Region by region: Creating corridors to encourage more balanced development

It was in 2006 that the government first unveiled a major new tool in its strategy to help the country achieve fully developed nation status by 2020. Contained within the Ninth Malaysia Plan (9MP), released back then as the latest of the country’s five-year development programmes, was a section outlining the creation of five distinct regional economic growth corridors.

DESIGNATED AREAS: These development areas have the ultimate goal of both elevating the overall standard of living in the regions they cover, while also realising more balanced socio-economic development countrywide. By being regional, the corridor developments provide a model that transcends state boundaries. They also employ a range of modernisation techniques and diversification strategies that, while locally applied, have both national and international backing. The planners decided this would allow the nation’s economic development to become more balanced, shifting focus away from highly developed areas such as Kuala Lumpur (KL), and allowing the less-developed states to grow. It would also refocus investment into rural areas.

Building on the 9MP, the 10th Malaysia Plan (10MP) and the Economic Transformation Programme (ETP), which followed in 2010, fast-tracked and prioritised the development within the five corridors of a series of high-density clusters. The ETP also declared the Greater KL/Klang Valley (GKL/KV) region as a place for special focus, making it a National Key Economic Area (NKEA, see analysis). Since the launch of the 9MP, the corridor strategy has faced some important challenges, though. Growth, for example, has not always proceeded consistently, with some corridors lagging behind, while others have surpassed goals and expectations. Yet the corridors continue to draw much investor interest – and the push is on to begin to close the gaps between different corridors’ progress.

Mainland Peninsular Malaysia is home to three of the five corridors from the 9MP: Iskandar Malaysia (IM), the East Coast Economic Region (ECER) and the Northern Corridor Economic Region (NCER). In Eastern Malaysia on the island of Borneo two corridors, the Sarawak Corridor of Renewable Energy (SCORE) and Sabah Development Corridor (SDC), are also in operation.

RULING BODIES: Each corridor is overseen by a Corridor Development Authority (CDA) that has broad powers to implement its corridor’s development plan.

These authorities are supported in overall investment promotion by the Corridor Development Corporation.

In IM, the local authority is the Iskandar Regional Development Authority; in the ECER, it is the East Coast Economic Region Development Council (ECERDC); the NCER has the Northern Corridor Implementation Authority; while SCORE and the SDC are run by the Regional Corridor Development Authority (RECODA) and the Sabah Economic Development and Investment Authority (SEDIA), respectively.

In the Prime Minister’s Department, the Public Private Partnership Unit (Unit Kerjasama Awam Swasta, UKAS, also known as 3PU) is responsible for legislating and strategising the country’s public-private partnership (PPP) policy – which is important to corridor development – as well as managing a facilitation fund, a portion of which goes to the corridors.

In addition, the ETP appended the GKL/KV area as one of its 12 NKEAs, all of which have been identified as priority areas for investment and incentives. The minister of federal territories and urban wellbeing (MFTUW) is the lead minister for the GKL/KV, as well as the chair of the GKL/KV Steering Committee. Largely running the show on a day-to-day basis when it comes to attracting investments in GKL/KV is InvestKL, a governmental body under the authority of the MFTUW and the Ministry of International Trade and Industry.

InvestKL’s mandate is to attract and facilitate large multinational companies to establish and expand their regional operations from GKL/KV.

GOVERNMENT FUNDING: The government also remains directly involved in supporting the corridors, as was recently made clear in the 2012 budget, in which the prime minister announced the government was allocating a total of RM978m ($315.5m) for various development projects in the corridors. The high-profile initiatives within this included heritage tourism in Taiping in the NCER, an “agropolitan” scheme in Besut in the ECER, the construction of the Johor Bahru-Nusa Jaya coast highway in IM, and palm oil and water supply projects in SDC and SCORE.

