Transcripts

The Iskandar Development Region

SUSIE GHARIB: Sovereign wealth funds have taken center stage on Wall Street recently, buying into U.S. businesses with big amounts of cash. But the U.S. isn't the only place where sovereign funds are investing. In Malaysia, a new special economic zone called the "Iskandar Development Region" is expanding just outside Singapore. As Rian Maelzer reports, the funding is coming from Malaysia, the Middle East and one very big American conglomerate.

RIAN MAELZER, NIGHTLY BUSINESS REPORT CORRESPONDENT: Malaysia's government is aiming to transform its southern region into a logistics, high-tech industrial, educational, medical services and entertainment hub. To that end, it's not only investing billions of its own dollars. To entice investors, it's also offering large tax breaks and liberalizing foreign investment rules. It's a move Vince Leusner of the American Chamber of Commerce in Malaysia, applauds.

VINCENT LEUSNER, PRES., AMERICAN MALAYSIAN CHAMBER OF COMMERCE: These incentives are perhaps icing on the cake and I think they will be very well received. There's nothing that business people enjoy more than higher levels of flexibility.

MAELZER: Land prices in the Iskandar special economic zone are as little as 1/30th those of Singapore just the other side of the causeway. The first significant foreign investment since the initiatives launch hasn't come from Singapore though, but from a consortium of investors from the Gulf States. They have pledged an initial $1.2 billion to buy some 3,600 acres of land with an eye to creating entertainment, medical and financial services facilities. It's one of the biggest single foreign investments in Malaysian history and if all goes to plan, it will grow several fold over the next few years, to the obvious delight of Malaysia's Prime Minister Abdullah Badawi.

ABDULLAH AHMAD BADAWI, PRIME MINISTER OF MALAYSIA: They have confidence that the political stability is continuing. They have confidence that the government policy is pro- business policy, pro-private sector policy, pro-investment.

MAELZER: One long time American investor in Malaysia, General Electric, has committed to a partnership with the government-owned, lead developer for the Iskandar project. GE's CEO Jeff Immelt was on hand for the signing.

JEFFREY IMMELT, CEO, GENERAL ELECTRIC: We think it's a great opportunity for security, water, energy, so I think it's going to be a substantial growth opportunity for us.

MAELZER: Analysts agree that for this economic zone to really take off, Singaporean government-linked and private investors will have to play a significant role. That will require the often prickly relations between the two countries to remain cordial, as they generally have been since Badawi replaced the abrasive Mahathir Mohamed as Malaysian prime minister four years ago. Singapore's Prime Minister Lee Hsien Loong said the project would be fundamentally good for Singapore if it succeeded, boosting the island states tourism, manufacturing and services sectors. Singapore and southern Malaysia lie at the heart of a region of some 600 million people. And if this special economic zone develops as the two governments hope, this region may one day be seen as Southeast Asia's equivalent of Chinas Pearl River delta. Rian Maelzer, NIGHTLY BUSINESS REPORT, southern Malaysia.