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Services sector investment picking up in Iskandar M'sia

posted 2 Oct 2011, 05:31 by Straits View

AHEAD of Iskandar Malaysia's projected tipping point next year, the signs are looking good for its services sector, particularly tourism and healthcare.

By June, the special economic zone in southern Johor had received a total of RM76 billion (S$31 billion) in committed investments - of which RM30 billion worth, or 40 per cent, has been realised.

Most investors have been drawn to the manufacturing sector, which attracted the bulk of investments since Iskandar's launch in 2006. But investments have also picked up in the services and property segments, owing to increasing demand.

Take healthcare, one of six targeted service-based areas, where pent-up demand is evident.

Columbia Hospital, part of Seattle-based Columbia Pacific, has seen more than 8,000 patients since its opening in June last year, Hwang-DBS Vickers said after a recent visit to Iskandar. Significantly, up to 40 per cent of patients were foreigners.

The US operator appears to have made the most of its 'first mover advantage' - its US$22 million, 82-bed hospital in Nusajaya is the first to be built in a dedicated 27-hectare medical and healthcare hub. The group has eight hospitals throughout the country and plans to build another five.

Much cheaper medical care and hospital beds have proven attractive to foreigners including Singaporeans, as evidenced by the 80-90 per cent occupancy rate enjoyed by Columbia with the average stay being two days.

Sovereign wealth fund Khazanah Nasional also has plans for a 300-bed hospital in Iskandar, which will be managed by hospital operator Pantai.

Feedback from fund managers (FMs) polled by Hwang-DBS also suggests healthcare to be a no-brainer, especially if standards are high and costs reasonable. Half of the 20-30 FMs expressed a willingness to patronise Iskandar's healthcare facilities.

Interestingly, most of them appeared keener on tourism facilities: 67 per cent said they would consider Iskandar for a weekend getaway; 72 per cent planned to visit theme parks; and a whopping 89 per cent desired to visit the Johor Premium Outlet. A megamall of sorts, its heavily discounted designer goods are expected to attract hordes of shoppers once it opens in November.

Other targeted service areas - creative, financial advisory & consulting, logistics, and education - appear to be lagging, however.

For example, only 11 per cent of FMs were prepared to consider Iskandar's EduCity. Change could come once up-and-coming institutions of learning such as the UK's Marlborough College, Raffles University, and Management Development Institute of Singapore open their doors.

The FMs listed infrastructure, security and government policy as the top three factors required for the zone's success. Overall, some 53 per cent were positive about Iskandar post-visit, 41 per cent neutral and 6 per cent negative.

But if the increasing demand for real estate and rising property prices are any indication, investors and the general public are warming to Iskandar.

Developers have indicated that future launches will be priced considerably higher. One of the biggest landbank owners, UEM Land, has plans to sell its Imperial@Putri Harbour condominiums at RM600- 700 psf.

Developer WCT intends to price its 1Medini units at RM450 psf, or 50 per cent more than two years ago.

Industrial plots will also cost more. UEM Land is looking at RM60 psf for land at its Southern Industrial and Logistics Cluster (SiLC). Previously, it was about RM35 psf.

Source: Business Times © Singapore Press Holdings Ltd. Reprinted with permission.