As Malaysia’s economy continues to grow, Tom Otley discovers why its capital is a magnet for investment
There’s an air of cautious optimism in Malaysia. Its GDP of 6 per cent in 2014 may have slowed to under 5 per cent in 2015 because of lower than expected oil revenues, but the World Bank’s Doing Business 2016 report still placed the country 18th for ease of operating, among a total of 189 economies.
It’s clear that the nation’s capital is expanding. Arriving in Kuala Lumpur after a three-year absence, this dual sense of a slight setback combined with forward momentum is obvious. The positive aspect first: it is immediately noticeable how the transport infrastructure has improved.
Kuala Lumpur International airport (KLIA) is the third-busiest among the Association of Southeast Asian Nations (ASEAN) in terms of international cargo traffic, and the fourth-busiest by international passenger traffic. It is efficient and clean, with plenty of natural light, and there’s a rapid monorail that takes you from satellite Terminal A to immigration in the main building.
If there’s one disadvantage, it is how far it is from the centre of Kuala Lumpur, although the KLIA Ekspres service, built in 2002 and now extended to connect the new KLIA 2 budget airport (opened in 2014), covers the 57km into the centre of town in less than 30 minutes – and even has free wifi.
It has seen a 40 per cent increase in passenger numbers since the extension opened. Controversially, the prices on board also increased by almost 50 per cent at the beginning of this year (up to RM55/£8.60 for a one-?way ticket).
Still, you’d probably pay anything to avoid Kuala Lumpur’s traffic. My lasting memory from previous visits was the near impossibility of reaching appointments on time. In the rush hour, it can sometimes seem that the entire population – pushing two million when the offices disgorge their commuters – is in a traffic jam.
This is made worse by the construction work taking place to implement what hopefully will act as a partial solution – a new Mass Rapid Transit rail system of, initially, 31 stops on Line 1, and a further 36 stops for Line 2. Line 3 awaits a formal confirmation.
In the meantime, the best advice for getting around is to use public transport – after the airport link, I tried the monorail and the light-rail system and found them infinitely better than taxis.
COMMON LANGUAGE
When I did get in a cab, the long delays meant interesting chats with the drivers as we sat in traffic and watched mopeds speed past. The generally high standard of English spoken throughout the country is just one of Malaysia’s strengths. The locals speak Malay, English, and then, depending on their origin, perhaps Hindi, Tamil, or Mandarin.
For UK business travellers, this is a particular advantage, says Tony Collingridge, director of UK Trade and Investment in Malaysia. “It’s not just an ability to speak English,” he says. “There are now 60,000 people in Malaysia studying British educational qualifications, the highest anywhere in the world outside the UK. There are 16,000 Malaysians in the UK, five UK university campuses here, and 80 UK educational establishments with a presence.”
Collingridge sees this as part of the wider attraction of the city for business. “Malaysia is a commonwealth country with historic ties to the UK. The educational, legal and government systems are very similar and familiar, which means companies can come to Malaysia and do business in a way that they understand. That is not the case in many other markets in Asia.”
This well-educated population is also welcoming to foreign firms, according to Tim Saw, director of communications at government agency InvestKL. “There are several initiatives for attracting businesses because it is seen as a way of employing and training Malaysians,” he says, citing the ease of obtaining work permits as one example.
In addition, while standard corporate tax rates can be as high as 25 per cent, various incentives can reduce this to as low as 5 per cent, or even zero, depending on whether companies are setting up a regional hub.
UNDER DEVELOPMENT
Skyscrapers – many more than 60 storeys – are springing up all over the city to cater for new companies. They have been encouraged by Kuala Lumpur’s mayor, Ahmad Phesal Talib, who describes them as “Towers of Excellence”. The most famous, the Petronas Towers, provide an excellent vantage point for checking out the rest.
The twin towers are on every tourist’s itinerary, but booking an online ticket ensures queuing is kept to a minimum, and the experience also gives a good sense of KL’s organisation, both on a micro and macro scale. The micro part comes in the way in which you are shepherded from one place to the next, along with school groups and tourists.
The macro part is clear both at the 41st-floor sky deck connecting the two towers – from where you can check out the solar panels helping to power the Suria KLCC shopping centre and Philharmonic Hall below – and higher still on the 86th-floor observation deck, from which the park at the base of the towers can be seen most clearly.
Green spaces are set to be a key feature of new constructions, as developers are now required by law to set aside 10 per cent of land to gardens.
The improvement works aren’t all high-rise, however. Kuala Lumpur takes its name from being at the confluence of two rivers, the Gombak and the Klang, and these are gradually being rehabilitated, not least through the “River of Life” project, which is opening up cycle tracks and paths along the waterways in the centre of town.
Malaysia is big on planning and, last May, Prime Minister Najib Razak unveiled the latest five-year economic programme with the intention of Malaysia achieving “developed economy” status by 2020. The 11th Malaysia Plan (11MP), which is the final one in the lead-up to the 2020 goal, includes updated forecasts for the country’s economy and its finances, as well as new projects.
