This article first appeared in The Edge Malaysia Weekly on November 4, 2024 - November 10, 2024

KULIM Hi-Tech Park (KHTP) will double its total area to 12,000 acres, from 5,557 acres currently, with the development of a new industrial park — KHTP 2.

Currently, all 2,161 acres of the industrial land in KHTP, comprising Industrial Zone Phase 1, 2, 3 and 4 are fully leased. Land clearing and infrastructure development of the next phase — Industrial Zone Phase 4A, measuring 247 acres with 10 industrial lots — are being carried out.

“The deals [for the Industrial Zone 4A lots] are expected to close by 2025, and taking into account the period for construction by the investors, the manufacturing operations may commence as early as year 2026,” says Kulim Technology Park Corp Sdn Bhd (KTPC) group CEO Datuk Mohd Sahil Zabidi.

KTPC is the developer and manager of KHTP and is wholly-owned by the Kedah State Development Corporation.

The 2,161 acres exclude non-industrial components allocated for recreational, residential, research  and development training, and public institutions.

In March this year, The Edge reported that Boustead Plantations Bhd, a wholly-owned subsidiary of Lembaga Tabung Angkatan Tentera-controlled Boustead Holdings Bhd, is in talks to sell 1,200 acres of plantation land in Kulim to KTPC at RM7.50 to RM7.80 per sq ft, bringing the total price to about RM400 million for the 1,200 acres.

On the progress of the land acquisition, Mohd Sahil says negotiations are ongoing, while the business model and development concept for the new area being worked on. “We are bound by confidentiality on the arrangement. However, we are currently exploring a few other locations for our expansion and are not limited to the KHTP-adjacent area.”

In 2016, it was reported that the Kedah government had identified 2,800ha for KHTP 2, which would complement KHTP that was reaching its maximum capacity.

KHTP’s appetite for land now stands out in contrast to when it was established in 1996, with Intel Corp as its first tenant. Approved investments going into KHTP never surpassed RM5 billion annually until 2021 with multi-year investments by China’s Risen Solar Energy Co Ltd (totalling RM42.2 billion) and AT&S Austria Technologie & Systemtechnik AG (RM10.8 billion).

“We used to get maybe two to three investors each year. But in the last five years, we have had at least seven or eight each year,” says Mohd Sahil.

Following the extraordinary investment activity, to the tune of RM65.5 billion in 2021, KHTP’s approved investments for 2022 and 2023 amounted to RM10.8 billion and RM20.1 billion respectively. For 1H2024, it attracted approved investments of RM30.3 billion.

Like its more established neighbour Penang, KHTP has benefited from the diversion of trade due to geopolitics and the China+1 strategy.

However, Mohd Sahil adds that there is more to it than geopolitics and that there are also those who are in Kulim because of its proximity to their customers. “Some are here because they want to expand their products to Asian countries or they want to have another production facility outside China. We don’t have many companies that want to be here just because they want to relocate from China.

“But there are also those who ... supply to other multinational companies (MNCs) that are already here in Malaysia or in Singapore. So for these companies, the secure business is already here.”

Mohd Sahil shares that the first Chinese investor in KHTP was the Jinjang Group back in 2018 through G-Crystal — a glass panel manufacturing company that counts US-based First Solar Inc as its customer.

While KHTP is getting its share of attention from global investors today, Mohd Sahil says the industrial park — the brainchild of the former prime minister Tun Dr Mahathir Mohamad as a means to develop Kedah — cannot yet match Penang’s status as the Silicon Valley of the East.

“It is fair to say that Penang is a preferred destination compared with KHTP as the former shares certain characteristics with the development of Silicon Valley. This may be due to the historical fact that Penang’s first industrial master plan was established in 1970, whereas KHTP only launched its plan in 1990.

“Penang’s manufacturing hub was established much earlier, followed by its continuous development over time, making Penang recognised as the Silicon Valley of Southeast Asia. The proximity between Penang and KHTP creates a good ecosystem where the strength of each area contributes to the overall growth and success of the industry on a national scale,” he says, adding that KHTP does not see Penang as a competitor.

KTPC is also thinking beyond the expansion of the industrial zones with plans to strengthen the surrounding ecosystem to further facilitate the growth of KHTP. Within the park, it has centralised labour quarters for the local workers at KHTP and is collaborating with housing developers for residential development. It is also working on bringing in a well-known hotel brand to accommodate the needs of the investor flow to the park.

KTPC’s role as a manager and developer of the industrial park covers a wide range of activities. It not only develops the industrial land and infrastructure, and promotes the 12 selected industries for the park, it also manages investment properties within KHTP and provides advisory services for investors looking to set up a plant there and assists with project management.

Mohd Sahil describes KTPC as a “one-stop centre” for investors, especially those new to investing in Malaysia. The industrial park manager takes pains to ensure investors’ experience in setting up their plants in KHTP is a smooth one.

“We assist the investor with the incorporation of the company, getting the necessary licences, state [government’s] consent and even opening a bank account. We take around six months to get all these done, when in other states it could take up to 12 months.

“We don’t want investors to just make announcements of the investments that they are doing, we want them to get started as soon as possible to create jobs. So, the sooner they plan and start operations, the better for us,” he says.

As manager of the park, KTPC also takes on the responsibility of seeking new investors for projects that hit speed bumps and cease operations before their 60-year land lease is up.

For example, Aspen Group’s glove manufacturing plant — a joint venture with CMY Capital Sdn Bhd, an investment holding company founded by businessman Tan Sri Chua Ma Yu — that was set up in 2020. It ceased operations within two years due to falling average selling prices of rubber gloves, stiff competition and high inventories.

“We found an investor from Germany (Schott Glass AG) to take over from them [Aspen]. Schott Glass had been in Perai, Penang, for over 50 years and they wanted to expand. We managed to convince them to take over [the leased land],” shares Mohd Sahil.

As for the recent case of ams Osram AG’s new micro LED plant, where the Austrian-German company put the brakes on plans to operate a mirco LED plant at KHTP due to the cancellation of the plant’s micro LEDs by a key customer, Mohd Sahil says KTPC “is working towards assisting them”.

It has been reported that the company is seeking an investor to take over the lease of the micro LED plant. The plant, part of Osram’s US$1 billion multi-year investment, currently lies idle.

It is worth noting that Permodalan Nasional Bhd, the Employees Provident Fund and Kumpulan Wang Persaraan came into the picture when they signed a 10-year sale and leaseback agreement worth RM2.03 billion with Osram.

“We don’t want land to be left idle. If any of our investors have problems, what we will do is to convince them to allow us to get other investors to come in or give back the land to us,” says Mohd Sahil on KTPC’s business philosophy.

While KTPC has ambitious plans for KHTP, funding the planned expansion is a major challenge, hinging on KTPC’s ability to secure adequate funds from the federal government.

“As KHTP seeks to enhance its infrastructure and attract high-tech industries, insufficient financial support can limit its growth and competitiveness in the market,” says Mohd Sahil.

“The rapid development of KHTP also necessitates improvements in public utilities, such as healthcare and education. Speedy allocations and implementation [are needed] to ensure it is in line with rapid development of KHTP to ensure that essential amenities keep pace with industrial growth,” he adds.

The good news for KTPC is that under Budget 2025, Prime Minister Datuk Seri Anwar Ibrahim has proposed the allocation of funds for the expansion of Kulim Hi-Tech Park. The federal government is also proposing to allocate funds for the construction of an auxiliary building at the Kulim Hospital.

The amounts involved have yet to be disclosed. 

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