JOHOR BARU: AS A greenfield development, Iskandar Puteri in Johor, formerly known as Nusajaya, has gone through two growth phases — infrastructure and property development. The question now is what industry should be promoted to turn it into an economically vibrant city?

The answer lies in its master plan and geographical location.

Iskandar Puteri has never been planned to attract the agriculture or manufacturing industries. Its proximity to Singapore and lower cost base makes it a prime location for the global business services (GBS) outsourcing industry.

Realising that the region offers tremendous opportunities for companies to benefit from the Singapore market while having a Malaysian cost structure, Khazanah Nasional Bhd set up i2M Ventures Sdn Bhd to promote Iskandar Puteri as a GBS hub.

“i2m Ventures started in August 2013, but it came out of what was called the business services unit in the investment division of Khazanah,” i2M Ventures’ managing director Zulfiqar Zainuddin tells The Edge in a recent interview in Medini.

“When Khazanah was drawing up the master plan for Iskandar Malaysia, one of the areas identified for high value growth was to bring shared services and outsourcing activities into this region,” he says.

What is GBS?

GBS encompasses business processes, shared services and outsourcing (BPO and SSO), as well as offsite information technology and technical support services in the financial services, oil and gas, technology, logistics, and electrical and electronics industries.

In a nutshell, i2M is trying to promote Iskandar Puteri as the BPO and SSO hub of the south. Because it is a lower cost centre, Malaysia is an attractive market for multinational corporations that want to outsource their business processes and shared services.

i2M Ventures is emulating what has been done in Cyberjaya, Selangor, while learning from the mistakes made in the 20 years since the Multimedia Super Corridor was established, says Zulfiqar.

“When we were trying to bring multinationals into Cyberjaya, the challenge was that it is really far from the city centre. The companies said their employees did not want to move — Cyberjaya was too disconnected, it is really far and there is nothing to do there,” he explains.

But as the infrastructure matured, especially the opening of the Maju Expressway, the floodgates opened, and Cyberjaya has grown into what it is today, home to the back offices of MNCs that include HSBC, DHL, IBM and AMD.

“If you want to develop a greenfield area like what Iskandar Puteri is today, it cannot be disconnected from where the people are. That was why, in 2012, one of the earliest developments was the opening of the coastal highway,” says Zulfiqar, who was involved in the development of Cyberjaya during his tenure at Multimedia Development Corp (MDeC).

While Iskandar Puteri is positioned like Cyberjaya — to attract MNCs to render back-office services to the Asia-Pacific region — the southern hub has an ​advantage over other outsourcing hubs such as Cyberjaya, Shenzhen, Cebu City and Bangalore.

Its competitive edge is that it is positioned as a platform for Malaysian outsourcing companies to serve the Singapore market, without being in the city-state.

Many MNCs who want to maintain their regional headquarters in Singapore face pressures in terms of the cost of the middle and back offices — support and technical services, as well as human resources and finance.

“Ten years ago, their best bet would have been to move these operations to Kuala Lumpur. Although Malaysia borders Singapore, you would still need to spend two to three days to visit your operations in KL, and then fly back.

“So, the real value proposition in Iskandar Puteri is that MNCs can still have their headquarters in Singapore, while moving their back offices across the straits. Downtown Singapore is just about 40 to 45 minutes from here,” says Zulfiqar.

i2M’s vision and mission

Being a non-profit entity, i2M’s objective is to kick-start the initiative to promote and attract local and MNCs to establish business services activities in Iskandar Puteri, and make the GBS industry a key growth area, says Zulfiqar.

“Khazanah sees value in us in that if we do our job well, the people who will benefit are the other companies that have invested in Iskandar, such as the property developers, shop owners and hotel operators,” he says.

Khazanah has set two key performance indicators for i2M Ventures. One is that it must ensure the realisation of the investors’ projects and eventually create 13,000 jobs, with a total income of RM6.5 billion.

Towards this end, i2M Ventures seems to be on the right track. As at 2015, just three years after its establishment, i2M Ventures had attracted six companies to set up outsourcing centres or back offices in Iskandar Puteri, and created 2,269 jobs with a total income of RM1.2 billion.

This year, i2M has set a target of creating another 2,000 jobs in the GBS industry.

To achieve these targets, Khazanah has provided RM90 million for customised incentives to attract companies to move there.

Apart from that, i2M Ventures is partnering government agencies including MDeC, Malaysian Investment Development Authority, Iskandar Regional Development Authority and Talent Corp Malaysia Bhd as well as the Johor government to attract investments via various incentive packages.

For example, under MDeC, a company can apply for MSC status recognition and be eligible for 100% investment tax allowance, research and development grants and duty-free import of multimedia equipment, among others.

Still, the biggest challenge for i2M Ventures is to grow the talent pool. Besides working with TalentCorp and various universities, i2M sees the need to promote Iskandar Puteri as a place where new graduates and young professionals can find high-value jobs.

“One of the things that we are trying to change is that people are not even aware of the job opportunities in Iskandar Puteri, especially in business services. Going forward, we want to make it known as the place to be in terms of high-value jobs,” says Zulfiqar.

This article first appeared in The Edge Malaysia on April 25, 2016.

Source: Edge Prop