Bayan Lepas all over again

IF you were walking around Bayan Lepas in Penang in 1970, it is unlikely you would have thought that the padi fields in the sleepy seaside village would one day give way to vast industrial complexes.

Such gargantuan plans need detailed planning and strong personalities to execute and succeed.

While Penang, with its Silicon Valley moniker is a success story, other places have been even more impressive with their planning and execution strategies.

Can you imagine what Singapore and China looked like in the 1970s?

Realising ambitious plans is not rocket science. It requires steadfast focus on execution and getting everyone, including government departments and their officials, to believe in the vision and work towards it.

Even so, walking through places like Johor Baru and Kuching today, one cannot help but wonder if their ambitious themes (and that of their states) will ever be realised.

While Johor Baru is quite developed, it is still playing that lower-cost role to its super rich neighbour, whether it’s for tourism or business.

When Iskandar Malaysia was launched 18 years ago, it was premised on bridging the property valuation gap with Singapore.

There was some success but Singaporeans or other foreign investors did not come in hoards to buy up real estate in Johor.

Economic activity was limited to some back-end assembly or manufacturing work, which may have still come off without the Iskandar Malaysia blueprint.

Going by the soon-to-be finalised Johor-Singapore special economic zone (JS-SEZ) plans, the ambition is to up the ante for Johor.

Imagine venture capitalists from Singapore funding a South Korean startup in the JS-SEZ, building new memory chips tailored to hyperscale data centres.

The venture capitalists do the transaction with ease minus red tape and banking charges; the South Korean start-up comes to Johor drawn by incentives such as affordable rentals, lower taxes and special work permits but most importantly, due to the data centre (DC) planned build-up in Johor. The DCs will be the startups’ addressable market.

Given what Johor is today, it is difficult that this scenario can materialise. But if Bayan Lepas could make that drastic transformation in the 1970s, shouldn’t the JS-SEZ today be a piece of cake?

The number of believers, however, seems to be growing.

Part of the optimism stems from the fact that the DC boom in Johor is real. But DCs alone will not necessarily bring about economic spin-offs as employment numbers are low due to their highly automated nature.

One school of thought reckons that the DCs’ presence in Malaysia will lead to software development but then you do not need DC presence for that.

What this government is aiming for though is an industry that caters more for the hardware that DCs will need. Think semiconductor chips and servers. Even then it is a long shot, as DC owners can scout globally for the best and cost-effective hardware solutions.

Other factors that need to fall into place for the JS-SEZ to work entail smaller but cumbersome details that involve two countries.

Singaporeans working in Johor will need to get access to the same quality and cost of medical care they get in their country.

The immigration authorities on both sides need to ensure that the robust new systems they are talking about, from QR codes to multiple autogates, work well and reduce security risks.

Financial authorities in Malaysia need to be willing to give the JS-SEZ special incentives without worries about drops in revenue collection (if it involves lower tax rates) or that other states could also make similar demands.

The list goes on and this is why it will ultimately boil down to execution.

Similarly, fly into Kuching today and you realise it is still the quiet friendly town it has always been. Nothing has changed except for a few things — flights are full and more expensive.

Businessmen are flocking to the state to explore high-end industries, such as green hydrogen production, petrochemicals, and mining, after the recent discovery that the state has many more valuable minerals.

Sarawak is open for big business. But this week, news and analysis on the state’s claims over resources located offshore again took centre stage. It is a complex legal matter. As such, it would be best resolved in the courts.

It is noteworthy that a key aspect of what Sarawak is looking for is a significant portion of the gas extracted offshore, to be used to power and attract industry in the state.

At the moment, the gas extracted is treated and liquified before being exported to other countries in long-term contracts which generate significant revenues for Petroleum Nasional Bhd.

Sarawak also benefits by receiving royalties and taxes from the hydrocarbons that are extracted, fees which have been raised in recent years.

Since 2019, these payments have become Sarawak’s single largest source of revenue, delivering RM18.6bil since then.

Sarawak’s intention to build up industry powered by the gas from its waters makes sense.

This week, Sarawak Premier Tan Sri Abang Johari Openg launched the Sarawak Gas Roadmap (SGR) summit in Kuching.

According to Abang Johari, the state launched the SGR in 2021 as it recognised natural gas as a bridge fuel to enable industrial expansion while facilitating the state’s energy transition.

Sarawak’s plans require significant building blocks and again, it will all boil down to execution and making the right bets on technology and other advancements.

Only then will Kuching (and Johor Baru) see the kind of big changes that Bayan Lepas experienced in the 1970s.