Johor’s data centre hub to get a boost from rising FDIs, says CIMB Research
15 Aug 2024
Johor’s status as Malaysia’s leading data centre (DC) hub is expected to strengthen further, bolstered by substantial foreign direct investment (FDI) in the services sector.
CIMB Securities Sdn Bhd (CIMB Securities) said Johor has cemented its position as an investment magnate as it topped the FDI charts and the state’s FDI flows are expected to re-accelerate in 2024, as a stable political climate ensures policy continuity following the conclusion of the six state elections in August 2023.
According to the research firm, the services sector accounted for about 70 per cent of the total FDI received by Johor last year, while the remaining 30 per cent came from the manufacturing sector.
By sub-sectors, the Information Communication Technology (ICT) segment was a major contributor towards the services sector, involving DC’s, cloud sharing services, software and design systems, as well as creative and digital content.
As for the manufacturing sector, it was mainly made up of electrical and electronics products (E&E) manufacturing, chemicals, and machinery and equipment.
“Due to its close proximity, Singapore is unsurprisingly one of the main sources of FDI for Johor.
“Given Johor’s transformative landscape, this would accentuate the demand for specialist builders of advanced technology facilities (ATF)’s, including high-tech industrial buildings, integrated logistics centres, and DC’s,” CIMB Securities said in a research note.
The firm added that a step-up in infrastructure-building is needed to augment Johor’s huge investment drive, and the state’s constructive outlook has also been galvanised by closer bilateral ties between Malaysia and Singapore.
Furthermore, the twin completion of the Gemas-JB Electrified Double Tracking (2025) and RTS Link (December 2026) could herald the start of more infrastructure spending to improve connectivity within Johor, it said.
It also noted that a firmer ringgit provides more fiscal leeway for the government to carry out large-scale infrastructure projects, especially for those that require machinery or inputs that are imported in US dollars.
“Therefore, to promote greater mobility, we firmly believe that the Madani administration may accelerate the rollout of large-scale public transportation projects to complement Johor’s robust growth prospects.
“As such, the Johor ART (autonomous rail transit) and KL-Singapore HSR (high speed rail) are the next two standout projects that could come to the fore,” CIMB Securities added.
Given that Johor’s rapid industrial drive could put a strain on the state’s natural resources, the research firm expects a greater push towards an upgrade of its utility network and related infrastructure in the months to come.
Source: NST
