also make assumptions where necessary.
The IMDF should be practical and rooted in reality. Out of the box solutions will be given higher ratings
© 2013 Frost & Sullivan
3
Actionable recommendations
“We Accelerate Growth”
Annex 1: Iskandar Malaysia – The Story so Far Establishment Iskandar Malaysia was announced under the Ninth Malaysian Plan (2006-2010) as the new southern development corridor in Johor. It has been identified as one of the catalyst developments to spur the growth of the Malaysian economy. The federal government entity Iskandar Regional Development Authority (IRDA) was created in 2007 to oversee the development plans of Iskandar Malaysia1 . Its contribution to economic development, job creation and investment attraction is seen to be significant in the short space of six years of inception. Cluster-based Development Iskandar Malaysia has followed a Cluster Development Strategy for its growth. Nine (9) strategic clusters for development have been identified – six from the services industries and three from manufacturing.
“Nine strategic clusters for development have been identified for Iskandar Malaysia”
Financial advisory and consulting
Creative industries
Logistics
Tourism
Education
Healthcare
Electrical & Electronics
Petro-chemical and oleo-chemical
Food & Agro-processing
1
http://www.iskandarmalaysia.com.my/news/070504/malaysia-will-the-planned-iskandar-developmentregion-complement-the-role-of-singapore-o © 2013 Frost & Sullivan
4
“We Accelerate Growth”
An Investment Magnet Considerable investments have already been made in this region and it continues to attract investors as depicted in Exhibit 1.
Exhibit 1: Iskandar is an Investment magnet
Exhibit 2 shows the investment targets for Iskandar. It is interesting to note that between 2007 and 2015, the cumulative target is RM 120 billion. An estimate indicates that the cumulative investment value in Iskandar Malaysia as at end of Q2, 2013 stands at around RM 119 billion. The target is to attract investments primarily in:
Manufacturing sectors.
Education
Creative
Tourism
Healthcare
© 2013 Frost & Sullivan
5
“We Accelerate Growth”
Exhibit 2: Iskandar’s Investment Targets2
However, the investment in Iskandar is concentrated towards real-estate investment. Real estate development contributed about RM 45 billion of the total investment of RM119 billion till date. Growing foreign investor interest has led to a sharp increase in real estate prices. This indicates a possibility of a real estate bubble being created in Iskandar. Appropriate measures to manage this growth of real estate prices have not been implemented. A significant increase in the cost of living can have adverse impact on development plans.
2
http://www.dbs.com/insights/conference/2013/slides/Malaysia_InvestingInIskandar.pdf http://www.theedgemalaysia.com/property/246738-iskandar-malaysia-cumulative-investments-atrm119b-in-2q.html 3
© 2013 Frost & Sullivan
6
“We Accelerate Growth”
Exhibit
3
shows
the
list
distribution
of
investments
for
Iskandar
Malaysia amongst various sectors:
Exhibit 3: Investments in Iskandar Malaysia
According to Mr Koh, Chairman of the Johor Real Estate Housing Developers Association, Iskandar will continue to attract investments . Of the RM119 billion investments, 34% are from foreign investors .Countries that top the list of foreign investors in Iskandar Malaysia include: a)
Singapore
b)
Australia
c)
Switzerland
d)
United Kingdom
e)
USA
While Iskandar is attracting foreign investments, it is imperative that investment from local businesses also come in tandem so that local companies can participate in the growth of Iskandar Malaysia. However there is still a long way to go for Iskandar Malaysia. The investments momentum needs to be consistent in order to achieve the RM 383 billion target for the year 2025.
4
http://www.thestar.com.my/Business/Business-News/2013/08/15/Iskandar-will-continue-wooing-investmennts.aspx http://www.theedgemalaysia.com/property/246738-iskandar-malaysia-cumulative-investments-at-rm119b-in-2q.html http://www.theborneopost.com/2013/04/25/iskandar-malaysia-receives-rm5-06-bln-new-investments-in-1q13/ 5
© 2013 Frost & Sullivan
7
“We Accelerate Growth”
Annex 2: Critical Challenges While many measures have been put into place, some factors continue to be identified as growth constraints. These factors are detailed out below:
Manpower It is very important to have skilled labour and the right talent in Iskandar
Malaysia
to
support
consistent
growth
in
investments.
