Incentives to attract investors
When Westport, one of Port Klang’s three major gateways, was opened some 15 years ago on Pulau Indah, it heralded the start of major development on the then sleepy isle.
While Westport has since come into its own, becoming one of the fastest growing ports in the country, development on the rest of the island appears to be struggling.
Apart from Westport, Port Klang’s other gateways are North Port and South Port. There are 18 berths in North Port, eight in South Port and 22 in Westport.
Volume at Westport grew 15% from 4.3 million twenty-foot equivalent units (TEUs) in 2007 to 4.97 million TEUs last year. The port, with a land area of 1,350 acres, has a total capacity of 7.2 million TEUs.
City & Country recently visited the 14,000-acre Pulau Indah located off the coast of Selangor. The drive to Pulau Indah from our office in Damansara Perdana, Petaling Jaya, took about an hour, with countless trailers zooming past us on the 1km-long bridge into Pulau Indah.
The island is accessible via the Federal Highway, Shah Alam Expressway (Kesas), North Klang Straits Bypass and the North Klang Valley Expressway (NKVE). The proposed South Klang Valley Expressway (SKVE), which connects Pulau Indah via Carey Island, is expected to be completed in 2012.
The island is home to the Star Cruises terminal, the Royal Selangor Yacht Club, Anglers Resort and many other multinational and manufacturing companies.
Developer Central Spectrum (M) Sdn Bhd owns a 5,324-acre tract of leasehold land known as Pulau Indah Industrial Park (PIIP) on the island and has to date sold some 2,900 acres of mainly industrial plots, with a gross development value (GDV) of RM1.1 billion.
The consortium was formed in 1994 to develop PIIP. Kumpulan Hartanah Selangor Bhd, a unit of Selangor state-owned Kumpulan Darul Ehsan Bhd (KDEB), has a 76.7% stake in the company while AMDB Bhd holds the remaining 23.3%.
Central Spectrum general manager Roslan Ahmad tells City & Country that Pulau Indah is the same size as Labuan in Sabah, Singapore is 10 times bigger while Penang is six times the size of Pulau Indah, or what was formerly known as Pulau Lumut. Selangor Halal Hub Pulau Indah (SHH), a special project of the Selangor government that was launched in 2003, takes up 1,000 acres of industrial land within PIIP.
Decade-long struggle
A drive around Pulau Indah, specifically PIIP, SHH and the residential Laguna Park, revealed huge plots of vacant land. Nevertheless, factories such as plastics manufacturer Mapo Industries, herbal products manufacturer Zeeta, Mewah Oil Sdn Bhd and Central Sugar Refinery Sdn Bhd are in operation there while a few factories are currently under construction.
Sadly, Indah Point, one of the commercial centres developed by Central Spectrum, looks deserted despite the presence of the developer’s office and a police station. Roslan says Indah Point was completed in 1999 and has 112 units of 4-storey offices. Since its launch in 1996, 95% of the units have been sold.
While the take-up rate is high, the occupancy rate seems non-existent. “It is still quite empty as it takes time for business to pick up, or perhaps it’s the ‘wait and see’ attitude that is being experienced here,” explains Roslan.
There is no denying that much needs to be done to improve the infrastructure and vibrancy of PIIP. City & Country spoke to the general manager of a chemical manufacturer operating in PIIP that had bought eight acres of industrial land there five years ago. Preferring to remain anonymous, he says when his company moved into the park almost four years ago, the infrastructure, such as telephone lines, was not ready yet and until today, public transport remains a problem. He adds that security in the area should be beefed up as there have been numerous break-ins.
Oil Line Fabricators Sdn Bhd’s director Pua Yiow Liang tells City & Country that the company bought 56 acres in PIIP in 2002 and started operations there in 2005. The company is a subsidiary of OilCorp Bhd, which deals in oil and gas fabrication works.
“The main roads should be widened and if possible, increased to three lanes on both sides (it is currently two lanes). The lanes are too small for containers and due to the heavy usage of containers, it could discourage other developments, such as residential, institutional and commercial, from coming into Pulau Indah,” he says.
He likens the access road to their land, which is just a couple of lots away from The Star Cruises terminal, to “a roller-coaster road” because of its poor condition.
