BREAKING NEWS

M’sia grants tax break for Medini, a showcase zone near S’pore

KUALA LUMPUR: Malaysia has granted a substantial tax break to a zone in a showpiece investment project near Singapore, a move likely to provide crucial support to a $800 million initial public offering of the area’s developer next year.

The Medini area in the southern state of Johor is the only section of the $30 billion Iskandar Development Region to get an exemption from a 30 percent property gains tax announced in October to cool soaring property prices, government officials said.

The area is being developed by Medini Iskandar Malaysia, a company that is 60 percent owned byIskandar Investment, a corporation controlled by sovereign fund Khazanah Nasional Bhd . Japanese conglomerate Mitsui & Co Ltd and Dubai-based realtor United World Infrastructure each own 20 percent.

“Medini in 2006 and 2007 was a sparsely populated area and not a preferred investment location,” Ismail Ibrahim, chief executive of Iskandar Regional Development Authority (IRDA), told Reuters when asked why the area received an exemption.

“The objective is to provide the catalyst to drive investments into Medini,” he said. Since its inception in 2006, Medini was exempt from property gains taxes.

Medini Iskandar declined to comment about the latest tax exemption.

The tax break, however, means the company should be able to attract more funds into the Medini area, helping the prospects for its IPO as well as the government, which is seeking to lure more investors, especially from cash-rich Singapore, into the Iskandar region without inflating a broader property bubble.

“It (the exemption) certainly gives it an edge over others in Iskandar,” said a banker involved in Medini Iskandar’s IPO, which is excepted to be launched in the first half of 2014.

Bank of America Merrill Lynch, Goldman Sachs and Maybank have been chosen to manage the planned listing, according to Thomson Reuters publication IFR.

Other major listed developers in the Medini zone include Mah Sing Group, Sunway Bhd, Eastern & Oriental and WCT Holdings Bhd.

ISKANDAR’S APPEAL

The whole Iskandar region has seen property prices climb in recent years due to speculators and higher demand from Singaporeans seeking a break from sky-high prices in the city-state. U.S., European and Chinese firms have also realised the potential of the area as a manufacturing hub.

The recent tax hike has left other Iskandar developers like Iskandar Waterfront, partly owned by Johorstate, and UEM Sunrise Bhd, Malaysia’s biggest real estate company, bracing for a chill next year.

Both companies declined to comment when asked about the tax exemption for Medini.

Iskandar Waterfront, which is developing a zone directly across the causeway that links Singapore withJohor Bahru city, has, however, delayed a $300 million IPO to the end of 2014 from the first quarter to gauge the impact of the property cooling measures, people with knowledge of the matter said last month.

The sources declined to be identified because the information was confidential.

The Iskandar Development Region struggled to attract investors at first, but improved infrastructure and soaring property prices in Singapore burnished its appeal.

Total committed investments by local and foreign firms in the area until September this year amounted to 128.21 billion ringgit ($39.87 billion), almost ten times a much as when the zone was first set up in 2006, IRDA officials said.

Local investors account for almost 65 percent of the total.

Medini, the largest township across the narrow strait from Singapore, is only a small part of one of the five sections that make up the Iskandar Development Region.

The area that was once mostly rubber and palm plantations is now home to a popular Legoland theme park resort, a production centre for Britain’s famed Pinewood Studios as well as some of the most developed infrastructure in the whole Iskandar region, government officials say.

Medini Iskandar has so far spent 5.9 billion ringgit ($1.8 billion) on developing the area, with $600 million going on well-lit roads and sewage treatment facilities. The rest was an initial capital injection, according to the company website.

“Medini came in at a time of doldrums, nobody wanted to go to Iskandar,” Shahrir Abdul Samad, a member of parliament for Johor Bahru, the state capital of Johor, told Reuters.

– Reuters

Source : http://www.thestar.com.my/

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