Penang promise: The second-smallest state has undertaken numerous projects recently

Overshadowed by developments in Selangor and Iskandar, Malaysia’s second- smallest state of Penang has quietly put together an impressive string of projects in recent years. Tucked in between the much larger Kedah and Perak states along Peninsular Malaysia’s west coast, Penang’s strong population growth coupled with a thriving real estate market and burgeoning tourism industries has given rise to a host of construction opportunities. Much of the state’s growth is centred around its densely populated administrative and cultural hub located around the city of George Town on Penang Island (Pulau Pinang).

Punching Above Its Weight

In 2013 Penang’s construction industry tallied the fifth-largest value of contracts awarded, with up to RM6.59bn ($2.06bn) worth of projects (spread over 479 contracts), placing it only behind the economic and political hubs of Selangor, the Federal Districts and Johor and the Borneo state of Sarawak, according to data from the Construction Industry Development Board Malaysia (CIDB). More impressively, the value of contracts within the state has increased for the third consecutive year from RM5.17bn ($1.61bn) and RM6.36bn ($1.98bn) in 2011 and 2012, respectively, even as construction building has tailed off nationwide from RM123.6bn ($38.58bn) in 2012 to RM92.3bn ($28.81bn) in 2013.

Stimulated by a number of high-profile transportation projects, infrastructure spending led all categories for the state in 2013 with 99 contracts awarded totalling RM2.85bn ($889.49m), up from the RM601.01m ($187.58m) awarded in 2012 as well as the RM1.1bn ($343.31m) the previous year. Residential developments ranked second with RM1.96bn ($611.72m) spread over 174 contracts in 2013 following bumper years in 2012 and 2011, which saw RM3.08bn ($961.27m) and RM2.07bn ($646.05m), respectively. A total of 164 non-residential contracts valued at RM1.62bn ($505.6m) were awarded on the year, down from RM2.33bn ($727.19m) inked the previous year, while social amenity contracts added another RM164.27m ($51.27m) of value in 2013 after recording RM342.85m ($107m) the previous year. In keeping with the nationwide trend, the private sector handily outpaced government contracts awarded, with the former garnering 364 of the 479 contracts signed in 2013, an even larger value disparity of RM5.98bn ($1.87bn) to RM611.59m ($190.88m).

North-East

Catering to its youthful and growing population, Penang’s residential and commercial centres within the north-east district enclaves of Tanjong Tokong, Batu Ferringhi, Pulau Tikus and Bayan Mutiara are currently in the midst of a strong wave of development. Some of the more significant projects in this area – many of which are being built on reclaimed land – include IJM Land’s The Light waterfront project, Penang International Sports Arena, Subterranean Penang International Conference & Exhibition Centre (SPICE) and the Penang World City Project.

The highest-profile of these projects costs RM8bn9bn ($2.5bn-2.81bn), which is up from initial estimates of RM5bn ($1.56bn). The Light mixed-use waterfront development was midway through its initial phase of development as of early 2014. Located on Penang island’s eastern coastline just north of the original bridge, the project is being constructed on 210 ha of reclaimed land, with 152 ha reserved for the initial three phases of construction and the remaining 58 ha set aside for future expansion.

The first phase of development is comprised of six parcels of high-tech residential units totalling 1177 units. Three parcels have been completed (The Light Linear, The Light Point and The Light Collection 1) as of April 2014, with construction still ongoing for The Light Collection 2, 3 and 4 projects.

The project’s second phase, meanwhile, features an integrated waterfront commercial hub complete with a waterfront mall, three hotels, a convention centre, a performing arts centre, a marina, as well as a central business district featuring a 40-floor IT building. The third phase entails the construction of Seafront Park.

South-West

Not to be outdone by the country’s north-east, a flurry of activity is also taking place in the south-west district, including the second-largest single development on the island in Ideal Vision Park.

A mixture of residential and commercial activity, the south-west district includes the Relau, Batu Maung, Bukit Jambul, Bayan Lepas, Sungai, Nibong and Teluk Kumbar neighbourhoods. Located in Bayan Lepas, the 10-ha Ideal Vision Park is another mixed-use development to be constructed in six phases over a five-year period. The RM2bn ($624.2m) project is set to include a total of 1945 freehold residential units as well as 500,000 sq ft of commercial space, recreation facilities and a hotel. Ground was broken on the initial RM350m ($109.24m) freehold high-rise condominium project Tree Sparina in 2013, with construction expected to be completed within three years.

