A towering accomplishment spearheaded by the government of Malaysia, ECER is a tribute to the roaring, resurgent East.
Akey player in Malaysia’s growth, ECER (East Coast Economic Region) occupies a staggering 51% of the geographical area of Peninsular Malaysia and is home to 14% of the country’s population. But then, it is one thing to possess resources and quite another to translate them into a high-impact enterprise. This region, standing as it does as the gateway to the booming Far East and Asia Pacific markets with a combined GDP of USD17 trillion, has everything going for it when it comes to fulfilling this particular promise.
SPREADING SOCIAL EQUITY
Though it is such a tremendous commercial engine, ECER has its heart in the right place. Presided over by the Prime Minister of Malaysia, it seeks to eradicate hardcore poverty within the region, generate higher household incomes through sustainable livelihoods and increase employment and entrepreneurial avenues. Bolstered by focussed growth in the chosen five sectors— tourism, oil & gas and petrochemical, manufacturing, agriculture and education—ECER is expected to raise the profile of the Malaysian economy by boosting knowledge and innovation, addressing inequalities, improving the quality of life and strengthening the region’s infrastructure.
One of the main features of the poverty alleviation programme is the Agropolitan Project, which is an integrated socio-economic initiative to help the hardcore poor communities within the region. Under this project, land is allocated for livestock farming, crop planting and aquaculture, supported by processing and marketing activities and resettlement of hardcore poor families. ECER will also play a part in supporting Malaysia’s New Economic Model (NEM) for the creation of a high-income society in the country by 2020. The development of human capital is thus prioritised.
KEY GROWTH TARGETS
According to the ECER Master Plan, 2020 will mark the culmination of all the efforts and targets envisaged by the authorities. By then, the total population of the region is projected to increase to 4.3 million, leading to the creation of 560,000 new jobs. Nearly half of these are expected to come from the proposed SEZ within the ECER, which could contribute USD6.75 billion to the country’s GDP.
ECERDC (ECER Development Council) has introduced various human development initiatives in the region and engaged with universities under its Centres of Excellence (COE) initiative. The authorities also recognise that coordination between the Council and other bodies, cooperation between all the states in the regions, efforts to complement other regional development plans and incentivising public-private partnerships will be critical to the attainment of these targets.
INCENTIVES FOR INVESTORS
The 5 key economic clusters in ECER— tourism, oil & gas and petrochemical, manufacturing, agriculture and education—are all packed with growth potential, and the ECER is also going all out to incentivise investments in them. Some of the fiscal incentives include income tax exemption of up to 10 years, Investment Tax Allowance (ITA) amounting to 100% of the qualifying expenditure for up to 10 years and exemption on stamp duty, import duty and excise tax.
To encourage research & development (R&D) in the region, investors are also eligible for double deduction on cash contribution to approved research bodies. Investors are, however, required to commence operations prior to 31 December 2015 to avail these incentives.
In addition, non-fiscal incentives include discounts for land premium, quit rent and land assessment, guaranteed land lease periods for a specific period and flexibility in the employment of expatriates.
Investors with the ECER status can also benefit from the special flexibility in foreign exchange administration under Bank Negara Malaysia. A registered business entity supported or approved by ECERDC to undertake projects and activities within this region may qualify for this exclusive status.
In terms of investment, the Middle East has already been identified as a focus market. In 2010, ECERDC organised an investment mission led by Tun Abdullah Haji Ahmad Badawi, Malaysia’s former Prime Minister, to Abu Dhabi as well as Jeddah and Riyadh in Saudi Arabia to attract investors. This mission has paid rich dividends in the form of the Dubai-based Oilfields Supply Center Ltd (OSC) and Tanjong Agas Supply Base and Marine Services Sdn Bhd (TASBMS) having signed an agreement to build, own, manage and operate a Multifunctional Common User Supply Base within the Tanjong Agas Oil and Gas and Logistics Industrial Park (TAOGLIP), located in the ECER SEZ. Both these companies have committed a total initial investment of USD200 million for the development of the supply base.
POTENTIAL AREAS FOR INVESTMENT
The vast area under ECER covers the states of Kelantan, Terengganu and Pahang and also the district of Mersing in Johor.
Of these, Kelantan’s geographical location makes it an ideal centre for cross-border trade and tourism on the East Coast. Alongside an education hub in Kota Bharu-Bachok, the region will also be home to the ‘plug and play’ Pasir Mas Halal Park, which is currently being promoted to Middle Eastern investors. The park will also act as a hub for the export of Halal food products through a Free Zone.
