Malaysia's Iskandar eyes investors from Middle East for fund boost

Dubai: Malaysia is turning to Middle East investors to boost investments in a special economic zone in the south of the country as financial turmoil in the United States slows interest from overseas.

The Iskandar Malaysia zone, three times bigger than Singapore, would be Malaysia's largest economic zone. The government says it should create 800,000 jobs and attract $100 billion (Dh367 billion) in investment over 25 years.

Its proponents say it could be Southeast Asia's answer to China's Pearl River delta, a manufacturing heartland that turns out more than a quarter of China's worldwide exports.

But Malaysia's track record in getting such grand projects off the ground is patchy and Singapore developers are looking to booming China and India instead, worried the plans will be shelved when Prime Minister Abdullah Ahmad Badawi loses power.

Speaking to Reuters ahead of the Gulf Arab region's largest real estate exhibition in October, Arlida Ariff, managing director of Iskandar Investment, said the project was on track, having secured up to August this year 39 billion ringitt ($11.38 billion), 80 per cent of a 47 billion ringitt target by 2015.

"It's a new market [Middle East] for us and an area Malaysia had not really tapped in the past," she said. "Those markets are not as affected by the financial crisis in the US and Europe."

Mainly Muslim Malaysia has been a magnet for Middle Eastern investors flush with petrodollars who have been snapping up banks, hotels and malls.

So far, much of the investment in Iskandar from the Gulf Arab region has gone into real estate.

Islamic lender Kuwait Finance House, Abu Dhabi investment agency Mubadala Development Co, Aldar Properties and Dubai-based Limitless are among the names that have signed up for the multi-billion dollar scheme.

Ariff, previously the planning manager for the developer behind the Petronas Towers in Kuala Lumpur, said investor interest remained with "the exception of financial services."

"We had ambitions to create a new financial district and of course we wanted to attract names like Morgan Stanley and Lehman Brothers to operate in the special economic zones, but obviously some no longer exist ... we will have to continue attracting other names," she said.

Theme park

Iskandar has managed to bring in some multinationals like General Electric and Ariff expects to seal a deal with an international theme park operator by year-end to develop one of three leisure parks in the economic zone.

Reports in April said the government was in talks with Walt Disney.