KUALA LUMPUR: Malaysia is well-positioned to be a hub of innovation and sustainable development in Southeast Asia in the long-term, supported by recently announced German Technology Park in Malacca.
MIDF Research said there are over 700 German companies in Malaysia to-date, which have created over 70,000 jobs for locals.
The firm said that the nation stood as a location of interest, given its strategic location and developed infrastructure.
"Given that German companies adhere strictly to sustainability practices, we believe this project is apt and timely to gain better investments to support the development of the technology park," it said in a research note today.
German Technology Park is designed to attract leading German technology and manufacturing companies, and aims to be a hub of innovation and sustainable development in the region.
Cypark Resources Bhd, Melaka Corporation (MCorp) and Jakel Capital have signed a memorandum of agreement to jointly explore and develop energy solutions for the industrial park, with the shared goal to manage the planning, generation, and distribution of at least 1,000 megawatt (MW) in the next five to seven years.
The consortium will be structured with Jakel Capital holding a 51 per cent stake, Cypark Resources at 29 per cent and MCorp at 20 per cent, with an estimated RM4 billion capital expenditure.
The project includes the integration of renewable energy sources and modern energy management systems.
This includes battery storage solutions to ensure firm and cost-efficient power supply to the industrial park in consultation with Tenaga Nasional Bhd (TNB) and Suruhanjaya Tenaga via the corporate renewable energy supply scheme (CRESS).
While optimistic over the project, MIDF Research also identified certain risks which includes high upfront cost of infrastructure set up and regulatory changes.
The firm said regulatory risks are the most significant, considering that German companies had to adhere to several regulations when operating abroad.
This includes Supply Chain Due Diligence Act (LkSG) which requires medium-sized German companies to ensure their supply chain comply with human rights and environmental standards.
Meanwhile, the Foreign Trade and Payments Act (AWG) regulates foreign investments in strategic sectors including technology manufacturing and General Data Protection Regulation (GDPR) ensures data privacy and security in both companies and the nation they operate in.
"Nevertheless, regulatory risks could be mitigated through thorough due diligence in tandem with engaging legal experts to ensure the proper navigation between the policies in Germany and Malaysia."
"Additionally, implementing a robust sustainability and human rights practices could meet LkSG requirements, through job creation and integration of greener solutions to energy generation," it added.