An Overview of Malaysia’s Investment Corridors

• Malaysia is home to five investment corridors (a type of special economic zone), which offer their own distinct investment roadmaps.
• These corridors shift focus away from already developed regions and redirect investments into less-developed rural areas.

Malaysia is home to five investment corridors (a type of special economic zone). These offer distinct investment roadmaps whose development is overseen by their individual governing bodies.

The concept of investment corridors was first mooted in the Ninth Malaysia Plan (2006–2010), and launched in 2006, due to growing concerns during the 1990s that urban-rural income disparities were beginning to widen. The corridors shift focus away from the already developed regions, such as Kuala Lumpur, and refocus investments into rural areas. The investment corridors already envelop close to 70 percent of Malaysia’s landmass.

The corridors are:

• East Coast Economic Region (ECER);
• Northern Corridor Economic Region (NCER);
• Iskandar Malaysia (IM);
• Sabah Development Corridor (SDC); and
• Sarawak Corridor of Renewable Energy (SCORE).

Combining infrastructure and legal and regulatory framework, the investment corridors are a vehicle to promote free trade and improve cross-border connectivity.  Supporting this business ecosystem are the distinct incentives provided by each investment corridor ranging from tax holidays to incentives for hiring local talent.

This has resulted in the development of various sectors, such as oil and gas, manufacturing, agriculture, logistics, tourism, and biotechnology, among others.

East Coast Economic Region

The East Coast Economic Region was established in 2007 and covers half the size of Peninsular Malaysia. Its development is spearheaded by the East Coast Economic Region Development Council (ECERDC).

The ECER Master Plan (2018-2025), highlights the investment corridor’s strategies for its next leap of growth, aiming to leverage its strategic location as the next gateway to ASEAN and the Asia Pacific.

In doing, the ECER will focus on moving up the business value chain by focusing on becoming the Industry 4.0 hub for the region. The ECER has seven Key Development Areas (KDA), or Nodes, with each Node representing a population center or resource-rich area.

Node 1 — the ECER special economic zone (ECER SEZ) contains key projects, such as prominent industrial parks for automotive manufacturing as well as the Halal product industry.

Node 2 — focuses on cross-border development in areas stretching the coastal belt Terengganu to the Kelantan-Thai border in Tumpat, Rantau Panjang, and Bukit Bunga. The development of this Node will leverage on the improving synergy by the Indonesia–Malaysia–Thailand Growth Triangle (IMT-GT).

Node 3 — a key initiative for Node 3 is the development of the Kuala Terengganu City Centre (KTCC), which is being transformed into a heritage waterfront city, complete with residential and commercial components.

Node 4 — agriculture and ecotourism projects stand at the core of Node 4 with several national parks and agro plantations already in development.

Node 5 — this Node focuses on spurring economic growth in the hinterlands from Gua Musang in Kelantan to Kuala Lipis in Pahang, through ecotourism initiatives.

Node 6 — tourism is the main focus under this Node, with attractions such as the Genting Highlands Theme Park, Bukit Tinggi Resort, Janda Baik, and the Kuala Gandah National Elephant Conservation Centre, serving as quick getaways for Kuala Lumpur residents.

Note 7 — this node aims to assist the development of rural and traditional areas through the implementation of strategic projects.

Northern Corridor Economic Region

The Northern Corridor Economic Region was established to accelerate economic growth in the northern regions of Peninsular Malaysia.

The NCER has a strategic development plan for 2021-2025, which covers six priority sectors:

• Manufacturing;
  • Aerospace;
  • FMCG;
  • Rubber products;
  • Automotive;
  • Medical devices;
• Agribusiness;
  • Livestock;
  • Aquaculture;
  • Paddy;
  • Cash crops;
• Services;
  • Education;
  • Digital economy;
    • Logistics;
  • Tourism;
  • Petrochemicals;
  • Green technology;
    • Renewable energy; and
  • Sustainable mining

As of July 2020, the NCER has created over 150,000 jobs and attracted 120 billion ringgit (US$29 billion) in cumulative investments. The NCER surpassed its investment targets for 2020, attracting 15.6 billion ringgit (US$3.7 billion) from the target of seven billion ringgit (US$1.6 billion), despite the pandemic.

Unique advantages of the NCER for businesses

The NCER is home to the second busiest airport and in Malaysia, as well as one of the busiest seaports, making it an important gateway to Southeast Asia. The government is currently channeling more infrastructure investments into the NCER to improve its regional and international connectivity.

Further, the NCER is considered the ‘rice bowl’ of Malaysia as it produces one-third of the country’s paddy demand, thus showcasing the NCER’s role in fulfilling Malaysia’s food security program.

Iskandar Malaysia

Established in 2006, Iskandar Malaysia is the main development corridor in the state of Johor and is three times the size of Singapore. The corridor’s development is guided by the  Iskandar Regional Development Authority (IRDA).

IM is targeting 383 billion-ringgit (US$92.6 billion) worth of investments by 2025, prioritizing investments in the following promoted sectors:

• Tourism;
• Education
• Healthcare;
• Finance;
• Creative industry;
• Food and agro-processing;
• Petrochemicals and ole-chemicals;
• Electrical and electronics; and
•  

Since its inception and as of June 2020, IM has accumulated 332 billion ringgit (US$80.25 billion) in investments and 194 billion ringgit (US$46.8 billion) in total cumulative realized investments. From the total cumulative investments, 40 percent or 132 billion ringgit (US$31.9 billion) were foreign investments.

Sabah Development Corridor

The Sabah Development Corridor was launched in 2008 as a vehicle to enhance the growth of the economy of the state of Sabah, underpinned by three key principles:

• Capturing high-value economic activities;
• Promote balanced economic growth; and
• Ensure environmental conservation.

By 2025, the SDC aims to triple Sabah’s GDP per capita and create some 900,000 new jobs. To achieve this target the SDC has several specific programs, which are:

• Agriculture;
• Manufacturing; and
•  

 Some of the established programs are:

• Development of the Interior Food Valley: commercial rice, fruits, and livestock production;
• Development of Kinabalu Harbor Front and Gold Coast Enclave;
• Promoting new sources of growth via the application of pioneering technology in SDC, such as ICT, biotech, and nanotechnology; and
• Establishing a One-Stop Service Centre for SDC and Business Desk for SMEs.

Sarawak Corridor of Renewable Energy

The Sarawak Corridor of Renewable Energy is the second largest investment corridor in Malaysia, and its 2030 development plan focuses on growing the energy sector in 10 high-impact priority industries.

These industries are:

• Palm oil;
• Aquaculture;
• Timber;
• Aluminum;
• Steel;
• Marine engineering;
• Tourism;
• Livestock;
• Oil and gas; and
• Solar gas.

Palm oil is a vital industry for Malaysia, being the second-largest producer of the commodity behind Indonesia. Palm oil is a ubiquitous ingredient in processed foods, cosmetics, and biodiesels.

By 2030, SCORE has targeted 334 billion ringgit (US$1.6 billion) in investments for industrial projects, physical infrastructure, and human capital development.

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