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Malaysia Business Report 2017

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Discovery Reports

KLIA Aeropolis: an airport city and service leader in the making

The biggest names in business are already in KLIA Aeropolis, coming from aerospace, repair, cargo logistics through to shopping and entertainment

PUBLISHED : Wednesday, 27 December, 2017, 11:05am
UPDATED : Wednesday, 27 December, 2017, 4:07pm

Offering businessmen and tourists everything they need within the vicinity of Kuala Lumpur International Airport (KLIA), KLIA Aeropolis has been master-planned by airport operator Malaysia Airports to seamlessly blend business and leisure.

Malaysia is emerging as a principal Asean partner in the Belt and Road Initiative, with hard and soft infrastructure, and connectivity being the key driving forces. In collaboration with the Malaysian government and Jack Ma’s Cainiao Network, Alibaba’s logistics arm, the airport city hosts the first electronic world trade platform (eWTP) outside China. The eWTP serves Asean and Oceania and is part of the Digital Free Trade Zone (DFTZ) initiative. Meanwhile, Tokyo-based global real estate developer Mitsui Fudosan is working with Malaysia Airports in constructing the Mitsui Outlet Park in KLIA Aeropolis. With the second out of three planned phases fully constructed, the outlet mall will be Mitsui Fudosan’s first commercial property investment in Southeast Asia.

“Malaysia Airports is undergoing an exciting transformation from an airport operator into an ecosystem manager. We are expanding the KLIA network hub into an integrated city,” says Badlisham Ghazali, Malaysia Airports managing director. “KLIA is evolving from a transport interchange into a maturing centre of global economic activity, and KLIA Aeropolis will stand as the airport’s multimodal business core.”

Spanning more than 100 sq km of aviation, business and leisure space, KLIA Aeropolis is at the heart of Asean. With more than 1,300 flights across the region, locators at the airport city can reach more than 600 million consumers and look forward to more than 20 township developments and double-digit population growth rates in the surrounding areas. In particular, the Asean Economic Community estimates the overall real value of Asean’s gross domestic product to reach US$5 trillion by 2020.

A strategic pillar in Malaysia Airports’ five-year business plan “Runway to Success 2020”, KLIA Aeropolis has three clusters – air cargo and logistics; aerospace and aviation; and meetings, incentives, conferences and exhibitions (MICE), including leisure.

The air cargo and logistics cluster

Malaysia Airports plans to expand KLIA to become a regional multimodal transhipment hub. Besides airfreight, infrastructure is also being set up to support sea freight and land transhipment such as cross-border trucking cargo. The company is committed to developing KLIA into a cargo and logistics hub in collaboration with up-and-coming regional transhipment and cargo feeder centres in other airports across Malaysia. These development plans are intended to capitalise cargo and e-commerce megatrends, underpinning trade growth and further supporting Asean international trade. One of the core vehicles in achieving these goals is the DFTZ.

Malaysian Prime Minister Najib Razak and Alibaba Group chairman and founder Jack Ma last month launched DFTZ, a regional logistics hub aimed at serving small and medium-sized businesses in Asean and Oceania. At the ceremonies, Alibaba went live with its electronic trading hub to serve 1,972 merchants.

Malaysia Airports also announced during the launch the incorporation of Cainiao KLIA Aeropolis, a joint venture between Malaysia Airports’ wholly owned subsidiary MA eLogistics and Cainiao HK, Alibaba’s logistics arm. The joint venture will develop cargo terminals, sorting centres, warehouses, fulfilment centres and other facilities for the e-commerce industry.

The strategic collaboration with Alibaba distinguishes KLIA Aeropolis DFTZ Park to be the first Electronic World Trade Platform hub outside of China. It is Malaysia Airports’ ambition and priority to ensure a successful collaboration with Cainiao HK to revolutionise the e-commerce and logistics sector in Malaysia. The goal is to make KLIA Aeropolis DFTZ Park a regional fulfilment centre for the consolidation and distribution of e-commerce B2C and B2B merchandise within Asean and Oceania and later on catapulting to become a global hub. The project will consist of a single phase development, built on a land area of approximately 24 hectares.

Malaysia’s excellent flight connectivity and surplus capacity within Asean will facilitate the plan of the new joint venture to re-route Asean’s transhipment volume via KLIA. Designed as a regional multimodal transhipment hub, KLIA Aeropolis will support the movement of goods for DFTZ also through sea and land including cross-border trucking.

With additional business injected by Alibaba, Malaysia Airports expects these initiatives to double the cargo volume in KLIA to 1.25 million tonnes per annum within 10 years. This significant volume growth will enhance airline profitability, making KLIA a highly feasible destination for airlines.

