Basic Information

Name: Malaysia–China Kuantan Industrial Park (MCKIP)
Chinese Name: 马中关丹产业园区
Location: Gebeng City, Kuantan District, Pahang State, Malaysia.
Type of Project: Industrial and logistics.
Project Developers: MCKIP 1 and 2 are developed by Malaysia–China Kuantan Industrial Park Sdn Bhd, together with Guangxi Beibu Gulf ASEAN Investment Group Company Limited (majority owned by Guangxi Beibu Gulf International Port Group Company Limited) and Kuantan Pahang Holding Sdn Bhd (40 per cent owned by IJM Berhad). MCKIP 3 is developed by Malaysia–China Kuantan Industrial Park Sdn Bhd together with a joint venture between China Harbour Engineering Company Limited and Malaysian Asas Panorama Sdn Bhd (60 per cent owned by IJM Berhad and 40 per cent by the Guangxi Beibu Gulf Investment Group Company Limited).
Main Contractors: Several contractors are involved in developing the project, both Chinese and local. On the Chinese side, China Metallurgical Group Corporation, through different subsidiaries, was the key contractor responsible for building the Alliance Steel plant, the main industrial project inside MCKIP.
Known Financiers: China Development Bank; Export–Import Bank of China; China Construction Bank; and the Agricultural Bank of China.
Cost: n/a
Project Status: Partly operational.

Project Outline

The MCKIP’s origins can be traced back to the launch of the China–Malaysia Qinzhou Industrial Park (CMQIP) in the Guangxi Zhuang Autonomous Region, China, in 2011. In April 2012, then premier Wen Jiabao and former Malaysian prime minister Najib Razak (in office 2009–18) attended the groundbreaking ceremony for the CMQIP. Discussions for the creation of a joint industrial park in Malaysia followed, culminating in the official launch of the MCKIP in Kuantan in February 2013. In February 2014, the first meeting of a newly established Joint Cooperation Council (联合合作理事会), a body gathering together relevant Chinese and Malaysian officials and administrators with the aim of promoting the ‘two countries, twin parks’ (两国双园) framework. Malaysia was the first country to partner with China on such a project—a model Beijing seeks to replicate across Southeast Asia to enhance regional industrial cooperation.

The establishment of the MCKIP in Pahang State, where Najib Razak was elected, was strongly motivated by the former prime minister’s personal interests. It also aligns with the Malaysian Government’s goal to develop the east coast of Peninsular Malaysia. The East Coast Economic Region (ECER), which includes Kelantan, Terengganu, and Pahang, was set up to enhance connectivity to national and international markets. Under this strategy, the Gebeng Industrial Estate, established in the 1990s and until now housing mainly petrochemical industries, is envisioned as a key growth hub and gateway to the Asia-Pacific, with local authorities even aiming to transform the area into an aerospace city. To support this vision, the MCKIP was designated as Malaysia’s first ‘National Industrial Park’ and Kuantan Port was granted free zone status in 2019. Investors in the MCKIP benefit from incentives granted as part of the ECER framework, such as a 10-year tax exemption, duty-free land use, and tariff exemptions for imported raw materials and equipment unavailable locally. Additional benefits specific to the MCKIP include a 15-year corporate tax exemption for high value-added investments. The main Malaysian player developing the park is IJM Corporation Berhad, a government-linked yet private conglomerate mainly involved in the construction and real estate sectors, as well as the majority owner of the Kuantan Port Consortium.

Chinese investments in infrastructure and manufacturing are seen as key drivers of the ECER. For example, the Chinese state-owned China Communications Construction Company (CCCC) is involved in constructing the East Coast Rail Link, a railway linking Kelantan in the north to Port Klang on the west coast via Kuantan. To facilitate connectivity between rail and port operations, CCCC’s subsidiary China Harbour Engineering Company Limited is partnering with the MCKIP and Kuantan Port operators to develop the Malaysia–China Kuantan International Logistics Park within MCKIP 3. This integration thus positions Kuantan as a focal point for Malaysia’s local development strategy and China’s regional New International Land–Sea Trade Corridor (国际陆海贸易新通道) plan, which aims to boost trade between southern China and Southeast Asia.

