Local-Foreign Joint-Ventures – Flavour of the Day in Iskandar
Foreign players are a significant part of Iskandar Malaysia's development, both as investors in their own right as well as in joint-ventures with local players
Posted Date: Aug 13, 2010
By: iProperty.com
The recent announcement by Malaysia Pacific Corp Bhd (MPC) that it has found a foreign partner for its two property projects in Iskandar Malaysia is a significant one. For one thing, the partner – Beijing Construction and Engineering Co Ltd – is one of China's largest state enterprises and construction / engineering company, with extensive experience in many major construction projects in the People's Republic. This giant player has now signalled its faith in two projects within Iskandar Malaysia – MPC's Asia Pacific Trade & Expo City (APTEC) and LakeHill Resort City.
BCE has signed a letter of intent to evaluate the development and financing of these two projects. The letter maps out the basis and the roles of the parties in pursuing the project, with a view to enabling Beijing Construction to hold discussions with third parties such as the Iskandar Regional Development Authority, Johor government and other relevant ministries. If all goes well, detailed terms and conditions (contracts) would then be signed in the presence of both governments.
MPC, which had spent many months searching and holding talks with foreign government bodies and private international firms from various countries, is not alone in seeking a foreign partner for a JV. China-based BCE is one of several high-profile foreign players entering Iskandar Malaysia. Others include the Australia-based Walker Group with its RM1.7 billion investment in Senibong Cove, Singapore-based Raffles Education Group, and Chelsea Property Group (a subsidiary of US-based Simon Property Group).
Foreign Partners – Cash and Credibility
There are several key factors which can be seen at play in the entry of these foreign players. For one thing, these foreign partners are almost always cash-rich. In MPC's case, the entry of a strong foreign partner was envisaged as early as last year by industry sources to erase or reduce the bulk of the bank borrowings of the MPC group – no small amount, considering the RM6 billion gross development cost for APTEC and Lakehill Resort City.
Aside from cash, a foreign partner can offer credibility and prestige – particularly a partner with an already internationally known brand name. For example, the Singapore-based Raffles Education Corp Ltd (REC), which aims to set up a multi-institutional education campus at Iskandar Malaysia by 2011, is the largest private education provider in the Asia Pacific and its key markets are China, India and South-East Asia. REC is collaborating with Education@Iskandar Sdn Bhd, a wholly owned unit of Iskandar Investment Bhd, on the development, to be known as Raffles University Iskandar.
Another example is Chelsea Property Group, known for its Chelsea Premium Outlets. Few local players can match the glamour and prestige of being the world's largest owner, developer and operator of upscale outlet centres in the United States, Japan and South Korea. Combine that with Asia's largest public-listed casino (the Genting Group) and Asiatic Land Development, and you have on your hands a high-profile, high-prestige development with name recognition all over the region, and potentially all over the world. This augurs well for the “Malaysian Premium Outlet” (MPO), Chelsea's first premium outlet in Southeast Asia offering international branded items at discounted prices.
Both cash and credibility are no doubt factors in the participation of Australian property developer Walker Corporation, with its RM1.7 billion investment in the “first exclusive waterfront project in the eastern corridor of Iskandar Malaysia”. The project, dubbed Senibong Cove, is spread over 208 acres of freehold land. The entire project will be developed in phases over 10 to 15 years, with the first phase consisting of 244 houses and final completion involving 2,200 homes. Walker is developing Senibong Cove in a JV with the landowner, Iskandar Waterfront Sdn Bhd.
Spillover Effects
Joint-ventures also enable local players to give foreign partners a positive introduction to the local market, in the hopes that they will be emboldened and inspired to continue joint-venturing with higher stakes, or even be willing to explore geographically. This, as pointed out by Minister of International Trade and Industry Datuk Mustapa Mohamed, was the impetus between the recent re-activation of the Malaysia-Singapore Business Council (MSBC), to further boost bilateral trade relations between the two countries.
Hopefully, Iskandar Malaysia will continue to attract more strategic joint-venture partners to yield direct and spillover benefits. With incentives aplenty, ranging from tax incentives to “customised package” incentives for Iskandar Development Region (IDR)-registered companies, it augurs well not only for these JVs to do well, but also for more foreign players to be attracted by this track record of success and enter the market, boosting the economic pie for all.
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