From mangrove swamp to industrial hub
According to Central Spectrum’s Roslan, before its transformation into Pulau Indah’s industrial hub, the land where PIIP is located was a mangrove swamp. PIIP has 12 sections comprising industrial, commercial and residential projects. The infrastructure cost is estimated at RM4 billion. The industrial, residential and commercial developments will take up 3,225, 1,874 and 225 acres of PIIP respectively.
Roslan says the infrastructure for the whole development — including road and roadside drains, water reticulation mains (the reservoirs and all pipes laid from the main source in Lipat Kijang), electrical supply, telephone ductworks and manholes — is expected to be completed by 2014.
Laguna Park
PIIP’s residential component is known as Laguna Park, with more than 15,000 units planned, including low-cost and high-end homes to meet the demands of the employees of factories located in Pulau Indah. To date, only two phases of 2-storey link homes have been completed — Phase 1A and Phase 1B1. The former consists of 134 units, with 110 currently occupied. The houses were sold from RM133,479 to RM175,888. Phase 1B1 consists of 136 units, with selling prices of RM146,428 to RM188,888. About 30 units remain unsold. Currently open for sale are 39 units of 2-storey shopoffices (in Phase 1C), tagged from RM295,999.
Says Abdul Manan, 46, who is renting a 2-storey link house in Laguna Park for RM450 a month: “I moved here a month ago as it is more convenient for me and closer to my workplace in Pulau Indah. I used to live in Taman Sri Andalas in Klang and it took me 45 minutes to drive to work. Now, I am only 15 minutes from my office.”
He plans to purchase a house here in the future.
Although Laguna Park is “quiet” now, the developer’s long-term aim is to make the place as livable as possible. “We plan to commence work on the town centre (commercial) in 2012. The majority of people living in Phases 1A and 1B1 are working in Pulau Indah. We plan to maintain part of the mangroves as part of the town park, with an information centre and a bird-watching area,” Roslan says.
Industrial
According to Roslan, all the industrial land in Phase 1, comprising Sections 6, 8 and 12, and Phases 2A and 2B of PIIP have been sold out. “Some land is vacant as the purchasers have yet to construct their factories or they are not ready to open or expand their business yet. Some buyers, of course, are speculators,” he explains.
The industrial land in Phase 1 was sold from RM14 to RM18 psf in 1995 and 1996, while Phase 2, which was launched in 2000 and thereafter, was sold at RM19 to RM20 psf. SHH was launched in 2003 at RM20 psf as well although it was in a specially designated zone for halal products.
During City & Country’s visit to the SHH site, some plots of land were being cleared while some factories were being constructed.
“We focus mainly on industrial properties, which not many developers do. The main reason we do that is simple. We are next to Westport. Our clients are all related to the import and export industries, be it food, non-food, logistics or services,” Roslan says.
PIIP’s role, he says, is to make the place relevant for port-related industrial development. This includes attracting foreign and local investment. “We also need to provide supporting housing developments, such as Laguna Park, and commercial areas, such as Indah Point and the town centre.
“The construction of the town centre will be at a later stage, maybe in another two years. Eventually, this will create more job opportunities and provide international standard infrastructure and increase the value of the surrounding land and properties,” he explains.
According to the developer, incentives given to companies in the manufacturing sector that are operating in PIIP include full income tax exemption, investment tax allowance, accelerated capital allowance, infrastructure allowance and export incentives. “After 2000, we saw more purchases by owner-occupiers and repeat buyers for expansion purposes,” Roslan says. Some plots of land have changed hands while some owners have started submitting plans for the construction of new plants, he adds.
Marketing strategies
On Central Spectrum’s marketing strategy, Roslan says: “We have all kinds of strategies. One is to attract the industrialists and business companies, especially in the port-related business (import and export business). We are also participating with GLCs (government-linked companies) that we think may contribute to our access to potential investment.”
Central Spectrum is also working with Malaysia Industrial Development Authority(Mida), Majlis Perbandaran Klang (MPK) and SSIC Bhd in providing clients with facilities and assistance in solving issues, especially with regard to planning approval, and identifying incentives to their benefit.
The developer has a rent-and-buy scheme for 1 and 1½-storey demi-detached factories, where part of the rent is used to offset the purchase price. “This is to encourage SMEs/SMIs to start their operations — they can decide to buy later when their cash flow has improved,” says Roslan.
The scheme was introduced three years ago and since then, the developer has managed to sell 18 units and rent out the remaining 30 units, at an average of RM2,500 per month.
