By Shannon Teoh(Themalaysianinsider) JOHOR BARU, Dec 23 — Acknowledging that retrenchments and shrinking order books are beginning to blight Johor's economy, Johor Menteri Besar Datuk Abdul Ghani Othman stated that 2009 will see Iskandar Malaysia finally deliver on its promise.
In an exclusive interview with The Malaysian Insider, Abdul Ghani explained that from the first quarter of next year, a substantial portion of the RM40.25 billion investment committed to Iskandar Malaysia will begin to materialise.
He said the reason that it has taken over two years since Iskandar Malaysia, the economic hub proposed for South Johor in 2006, was launched was because it took about 18 months for the federal government to work out the details of a support policy/incentive package for the hub.
"You have to remember, we are talking about an area three times the size of Singapore," he said, referring to the complexity involved.
"We are just done with all the planning and the groundwork will start to manifest now," he added.
Abdul Ghani, who is also Iskandar Regional Development Authority (IRDA) co-chairman, cited the example of the federal allocation of RM6.83 billion for Iskandar Malaysia under the 9th Malaysia Plan of which IRDA has only been allocated RM452.79 million so far.
As such, there is more to come for local entrepreneurs, with the imminent construction of the RM5 billion plant by Spanish steel giant Acerinox in Q1 2009.
This statement comes on the back of a report by The Malaysian Insider that small and medium enterprises in Johor were suffering from a drop in sales by 20 to 70 per cent and were getting frustrated at not having much direct involvement with Iskandar projects.
It has resulted in massive cuts to wage bills.
The Johor Baru Chinese Chamber of Commerce and Industry confirmed this, with its president Datuk Soh Poh Sheng describing to The Malaysian Insider the constant investor announcements by Iskandar Investment Berhad (IIB) as "thunder without rain."
But Abdul Ghani has called for patience on two counts — that the economy has seen over seven good years and that the impact from two to three lean years would be softened as the Iskandar billions come into play.
Aides to the menteri besar acknowledge that the public-relations strategy behind Iskandar was not well-conceived.
"All this talk of billions gets people excited and they expect to see it happen immediately," an official said.
In the interview, Abdul Ghani also admitted that unemployment would be a key issue once retrenchments begin in earnest next year.
With the rate of new entrants to the labour force growing and the added burden of retrenched workers, including those returning from Singapore, there is no guarantee that the jobs generated from Iskandar developments would keep the labour market on an even keel.
While there are still thousands of vacancies in Johor, Abdul Ghani acknowledged that it was sometimes a case of square pegs for round holes.
The fact that it was recently reported that Malaysia has 60,000 unemployed fresh graduates is a key indicator of this.
"Yes, this may result in social problems as well as a dip in consumer spending," Abdul Ghani conceded, but said that it would depend on how drastic the depression would be versus the drive from Iskandar.
Local business associations are already predicting dire multiplier effects from a shrinking job market.
The fear is that a chain reaction will occur from tighter consumer spending as well as the setback to investor confidence due to a possible rise in crime.
Another issue brought up by Soh was the drastic drop in the price of commodities. Smallholders are seeing a drastic cut in margins as raw rubber now trades for RM1.05 per kg as opposed to a recent high of RM4.50 per kg.
The price of fresh fruit bunches of oil palm has also dropped from RM820 per ton to RM300. Soh estimates the average cost of production is RM250 per ton.
But the state government is confident that the materialising of Iskandar developments will stimulate local demand for raw materials even if export markets soften.
IRDA officials are confident that over the next two years, Johor will see more public works than any other state in Malaysia.
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