Friday, June 15, 2012

MALAYSIA COUNTRY REPORT

SPECIAL REPORT

INSIDE: 13-PAGE SPONSORED SECTION IN CO-OPERATION WITH DISCOVERY REPORTS

An ambitious project toturn a military airport inthe heart of KualaLumpur into a thrivingglobal financial hub is

among a range of developmentswith the potential to unearth goldeninvestment opportunities inMalaysia’s property market.

The Kuala Lumpur InternationalFinancial District (KLIFD) andBandar Malaysia programmes willexpand the commercial capital’sbusiness zone and create a new citywithin a city, covering more than200 hectares and incorporating anew central business district, anIslamic finance centre, university,park and residential properties.

The Greater Kuala Lumpur andKlang Valley redevelopmentprogramme, worth about 30 billionringgit (HK$243.7 billion), is part ofMalaysia’s drive to achieve high-income status by 2020 and hasopened the door for foreign intereststo invest in the commercial andresidential real estate markets.

Hong Kong’s ARUP GroupInternational was appointed by1Malaysia Development Berhad, thegovernment-linked companyoverseeing the project, last year toact as security and risk engineers,and consultants.

“The Malaysian real estatemarket is dynamic and has been asuccessful economic growth driverfor Malaysia over the past 20 years,”says Ramu Thanni, a researchanalyst with business consultancycompany Inside Investor. “Thebuilding innovation coupled withgood investor returns oninvestments will keep foreigninvestors interested in Malaysianproperty despite uncertainties.”

The KLIFD development is oneof 12 national key economic areasoutlined in the 10th Malaysia Plan todrive the government’s 2020 visionand has helped to ignite a propertysector that has been growingsteadily over the past two decades.

It is one of many infrastructuraland development projects that haveallowed investors to take advantageof Malaysia’s property market,which has resisted pressure from thedebt crisis in the euro zone andUnited States economic woes.

The continuing Iskandar projectin Johor Bahru has changed the faceof an area that was once likened to aWild West town, with significantinvestment in office buildings, malls,hotels and residential plots onhectares of new land createdthrough reclamation.

Malaysia’s administrative capital,

Putrajaya, is also set for a fresh lookwith investors sought to developvast tracts of land that can be used tobuild a special economic zonecontaining commercial property,residential areas and universities.

The commercial real estate

market is expected to grow10 percent this year, according to analysts,while returns on office rentals areforecast at about 6 per cent.

The residential property marketoffers strong potential for individualforeign buyers looking either for ahome in Malaysia or as aninvestment that offers good returns.

Property companies arepreparing their sales teams to wooforeign buyers, luring potentialinvestors from Hong Kong,

Singapore, southern China, Japan,South Korea, Indonesia, India, SaudiArabia and Qatar.

Malaysia can offer relatively lowprices and potentially strongreturns, although foreigners arerestricted to buying property worthmore than 500,000 ringgit andcapital gains tax of 10 per cent islevied if the property is sold withinfive years of purchase.

Real estate agents in Malaysiahave been encouraged to completea Certified International PropertySpecialist course to arm them withthe skills and knowledge to sell tooverseas investors, who make up 2per cent of residential buyers in thecountry.

Generally, the bulk of the realestate offered is in Kuala Lumpurcity centre, Penang and Johor. In theprimary market, about 120,000 unitshave become available each year.However, a thriving secondarymarket dominated by domesticbuyers offers foreigners a bargain.

Another investment avenue isreal estate investment trusts (reits), a growing sector with 14 entitiesestablished on the national stockexchange.

Reits, providing returns throughcapital appreciation from pricechanges and investment income

such as rentals, offer accessibleinvestment opportunities forforeigners because they are listed.

“There have been more andmore reits listed on the BursaMalaysia [national stock exchange],indicating confidence in thesemarkets locally and internationally,”Thanni says.

However, Thanni says that whileMalaysia’s property environment isrelatively safe, uncertainties remain.

