Malaysia on Saturday launched an ambitious project aimed at transforming the idyllic southern Johor state into a metropolis similar to Hong Kong or Shenzhen.

The RM17.7 billion ringgit project, called the South Johor Economic Zone, will be 2.5 times the size of Singapore when completed.

It is designed to woo foreign investment and compete with neighbouring Singapore for manufacturing and logistics businesses to spur growth and employment.

Prime Minister Abdullah Ahmad Badawi who unveiled the mammoth project described it as one of Malaysia's "most important and ambitious initiatives."

"The project aims to be a model of economic development in the extremely competitive era," he told some 2,000 people including business leaders and senior ministers.

"The South Johor Economic Zone is blessed with elements that make for a dynamic international metropolis," he added.

The project will cover an area of 2,217 square kilometers - making it one of the single largest integrated developments in the country.

Abdullah said the government will inject RM4.3 billion while Khazanah Nasional, the state investment agency, will pump in RM3.4 billion. The private sector will provide an additional RM10 billion in the early phase of the plan.

Iskandar Ismail, director of special projects with Khazanah said the infrastructure project will be developed over 25 years and will be created off the west coast of Johor which borders Singapore.

Taking advantage

Experts say it is a move to reduce Johor's dependency on agriculture and plantation and to take advantage of being physically close to Singapore, considered the most developed Southeast Asian country.

"It will definitely help diversify the economy and create employment," Suhaimi Saidi, economist with Kenanga Research said.

Cash-rich Khazanah Nasional will act as a catalyst for the development while United Engineers (Malaysia) Bhd (UEM), a major infrastructure player linked to the ruling Umno, will be the master developer.

Wan Abdullah Wan Ibrahim, managing director of UEM Land said some RM10 billion of projects have been identified by the company in Nusajaya, which is the key development project within the economic region.

"The first phase of the new Johor state administrative capital project costing one billion ringgit will be completed by August next year," he told reporters.

A plan to build a controversial bridge to replace a causeway linking Johor and Singapore has been scrapped.