US-China trade tensions: Boom and gloom - Kedah

'Rice bowl' state sees investment surge in high-tech industries

Kedah state is better known for its scenic rice fields and sleepy towns, but it now looks set to rival Malaysia's other industrial centres Penang and Selangor as a manufacturing hub for foreign investors.

From January to September this year, the bucolic northern state has drawn manufacturing investments worth RM7.8 billion (S$2.5 billion), more than three times the RM2.38 billion it received for the whole of last year.

This vaults it from ninth place last year to third spot behind Selangor and Penang, which attracted RM16.4 billion and RM13.2 billion respectively over the same period, and just ahead of more developed Johor.

The state government puts Kedah's sudden success down to its lower land costs, better infrastructure and improved efficiency.

"Land price in Kedah is cheaper and the basic infrastructure - roads and expertise - it is already there," Mr Tan Kok Yew, Kedah's top official for industries and investments, told The Straits Times.

Close to 97 per cent of the investments in Kedah from January to June this year came from the United States and China, with the US taking top spot by contributing two-thirds of total investments.

Canada-based Aerospace Composites Malaysia - which produces parts for Boeing - is ramping up production at its plant in Bukit Kayu Hitam, near the border between Kedah and Thailand. Managing director Jose Garza said in March: "Malaysia offers a lot of advantages for us in terms of cost competitiveness, good performance in terms of quality and on time delivery."

  • RM7.8b

    mount of manufacturing investments Kedah has drawn from January to September this year.

    RM2.38b

    Amount it attracted for the whole of last year.

Other investors in Kedah include Celestica, another Canadian company which produces in-flight entertainment systems in its Kulim factory, and China's Zhejiang XSD, a cardboard company that has invested RM1.2 billion in its own 120ha paper industry park.

Kedah, Malaysia's "rice bowl" state, is governed by the Pakatan Harapan coalition, which formed the federal government in Putrajaya in May last year after its surprise win at the general election.

Kedah is also the home state of Prime Minister Mahathir Mohamad, whose son, Datuk Seri Mukhriz Mahathir, heads the state government as menteri besar.

Mr Mukhriz said the state has finally begun appearing on foreign investors' radars.

"Investors are becoming more aware of Kedah... the existing ecosystem of suppliers present in Kedah and Penang made it an easy choice for companies to set up design and assembly plants," he told ST. "It makes logical sense to be where your suppliers are."

Kedah's industrial town of Kulim, for example, is less than 30km away from Seberang Perai, Penang's manufacturing hub on the mainland part of the state.

More plans are afoot to beef up infrastructure. The state government has unveiled a RM3.6 billion development plan, which includes a privately funded RM1.6 billion airport in Kulim, just 35km away from the area's high-technology park. This would make it Kedah's third airport - there are already airports in state capital Alor Setar and on holiday island Langkawi.

The new airport however, has been criticised for being located close to existing main export gateways for the northern states - just 72km from Penang airport and 51km from Penang port.

Kedah's administrators, however, believe the new airport will spur more investments, with its facilities fully utilised for air freight and as a logistics hub.

"Once (Kulim airport) is completed, we will have an alternative to the seaport in Klang or the Bayan Lepas airport in Penang in transporting cargo out of this area," Mr Mukhriz said in March after the project was announced.