MCKIP forms part of Guangxi’s strategy to promote investments in Southeast Asia and position the autonomous region as a trade hub linking China’s western provinces with Association of Southeast Asian Nations (ASEAN) countries. The Guangxi Beibu Gulf International Port Group Company Limited (广西北部湾国际港务集团有限公司, hereinafter ‘Beibu Group’), a Guangxi state-owned enterprise (SOE) specialising in port infrastructure, plays a central role in this plan. According to the China Enterprise Confederation (中国企业联合会) and the China Entrepreneur Association (中国企业家协会), in 2023 Beibu was ranked 230 among China’s top 500 companies, and 84 among the top 100 companies in China involved in strategic industries. The latter ranking mainly focuses on industries such as new generation information technology, new materials industry, and high-end equipment manufacturing. In addition to operating Guangxi’s main ports—Fangcheng, Qinzhou, and Beihai—the group holds shares in the operating companies of Kuantan Port (40 per cent) in Malaysia and Muara Port in Brunei. The MCKIP is a cornerstone of Beibu Group’s port–industry–park (港产园) investment model, which is designed to exploit synergies between industrial and port activities. This model supports both the industrialisation of port hinterlands and the expansion of port operations. Initially designed to develop the port areas of southern Guangxi, the group is trying to roll out this model in several countries in the region, notably around the Muara Port in Brunei. However, it has so far succeeded in developing both a port and a park only in Malaysia.

Alliance Steel (联合钢铁[大马]集团公司), a 1.4 billion USD steel production site in MCKIP 1 and so far the main investment project realised, exemplifies this strategy. A joint venture between the Beibu Gulf Port Group and Guangxi Shenglong Metallurgical Company Limited, the high-end facility produces high-speed wire rods, steel bars, and H-beams. It is notable as the first steel company in an ASEAN country to adopt complete flow and process technology in producing steel H-beams. The project, launched in 2014, was facilitated by a 2013 memorandum of understanding between China and Malaysia aimed notably at facilitating technology transfers in a sector in which Malaysian players lacked capabilities. Financial support included 423 million USD in direct investment from Beibu Group and loans totalling more than 1 billion USD from Chinese banks. The project was implemented through a cross-border syndicated direct lending model—a first for Chinese foreign investment. Under this framework, China Construction Bank, the Export–Import Bank of China, and the Agricultural Bank of China partnered to provide a loan to Alliance Steel, a Malaysia-based company. In this development, the Beibu Group acted mainly as an intermediary to facilitate Shenglong’s overseas investment given its SOE status and key role in the development of MCKIP. The plant’s reliance on imported iron ore and coal ensures substantial cargo volumes for Kuantan Port, the expansion of which Beibu has invested heavily in.

Despite its promising start, progress within the MCKIP has been uneven. Beyond Alliance Steel, three other companies had started operation as of 2024. IJM’s industrial division leader, Industrial Concrete Products Sdn Bhd (ICP), has set up a spun concrete piles manufacturing plant. Among Chinese enterprises, which should constitute the main pool of investors in the park, only Camel Power and Maxtrek Tyre have operational facilities. Delays notably stem from land allocation disputes during the project’s early stages and political uncertainty following Malaysia’s 2018 general election. The fall of Najib Razak and the anti-China rhetoric of his successor, Mahathir Mohamad (last in office 2018–20), caused many Chinese investors to halt plans. Interest in investing in Kuantan is nevertheless still supported by the ongoing trade tensions between China and the United States, which are pushing many manufacturers based in China to consider relocating to the region. Confidence in the project has also improved under Prime Minister Anwar Ibrahim’s administration (in office since 2022), which is seen as prioritising closer ties with China. Recent developments include the entry of Zhongxin and Alliance Steel’s 1.8 billion USD expansion to increase annual capacity to 10 million tonnes. The company notably is looking to broaden its production range towards high-end steel plates to meet the growing needs of local industry, particularly the automotive sector.