The developer also has public facilities as a food court — Indah FC — in the first phase of PIIP. Then, there is De Bund in Laguna Park, a seafront landscaped public rest area with exercise facilities, says Roslan.
Vibrant halal hub
SHH seems to be the most vibrant and successful part of PIIP at the moment. Launched in 2003, this is a special project in collaboration with the Selangor government. According to Roslan, SHH is the largest (in terms of size) and most advanced halal hub in the country.
There are three phases in SHH, with a combined total of 1,000 acres. Phase 1, comprising 300 acres, has been sold out, and the developer is now selling plots in Phase 2, which consists of 400 acres. “The first phase of SHH started in 2004 and it was fully sold out by 2007, priced from RM18 to RM20 psf,” Roslan says. The developer might start selling the 300-acre Phase 3 in 2010/11, depending on the response to Phase 2.
Malaysia Integrated Logistics Solutions, a subsidiary of shipping giant MISC Bhd, is the developer’s halal storage partner in SHH.
SHH has been accredited by the Halal Development Corporation (HDC), which has been tasked by the government to boost the halal industry in terms of standards development, branding enhancement as well as commercial and industry development. “HDC is world recognised and not just for food. Benefits of operating in SHH include fast-track approval, processing and certification, its proximity to Westport and the ease of monitoring by the authorities, which reassures users,” Roslan says.
The global halal market is growing stronger by the year, he adds, citing a report that says growth was between 16% and 25% and valued at US$80 billion (RM292 billion) two years ago.
On how the global economic crisis might affect the industry’s development and sales, he says: “People will still need to eat, so we do not see the food industry being too affected. In times of economic uncertainty, foreign investors may look for a more stable location and in fact, we just received enquiries from China.”
Companies producing halal food will be given an investment tax allowance of 100% of qualifying capital expenditure incurred within five years.
Major players operating in SHH include F&N, Secret Recipe, Ramly Burger, Mewah Oil Sdn Bhd, esther-palm oil productss producer Oleon Sdn Bhd and Felda, which bought 128 acres for its palm oil-based products plant. F&N has 37 acres while Ramly Burger has 22 acres for its frozen food business.
The second phase of SHH, with industrial lots ranging from 0.5 acre to more than 10 acres each, is now for sale at RM22 psf.
The challenges
According to analysts, Pulau Indah’s uneven development record is due to a confluence of natural, historical and marketing-related factors. Hectares and Stratas’ managing partner Stephen Tew believes Central Spectrum’s launch prices were too high. “About RM14 psf would have been more reasonable than RM20 psf. I think the price was high then as the economy and the property market were at their peaks. The high price plus having no catalyst for Pulau Indah would cause its ‘failure’,” Tew tells City & Country. He says there is still a need to increase traffic to Westport.
VPC Alliance (KL) Sdn Bhd’s managing director James Wong feels that Pulau Indah’s land area of 14,000 acres is “too big” and that there are not enough strong developers to develop the island. “Also, portions of the land are low-lying and need to be reclaimed. In view of the soft soil conditions, piling and building costs go up,” he adds.
He points that about 4,000 acres of Pulau Indah are Malay reservation land, which contributed to the depressed property market there. Being an island also means Pulau Indah is isolated from the rest of Port Klang, he adds. “Most of the housing and shopoffice development there suffers from low occupancy. Hence, there is not enough catchment and facilities such as schools and shopping to attract the outside population to live in Pulau Indah.”
Wong says only two developments are doing relatively well in Pulau Indah — the Star Cruises Terminal and Westport. “In fact, Westport recently purchased additional land in Pulau Indah for its expansion.”
From a longer-term perspective, the island does have certain advantages. According to a VPC Alliance report, Pulau Indah is one of the few large tracts of industrial land available in the Klang Valley. “Eventually, as the supply of industrial properties dwindles in the rest of the Klang Valley and/or older industrial properties convert to commercial or residential use, more companies will relocate to Pulau Indah and industrial property demand in Pulau Indah will increase,” says the report.
The success of Westport and the Star Cruises Terminal however has not been a catalyst for the overall development of Pulau Indah, particularly in PIIP. Thus, in the near term, the task of Central Spectrum and other developers in Pulau Indah remains daunting, especially with the economic storm clouds expected to play havoc with the local economy.
This article appeared in City & Country, the property pullout of The Edge Malaysia, Issue 744, March 2-8, 2009.