Officially, all of this is continuing as scheduled and, at the end of 2015, the country sold some of its power assets to the China General Nuclear Power Group. Unofficially, the prime minister has been mired in controversy and corruption allegations to do with a US$700 million donation into his personal account from a mysterious donor.
The most highly anticipated project is the US$11 billion, 340km-long Kuala Lumpur to Singapore fast rail link, with seven stops in Malaysia. It’s certainly not going to be an easy proposition, not least because the airlines flying between the two cities aren’t keen on seeing their traffic disappear. Civil Aviation Authority of Singapore figures reveal that 7,500 people travel from the city-state to Malaysia daily, most of whom are heading for KL.
That doesn’t include other crossing points – a car can take you there in less than five hours on a good day, and traffic between both countries through the Causeway and Second Link bridges is estimated at 400,000 crossings both ways daily.
But with a proposed travel time of only 90 minutes, the rail link would open up all sorts of opportunities, and not just for people looking to take advantage of the wage rates in Singapore, which are more than 250 per cent higher than in Kuala Lumpur. And then there’s the matter of freight, which could be transferred by train rather than by air.
BUSINESS SENSE
Collingridge says that KL is an inexpensive place for companies to set up operations, but Malaysia’s advantage is more about the skills it can offer. “A lot of electronic businesses that first went to China have come here,” he says. “China may be cheaper in the middle and the north, but the logistics of that means it’s not viable. If you want value-added electronics then Malaysia is the place.
All of Dyson’s global production comes out of here, for instance. This is a regional centre, so if you want China you go to China, but if you are looking at elsewhere in the region, then Malaysia has a very good sell.”
InvestKL has had plenty of success in encouraging multinationals to relocate to Malaysia, says Saw, including Japan’s Hitachi Systems, German industrial gases, engineering company Linde, the UK’s Rentokil Initial, Zurich Insurance, US food giant Cargill and the world’s largest oilfield service company, Schlumberger.
“Business speaks with its feet,” Collingridge says. “If it likes what it sees, it comes in. If not, it goes somewhere else. Dyson and British Telecom have both increased their size in the past two or three years, and also the Weir Group [engineering] and Petrofac [oilfield services].”
Zainal Amanshah, chief executive of InvestKL, points out: “It takes only four to six hours to reach key Asian business centres such as Hong Kong, Shanghai and Tokyo.” He adds that the greater Kuala Lumpur area is fast becoming the regional ASEAN financial centre, with many local and foreign banks choosing to base their local headquarters here.
The Malaysian government’s goal is to get the whole population earning at least US$15,000 a year by 2020. In Kuala Lumpur, that average has probably been achieved, but the greater KL region of more than seven million has a way to go (the population of the rest of the country is more than 30 million).
In the meantime, the government has continued moves to reform the tax base and has introduced a general sales tax of 6 per cent.
LEISURE HOTSPOT
Tourism plays an important part in improving wages. Chong Yoke Har, deputy director-general of planning at Tourism Malaysia, says the country hopes to generate RM168 billion (£26 billion) from 36 million tourist arrivals by 2020.
In 2014, Malaysia received 27.4 million visitors (an increase of 6.7 per cent on 2013), with the majority coming from Singapore, Indonesia, China, Thailand, Brunei, India, Philippines, Australia and Japan. This equated to RM72 billion (£11 billion) in receipts, making tourism its second-largest foreign exchange earner.
Outside of the Asia-Pacific region, the European market (particularly the UK, Germany, France and Italy), together with the US and the Middle East (UAE, Saudi Arabia, Egypt, Oman, Bahrain, Qatar and Kuwait) contributed more than 1.2 million visitors in 2014, which is a 10 per cent increase on 2013.
In terms of accommodation, YTL Hotels owns some 20 properties in Malaysia, including the Majestic in Kuala Lumpur, which dates back to 1932. The company is part of the larger Malaysian conglomerate YTL, which has interests in everything from utilities to rail (it built the KLIA Ekspres infrastructure).
Mark Yeoh, executive director of YTA’s hotels division, says the country is doing well at attracting both business and leisure visitors, and that repeat visitors are high.
Hotel prices in Kuala Lumpur are a significant attraction, with the city ranking 113th in Mercer’s Cost of Living Survey 2015, well below Hong Kong and Singapore, which ranked second- and fourth-most expensive respectively.
This final advantage means it needn’t cost the earth to visit Kuala Lumpur on an exploratory trip. And once there, its attractions quickly mount up – now even more easily reached thanks to the new transport links.
FACTFILE- Population 30.1 million (June 2014), with a growth of 1.5% per year
- Ethnic groups Bumiputra 67.4%, Chinese 24.6%, Indian 7.3%, other 0.7%
- Languages Bahasa Melayu (official), English, Chinese (various dialects), Tamil and indigenous
- Religions Islam, Buddhism, Christianity, Hinduism and others
- Economy Oil-related revenue is 21.5 per cent (target is 15.5 per cent by 2020)
