Iskandar losing shine due to rising costs, labour issues

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#1
Iskandar losing shine due to rising costs, labour issues

It should be seen as 'complementary production base'
Published on Apr 19, 2014 1:15 AM
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Dr Elgin Tan of Sugalight bought a factory in Iskandar earlier this year. The 13,000 sq ft factory in Gelang Patah cost RM3.8 million. The company is planning to move labour-intensive operations there. -- PHOTO: NG SOR LUAN

By Chia Yan Min

THE Iskandar region has long been touted as a cheaper destination for Singapore companies grappling with escalating costs at home, but the shine seems to be fading.

Industrialists cite the rising cost of real estate and labour, a lack of skilled workers and low labour productivity as among the reasons holding them back from shifting to the sprawling development across the Causeway.

"I've heard that it's difficult to hire skilled labour... Also, most of our customers are in Singapore and we would have to deal with Customs fees and longer lead times if we were there," said Mr Johnny Mok, assistant general manager of electronic component assembly firm Add-Plus.

Mr Mok visited Iskandar, which at 2,217 sq km is three times the size of Singapore, to scope out opportunities. But he eventually decided the company should stay put in Singapore.

It is a similar story for Mr Paul Lim, managing director of Craftech Printing Services. He has had to cope with a 10 per cent rise in rent every two years for the company's MacPherson premises, yet remains unconvinced that shifting to Iskandar is the solution.

"We have considered the possibility, but the workmanship and attitude of workers in Singapore tend to be better," said Mr Lim.

Mr Kurt Wee, president of the Association of Small and Medium Enterprises, said the association is "extremely conservative towards moves to Iskandar".

"It hasn't been an entirely successful low-cost venue... When people move there, it's a whole new set of problems," he added.

Wages, for instance, are only 10 per cent to 20 per cent lower than those in Singapore, and sometimes even on a par due to the tight labour supply, said Mr Wee.

Iskandar's proximity to Singapore also makes it tough for firms to hire Malaysians, as many tend to prefer working here and being paid in Singdollars, said Mr Victor Tay, chief operating officer of the Singapore Business Federation.

OCBC economist Wellian Wiranto said productivity levels in Malaysia have yet to catch up with wages. Coupled with rising inflation and government policies put in place to cool the property market, this is "likely to put a bit of a dampener on investor sentiment", he added.

In addition to wages, the rising cost of space in Iskandar is also giving companies pause.

Demand for sites was strong in the first half of last year as the buzz about the region drew companies, said Mr Wong Hsun-Min, head of business banking at RHB Bank Singapore.

The surge in demand since January last year led to a spike in prices, which rose from between RM250 and RM320 per sq ft (S$96 and S$123 psf), to between RM300 and RM400 psf depending on location.

Buying interest was "more muted in the second half of 2013" as a result, said Mr Wong.

While prices in Iskandar are rising, overall land costs are still lower than those in Singapore, said Mr Sam Cheong, executive director and head of the foreign direct investment advisory unit at United Overseas Bank.

Firms can benefit from industrial zones within the Iskandar region that offer freehold industrial property, "which is rare in Singapore", he said.

"Businesses expanding into Iskandar see it as a cost-competitive logistics and processing hub."

Some companies are still finding it worthwhile to have a presence in Iskandar.

Singapore is the biggest investor in Iskandar, accounting for 16 per cent of its total foreign investment as at June last year.

Singapore Chinese Chamber of Commerce and Industry president Thomas Chua said it recommends that Singapore companies "look at Iskandar Malaysia as a complementary production base to their Singapore operations, rather than as a low-cost base".

He is also the chairman of printing and packaging firm Teckwah Industrial Corp, which has bought three factories in Iskandar.

"When I made the decision to start Teckwah's plant in Iskandar, I was very clear-minded about one thing - that my operations had to be highly automated as I could not rely solely on manpower resources, even though the overall labour pool was more affordable," Mr Chua said.

Dr Elgin Tan, managing director of confectionery and ice cream-maker Sugalight, bought a factory there earlier this year.