The aerospace and aviation cluster

The aerospace and aviation cluster, on the other hand, comprises various government-favoured entry-point projects that include maintenance, repair and overhaul, original equipment manufacturing and aerospace engineering services.

Regional hubs for private jet aircraft and aero-manufacturing services will attract critical mass and help Malaysia become the region’s leading aviation business centre. This is also in line with the National Aerospace Blueprint (2015–2030), which aims to position Malaysia as Southeast Asia’s No 1 aerospace nation and an integral part of the global market.

“We are excited to create value through smart and synergistic collaborations. We welcome business partners to achieve mutual benefits and provide solutions in the areas of supply chain, human capital, infrastructure, equipment and technology,” Ghazali says.

The aerospace ecosystem in Subang, for instance, hosts GE Aviation, Global Turbine Asia-Safran Helicopter Engines, Spirit AeroSystems and Airbus Helicopters Malaysia.

Spirit AeroSystems is one of Boeing’s largest aircraft parts supplier that has been attracting a variety of tier-2 and tier-3 players to Subang since 2007. Operating on a 242,000 sq ft, built-to-suit manufacturing and assembly facility, Spirit AeroSystems also serves Airbus. Parts are shipped from the main sub-assembly facility of Spirit AeroSystems in Subang to the final wing assembly unit of Airbus in Broughton, Britain.

Meanwhile, Subang Helicopter Centre hosts seven players including Airbus Helicopters Malaysia within an 8-hectare site. Airbus Helicopters operates on a 100,000 sq ft, built-to-suit facility complete with an office building, dedicated hangar and a simulator centre, which is the first of its kind in Asean.

The MICE and leisure cluster

The MICE and leisure cluster, meanwhile, is committed to expanding KLIA’s service portfolio, thereby giving passengers a richer business and entertainment experience.

“We are creating airports as destinations in themselves,” Ghazali says. “By incorporating business with leisure, we are extending the boundaries of KLIA Aeropolis.”

This development cluster is aligned with Malaysia’s Economic Transformation Programme (ETP) in the tourism sector, particularly with the Kuala Lumpur Tourism Masterplan (2015-2025) billed as “Initiative 10.14 – Expand Connectivity to KL”.

The Mitsui Outlet Park is Malaysia Airports’ first non-airport real estate development project under the MICE and leisure cluster. Malaysia Airports signed a joint venture with Mitsui Fudosan in 2013 to develop Mitsui Outlet Park. The development of Phase 2 is ongoing and is targeted to commence operations in February next year.

Being built on a 27,500-square-metre site near Mitsui Outlet Park, Phase 2 will host 60 more shops and 500 more car park lots to complement the existing 140 stores and 2,100 parking spaces. The development project will introduce more premium brands to the outlet and is bound to increase the presence of luxury international and local brands in fashion, cosmetics, sportswear and accessories. Phase 2 of the Mitsui Outlet Park will explore a fresh ambient experience with its sky walk and river walk themes, which are in line with the “paradise village” architectural concept of Phase 1.

“We expect our locators to grow tremendously with the global market,” Ghazali says. “We have the track record as a government-linked corporation with more than 45 per cent of shareholding from the national treasury and pension fund. Foreign businesses trust us with a shareholding of approximately 36 per cent.”

In addition to this, KLIA Aeropolis comes with the full measure of tax and other financial incentives given to investors under the ETP. Business clusters at the city are all aligned with the government’s national agendas such as the National Logistics and Trade Facilitation Masterplan (2015-2020), National Aerospace Industry Blueprint (2015-2030) and many national key economic areas such as business services and tourism.

Other future plans and developments

Malaysia Airports is just warming up. On the planning board is the Airport Central, a central business district linking KLIA and KLIA2. As the animated core of KLIA Aeropolis, Airport Central will create a destination for locals and tourists. It will feature commercial amenities, attractions and spaces that create a robust work and play environment. Airport Central covers businesses, leisure, entertainment, hotels, offices, campuses, museums and other diverse cultural assets.

KLIA Aeropolis will also build a business park, grouping related commercial, business and industrial development components under one attractive address. The activities in the business park will be well connected through a multimodal transport hub and a network of pedestrian walkways and bicycle lanes. Equipped with modern and smart infrastructure, the park will boast a highly reduced carbon footprint.

“Capitalising on our strategic advantages and global market uptrends, KLIA Aeropolis will accelerate the realisation of Malaysia Airports’ vision of becoming a ‘global leader in creating airport cities’,” Ghazali says.

www.malaysiaairports.com.my