September 19, 2012
As operating costs climb in China, Iskandar Malaysia in Johor could step up as a viable option to MNCs seeking lower-cost alternatives.
South Johor SME Association chairman Teh Kee Sim wants the Johor government and the Iskandar Regional Development Authority (Irda) to act quickly in order to woo multinational corporations (MNCs) seeking a cheaper alternative to China to base their operations.
Teh said that Johor, being the host of the Iskandar Malaysia development zone, is in a good position to attract these MNCs, as many of them, especially the ones on the coastal cities, are looking to leave China due to climbing operating costs.
Another push factor was the trade barrier imposed on goods made in China by the European Union and the US. As a result, many MNCs are seeking a third country from which to export their products.
"China is no longer a cheap place for manufacturing activities unlike a decade or two ago when many MNCs from all over the world were rushing to relocate their operations there," said Teh. "The higher cost of doing business are not only eating the profit margins of the MNCs but also the Chinese small- and medium-sized enterprises."
He noted that companies in Fuzhou, Guangzhou, Nanning, Shanghai and Shenzhen were particularly affected by business cost increases in China. During his two-week business trip, Teh said there were several news reports that 90 Chinese companies had already relocated to Myanmar. An American MNC in Nanjing had also retrenched thousands of workers.
"This is something that was unheard of before in China and we must entice the MNCs and even Chinese manufacturers to relocate to Iskandar Malaysia," said Teh.
"By investing here, they have the best of both worlds with Singapore as an international trade and financial centre and having a competitive cost in Malaysia."
Teh urged that with Chinese companies willing to invest in Myanmar, which had only recently opened up to foreign investors, Johor and Irda should take a more aggressive and proactive stance in promoting Iskandar Malaysia.
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