The 13,000 sq ft factory in Gelang Patah - about 15 minutes from the Tuas Checkpoint - cost RM3.8 million, about one-third the price of similar space here.

"We're planning to move more labour-intensive operations there - for instance, the baking of Chinese New Year cookies," said Dr Tan.

The company's Singapore operations at Jurong Food Hub will continue making ice cream.

"We want to penetrate the Malaysian market, and the proximity to Singapore will help us keep a close eye on the factory," he said.

Mr Cheong said the region still holds long-term potential.

"Iskandar complements what Singapore now has to offer, as Singapore's value-add comes from its financial hub status and marketing and trading expertise."

chiaym@sph.com.sg
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#2
http://www.todayonline.com/business/pm-l...-expansion

PM Lee urges SMEs to consider Iskandar for expansion
BY
TAN WEIZHEN
PUBLISHED: MAY 8, 4:14 AM
SINGAPORE — Small and medium enterprises (SMEs) seeking to venture overseas should seriously consider Iskandar Malaysia as an option, Prime Minister Lee Hsien Loong said yesterday.

Faced with a deluge of challenges including manpower woes, the special economic zone in Johor Baru offers the advantages of lower costs and more land, Mr Lee said at a Malay Muslim Business Conference yesterday.

Acknowledging staffing challenges SMEs face as Singapore reduces its inflow of foreign workers, he stressed that the best way to attract good people is to offer higher wages and exciting jobs. But it is possible only if companies raise their productivity and “climb up the value chain”, he said. When they do that, they will also be in a better position to venture overseas.

“All SMEs want more foreign workers … But we cannot ease up on the foreign worker limits,” Mr Lee said in a prepared speech. “We are still allowing in more foreign workers, so the number of foreign workers here is still growing, although not as fast as before. We know that even this is still not enough, and that SMEs have to turn away business because they cannot find workers,” he said.

By raising productivity and hiring better workers, though, SMEs will be in a stronger position to venture overseas.

Suggesting Iskandar as an option, Mr Lee said: “(SMEs) can take advantage of lower costs, and greater supply of land, while staying close to Singapore … I encourage companies to consider this seriously.”

Mr Lee pointed out various government schemes SMEs can tap to help with their expansion plans or to improve productivity.

He also noted that as Singapore moves to integrate more closely with its Asian neighbours, there will be opportunities for the “bold and enterprising”. TAN WEIZHEN
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#3
IMO, the toll increase might be better for businesses, rather as stated. The jam in Woodland link is non-productive, and the lower Woodland link toll has encouraged the situation. The Tuas link for a more productive option.

Toll increase to further erode Iskandar’s cost advantage, say experts

SINGAPORE — Businesses here looking to relocate some of their operations to Malaysia’s Iskandar special economic zone may have to rework their sums, following the increase in tolls announced by the Land Transport Authority (LTA) on Friday, and the higher transport costs will further erode the shrinking cost advantage, economists told TODAY.

Additional costs incurred by firms that have a presence in both Singapore and Malaysia when the higher tolls kick in on Oct 1 would likely be passed on to consumers, they added.

However, they said the impact on both nations’ economies, including on tourism, would be minimal as commuters and businesses are expected to adjust to the hikes.

For example, Singaporeans may choose to take public transport instead of drive across the Causeway, while firms may locate more operations in one country or ship their goods instead.
...
http://www.todayonline.com/business/toll...ay-experts
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#4
I think a lot of people will be walking over the causeway going fwd.

I will say increased toll is not disadvantage to us but disadvantage to malaysians. Singaporean not many work in msia mostly go in for shopping. But a lot of malaysians come here to work I read figures from many years ago over 900k visitors cross over to singapore daily to work, assume they come in morning and cross back in the evening at $5 per entry for motorcycle that's $10 per day 30 days is over $300 a month cost and less earnings.