He says the global slowdown inmanufacturing, the euro-zone crisisand its effects on internationalcurrencies, and a decline inproduction as a consequence ofEurope’s debt affectingmanufacturing and exports from theBRICS nations (Brazil, Russia, India,China and South Africa), coulddestabilise the property market.

“The flight of capital is a majorconcern as this is the resultwhenever a globally encompassingincident occurs, such as thefinancial crisis of 2007-2008,” he says.

“Nevertheless, Malaysian realestate growth has been organic andreal estate regulators have beenprudent. This gradual priceappreciation will maintain investor-confidence with a consistent trackrecord of appreciation.”

Ambitious projecttargets investors

The Greater Kuala Lumpur and Klang Valley redevelopment programme, worth about 30 billion ringgit, is part of Malaysia’s drive to achieve high-income status by 2020. Photo: Bloomberg

HK group to serve as security and risk engineers, and consultants, writes Nazvi Careem

There have beenmore and morereits listed on theBursa Malaysia RAMU THANNI, RESEARCH ANALYST, BUSINESSCONSULTANCY INSIDE INVESTOR

Trade links between Hong Kong andMalaysia are growing, withinitiatives under way to boosteconomic ties.

Bilateral trade grew 6 per centlast year, with Malaysia remainingHong Kong’s 10th largest tradingpartner. Between 2007 and 2011,bilateral trade grew 7 per cent.

Hong Kong exported HK$1.26billion worth of goods to Malaysialast year, with top demand being forelectrical machinery, apparatus andappliances, and electrical parts.Another big export to Malaysia isspecialist industry machineryand jewellery.

In turn, Malaysia primarilyexports electrical machinery,apparatus and appliances to HongKong, and office machines andautomatic data processingmachines. Last year, Hong Kongimported HK$89 million worth ofgoods from Malaysia.

Hong Kong also retains animportant strategic role – that ofmiddleman between Malaysia andthe mainland.

Last year saw HK$87.4 billionworth of trade between Malaysiaand China, routed through HongKong, representing 12.5 per cent oftotal trade between the twocountries, according to Departmentof Trade and Industry figures.

As Bank of East Asia chiefeconomist Paul Tang Sai-onexplains, despite a slowdown inChina’s economic growth, HongKong is going to retain this key rolefor the immediate future.

As China sets its sights on Aseanmember countries, of whichMalaysia is one, Hong Kong’s portsand service providers will continueto reap the benefits.

“Hong Kong is a major steppingstone they are using,’’ he says.“There is an intention on both sides[Malaysia and China] to strengtheneconomic ties, it has been workingvery well. So I don’t expect thecurrent economic climate has amajor impact,” he says.

“Asean countries are one of[China’s] top priorities, as there islots of synergy between theeconomies, strategically speaking. Ifeel there will be great prospect ofgreater economic co-operation.”

According to William Cheung,head of media and public affairs atthe Hong Kong Trade DevelopmentCouncil, a shift from the West to theEast in recent years is moreoverboosting domestic consumermarkets in the region.

These are in turn expanding,making Hong Kong’s services

industry in particular “ideal partnersfor overseas companies, helping toexpand to Chinese or Asianmarkets,” including Malaysia.

In the meantime, initiatives areunder way to further boost relationsbetween Hong Kong and Malaysia,including co-operation on theIslamic finance market.

In March the Hong Konggovernment launched aconsultation exercise on proposedlegal amendments to develop anIslamic bond market as part of its goal to make the city a host for sharia-compliant financial products.

The Hong Kong MonetaryAuthority and Bank Negara Malaysiasigned a memorandum ofunderstanding on co-operation inthe development of Islamic financein 2009.

The two also moved towards aFree Trade Agreement (FTA) inDecember 2009 by signing a jointdeclaration on economic co-operation, explains Edison Choong,Trade Commissioner at theMalaysia External TradeDevelopment Corporation.

This covers areas such as trade ingoods, services and tourism. It

involves promoting trade andinvestment, mutual visits bybusiness delegations and theorganisation of and participation intrade fairs and exhibitions.

