Cheap as China and closer: Malaysia zone woos Singapore firms

Sun Oct 21, 2012 5:45pm EDT
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By Kevin Lim and Eveline Danubrata

SINGAPORE (Reuters) - When Tastyfood Industries decided to boost production to meet demand in Africa and the Middle East, the maker of Mr Cafe instant coffee and Vitamax cereal did not expand its Singapore factory or another one it owns in Xiamen, China.

Instead, it plans to close its Singapore plant next year and move up the road to Malaysia's Iskandar economic zone, where it will set up a factory three times the size on low-cost freehold land and hire willing workers as cheaply as it can in China.

"New generation Singaporeans do not like production positions as they are more educated now," Tastyfood founder and managing director Joseph Lim, a Singaporean, told Reuters.

"It's not easy to manage a manufacturing company in Singapore unless you are in high-tech, high value-added businesses like pharmaceuticals."

Singapore companies dominate the firms setting up factories in Iskandar, accounting for around 15 percent of the 32.7 billion ringgit ($10.7 billion) committed as of June, according to the Iskandar Regional Development Authority (IRDA).

Firms from Spain, Japan, the Netherlands and Germany are other large manufacturers in the zone in Malaysia's southern state of Johor, while companies from the United Arab Emirates are involved in housing and other property projects.

Lim, who will keep Tastyfood's marketing and product development operations in Singapore, said an average factory worker in Malaysia and China earns S$400-500 ($330-410) per month, less than half the wage in the wealthy city-state.

Proximity is also key. The new Iskandar factory is just a 30-minute drive from Tastyfood's home base and major market, he said, against the four-hour flight from Xiamen.   Continued...

An excavator drives past a cluster of uncompleted residential apartments at Nusajaya in the southern state of Johor in this September 14, 2012 file photo. REUTERS/Edgar Su