While the special economic zone of Iskandar Malaysia was established in 2006, it is only in the past two years that interest among Singaporean SMEs has begun.

Fervent relations between Singapore and Malaysia and the completion of infrastructure and property projects are among the factors that could have played a role in attracting investor interest, along with rising costs and the ongoing economic restructuring in Singapore.

Drawn into the region for a more conducive place to operate, Singaporean firms make their presence in Iskandar for a variety of reasons — some to provide supporting services to existing businesses, and others to take advantage of the lower land and electricity costs. This is reflected in the growing volume of business loans to Iskandar.

Singapore is currently in its third year of its restructuring drive to raise productivity growth, and the pressure on SMEs is unprecedented.

OCBC Bank said that there has been a four-fold increase in the number of local SMEs expanding overseas in the last two years. UOB Bank supplemented this, saying that loans extended to these companies have grown close to 50 per cent.

To firms such as office products maker Paclin, which already has operations in Kuala Lumpur and Penang, Iskandar is a viable location for branching out further.

Rising labour costs owing to restructuring in the Singapore economy have spurred the overseas expansion of SMEs.

OCBC Bank expects loan commitments by Singaporean SMEs expanding into Iskandar to grow by S$200 million by the end of 2013, and its assets to grow three-fold over the next two years. OCBC Bank has been in Iskandar since 2007 and they claim that one in three Singaporean SMEs in Iskandar have accounts with them.

Going beyond business loans, economists postulate that more can be undertaken at the government-to-government level to generate even greater value for Singapore’s relationship with Iskandar. 

Beyond business loans, some economists said more can be done at the government-to-government level to generate greater value for Singapore’s relationship with Iskandar.