Attracting the right talent has been challenging in the short term, but it could be
easier
in
the
institutions
of
EduCity™
Iskandar
future
with
higher Malaysia
the
setting
learning is
a
in fully
up
of
world
Iskandar integrated
class
Malaysia.
education
“Increasing cost of living is also a significant constraint that can inhibit the growth of Iskandar Malaysia”
hub
recognized as an Entry Point Project (EPP) under the National Key Economic Area (NKEA), which will play an integral part in the success
of
Malaysia’s
Economic
Transformation
Programme.EduCity™ comprises universities and institutes of higher education,
academia
industry
action
and
R&D
centres,
student
accommodations, as well as recreational and sports facilities6. Exhibit 4 shows the proportion of students in each of the courses indicating their area of focus. The exhibit shows that a majority of the students are in the Maths, Science, Business and Accounting categories constituting about 49% of the total students in institution of higher learning in Iskandar. In addition, Iskandar needs to attract experienced talent from other parts of Malaysia as well as overseas. Since this is a developing region many talented individuals may have concerns relocating here. Some of the common
concerns
include
safety,
security,
limited lifestyle and entertainment options. Increasing cost of living is also a significant constraint that can inhibit the growth of Iskandar Malaysia. These challenges need to be proactively addressed to ensure on-going supply of talent to support growth in investments.
6
http://www.iskandarinvestment.com/master-planned-development-projects/educity/
© 2013 Frost & Sullivan
8
“We Accelerate Growth”
Exhibit 4: Distribution of students in various courses in Institution of Higher Learning in Iskandar
Exhibit 5: Airline connectivity from Senai
© 2013 Frost & Sullivan
9
“We Accelerate Growth”
Connectivity Connectivity is essential to attract corporations to invest in Iskandar. Senai International Airport, located within Iskandar Malaysia, is served by 4 airlines to
15
destinations
locally.
As
a
gateway
to
Iskandar
Malaysia, Senai International Airport is just a stone’s throw away from Singapore,
well-equipped
with
structured
highways
(North-South
Expressway, Senai-Desaru Expressway & Second Link Expressway) which provide direct access to the seaport facilities such as Tanjung Pelepas Port, Johor
Port
and
Singapore
Ports.
Providing
sufficient
capacity; Senai International Airport is able to handle up to 3.5 million passengers with 80,000 tonnes of cargo per annum 7. Exhibit 5 shows the airline routes from Senai International Airport. At the moment, Senai International Airport is only connected to Indonesia and Saudi Arabia. There are challenges in the limited options of airline routes from Senai.
For
instance,
there
is
only
1
flight
from
Senai
to
Jakarta on a daily basis. To overcome this constraint, many passengers travel to Singapore’s Changi airport for more options as the airports only a 45minute drive away from Nusajaya. There are also a number of buses that passengers can take across the Causeway. However, there are 2 major issues to consider when one travels from Iskan-
“Connectivity is essential to attract corporations to invest in Iskandar”
dar to Singapore.
Traffic conditions at the Johor-Singapore Causeway (the bridge that connects Malaysia and Singapore) are not predictable, which leads to an uncertainty in the time it takes to reach Changi Airport.
Since passengers need to cross an international border, time taken to clear immigration checkpoints needs to be considered.
7
http://www.senaiairport.com/travellers.asp?menuid=100025&rootid=100013&splid=100001&parentid=100025
© 2013 Frost & Sullivan
10
“We Accelerate Growth”
Lifestyle and Entertainment Options Iskandar
Malaysia
Malaysia's
most
is
set
developed
to
become
region,
Southern
where
living,
Peninsular
entertainment,
environment and business seamlessly converge within a bustling and vibrant metropolis8. The opening of Legoland Malaysia, a 30.7 hectares theme park in Nusajaya in 2012 is part of the plan to make Iskandar Malaysia a place to invest, work live and play. There are more developments in the pipeline. In terms of shopping, Johor Premium Outlet (JPO) was opened with much fanfare
in
2011.
JPO
was
the
first
Premium
Outlet
“A safe and secure environment is a prerequisite for attracting sustained investments and talent”
megastore in Southeast Asia and the 70 th in the world. It is a collection of 80 designer and name-brand outlet stores featuring savings of 25-65 per cent every day9. However compared to Kuala Lumpur, currently Iskandar has fewer lifestyle and entertainment options. Further economic development and growth in local consuming population will attract more investments in lifestyle and entertainment.
