Beyond Johor, Singapore companies looking at Klang Valley, Penang for Malaysia expansion

[KUALA LUMPUR] When it comes to expanding in Malaysia, more Singapore companies are looking beyond Johor and seeking opportunities in Klang Valley and the northern state of Penang, said a senior executive at the Singapore Business Federation (SBF).

Klang Valley is an urban area comprising the capital Kuala Lumpur and its suburbs and adjoining cities in the state of Selangor.

While Johor is still the first choice for most Singapore companies, congestion at the land crossings and a growing need for talent have seen them turn to other cities, said Tan Teck Lee, SBF’s country head for Malaysia, Thailand and the Philippines.

Singapore’s apex business chamber, with the support of Enterprise Singapore, recently organised an overseas market workshop in West Malaysia – the first such trip to Malaysia since the start of the Covid-19 pandemic.

In all, 21 participants from 19 Singapore companies attended the five-day workshop that took them to Kuala Lumpur, Melaka and Johor Bahru.

“Different cities in Malaysia have their unique advantages, and we are seeing increasing interest in Klang Valley and Penang,” said Tan.

Writing about the workshop on his LinkedIn page, he said the trip was driven by three key objectives: to learn, land (launch the business) and localise.

“Through intensive meetings, discussions and networking, we are determined to place these Singaporean companies firmly on the map of Malaysia, setting the stage for their successful expansion when the time is right.”

Numerous options

Delegate Malcolm Tan, chief executive of electric vehicle battery maker Providence Greentech, told The Business Times he is looking for a new warehouse in Malaysia.

He has singled out several areas near Port Klang in Selangor for this new facility, given its proximity to international ports and airports, good infrastructure and easy accessibility by land.

“My main consideration is finding a location in Malaysia that I can travel to by plane in the morning, get my meetings done and fly back at night,” he said. “Johor was an ideal destination, but the unpredictable traffic conditions at the Causeway are a concern.”

Another workshop participant, Samsul Lokman, said his priority when expanding in Malaysia is to be in a city with a larger talent pool. He is the CEO of IT solutions company DSMR Group.

He first took his business to Malaysia in 2017 by setting up an office in Kuala Lumpur, a short walk from the Petronas Twin Towers.

“Retaining talent in Kuala Lumpur is easier, as many people prefer the lifestyle there and are not looking at relocating. In Johor, however, keeping talent is quite challenging. Given how close it is to Singapore, skilled workers in Johor would consider working in Singapore if they had the opportunity,” he said.

Paul Ng, CEO of recruitment agency APBA TG Human Resource, entered the Malaysia market in 2017 with an office in Johor. He said the company wants to offer its services to multinationals in Penang and Kedah, to take advantage of the booming industrial development in those two states.

Similarly, Jason Chong, chief commercial officer of Archisen, said the agritech company is looking to expand beyond Johor, and is scouring for scalable sites that are suitable for vertical farming.

Archisen recently signed an agreement with Farmbyte – a subsidiary of Johor Corporation, the main development institution of the state of Johor – to establish a joint venture in urban farming.

Latest figures from the Malaysian Investment Development Authority (Mida) support a picture of the Klang Valley becoming more attractive to investors.

Kuala Lumpur and Selangor topped the list of destinations receiving the highest value of approved investments in the first six months of 2023 – at US$6.8 billion and US$6.4 billion respectively.

They were followed by Kedah (US$3.1 billion), Johor (US$3 billion) and Sabah (US$1.9 billion). These five locations accounted for 75 per cent of the total approved investments in Malaysia.

Singapore is the top source of foreign direct investment (FDI) in Malaysia with total approved investments of US$2.9 billion for the entire country. Mida could not provide data for specific Singapore investments in the different states.

Johor retains appeal

Nevertheless, Johor remains the preferred location for Singapore companies in Malaysia, especially for manufacturing businesses such as those doing food processing, said SBF’s Tan.

For the whole of 2022, Johor secured the most FDI of RM70.6 billion (S$20.2 billion), followed by Selangor (RM60.1 billion) and Sarawak (RM28.2 billion).

Prakash Nagarajan, vice-president of economics and investment at Iskandar Regional Development Authority, said that Iskandar Malaysia in Johor attracted investments worth a total of RM391.6 billion in the 17 years from 2006 to June 2023.

Iskandar Malaysia, the first economic region established in Malaysia, has a target to achieve a cumulative investment of RM636 billion by 2030.

Addressing the complaints about traffic congestion within the state, he noted the numerous projects being built to improve connectivity.

These developments include the Rapid Transit System (RTS), the Gemas-Johor Bahru electric train system, and the Iskandar Rapid Transit (IRT).

Both the RTS and IRT are expected to be ready by 2026. The IRT will complement the RTS by connecting the city centre to various business hubs in Johor Bahru such as Tebrau, Skudai and Iskandar Puteri.

The Gemas-Johor Bahru system is on track to be completed by 2025, with the 192 km line covering four major districts in Johor: Segamat, Kluang, Kulai and Johor Bahru.