Project Impacts

• Employment and labour rights: Given that only four investors have started operations in MCKIP, it is hard to generalise about working conditions inside the industrial park. Abuses against Chinese workers and labour conflicts at the Alliance Steel plant have been reported by local authorities and newspapers, whereas no specific violations and conflicts have so far been recorded inside the three other factories that have started operations.
• Environment: Although measures have been taken to reduce its environmental footprint, the main investor Alliance Steel’s demand for iron ore remains a source of pollution, mainly at the Port of Kuantan. Given the polluting and resource-intensive nature of the investments made and planned within the MCKIP, local stakeholders are concerned about the environmental impact of the industrial park.
• Governance: The MCKIP project was strongly motivated by the personal interests of former prime minister Najib Razak. The top-down nature of the project has provoked resistance at the local level, in terms of access to both land and the natural resources needed for its deployment, fuelling conflict with the developers.
• Other: The main Alliance Steel project has been accused by some local actors of unfair competition and dumping excess capacity. There have also been complaints about the lack of spin-offs for the local workforce and suppliers.

Although rebalancing is under way, Alliance Steel has been criticised for heavy reliance on foreign workers, particularly from China, who still make up about one-third of its 4,000-strong workforce. The company has argued that the skills and culture of local workers do not match its needs. Malaysian authorities, however, have sought to reduce the foreign worker ratio to 20 per cent in accordance with a national law passed in 2016. The implementation of the law has, however, been repeatedly delayed due to the local manufacturing sector’s dependence on migrant workers.

Industrial disputes involving Alliance Steel have also drawn attention. Local authorities have reported cases of excessive overtime and unfair dismissals, particularly during the Covid-19 pandemic. Management allegedly instructed local workers to stay in designated hotels or take unpaid leave, which many refused. Chinese workers housed onsite were also confined to the factory premises and prohibited from leaving—a measure facilitated by the site’s enclosed design. Additionally, incidents involving Chinese workers allegedly eating stray dogs and engaging in physical altercations have further strained relations with the local community.

Despite being one of the region’s largest employers, Alliance Steel did not have a trade union at its plant as of 2023. While Malaysian law allows employees the freedom to form trade unions, reports suggest that some employers and local authorities in the country have undermined efforts to unionise workers.

Alliance Steel has made notable investments to mitigate its environmental footprint. For instance, it constructed a conveyor belt from Kuantan Port to the plant to minimise pollution associated with transporting iron ore. Nonetheless, significant pollution remains around the port, where iron ore and coal—both imported for production—are stored. Although efforts have been made to manage the environmental consequences of port expansion, assessments revealed that sand extraction for the project has severely affected marine ecosystems and fisheries in nearby areas. To offset the negative impacts of its activities, the port and MCKIP’s local operator, IJM, have initiated community-focused charitable projects, such as the #ProjekOrangPort campaign, which provides food and financial aid to underserved communities.

The population of Kuantan remains particularly sensitive to environmental issues following the 2015–16 bauxite mining disaster. After Indonesia’s 2014 ban on mineral exports to encourage domestic processing, Kuantan saw a surge in bauxite mining, much of it illegal, to meet China’s demand for aluminium. This mining boom resulted in soil and water pollution, particularly along the expressway to the port, where trucks spilled bauxite into local waterways. These unregulated activities also posed health risks to miners and nearby communities.

Local concerns persist about the MCKIP’s focus on attracting highly polluting and energy-intensive industries that China seeks to relocate overseas. The list of investment projects signed within the industrial park includes, in addition to those already in operation, ceramics, aluminium, and fertiliser factories. The Beibu Group has also faced criticism from Guangxi Zhuang Autonomous Region authorities for inadequate implementation of environmental protection measures across its projects.

Governance issues have further complicated the MCKIP’s development. Initially, the Malaysian consortium managing the project included two private companies. SP Setia, a real estate company led at the time by Najib’s brother, and Rimbunan Hijau, a conglomerate with close government ties, were dissatisfied with the size and location of the land, citing high development costs due to its swampy terrain. Their withdrawal prompted Najib to intervene and reallocate land from the Ministry of Defence and plantation land belonging to Sime Darby, a government-owned palm-oil company, adjacent to the park. Sime Darby subsequently replaced Rimbunan Hijau as a shareholder, while IJM Group took over SP Setia’s role in managing daily operations at the park, supported by the Beibu Group, which was eager to deal with the same interlocutor in managing the Kuantan Port and MCKIP.