Safety and Security A
safe
and
secure
environment
is
a
pre-requisite
for
attracting
sustained investments and talent. The crime rate in Johor has dropped by 3.89% over 2009 to 2011 while the national crime average dropped by 9.81% over the same period. The Government has taken several steps to further reduce the crime rate. In
conclusion,
despite
the
promising
business
environment,
Iskandar still faces some infrastructure, connectivity, lifestyle, safety and security related issues. For sustained economic development a comprehensive strategy to overcome these issues needs to be developed.
8
http://www.iskandarmalaysia.com.my/what-is-iskandar-malaysia 9http://www.nst.com.my/top-news/pm-launches-johor-premium-outlets-1.17830 © 2013 Frost & Sullivan
11
“We Accelerate Growth”
Annex 3: Outline for IMDF and the KPIs There is a need for actionable strategies along various dimensions to achieve the vision for Iskandar Malaysia to be a world-class sustainable region. These dimensions are shown in Exhibit 6.
Exhibit 6 : Dimensions of development for Iskandar Malaysia
© 2013 Frost & Sullivan
12
“We Accelerate Growth”
Annex 4: KPIs and Guiding Questions Guiding Questions The following important questions, in relation to the development of Iskandar Malaysia, need to be addressed while developing the IMDF: Growth Opportunities:
What Industries are best fit for Iskandar’s development?
Talent:
How to attract local and international talent to Iskandar for these selected Industries?
What kind of talent needs to be targeted – is it budding fresh talent or experienced returning Malaysians or experience global executives?
Connectivity:
What measures need to be taken to improve the telecom and broadband infrastructure of Iskandar?
What measures need to be taken to improve transport infrastructure of Iskandar?
Safety & Security:
What can be done to improve the safety situation in Iskandar?
How to best monitor the safety?
Cost of Living:
How to best utilise the proximity to Singapore, keeping the cost of living at check?
Entertainment:
What lifestyle options are necessary to make Iskandar a world class location?
Environment:
What can be done to ensure all the development is sustainable without adversely affecting the environment around Iskandar Malaysia?
© 2013 Frost & Sullivan
13
“We Accelerate Growth”
Key Performance Indicators A.
Economic Impact of the Initiatives – Create 1 million jobs by end of 2015 and 1.46 million by 2025, GDP needs to reach USD43 billion by 2015 and USD 93 billion by 2025. Investment levels should reach RM383 billion by 2025 from the existing RM119billion
B.
Social Impact of the initiatives on the masses – increased literacy levels, poverty reduction, and reduction in crime rates.
C.
Innovation factor – Monitor investments which are R&D intensive. 20% of the exports from Iskandar must be of high-tech products & services.10
D.
Sustainability –Malaysia has agreed for voluntary commitment of reducing the CO2 emission by 40% in 2020 from 2005 levels. Iskandar Malaysia population would reach 2.4 million while total Malaysian population would reach32 million by 2020. The carbon emission on a per capita basis as of 2011 is 6.66 metric tonnes for Malaysia. The carbon emission per industry sector is available in world resources institute 11
10
For definition of High-Tech refer OECD file http://www.oecd.org/sti/ind/48350231.pdf. http://www.wri.org/image/view/11147/_original and http://www.theguardian.com/environment/2011/apr/28/ industries-sectors-carbon-emissions 11
© 2013 Frost & Sullivan
14
“We Accelerate Growth”
About Frost & Sullivan Frost & Sullivan, the Growth Partnership Company, works in collaboration with clients to leverage visionary innovation that addresses the global challenges and related growth opportunities that will make or break today's market participants. For more than 50 years, we have been developing growth strategies for the global 1000, emerging businesses, the public sector and the investment community. Is your organization prepared for the next profound wave of industry convergence, disruptive technologies, increasing competitive intensity, Mega Trends, breakthrough best practices, changing customer dynamics and emerging economies? Contact us: Start the discussion
For more information, please write to iskandarcasechallenge@frost.com or connect with us via www.facebook.com/FSICC
Š 2013 Frost & Sullivan
15
“We Accelerate Growth