WITHIN THE CORRIDORS: In 2011 the Performance Management and Delivery Unit, which comes under the Prime Minister’s Department, in concert with corridor authorities and various stakeholders in the public and private sectors, held a series of labs, or brainstorming sessions, for projects that would boost the corridors’ economic development.

The outcome of one lab – the Regional Cities and Economic Corridors Transformation Programme (RCECTP) – aims at the development of five regional secondary cities and their corresponding economic corridors, as part of the ETP. Secondary cities include Georgetown in the NCER, Kuantan in the ECER and Johor Bahru in IM. Eastern Malaysia’s secondary cities are Kuching in SCORE and Kota Kinabalu in the SDC.

Each corridor has been given a particular focus, with each containing a number of high-density development clusters, chosen for their particular geographical and/or sectoral strengths. The clusters have also been selected with an eye on how they might help reconcile any regional disadvantages, such as socio-economic imbalances or geographical inaccessibility.

The main focus of the first corridor, IM, is to establish the region as an international centre for the industrial and service sectors. Five flagship zones have been designated to bolster the corridor’s existing economic strengths. These zones serve to advance and differentiate targeted growth sectors, including electrical and electronics, petrochemicals and oleo-chemicals, and food and agro-based industries for the manufacturing sector. IM’s growth sectors also include services, with financial, tourism, education, logistics, health care and creative industries given special attention.

The NCER’s objective, meanwhile, is to become a top agricultural and high-tech region. Considered the rice bowl of the country, this corridor aims to lead the transformation of the country’s agro-industry by making its agricultural sector into a highly modernised, commercial-scale food-production zone. At the same time, building on its 40 years of experience in the semiconductor industry, the NCER also aims to become a centre for high-tech electronics.

For its part, the ECER focuses on general development, specifically in the area of tourism, as well as trading, infrastructure, logistics, manufacturing and exports. Working toward these goals, the ECERDC has identified specific projects in agriculture, tourism, manufacturing, oil and gas, and education. The ECER also has in its corner a sizeable palm oil cluster and plantations sector, as well as a biopolymer cluster. In addition, the region’s manufacturing base has made great strides in developing an automotive cluster in Kuantan.

Meanwhile, the SDC is looking to diversify wealth creation by picking up the pace of growth and closing the gap between its rural and urban population, while ensuring sustainable resource management. Although the region’s infrastructure is comparatively underdeveloped, SEDIA is able to play up the region’s natural assets by promoting tourism and boosting agriculture via oil palm sector development.

Competitively priced energy resources, particularly hydropower, coal and natural gas, are at the heart of the development plan for SCORE. RECODA encourages investments in power generation and energy-intensive industries, identifying those such as aluminium smelters and manganese and steel production to boost the corridor’s development.

The two eastern Malaysian corridors have seen some success. According to Sabah’s chief minister, Musa Aman, from 2008 to first-quarter 2012 the SDC reported cumulated investments of RM107bn ($34.5bn). Meanwhile, SCORE secured RM28.55bn ($9.2bn) in investments from 2009 to August 2011, according to the Malaysian Investment Development Authority.

The GKL/KV region, while not a corridor in itself but an NKEA, has been designated as a priority area by the government as well. The region has been targeted for general enhancements and structural improvements, with the ultimate aim of transforming GKL/KV into one of the top 20 most liveable urban conglomerations in the world, while also bringing it into the global top 20 in terms of economic growth.

OUTLOOK: Going forward, certain overlaps in the corridors’ goals are likely to create increased competition – especially in the case of IM and GKL/KV, which also have geographical proximity. This may be considered healthy, however, while synergies can continue to emerge thanks to the mostly trans-state structure of the corridor development plan. This supra-state aspect encourages cooperation among local, state and regional leaders and businesses. At the same time, with the implementation of the RCECTP, the secondary cities are expected to develop individual strengths and unique profiles as well, adding an extra string to the corridor development bow. Going forward, the challenge will be to more consistently and evenly attract private investment across a broad range of territories and projects.