“Malaysia and Hong Kong areopen to have an FTA if Malaysia isable to access the services sector inHong Kong, such as constructionservices, and other professionalservices,’’ he says. “There is a needfor further discussion.’’

Further efforts to boost tiesincluded the signing of anagreement with Malaysia in April this year for the avoidance ofdouble taxation.

The aim was to strengthenbilateral ties by smoothening theflow of investment and talent.

As of June last year, there werefive regional headquarters, 22regional offices and 37 local officesset up by Malaysian companies inHong Kong.

Hong Kong portsreap the benefits

Malaysia is Hong Kong’s 10th largest trading partner. Photo: Bloomberg

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Josephine Bond

There is anintention on bothsides to strengtheneconomic tiesPAUL TANG SAI-ONCHIEF ECONOMIST, BANK OF EAST ASIA

Malaysia is a melting pot of race andethnicity; food carries influences notonly from the Malay, Chinese andIndians who live there now, but alsothe British, Dutch and Portuguesewho once did.

Holidays in Kuala Lumpur are allabout eating, and for Hong Kongfoodies, who like their dishes heavyon multiculturalism, there’s nobetter weekend getaway.

For Burma-born, Hong Kong-bred engineer Henry Aung-Kyi, “thenicest thing to eat in the morning isnasi lemak”, Malaysia’s nationaldish. Rice is cooked in coconut milkand then tossed with roasted

peanuts, anchovies, sambal, a hard-boiled egg and sliced cucumber,before being wrapped in a bananaleaf. You’ll find nasi lemak shops onnearly every street.

If you’re up with the sun, makeyour way to Petronas Towers in thedowntown area of Kuala Lumpur,whose glass and steel façade,designed to resemble Islamic artmotifs, has left an indelible mark onthe capital’s skyline.

Tickets to the observation deckand sky bridge sell out very early, sohop in the queue right afterbreakfast. If you don’t make the cut,go across the street to 20-hectareKuala Lumpur City Centre Park,which houses a playground, publicpool and assorted water features;

these are particularly picturesqueduring and after sunset, when the spraying jets are framed by the Towers.

Time to eat again. Indian food in

Kuala Lumpur, much of it of thesouthern variety, is phenomenal andcheap. You can find it on everycolourful, chaotic street inBrickfields, Kuala Lumpur’s largest

Little India, and around the MasjidJamek LRT station. You have a lotmore to eat before day’s end, so splitan order of buttery roti canai andbanana leaf rice, in which white rice,vegetables, dal and papadum areserved on a banana leaf.

Beyond eating, Brickfields hasstalls selling saris, Bollywood videos,and all manner of Indian snacks.

Within the neighbourhood,along Jalan Scott, is Sri KandaswamyKovil, a century-old Hindu templewhose exterior is staggeringlyornate; photography is not allowedinside, so you’ll have to do all yoursnapping on the street.

Work your way back towards thecapital’s Golden Triangle, home tothe Towers and Aquaria KLCC,

which is open until 8pm and houses5,000 varieties of tropical fish.

After staring at fish for an hour,you’ll be ready to eat again. Walkover to Jalan Alor Food Street andorder chicken wings at jam-packedWong Ah Wah, but save room forwhat awaits at Lot 10 Hutong.

This hawker-stall food court ishome to 20-plus family-ownedoutlets serving Southeast Asiancuisine – mostly Malay and Chinese.

Working his way through themaze of stalls, You Kok-Hoe, whoworks in business development for aGerman industrial gas supplier, says:“There’s no one favourite. Thewhole thing is this Southeast Asianculture. Dining is an experience. Welove to eat and we love our food.”

Multiethnic Kuala Lumpur is an all-day dining experience. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Sophie Friedman

KLCC Park covers 20 hectares of thecity. Photo: Sophie Friedman

The most popularmeal to start the day is nasi lemak,Malaysia’s nationaldish.Photo: Jonathan Wong