Terengganu’s greatest strength lies in its tourism potential. The Kuala Terengganu City Centre (KTCC) will be a Heritage Waterfront City and a gateway to the East Coast for foreign tourists. Terengganu is also the leading oil, gas & petrochemical hub in Peninsular Malaysia and will benefit from the establishment of the Kertih Polymer Park (KPP) in the ECER SEZ.
The state will also house numerous goat breeding farms as part of the livestock sub-cluster as well as a 1,139- acre herbal farm in Pasir Raja, Dungun. Additionally, it will promote human capital development through a network of reputable colleges and universities in the Knowledge Park.
Pahang, the largest state in Peninsular Malaysia, will be the centrepiece of ECER’s industrial and logistics activities. Significantly, Pahang will be the centre of the ECER SEZ, which is expected to catalyse growth across the region. Another notable development in the state is the Gambang Halal Park, a 200-acre ‘plug and play’ property, which also offers vast opportunities to Middle Eastern investors, with a focus on high value-added industries. Other key projects in Pahang are the Palm Oil Industrial Cluster (POIC), Pekan Automotive Industrial Park, Rompin Integrated Pineapple Plantation and a 825-acre herbal farm in Chegar Perah, Lipis. The state will also focus on the livestock sector, particularly on cattle production.
The district of Mersing is expected to emerge as a vital mainland coastal tourism destination and will also see various initiatives to support the local fishing community, through developments such as the Fish Processing Park in Endau.
MESSAGE TO THE WORLD
According to the Council, every challenge facing the region represents a unique opportunity for its investors. Many infrastructure projects are still in the implementation stage, indicating considerable room for investments. In comparison with the West Coast, the ECER has fewer education institutions, which translates into opportunities for industry players to establish their presence here.
Opportunities also abound in downstream economic activities and human capital development. In keeping with the government’s keenness to play an active role in championing the growing markets of the Far East and Asia Pacific, ECER is set to take the region’s economic growth to new heights.
ECER SPECIAL ECONOMIC ZONE (ECER SEZ)
Stretching from Kertih, Terengganu, to Pekan, Pahang, a vital component in ECER’s investor attractions is the ECER SEZ, which will act as the catalyst for focused economic growth in the region. Endowed with a strategic location facing the South China Sea, which translates into easy access to regional as well as international markets that include the ASEAN and Asia Pacific regions, the ECER SEZ will consist of 4 ports, 2 airports and innovation zones to support the high- value manufacturing, petrochemicals and plastics industries, as well as agriculture and tourism clusters.
A NUClEUS OF GROWTH
In keeping with its central presence in ECER’s scheme of things, by 2020 the SEZ is expected to account for 50% of all jobs in the region and add USD6.75 billion to Malaysia’s GDP. Its investment potential is estimated at an impressive USD26.4 billion. Good infrastructure is one of the strongest magnets for investors interested in the SEZ. It covers 2 growth areas in the central and east coast corridors and is well connected to Kuala Lumpur and the West Coast through the East Coast Expressway. The future looks bright for the SEZ, thanks in no small measure to the availability of competitive human capital, a favourable socio-economic climate, government support and investor-friendly business policies.
ECERDC has already developed a One-Stop Centre for potential investors in ECER, and it is also prepared to expedite the approval process, supported by a high-power task force including heads of state agencies. ECERDC could also assist in obtaining lower land premiums to ease the initial capital expenditure burden off investors. Certain companies may also apply for ECER status, which will qualify them for special incentives, loan application facilitation, faster application process and unlimited hiring of knowledge workers and skilled expatriates. At the same time, investors are also encouraged to leverage on the readily available human capital from ECER itself.
One of the key components of the SEZ is the development of the Kuantan Port City. Located in Pahang, the largest state in Peninsular Malaysia, the port is expected to become a gateway for Asia Pacific trade. It is slated to handle over 30 million tonnes of cargo annually by 2020, almost twice its capacity in 2009. Other major upgrades to facilities in the SEZ are also planned for Kemaman Port and Kuantan Airport. Among the other establishments, the Pekan Automotive Industrial Park (AIP) has already attracted global giants such as DRB-Hicom, Mercedes and Suzuki. Tourism will also get adequate representation in ECER SEZ through projects such as Pantai Sepat Mainland Coastal Tourism, Cherating Tourism Town, Kijal Mainland Coastal Tourism and Pekan Heritage Tourism.
A BEACON FOR THE FUTURE
The integrated nature of the ECER SEZ makes for an excellent investment case and sets it up as a truly unique and distinctive world-class business destination. Apart from its tremendous development potential, its biggest attraction lies in all the development that has already taken place. The infrastructure is in place, making things conducive for rapid expansion. This is a treasure for the future, one that will be savoured for a long time to come.