SINGAPORE (Sept 9): It did not take long for pundits a decade ago to conclude that the key to Iskandar Malaysia’s success would be Singapore’s participation. And indeed, cheap real estate and the promise of development and growth did lure many, both companies and private investors, over the Causeway. Thirteen years and billions of dollars later, the investor profile has changed even as investors here have been poorly rewarded.

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The region, as a special economic zone spanning an area in southern Johor about three times the size of Singapore, was dubbed the “next Shenzhen”. It would leverage its proximity to Singapore, along with the abundant land and cheap labour that Johor had to offer, and be the city state’s “hinterland”, a lower-cost manufacturing hub for its companies. The idea was that Singapore and Malaysia would collaborate to develop the area and offer international investors the best of both worlds — Malaysia’s lower costs of operations and extensive resources and Singapore’s high-tech and service capabilities. The development was projected to attract about US$105 billion in foreign direct investment and create more than 800,000 jobs for a population of three million by 2025.

However, take-up from Singapore was slow. By 2011, only 5% of the total investment into the region came from Singapore, as this paper reported at the time.

But momentum picked up soon after that, spurred by the completion of so-called “catalytic” projects, such as the international schools and the Lego land and Hello Kitty theme parks, and the signing of a new economic cooperation agreement between Singapore and Malaysia. With that came various announcements of extra connectivity over the Strait of Johor. There were plans for a SingaporeKuala Lumpur High Speed Rail and a Singapore-Johor Rapid Transit System. There was talk of a third road link between the two countries and a new ferry service that would run between Puteri Harbour and Singapore.

In 2013, a number of major developments out of Singapore were announced. One was a joint venture between CapitaLand, Temasek Holdings and Iskandar Waterfront to build a $3.2 billion township in Danga Bay. The other was a massive integrated project, Vantage Bay, with a major residential, retail and entertainment complex, that billionaire Peter Lim was going to build on 9.32ha of freehold waterfront land, which his investment holding firm Rowsley purchased for $358 million. Lim was also going to develop a RM3.5 billion Motorsports City in a joint venture with UEM Land. The Malaysian developer was also in a JV with Singapore’s Ascendas Land to develop a tech park at Nusajaya.

Around that time, however, other major investors had started to come into Iskandar Malaysia. In 2013, one of the biggest real estate groups in China, Country Garden Holdings, launched a 9,539-unit residential development in Danga Bay. The Foshan-based developer, whose 2007 Hong Kong IPO attracted investors such as Malaysia’s Kuok Group and Singapore’s Temasek Holdings, would go on to launch the US$100 billion Forest City metropolis. The project, near the Tuas Second Link, spans four man-made islands three times the size of Sentosa. The first phase of development has a golf resort, hotel, international school and retail complex, in addition to more than 20,000 apartments. Forest City will also have office towers and parks.

Other Chinese developers are also building big in Johor. Guangzhou R&F Properties Co’s Princess Cove mixeduse development flanks the Causeway, while state-owned Greenland Holdings is building office towers, shops and apartments in Tebrau. Yet, as The Edge Malaysia reports in these pages, Iskandar Regional Development Authority CEO Ismail Ibrahim repeatedly states that property was not a promoted sector within Iskandar Malaysia.

Indeed, by 2014, there were concerns of a looming oversupply of upscale property in the region, owing to virtually unfettered development led by the Chinese companies. Prices softened and sentiment weakened considerably.

Since then, the Vantage Bay development has been repositioned as an integrated healthcare project. There will be specialist, community and teaching hospitals, as well as a medical school, research and training facilities, a purpose-built wellness resort and associated facilities, developed over 10 years.

A CapitaLand news release in 2015 tried to sound upbeat. Southeast Asia’s biggest property developer said it remained “optimistic about the potential of Iskandar Malaysia”. It also said the Danga Bay development “will be paced and executed in phases over a period of 10 to 12 years according to market conditions, as originally envisaged”. Not much else has been said or done about the project since then.

Apart from mothballed projects, the much-anticipated transport links, which would have been welcome alternatives to the terribly congested Causeway and Second Link, have yet to be finalised.

Meanwhile, many Singapore residents had also snapped up “second homes” in Johor, lured by the steeply discounted property prices. More than a few of them had hoped to flip those properties for a profit.

In January this year, the scheduled annual meeting of the bilateral Joint Ministerial Committee for Iskandar Malaysia was postponed, following a maritime dispute between Singapore and Malaysia. It looks like investors are going to have to wait a while more for any clarity on the region’s progress.

This story first appeared in The Edge Singapore (Issue 898, week of Sept 9) which is on sale now