Thursday, August 30, 2007

Malaysia Massive US$ 51 Billion Northern Development Plan

Prime Minister Abdullah Ahmad Badawi on Monday launched a 51-billion-US-dollar development masterplan to spur economic growth and reduce poverty in northern Peninsula Malaysia.

The Northern Corridor Economic Region (NCER) is a government initiative to boost the economy and raise income levels in the northern states of Perlis, Kedah, Penang and Perak over 18 years.

'Projects and programmes to enhance human capital, infrastructure, and competitiveness in the region will involve about 177 billion ringgit public and private sector investments from 2007 to 2025,' a government statement said.

'The focus will be to turn the NCER into a modern food zone of Malaysia, increase the value-add in the manufacturing sector and strengthen tourism,' it said.

Of the 177 billion ringgit, one-third will be spent by the government, with the balance to be undertaken through private finance initiatives and private sector investments, the statement said.

'It will be led and driven by the private sector and market imperatives,' it said, adding that the masterplan aims to create half a million jobs by 2012 and one million by 2018.

The government added that financial incentives will be given to promote agricultural transformation through economies of scale.

Abdullah launched the project in the Kedah state capital, Alor Star.

The masterplan includes key benchmarks, with the agriculture sector expected to increase its exports to 48 billion ringgit by 2012 from 32 billion ringgit in 2005.

For manufacturing, investments are projected to jump to 24.3 billion ringgit by 2012 from 16.5 billion ringgit in 2006, while the tourism sector aims to raise average spending per visitor to 3,034 ringgit by 2012 from 1,890 ringgit currently.

Government-linked conglomerate Sime Darby, which drew up the masterplan for the Northern Corridor, will act as project manager and investor.

The launch of the NCER comes months after the prime minister kicked off the Iskandar Development Region in southern Johor state.

Abdullah, also finance minister, has said Malaysia aims to attract 50 billion ringgit to the IDR in the next five years as part of an initiative to turn the area, 2.5 times the size of neighbouring Singapore, into a new Asian metropolis.

Today the Prime Minister (Abdullah) told the Japanese Premier that Malaysia wants Japanese investors to participate in the IDR," he told reporters after a delegation meeting between Japan and Malaysia here.

"We have launched the Northern Corridor, while the Eastern Corridor as well as the Sabah and Sarawak Corridors, when they are launched, we feel that the Japanese has a very constructive role to play and Malaysia has benefited as a result of economic relations with Japan," he said.

All eyes on eastern corridor

WITH the Iskandar Development Region (formerly the South Johor Economic Region) kicking off rather successfully, the spotlight is now on the Petroliam Nasional Bhd (Petronas)-led Eastern Corridor Economic Region.

The eastern corridor development blueprint, which is expected to be out this quarter at the earliest, is said to be focused on the socio-economic and industrial development of the region involving Kelantan, Terengganu and Pahang.

The development of the eastern corridor, together with the northern corridor spearheaded by Sime Darby Bhd and southern corridor (Khazanah Nasional Bhd) are part of the Ninth Malaysia Plan (9MP), which has the objective of spreading economic development throughout the country.

Billions are expected to be poured into the region – RM22.3bil from Government coffers under the 9MP (which is a big 56% jump from the 8MP) and about RM40bil from Petronas' investments in O&G projects there.

“We expect the modus operandi of the eastern corridor development to be similar to the Iskandar Development Region in terms of the setting up of special bodies and institutions akin to the Iskandar Regional Development Authority and South Johor Investment Corp.

“This is to ensure smooth implementation, active engagements and balanced representation among the private and public sectors, Petronas (as the lead agency in the project), the federal and State Governments,” Aseambankers said.

So, what's new that could emerge from the eastern corridor development?
“Setting up a shipyard in Terengganu’s backyard could also lead to greater economic activities, considering that there is a massive need for offshore marine vessels to support the O&G activities there.

“We also foresee further expansion at existing seaports and the centralised tankage facilities in Kertih,” Aseambankers said.

Kelantan offers ample opportunities in terms of new infrastructure requirements to support the increasing activities in the Malaysia-Thailand Joint Development Area and potential O&G discoveries offshore Kelantan.

“We favour the idea of setting up O&G infrastructure (supply base and petrochemical site) in Kelantan similar to that of Terengganu, as it is strategically located and could potentially become a regional base for Malaysia-Thailand-Vietnam O&G activities,” Aseambankers said.

It added that a new cracker plant could be built in the region as well.
The development of the eastern corridor as the country's petrochemical hub is now well underway.

“The challenge would be to spearhead its growth into a leading petrochemical and O&G hub in the region by catalysing an inflow of investments in related industrial, commercial and infrastructure development,” he said.

He believes further expansion and deepening of the petrochemical hub will be the eastern corridor's core economic foundation and strategy for growth and industrial development.

Yeah expects the potential size of the investments, together with Petronas' ongoing capital investment in O&G exploration, development and production activities to rival those in the other corridors.

“Given Petronas' strong profits in recent years, an assumed 10% to 20% re-investment rate of after tax profits would result in an internal financing capacity of RM5bil to RM10bil annually,” he said.