This content is from: Local Insights

Iskandar Development Region

The proposed Iskandar Development Region (IDR), in the state of Johor (the southern-most state of Malaysia), was officially launched on November 4 2006 and designated as a special economic zone. The IDR comprises both greenfield and brownfield development, encompassing an area of 2217 sq km. It leverages itself on, among others, its strategic location (close to Singapore and Indonesia) and good logistics: the North-South expressway, road and rail links to Singapore, and air and sea links to Indonesia and regionally. The IDR is also bordered by three main ports: the Pasir Gudang Port, Port of Tanjung Pelepas and the Tanjung Langsat Port.

Although much development of the IDR is planned over the next 15 years, five flagship zones are proposed as the focal points for development, four of which will be in the Nusajaya-Johor Bahru-Pasir Gudang corridor (also known as the Special Economic Corridor). Many of the catalyst developments are expected to be in the greenfield area of Nusajaya, which will be home to the new state administrative centre and is envisaged to be an education and medical hub. The Johor Bahru City Centre will be the IDR's financial district.

The Iskandar Regional Development Authority (IRDA), an administrative authority established by statute, has been tasked with overseeing and coordinating development of the IDR as well as implementing policies and promoting the IDR.

Incentives

Investors must first be approved by the IRDA and carry out qualifying activities within designated zones (all within the flagship zones). The IRDA will release details of the qualifying activities in the third quarter of 2007. Once approved, these companies will be known as IRDA-status companies and will enjoy:

  • exemption from the Foreign Investment Committee Rules;
  • freedom to source capital globally;
  • the ability to employ foreign employees freely within the approved zones (depending on the amount of space occupied in these zones);
  • exemption from corporate tax for 10 years from the commencement of operations for activities within the zone and outside Malaysia, provided these operations begin before the end of 2015; and
  • exemption from withholding tax on royalty and technical fee payments to non-residents for 10 years from the commencement of operations.

Foreign knowledge workers in the IDR will also be allowed to import or purchase a duty free car for their personal use.

Detailed guidelines on these aspects are yet to be released by the IRDA.

Ng Swee Kee and Aaron Gerard Sankar

Instant access to all of our content. Membership Options | One Week Trial