Expanding into Asia-Pacific while keeping costs low can be challenging for businesses. Attracting talent is another concern. Singapore-listed electrical and furniture retailer Courts Asia found a solution just across the border. Last year, it set up the Courts Solutions Centre in Iskandar Puteri, in the burgeoning Iskandar district of Johor, Malaysia. The regional shared service centre supports the company’s portfolio analysis and credit operations.
Courts Asia is one of 14 companies to benefit from the GBS (Global Business Services) Iskandar programme. Launched in 2016, GBS Iskandar aids companies in establishing or expanding their GBS operations — i.e. shared services such as finance, human resources, IT and customer support — to the Iskandar district so they can take advantage of lower overheads and draw from the local talent pool. The programme is managed by i2M Ventures, a wholly-owned subsidiary of Khazanah Nasional — the strategic investment fund of the government of Malaysia. Other companies that have made the move include consulting firm Frost & Sullivan, outsourcing and tech services provider Aegis and professional services firm KPMG.
Iskandar Malaysia serves as a regional gateway for companies that want to be cost-efficient, says Zulfiqar Zainuddin, managing director of i2M Ventures. The district is more than a “real-estate play”, he says. Its development is in line with the government’s strategic focus on GBS as a pillar of growth. In the 11th Malaysia Plan (2016 to 2020), GBS is identified as a key sector that will add high-value jobs to the economy. GBS Iskandar aims to generate RM6.5 billion in investments and create 14,000 high-value jobs by 2020.
The nascent Iskandar Puteri district, which recently received city status, is set to be a business hub synonymous with knowledge-based jobs, Zulfiqar reckons. This is pertinent as the concept of GBS gains traction in the corporate world. “GBS today has become what Information Technology was in the early 2000s. At that time, people began to understand that IT is the DNA of any organisation. Today, if you cut across any sector, you will find IT functions evident,” he says. “[Similarly], GBS is becoming part and parcel of all industry verticals, because it involves horizontal functions.”
One of Iskandar Puteri’s key strengths is its proximity to Singapore, Zulfiqar says. He notes that the district is just 45 minutes away from the city state’s CBD. This connectivity could be further enhanced with the construction of the Singapore-Kuala Lumpur High Speed Rail, expected to be completed by 2026. Rather than viewing Singapore and Iskandar Puteri as distinct locations, Zulfiqar suggests companies can now start to view both collectively as a region for strategic growth.
Another key factor is the lower overheads in Malaysia, made possible by a favourable exchange rate and more competitive rental and labour costs. Annual salaries for graduates with a bachelor’s degree start at US$7,500 ($9,881) , wh i le office rents start at US$1.50 psf. “The real value proposition is that we are the best nearshore option to Singapore , f o r companies — foreign or local — that are looking to penetrate the Asia-Pacific market. Companies that set up in Iskandar can participate in projects in Singapore without having to face the risk of a very expensive exercise of setting up operations and employing people in Singapore,” he says.
He highlights Frost & Sullivan as one of GBS Iskandar’s success stories. The MNC was an early mover, setting up its Global Innovation Centre in Iskandar Puteri in 2012. “They were looking for a location to house highly skilled employees to serve the global market. After five years now, they’ve been successful in establishing these functions. A notable one is knowledge as a service. Today, the main centre for that globally is here in Iskandar Puteri, serving clients in the US, Europe and Asia-Pacific,” he says.
Companies can take advantage of tax breaks from operating in the region, such as a 10-year tax exemption under the Iskandar Regional Development Authority. In December 2016, Malaysian Prime Minister Najib Razak also announced a slew of special tax incentives for companies in the GBS sector. For those making their first venture into Malaysia, navigating the various schemes can be difficult. GBS Iskandar can aid in identifying the most suitable schemes and help with the application process, Zulfiqar points out: “Rather than scratching their heads and later having to appoint a consultant to help them get what they need, [they can obtain help from us] for free.”
With this level of involvement, Zulfiqar prefers to call the companies he works with “partners” rather than clients. “We call them partners because we place a very high emphasis on the delivery of the projects. We can do that only if we have a very strong partnership and understanding with our companies on their requirements and plan ahead with them to address concerns,” he says. “That’s the advantage of having an agency like i2M. We can address the micro issues and try to meet the individual needs of the companies for them to realise their projects.”
Talent pool for innovation
For globally minded companies, sourcing for local talent is one of the biggest challenges. In response, GBS Iskandar has been working on initiatives to develop, attract and retain skilled professionals for the high-value jobs coming into Iskandar Puteri. For instance, i2M facilitates the Campus Connect Initiative, in which Vision Technology Consulting facilitates a three-month Oracle training and certification programme for selected computing students from Universiti Teknologi Malaysia.
GBS Iskandar also works closely with companies to understand their hiring needs. Zulfiqar cites the case of Aegis, which set up its third Business Process Management Centre of Excellence last year. GBS Iskandar worked closely with the company for at least a year to help understand its talent acquisition needs. As a result, Aegis was able to hire close to 800 staff for its contact centre within a short timeframe of three months. About 95% of these employees were from Johor. “It was a real game-changer, because, previously, the perception was that one could not hire [quickly]. But they have proved it can be done, and that is a very good testimonial for us.”
Even small and mid-sized businesses such as start-ups can scale their talent pool in Iskandar Puteri, Zulfiqar adds. He notes that GBS Iskandar works with four such Singapore enterprises: IT consultancy Technopals, digital learning and software development company Kydon, multi-channel contact centre Connect Centre and e-commerce platform SGshop. While Singapore has a thriving environment for start-ups to kick off, Iskandar Puteri can be a venue for them to scale up “from five to 500 people”, he says. “Iskandar Puteri provides a very valid value proposition for the next phase of their growth and innovation.”
Ultimately, Zulfiqar believes the region is poised for growth. He hopes that more companies will take the leap, rather than adopt a “wait-and-see approach”. He figures that the best sign of success would be when his own role becomes obsolete. “Are we on target to achieve the 14,000 jobs and RM6.5 billion in investments? Yes, but for us, those numbers represent a tipping point in terms of when we think the environment would be mature enough. Or, for lack of a better description, when we don’t need i2M anymore. Then we know we have done our job.”