Iskandar, the latest development in Johor, is leading the charge in southern Malaysia. It is set to be a metropolis buzzing with economic activities, including financial advisory, logistics, creative industries, leisure and tourism, education, health care, petrochemicals and electronics.
Given Iskandar’s proximity to Singapore, Singaporeans have shown strong interest toward residential, commercial and industrial properties in and around Iskandar – which is about three times Singapore’s size and provides cheap land and labour for foreign investors who want to pursue development there.
We believe Iskandar will become the Shenzhen of Singapore, and there are many reasons for this comparison to Hong Kong’s northern neighbour. In purchasing power parity terms. Singapore’s per capita GDP¹ was USD 56,500 in 2012, compared to Malaysia’s USD 17,000; property, rent, food and services cost a lot more in Singapore compared to Iskandar. Their real exchange rates, and therefore their relative competitiveness, have diverged in recent years, with Singapore’s real effective exchange rate with Malaysia appreciating sharply since 2010.
To deal with these factors, Singaporean companies must improve productivity or outsource labour-intensive or low value-added activities to lower-cost countries. Already, there is evidence of goods and services companies from Singapore shifting some of their operations to its cross-border neighbor.
As Singapore becomes more expensive, the number of commuters living in Malaysia, but working and studying in Singapore, is rising rapidly. Properties in Singapore have always received tremendous interest from the region’s wealthy, but now we are seeing Singaporeans looking at Malaysian properties with strong interest because of lower prices.
Singapore and Malaysia have lowered intra-regional tariffs under the ASEAN² Free Trade agreement. Looking at the example of the US and Mexico post- NAFTA³, US exports have increased in ever-rising quantity compared to Mexico, with the share of total exports reaching an all-time high in 2012. We believe the development of Iskandar will be a win-win situation for Singapore and Malaysia.