Business loans in Malaysia on the rise


The special economic zone of Iskandar Malaysia was established in 2006, but it is only in the past two years that interest among Singapore SMEs has heated up.

Warming relations between the two countries and completion of infrastructure and property projects are among the factors that may have attracted investor interest.

Rising costs and the ongoing economic restructuring in Singapore have also benefited the Iskandar region.

More Singapore firms have been drawn into the region in search for a more viable place to operate — some to provide supporting services to existing businesses, and others to take advantage of lower land and electricity costs. That has reflected in the growing volume of business loans to Iskandar.

Singapore is into the third year of its restructuring drive to raise productivity growth and the pressure to shape up or ship out has never been greater.

In the last two years, OCBC Bank said there has been a four-fold increase in the number of local SMEs expanding overseas. Over the same period, rival bank UOB said loans extended to these companies have grown close to 50 per cent.

The Singapore SME already has operations in Kuala Lumpur and Penang, and is considering branching out to Iskandar.

Many staff working in the companies are Malaysian and all from Johor — every morning they commute to Singapore. But now that the amount of interest, the amount of investment in Iskandar, the properties being built, and everybody is moving. There is now an awakening and everything is developed and all the Singaporeans are coming in to invest.

The overseas expansion of SMEs is also partly driven by restructuring in the Singapore economy, which has raised labour costs. Even so, Singapore SMEs are starting to find the window for land price arbitrage narrowing. This is as prices of industrial parks in the Nusajaya, the area in Iskandar closest to Singapore, gets bidded up. That has pushed SMEs to seek industrial properties further inland within Iskandar.

OCBC said it expects loan commitments by Singapore SMEs expanding into Iskandar to grow by S$200 million by the end of this year, and assets to grow three times in the next two years. The bank has been in Iskandar since 2007 and said that one in three Singapore SMEs in Iskandar bank with them.

Beyond business loans, some economists said more can be done at the government-to-government level to generate greater value for Singapore’s relationship with Iskandar.

For instance, DBS bank said the Iskandar region could be allowed to tap into Singapore’s existing Free Trade Agreement network to attract and benefit companies there.

The most of the enhancements made on connectivity between the two states thus far have focused on the “hardware elements”, such as the mass rapid transit link and high-speed rail link. This is likely to include the harmonization of custom clearance procedures to speed up transfers of humans, goods and services between the two states, a mutual recognition of standards, and comprehensive and in-depth investment and intellectual property protection agreements.


About thomasdinnocenzi

Thomas D’Innocenzi is a highly accomplished, results-focused international consultant with extensive experience in global sourcing and business development worldwide to meet evolving business needs. Tom has proven ability in implementing and managing profitable global marketing and sourcing operations. He has extensive experience in international business development to accommodate rapid growth. Skilled in building top-performing teams, bench-marking performance, and developing organizations to improve efficiency, productivity, and profitability. Experienced transition leader and change agent. Tom founded Nova Advisors with the mission of providing expert Global Business Development consulting services for companies seeking to expand their market share as an independent consultant. Tom has a network of experts and advisors throughout the Asia-Pacific region and North America. His expertise includes business development, global sourcing, manufacturing, commodities, logistics, QA/QC, FDA, regulatory compliance, sustainability, and supply chain optimization. Tom is experienced in the medical device, apparel, consumer goods and technology services verticals helping companies advance their global sourcing capabilities and develop new markets through a local and sustained approach. Located in SE Asia and the United States, Tom expands market reach to drive sales. His global sourcing strategy includes directly negotiating with commodity suppliers, supply chain networks and distributors for optimal terms based on his expertise and first-hand knowledge of the players. Contact Tom to use his consulting service to increase your global market and make global sourcing profitable for you in the Asia Pacific Region and the United States. USA Direct: +1.904.479.3600 SINGAPORE: +65.6818.6396 THAILAND: +662.207.9269
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