A few slightly smaller-scale ongoing projects in the district after Ideal Vision Park include Southbay City Project development by Mah Sing Group and a host of new condominium projects being built by SP Setia for a combined RM1bn ($312.1m). The 87-acre, RM1. 35bn2bn ($421.34m-624.2m) Southbay City is located in Batu Maung and will include a resort, hotels, shopping facilities, offices and residential units.

Linking Up

With strain on existing infrastructure, Penang’s Master Transportation Plan is expected to alleviate the logistical stresses of having an islandbased commercial centre by rolling out two ambitious solutions. Penang’s second bridge, touted as the longest in South-east Asia at 16.9 km, opened in March 2014 after a seven-year construction period.

The RM4.5bn ($1.4bn) bridge package included the construction of 7.1 km of expressways and interchanges as well as toll collection systems and administrative buildings. Work on the project has been carried out by a number of construction companies including CHEC Construction, UEM Builders, Cergas Murni, IJM Construction, HRA Teguh and S U Citra Bina. Seeking to create additional thoroughfare options, city planners have also opted to build an undersea tunnel linking the island to the mainland with 12 km of new bypass roads. The Penang-Butterworth tunnel project is made up of the 6.5-km Gurney Drive-Bagan Ajam undersea tunnel along with the 4.2-km Gurney Drive-Lebuhraya Tun Dr Lim Chong Eu bypass, the 4.6-km Lebuhraya Tun Dr Lim Chong Eu-Bandar Baru Air Itam bypass and a 12-km road connecting Tanjung Bungah and Teluk Bahang.

A contract to carry out a feasibility study for the project along with a 30-year concession to operate the tunnel was awarded in October 2013 to Consortium Zenith BUCG, whose major shareholders include Zenith Construction and China Railway Construction Corporation (CRCC) with a joint 70% equity share, along with 10% equity stakes for Beijing Urban Construction Group (BUCG), Sri Tinggi and Juteras. Estimated to cost approximately RM6.3bn ($1.97bn), construction works will be carried out by Chinese heavyweights CRCC and BUCG with an completion date of 2025-30. The massive build will also require its own support infrastructure catering to an estimated labour force of up to 2000 workers contracted to the Koperasi Staff CIDB Malaysia (KoCIDB). Construction of the Integrated Construction Workers Complex (ICWC), which will include housing, business conference centres, a cafeteria, sports centre, recreational facilities, mosque, clinic and supermarket, is expected to begin in 2015 with a projected price tag of RM10m-15m ($3.12m-4.68m).

In addition to these local projects, Penang is also the northern-most stop on the highly-touted high-speed rail (HSR) link with Singapore. Upon completion of the first phase of the RM40bn ($12.48bn) project linking Kuala Lumpur (KL) with Singapore expected by 2020, the second phase of building will link KL with Ipoh in the state of Perak and then Pulau Pinang. Both direct express trains to KL as well as intercity stops will be available upon projected completion.

Role Player

In addition to the mixed-use developments being built to support organic growth within the state, various high-profile commercial and industrial projects are being constructed in Penang as part of the government’s Economic Transformation Plan. A major component of Malaysia’s Northern Corridor Economic Region (Koridor Utara) along with Perlis, Kedah and North Perak, these new projects garnered a total of RM3.91bn ($1.22bn) in foreign investments in 2013 spread over 119 separate projects, according to Malaysia Investment Development Authority reports. This ranked it third out of all states behind only Johor, which received the largest amount of new FDI with RM14.4bn ($4.49bn), followed by Selangor with RM9.8bn ($3.06bn) and Sarawak with RM8.3bn ($2.59bn).

Some of these recent projects have included the construction of Manufacturer UWC Holding’s new RM200m ($62.42m), 80,000-sq-ft medical equipment manufacturing facility in Bukit Minyak which was opened in February 2014. Investments have also been in other key entry points, including the RM1.38bn ($430.7m) Philips Lumileds Lighting LED manufacturing facility, established in June 2013 in Bayan Lepas, as well as the RM30m ($9.36m) Penang Skills Development Centre.