Requiem for an industrial dream

Contributed by Datuk Stewart Labrooy  S hah Alam was launched in 1963 with the purpose of replacing Kuala Lumpur as the new administrative centre of Selangor.

Previously, Kuala Lumpur was converted into a Federal Territory on Feb 1, 1974.

With the consent of the Sultan, Shah Alam was made the capital of Selangor on Dec 7, 1978, and today covers an area of 293 sq km.

It was named by the previous Sultan of Selangor, Sultan Salahuddin Abdul Aziz Shah after his late father, Sultan Alam Shah.  After the separation of Singapore from Malaysia on Aug 9, 1965, the Malaysian government decided to make Port Klang as the nation’s new national port to replace the one in Singapore.

The construction of the Federal Highway was commissioned soon after, and it became Malaysia’s first expressway.

This first significant infrastructure project sealed the success of Shah Alam as a major industrial hub in the Klang Valley, displaying the importance of infrastructure investments in the growth of a nation.

   The reason for Shah Alam’s success lays in its original master plan, which was remarkably forward-looking — it was designed to be a significant industrial hub as well as the capital of the State of Selangor.    Combining the two objectives have led to the concept where industries were kept on the southern part of the newly minted Federal Highway, while the residential and commercial developments were confined to the north.

   Thousands of new homes were built and sold to Malaysians working in the new industries that were being set up in Shah Alam’s industrial estate, and the population of the new administrative capital rose sharply.

   Being able to live near your place of work meant that the theme of “Live, Learn, Work, Play.” became a reality long before housing developers latched on to using it as a marketing tool.

Malaysia’s first Industrial City was born Soon after Tun Dr Mahathir Mohamed was elected as Malaysia’s fourth Prime Minister, he launched his “Look East” policy in 1981 to woo Japanese, Korean and Taiwanese companies to invest in Malaysia.

 The policy was a success as the much-needed capital flowed into the country’s manufacturing sector, and the trade between these and other Asian countries grew.

Many such companies that are investing in Malaysia chose to set up their base in Shah Alam.

As new factories mushroomed in Shah Alam, more jobs were available, and Malaysia thrived with growth rates of 7% to 8%.

We became the first of the Asian Tiger economies.

   Looking back, it was clear that the party would not last forever — competition intensified from the other Tiger economies in The Association of Southeast Asian Nations (ASEAN).

When China opened its doors and became an incredibly cheap manufacturing base with a vast domestic economy, the multinational companies based in Shah Alam came under intense competitive pressure.

Many chose to close and relocate to cheaper locations such as Vietnam and China.

The local labour cost was also rising faster than the productivity rate.

By the time the new millennium arrived, it was clear that many of the older manufacturing facilities were emptying fast and an alternative use for the empty factories was missing from the equation.

   Aggravating the situation was an unprecedented boom in housing and commercial developments in the Klang Valley.

The value growth of the older industrial sites has made Shah Alam an expensive option for manufacturers who now chose to cash in on the new valuations being offered for their land.

They would then relocate to farther but cheaper locations such as Banting, Bangi, Nilai and Seremban.

However, the Fourth Industrial Revolution had arrived in the midst of all this, and the forerunner of this was the rapidly growing e-commerce industry.

The advent of the smartphone coupled with ever increasingly available broadband speeds and 4G mobile networks globally gave rise to the e-commerce giants such as Amazon, Alibaba, Tencent, JD.com and Lazada whose business models led to a boom in logistics warehousing.

Our younger generation fell in love with online retailing.

   New challenges for the uprising industrial enterprise The new growth story of Shah Alam will centre on the region repositioning itself as a major logistics hub of Klang Valley.

New multi-storey warehouse developments can already be seen emerging from the ashes of the abandoned older manufacturing facilities.

The average age of warehouses in Shah Alam is about 35 to 50 years old, rendering them increasingly obsolete for companies seeking new tech-friendly warehouse buildings.

As a result, e-commerce companies are struggling to make do with the available warehouse space.

While all of them may want newly built, modern warehouses with high ceilings, modern amenities and new tech compatibility, they can’t always find those warehouses in the right location.

Warehouses before the e-commerce boom tend to have lower ceilings, uneven floors and less square footage, making them less attractive to e-tailers looking to maximise space and efficiency.

  Hence, choosing a warehouse in 2018 has become a complex series of trade-offs and strategic business decisions.

It’s not a “one size fits all”.

Changing trends and cost considerations could result in e-commerce companies choosing to relocate their warehousing facilities farther from their target markets.

More extensive tracts of cheap land are available there, and custom-built facilities are possible.

In doing so, they will most probably decide to invest in more technologically advanced warehouse systems to accelerate operations, lower costs and also for quicker delivery to their customers. These warehouses will use more automation in its processes to keep operations moving quickly, allowing faster delivery to customers, not unlike a warehouse that is located closeby to its customer base.

The challenge in Shah Alam is that there is an urgent need to look into the best use options available for the current existing industrial areas.

E-commerce is an option, but the cost of land in Shah Alam is becoming increasingly prohibitive, and the new network of highways are opening alternative locations for logistics companies to choose from.

The other challenges are the lack of large parcels of land in Shah Alam to cater for the “one million square foot” type of warehouses that are required by the new logistics companies.

It could blunt the momentum of progress in this field.

     Shah Alam’s industrial dream would seem to be over, but that’s not necessarily so.

There is an urgent need for the planners in the state government to seriously reinvent the capital of Selangor by launching a new master plan for the older industrial areas which could see a mix of residential and commercial developments existing side by side with logistics precincts, specialist hospitals, innovation labs, data centre business parks and specialised manufacturing facilities.

There is no time to waste.

  Datuk Stewart Labrooy  Datuk Stewart is an engineer by training and a member of the Institute of Engineers, Malaysia.

He earned a Bachelor of Engineering (Hons) degree in 1973 and a Post Graduate Diploma in Business Studies in 1974 from the University of Sheffield.

Datuk Stewart is the chief executive officer of Axis REIT, the first Shariah-compliant industry REIT in the world and one of the first REITs to be listed on Bursa Malaysia.

He is also the chairman of the Malaysian REIT Managers Association and a board member of the Asia Pacific Real Estate Association.

He has over 40 years of experience in manufacturing, operations management, property development and REIT management.

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