MPI targets Japan

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FIVE years after it was set up, Malaysia Property Inc (MPI) has finally established a direct business-to-business (B2B) marketing model. It has cast its net into the client base of major banks within developed economies such as Japan to offer opportunities to investors keen on putting their money on a maturing real estate market like Malaysia.

Last year, it helped to redirect the attention of the Japanese back to Malaysia. "We are making them come back with smarter investments, not manufacturing per se because they are relying more on robotics now due to their ageing population, but more into warehousing, cold rooms and logistics," says Kumar Tharmalingam, the former MPI CEO who recently retired.

"We are trying to make them see that Malaysia can be a place for them to spend their retirement or to do business with Japan and the rest of the region," he tells City & Country.

Five years after it was set up, Malaysia Property Inc (MPI) has finally established a direct business-to-business (B2B) marketing model. It has cast its net into the client base of major banks within developed economies such as Japan to offer opportunities to investors keen on putting their money on a maturing real estate market like Malaysia.

Set up to encourage foreign investments in Malaysian real estate, the agency took two batches of Malaysian developers to the Land of the Rising Sun last November. The first delegation, comprising Sime Darby Property Bhd and UEM Land Holdings Bhd, met a host of Japanese companies that are clients of Sumitomo Mitsui Banking Corp, Japan's second largest bank.

Among the companies were Jones Lang LaSalle, the Starts Group, Tokyu Real Estate, Mitsubishi Jisho/Mitsubishi Estate Co Ltd, Nomura Real Estate, and property developers Marimo Co Ltd, Mori Building Co Ltd and Mitsui Fudosan Co Ltd. Others included retailer Parco Co Ltd, Sekisui Chemical Co Ltd's housing arm Sekisui Heim and Panasonic Group's unit PanaHome.

On the second trip, MPI brought the senior management of S P Setia Bhd and Sunway Bhd to Japan to meet customers of the Bank of Tokyo.

"The two banks requested that these developers come to Japan. As their client base is very important to them, we could only take the very best companies to Japan. The Edge Property Excellence Awards was also used as a benchmark to pick the top developers," says Kumar.

"MPI as a government agency becomes the funnel for them to pick the developers, although they had suggested these companies."

The companies were coached on their presentations, which were distilled to the key points that most concerned the Japanese, namely who they were, what their projects are and their financial strength.

"We met 34 companies over 20 days during these two trips. About 90% of these companies have never been to Malaysia. The presentations were real eye-openers for them because they did not know about our economics, our real estate, our financials, the country's non-financial services, education and hospitality, medical facilities, our banks and entertainment.

"They did not know that we have five-star medical facilities, private schools and that there are 300 malls in Malaysia. They did not know that they could just walk in and set up a business, that we had freehold land and that foreigners could buy freehold real estate here. We spent 15 minutes explaining and they were surprised.

"The Japanese appreciated the fact that while we presented in English, which was understood by all except their very senior chairman who was in his seventies, there were also slides in Japanese for them to peruse," he adds.

While Kumar declines to reveal the exact deals being discussed, he reveals that the Japanese are keen on investments in the Klang Valley. Besides new big-ticket projects such as the Tun Razak Exchange, they are keen on the suburbs as well as Iskandar Malaysia, places near KLIA and opportunities to invest in and acquire real estate development near the upcoming mass rapid transit stations.

"To make it worth their while, they have to invest at least US$100 million (RM302.79 million)," he says.

Following these visits, MPI was also approached by other businesses not related to real estate but that see potential in moving to Malaysia. For instance, a tertiary institution in Japan that offers only technical courses plans to move to Malaysia because of the lower cost of living and larger population of young people.

"They offer courses like how to do Japanese manga [comics], make-up and costumes for movies, and all of these courses are recognised. They know Japan is an expensive place to stay, so they are looking to relocate here to use Malaysia as a base to do technical courses. Right now, they are only doing short courses in Japan and they want to conduct long courses here. So we met a lot of unusual businesses who want to move here," Kumar explains.

"We want to see if we can do the same thing in South Korea. They, like the Japanese, are also concerned about longevity and financials. We even want to go to China and the other developed economies next year."

Besides South Korea and China this year, MPI will have an exhibition at the Marina Bay Sands in Singapore in June, showcasing Iskandar Malaysia, Greater Kuala Lumpur and Penang. It will also be bringing in education and healthcare providers.

MPI smartphone app
In March, MPI will launch its first smartphone application on iTunes. It will be a virtual catalogue featuring profiles of participating developers and their products. The app will be free to download, while participating companies will be charged RM10,000 to upload their particulars, excluding additional fees per product. The Android equivalent will be launched in April.

Kumar says MPI has shortlisted 30 developers, with 10 of them stating their interest in the app although nothing has been made official yet.

At the crossroadsIn the last five years, MPI has used up RM15 million out of its RM25 million grant to generate what it estimates is RM1.3 billion worth of foreign direct investment (FDI) deals.
"Of course we are happy with our progress because it takes time to build the momentum. The tipping point doesn't happen immediately. We had to spend almost two years travelling around the region to talk about Malaysia. [Minister of International Trade and Industry] Datuk Seri Mustapa Mohamed was very good to us. We used his good officers to get us into the front doors of many offices in the region."

Now, MPI stands on the cusp of change, as it will welcome a new CEO and also possibly be consolidated into a larger body tasked with drawing FDIs into Malaysia, Kumar reveals

After stepping down as CEO, Kumar recently joined Sunway Bhd as an executive director after resigning from Sime Darby Property Bhd as a director. Currently holding the fort at MPI is general manager Veena Loh.

"We have shortlisted two candidates for the CEO's post, but we will have to wait until after the Malaysian general election as MPI was set up by the federal government after the last election in 2008," says Kumar.

"We will also have to wait until after the election, which must be called by June, for their decision if we will be merged into a larger group of agencies targeting investments.

"You have InvestKL, TalentCorp Malaysia, the ETP (Economic Transformation Programme) and other state economic corridors looking for investments as well and almost all of them are driven by or supported by real estate, so the government is asking, 'Instead of having all these different people talk about Malaysia, isn't there a way to bring them all together, like Singapore's Economic Development Board?' But the government may decide that we will just carry on. I can't ask the government to make the decision now because they are busy trying to get re-elected."

Kumar notes that there are pros and cons to being either a quasi-non-governmental-organisation (quango) or part of a larger government body.

"We do need relationships with MIDA, Matrade, MITI, Ministry of Tourism and Ministry of Finance. But if you are a quango, you are able to make decisions quickly without having to go through a whole hierarchy of decision makers in the government.

"For example, we moved from a B2B to a B2C (business-to-consumer) model in three months. We told the board we wanted to do this, the board agreed and we moved. If it is a larger group, decisions take longer to filter down. And as I mentioned, real estate is getting more volatile, with cycles down to two good years followed by two bad years, instead of five good years then two bad years previously, because of what is happening in the world right now, so we need to make quick decisions to move or change."

Until then, it will be business as usual at MPI, which hopes to draw more than the RM1.3 billion worth of investments achieved in 2012.

This story first appeared in The Edge weekly edition of Jan 28- Feb3, 2013.