This article first appeared in Forum, The Edge Malaysia Weekly on September 23, 2024 - September 29, 2024
Thirty years ago, in 1994, the Suzhou Industrial Park was established as a joint venture between the governments of China and Singapore. Despite some initial hiccups, this industrial park is widely seen as a success story in putting Suzhou on the international map with many multinational corporations (MNCs) setting up shop there. World-class industrial parks can similarly be an important positioning feature in the Johor-Singapore Special Economic Zone (JSSEZ) to attract new MNC investments to this area. With a better coordinated marketing strategy by the relevant investment promotion agencies and strategic partnerships facilitated by industrial park developers, such developments have the potential to change the manufacturing landscape in southern Johor. They can also catalyse the development of related service capabilities that can be deployed to other parts of the country and potentially as exports.
The current quality of industrial parks in Malaysia suffers from a wide variance, with many of the older industrial parks facing serious challenges of poor infrastructure which have not been properly maintained as a result of ineffective management. Some of the older industrial parks that are located close to residential areas have not been “legalised” and as such, do not even have public amenities such as fire hydrants. As it stands, there is no proper classification framework for industrial parks.
This is not to say there are no best-in-class industrial parks in the country. AME Elite Consortium Bhd, a publicly listed company, made its name developing award-winning integrated industrial parks in its home base of Johor, including I-Park in Senai, which I’ve visited. Not only is the infrastructure for these parks well developed and well maintained, shared facilities and common recreational areas are also provided. Accommodation for workers is often located nearby. The industrial parks as well as the workers’ accommodation are still managed by the developer. Many of the properties built and managed by AME were packaged into a real estate investment trust (REIT) in 2021.
The characteristics of world-class industrial parks are increasingly shaped by the demands of MNCs that have adopted strict ESG standards for their manufacturing facilities. These include:
• Transparent and detailed master plans
• Energy and environmental sustainability (solar renewable energy (RE) on rooftops, centralised district cooling and heat recovery systems, detailed waste management plans including recycling of wastewater)
• Workers’ accommodation, welfare and safety (especially for foreign workers)
• Risk and safety management (safety of processes and for people, managing accidents, real-time monitoring of activities)
• Management of common property and infrastructure (usually by the developer)
• Internet and mobile connectivity (Broadband, 4G and 5G)
• Alignment with government policies in terms of tax and other incentives
Integration with nearby townships with commercial and residential developments are a bonus.
UNIDO, the United Nations Industrial Development Organization, has devised detailed recommendations in the Industrial, Environmental and Social Infrastructure of industrial parks to achieve optimum objectives for developers and customers. The organisation has also devised a framework for eco-industrial parks, in line with changing global demands.
It may be worthwhile for property developers that are new to industrial park development to consider strategic partnerships with local and foreign players to bring new technologies and value propositions into the picture. These partnerships can raise the value of industrial park properties and help attract higher quality investments, especially if the presence of these strategic partners can increase the brand value of these parks. It may also be worthwhile to explore models of rehabilitating “brownfield” industrial park sites into eco-industrial parks with support from local, state and federal governments, with the possible assistance of international organisations such as the Asian Development Bank and the World Bank. Malaysia-China, Malaysia-Japan, Malaysia-South Korea and Malaysia-EU branded industrial parks with infrastructure players from partner countries to anchor these developments should also be considered.
Examples of strategic local partners include Pantas, a start-up in the climate solutions for carbon and ESG measurement and management space; I-Handal for heating and energy solutions; KJTS for centralised district cooling systems and facilities management; and Solarvest for RE solutions and UEM Lestra for the larger RE ecosystem solutions, just to mention a few. Examples of foreign strategic partners include Keppel Infrastructure and CapitaLand (Singapore), IHI Asia Pacific (Japan) and CMEC (China).
The private sector should also collaborate with relevant government agencies such as the Malaysian Investment Development Authority (Mida) to come up with a proper classification scheme for factories as well as industrial parks, similar to the framework provided by the Green Building Index (GBI) for office buildings. Having such a classification scheme will provide incentives for industrial park developers to provide better infrastructure and incorporate more sustainability features in their master plan. This will slowly upgrade and raise the capability of industrial park developers in the country and get the private sector more used to paying for quality infrastructure and better facilities. In addition, this can create business opportunities for the service sectors involved in building better quality industrial parks such as those involved in energy management software systems and safety and security monitoring systems, as examples.
The JSSEZ provides a fantastic platform to catalyse the development of world-class industrial parks. There will be many more opportunities to replicate the cooperation between UEM Sunrise and CapitaLand, which are working on a joint venture in the development of the Nusajaya Techpark near Iskandar Puteri. JLand’s massive Ibrahim Technopolis (IBTEC) also provides interesting collaborative opportunities.
The experience which Malaysian companies can obtain from strategic partnerships will hopefully allow some of them to spread their wings and expand these developments beyond Johor and our borders.
If world-class industrial parks become a normal part of the economic landscape in Malaysia, with the JSSEZ as the catalyst, our manufacturing ecosystem would look very different within a decade.
A version of this article was presented at the UEM Sunrise Real Estate Forum on Sept 4.
Professor Dr Ong Kian Ming is the pro vice-chancellor for external engagement at Taylor’s University. He can be reached at [email protected].
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