Malaysia's Massive Iskandar Project

Recently-installed Malaysian prime minister Najib Tun Razak last week threw his full weight behind the ambitious Iskandar development project on a visit to Singapore designed to drum up new investment.

But his call for Singaporeans to reap the economic benefits on offer in the Johor-based development zone, which is situated just over the causeway from the Lion City, could further damage relations with his one-time mentor, former prime minister Mahathir Mohamad, if for no other reason than that it was launched by his ill-starred successor and the man Mahathir learned to hate, former Prime Minister Abdullah Ahmad Badawi.

Calling the project ambitious is an understatement. It covers 2,217 square kilometers and is three times the size of Singapore itself, not to mention 48 times the size of Putrajaya, the vast government complex south of Kuala Lumpur that Mahathir himself championed. The area, which encompasses much of southern Johor, is estimated to be home 1.35 million people, 43 percent of the state's 3.17 million people.

The rationale behind the massive development, which was launched by Badawi in 2006, is to take advantage of Johor's strategic location and turn the sleepy state into an advanced business, education and tourism hub. The hope is that Iskandar can tap into Singapore's success in the much same way that Shenzhen has profited from its proximity to Hong Kong and Indonesia's Batam Island has profited from its proximity to the Lion City to the south.

But in a country where crony capitalism is hard-wired into the system, political leaders have tended to champion large-scale development projects that benefit their business allies without properly assessing the wider economic rationale for such endeavors. That is why new leaders in Malaysia often end up jettisoning the grandiose schemes promoted by their predecessors, just as Badawi put a stop to Mahathir's plan for a new crooked bridge to link Johor Bahru with Singapore.

However, Najib now appears ready to break with history by pushing ahead with the expansive Iskandar project, which was the brainchild of the man he helped to hound from office. Such a move is likely to put further strain on Najib's relationship with Mahathir, which has already been tested by the PM's decision to disregard the elder statesman's advice and not contest the upcoming Penang by-election.

Mahathir, who has long had a stormy relationship with Singapore, was quoted last year as saying Singaporean investors could force Malays out of the project.

"After the land is sold, the Malays will be driven to live at the edge of the forest and even in the forest itself," he was quoted as saying last May. "In the end, the area in Iskandar Malaysia will be filled with Singaporeans and populated with only 15 percent Malays."

According to the project's website, ethnic Malays comprise 48.2 percent of the area, Chinese 35.8 percent, Indians 9.4 percent and foreigners the rest. That compares to an overall Malaysian population that is about 55 percent Malay and 25 percent Chinese and Indian about 8 percent. Singapore, just across the Causeway, is 76.8 percent Chinese and 13.9 percent Malay, with Indians making up about 8 percent.

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Najib's wholehearted backing is crucial for Iskandar at time when the project and the Malaysian economy as a whole are under severe pressure because of the global financial crisis. Despite his lofty rhetoric about hopes that Singapore-Malaysia relations "can blossom into something beautiful like the orchid", his visit to the Lion City was in reality driven by more earthy matters, such as the need to attract Singapore dollars into Iskandar.

Following a helicopter tour of the development zone just before he landed in Singapore, Najib told reporters that Iskandar was "a very promising and exciting development for Singapore to consider…whether at the strategic level…or for individual Singaporeans".

Iskandar has already secured more than RM 42bn ($12bn) of the RM110bn that it hopes to attract by 2025. A brand new state administrative centre, a plush yachting marina and several up-market gated housing estates have already been built and construction has begun on the site of a new Legoland theme park and a medical school to be operated by the UK's Newcastle University. But Najib and the Iskandar team need to ensure that the flow of money does not dry up as the initial enthusiasm surrounding the project wanes.

The man charged with bringing in the money, Harun Johari, is confident of fulfilling this challenge.

"By the end of April, we had already attracted more than half of our RM 3bn investment target for this year," explained Harun, who is chief executive of the Iskandar regional development authority, on the sidelines of a property investment exhibition in Singapore's Suntec convention centre. "And of out the more than RM 42bn of investment committed to Iskandar so far, 30 percent is already in place on the ground."

With just 15 percent of this investment having come from the government, Harun believes that that the private sector, both within Malaysia and outside the country, is fully behind Iskandar.

However, he accepts that relations with Singapore need to improve if Iskandar is to live up to its promise. Singapore is already the third biggest investor in the project after Japan and Spain but Iskandar needs co-operation from its neighbor, not just cash.

To truly prosper, Iskandar will need to ensure a free flow of people and goods to and from Singapore. Anyone who has had the misfortune to be stuck in the lengthy weekend traffic jams on the Causeway that connects Singapore and Malaysia or held up in the snaking queues at immigration and customs, will know that this goal is a long way off.

Harun insists that the situation is starting to improve, noting that the Malaysian immigration authorities have agreed to pilot a fast-tracking system, whereby those entering the country from Singapore will no longer have to fill out the time-consuming immigration cards.

"We're starting to see better Singapore-Malaysia relations under Najib but trust only comes through experience," added Harun.

While Najib and Harun may be ready to welcome Singapore with open arms, the same is not necessarily true of many Johor citizens, whose natural rivalry toward their neighbor has been sharpened by the hostile views of Mahathir and several other key politicians from the ruling United Malays National Organisation.

The perception that Iskandar would precipitate a voracious land-grab by acquisitive Singaporeans was fueled by the approach of the previous management team, which often sold the project as a large property play for wealthy investors.

Harun, who took charge in March, says that he is now working hard to dispel this view by engaging with the local community in Johor and emphasizing Iskandar's aims of creating 800,000 jobs and upgrading the state's obsolete infrastructure.

"The acceptance of the local population is key and we want to make sure that they have the opportunity to benefit," he insisted.

Another problem in terms of public perception is that such large-scale construction is a slow process and people remain skeptical so long as can they see so many building sites and so few completed projects.

But Harun called on the public to be patient, pledging that flagship developments like the Legoland theme park are on track to be completed by 2012.

"If we don't deliver by 2013, then we've failed," he said.