I think malaysia gov they didn't expect we would also increase to match the toll amount going to be a lot of unhappy people. Read the news few days back they want to implement hourly rail service from msia to sg, they could be trying to mitigate this unhappiness and sort of go-stan(backtrack) a bit.
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#5
Biggest investment in iskandar is resi property.
"... but quitting while you're ahead is not the same as quitting." - Quote from the movie American Gangster
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#6
(15-09-2014, 09:57 AM)sgd Wrote: I think a lot of people will be walking over the causeway going fwd.

I will say increased toll is not disadvantage to us but disadvantage to malaysians. Singaporean not many work in msia mostly go in for shopping. But a lot of malaysians come here to work I read figures from many years ago over 900k visitors cross over to singapore daily to work, assume they come in morning and cross back in the evening at $5 per entry for motorcycle that's $10 per day 30 days is over $300 a month cost and less earnings.

I think malaysia gov they didn't expect we would also increase to match the toll amount going to be a lot of unhappy people. Read the news few days back they want to implement hourly rail service from msia to sg, they could be trying to mitigate this unhappiness and sort of go-stan(backtrack) a bit.

FYI, motorcycles are excluded from the toll hike.

The Tuas link suppose to ease the traffic in Woodland link, but Tuas link is way under-utilized, while jam is a common scene in woodland link. The toll hike is probably a measure to re-balancing the traffic between the two links.
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡
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#7
(15-09-2014, 10:08 AM)CityFarmer Wrote:
(15-09-2014, 09:57 AM)sgd Wrote: I think a lot of people will be walking over the causeway going fwd.

I will say increased toll is not disadvantage to us but disadvantage to malaysians. Singaporean not many work in msia mostly go in for shopping. But a lot of malaysians come here to work I read figures from many years ago over 900k visitors cross over to singapore daily to work, assume they come in morning and cross back in the evening at $5 per entry for motorcycle that's $10 per day 30 days is over $300 a month cost and less earnings.

I think malaysia gov they didn't expect we would also increase to match the toll amount going to be a lot of unhappy people. Read the news few days back they want to implement hourly rail service from msia to sg, they could be trying to mitigate this unhappiness and sort of go-stan(backtrack) a bit.

FYI, motorcycles are excluded from the toll hike.

The Tuas link suppose to ease the traffic in Woodland link, but Tuas link is way under-utilized, while jam is a common scene in woodland link. The toll hike is probably a measure to re-balancing the traffic between the two links.

the $5 listed per entry toll is for light vehicles I'm assumed that referred to motorcycle.

Sgp side I think people will just cut back on shopping visits to malaysia, those sgporean who live there no choice, msia side, work and tourism affected for them double whammy.
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#8
Thos who have invested in Iskander residential projects have a lot to worry on. The toll basically reduce the flow of traffic beta the two countries. And the many China investors hoping a holiday resort in JB w close proximity to Sg will be disappointed.

Having said that, maybe close to 2016 both countries may decide to lift the toll. And save some grace for the Sg election. Also coming cpf investment review will start soon, and cpf rule relax (slight chg most lightly) may come in 2015. So expect a goody-filled 2015/16.
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#9
There are choices example Batam Bintan but it is very difficult to bring along the car unlike Malaysia. To maintain the G&G JB properties with sinking funds thrown in cost around RM180 to RM220 per month for some condo which is equivalent to S$70 to 87 per month (just sufficient for the HDB parking here).
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#10
Msia probably didn’t expect Spore to raise the toll on the Spore side to match the toll on the Msia side. Spore has said that she is following Msia lead in this increase, which effective put the “blames” on Msia. It went further to say that if Msia decided to lower the toll, Spore will follow suit, thereby putting the ball on the Msia court. Politically smart move.

On the whole, I think Msia is at a more disadvantage than Spore. Just think about these two things: Msia wants Sporean to go there to spend money; and Msian wants to come to Spore to work because they can earn a higher wages. Any factors that affect this two things is at a disadvantage to Msia. Now I wonder if the Johor state will go ahead to implement the levy on Spore cars entering Johor, which they have said previously should be no less than RM50 per entry. This is on top of all toll charges. Their PM has already approved this proposal.
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