Resource conflicts have also arisen, particularly over water usage. Alliance Steel was accused of unauthorised water use worth more than 126,000 USD, though the company claimed it was a misunderstanding. Tensions have been exacerbated by the company’s lack of transparency and the restrictive nature of its enclosed industrial site, which management claims is necessary to protect high-end equipment. Local stakeholders expressed frustration when an elected official was denied access to the site in 2017.

Alliance Steel has faced allegations of unfair competition and dumping excess capacity from Malaysia’s domestic steel industry. Critics argue that the company benefits from preferential policies, including favourable loans from Chinese banks and incentives provided by the East Coast Economic Region Development Council. Furthermore, its licence permits the sale of up to 50 per cent of its production of certain steel products at highly competitive prices on the local market. In the face of complaints from local industry, the authorities have defended a hands-off approach, stating that Alliance Steel, through its advanced technology and production capacities, will improve the competitiveness of a sector deemed inefficient. However, apart from training dispensed to the local workforce, no significant technology transfer policy has yet been adopted, and local industry representatives highlight the limited benefits for local suppliers, who are mostly confined to low value-adding roles. Alliance Steel’s preference for importing high-quality iron ore from Australia, stating that locally produced ore does not meet the quality required by its production process, further limits opportunities for local businesses. The company nevertheless claims that Malaysia has benefited from the project through about 230 million USD worth of construction work.

In-depth sources

Camba, Alvin, Guanie Lim, and Kevin Gallagher. 2022. ‘Leading Sector and Dual Economy: How Indonesia and Malaysia Mobilised Chinese Capital in Mineral Processing.’ Third World Quarterly 43(10): 2375–95. Link.

Gomez, Edmund Terence, Tham Siew Yean, Ran Li, and Cheong Kee Cheok. 2020. China in Malaysia: State–Business Relations and the New Order of Investment Flows. London: Palgrave Macmillan.

Hee, Yap Jia. 2017a. ‘The Mystery Behind Kuantan’s “Great Wall of China”.’ Malaysiakini, 9 October. Link.

Hee, Yap Jia. 2017b. ‘Malaysian Contractors and China Chefs Juggle Kuantan’s Industrial Dawn.’ Malaysiakini, 10 October. Link.

Hee, Yap Jia. 2017c. ‘MCKIP: “Wall” Limited to Steel Plant, Factories Won’t Pollute.’ Malaysiakini, 17 October.Link.

Li, Mingjiang. 2019. ‘China’s Economic Power in Asia: The Belt and Road Initiative and the Local Guangxi Government’s Role.’ Asian Perspective 43(2): 273–95. Link.

Liang, Yutian, Jiaqi Zengm, Cheng-Chwee Kuik, Zhengke Zhou, and Keyang Zhou. 2021. ‘Policy Transfer and Scale Reconstruction of China’s Overseas Industrial Parks: A Case Study of the Malaysia–China Kuantan Industrial Park.’ Journal of Geographical Sciences 31: 733–46. Link.

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Tritto, Angela, and Alvin Camba. 2022. ‘State-Facilitated Industrial Parks in the Belt and Road Initiative: Towards a Framework for Understanding the Localization of the Chinese Development Model.’ World Development Perspectives 28: 100465. Link.

Yean, Tham Siew. 2019. ‘The Belt and Road Initiative in Malaysia: Case of the Kuantan Port.’ ISEAS Perspectives 3/2019, 15 January. Singapore: ISEAS–Yusof Ishak Institute. Link.

Yean, Tham Siew, and Siwage Dharma Negara. 2020. Chinese Investments in Industrial Parks: Indonesia and Malaysia Compared. ISEAS Economics Working Paper No. 2020-08. Singapore: ISEAS–Yusof Ishak Institute. Link.