Car-rying on in Pekan
PEKAN – named after the flower, Bunga Pekan, is the Royal Town of the Malaysian state of Pahang and was best known as a trade centre and producer of gold and tin.
Today, it’s gaining recognition as a fast-rising automotive capital. Situated within Pekan is the Pekan Automotive Park (PAP), a 217ha industrial park focused on high value-added manufacturing, with special emphasis on producing premium and alternative technology vehicles.
According to the East Coast Economic Region Development Council (ECERDC), the park is envisioned to become a national and regional hub for car assembly, manufacturing of automotive parts and components, as well as automotive research and development activities.
Based on reports, some RM4.5bil is expected to be generated in investments throughout its three stages of development, with a total of 10,580 jobs to be created. It was expected to contribute RM12bil to the Gross National Income by 2015.
According to the ECERDC, the expansion of PAP is scheduled for completion in 2020 and will result in a dedicated industrial zone, a National Automotive Centre, integrated vendors park, as well as a residential and commercial zone.
“By 2020, PAP is envisaged to be an Asean automotive hub with emphasis on sustainability, both economically and ecologically,” says the ECERDC on its website,’ quoting its chief executive officer Datuk Jebasingam Issace John.
The industrial park will adopt environmental-friendly practices designed to reduce carbon dioxide emissions.
“PAP will draw upon the region’s strategic location as the ideal motor vehicle supply and distribution base for South-East Asia with the expansion of Kuantan Port.”
Among the well-known automotive players that PAP has attracted are Isuzu Hicom Malaysia, DRB-Hicom Defence Technologies (Deftech), Mercedes-Benz Malaysia and Suzuki, among others, with DRB-Hicom Bhd being the anchor tenant in the park.
DRB-Hicom has also set up the International College of Automotive to train human capital for the automotive companies in PAP.
March 2012 saw the first locally assembled Volkswagen Passat leave the line in what was described as a milestone in the history of the country’s automotive industry.
The production of the Passat was a result of a collaboration between Volkswagen and DRB-Hicom. Based on reports, the tie-up, which was established in December 2010, created over 3,000 jobs for the people in Pekan and brought in RM1bil worth of investments in four years.
According to ECERDC, key incentives at the PAP include 100% income tax exemption for 10 years; 100% investment tax allowance on qualifying capital expenditure incurred for five years; customised incentive based on merit of each case; import duty and sales tax exemption for raw materials, parts and components, plants, machinery and equipment, stamp duty exemption on transfer or lease of land or building used for development; flexibility in employment of expatriates and facilitation of human capital development and facilitation funds.
According to Jebasingam, the PAP is in line with the National Automotive Policy (NAP) to attract investments in high value-added manufacturing activities using the latest and high technology.
Among the objectives of NAP 2014 are developing Malaysia as the regional automotive hub in energy efficient vehicles (EEV), increasing exports of vehicles and automotive components, and offering safer and better quality products at competitive prices.
An automotive analyst says the PAP could capitalise on NAP by focusing on attracting new investments in areas such as hybrid technologies and electric vehicles.
“It would make sense to try and attract original equipment manufacturers that are still building their presence in South-East Asia,” he says.
Under NAP 2014, new vehicle manufacturing licences can be given for the production of EEVs, which includes fuel-efficient internal combustion engine vehicles, hybrid, electric vehicles and alternative fuel vehicles such as compressed natural gas, liquefied petroleum gas, biodiesel, ethanol, hydrogen and fuel cell.
Another industry observer says the development and growth potential of the PAP can be steered to cater to the country’s growing total industry volume (TIV).
He pointed out that the Malaysia Automotive Institute (MAI) has projected TIV to hit one million units by 2020.
“Malaysia is expected to be a developed nation status by 2020. With the growing population and growing income per capita, there will be steady growth in TIV. Whether or not we can hit one million, is difficult to say.
“But TIV will continue to grow annually, and a need for an automotive hub, like the PAP, is crucial to meet this demand.”
According to the Malaysian Automotive Association (MAA), the automotive industry has been growing for six consecutive years since 2010, peaking at a new all time TIV high of 666,674 units last year.
However, due to subdued consumer sentiment, a sluggish economy, weaker ringgit and tighter lending requirements, the MAA has forecast TIV to drop by 2.5% to 650,000 units in 2016 against last year.