108 | PART A. NATURAL AND APPLIED SCIENCES INTERNATIONAL JOURNAL of ACADEMIC RESEARCH Vol. 4. No. 3. May, 2012 RELOCATION OF ICT COMPANIES THROUGH POLICY INCENTIVES: EVIDENCE FROM MALAYSIA Muhammad Asim Tufail, Abu Hassan Abu Bakar School of Housing, Building and Planning Universiti Sains Malaysia (MALAYSIA) E-mails: safearch@yahoo.com, abhassan@usm.my ABSTRACT Many Cities have developed satellite towns at the periphery with hi-fidelity digital and physical infrastructure converting a single cantered city into a multi nucleus one. In case of Kuala Lumpur Metropolitan Area (KLMA) development of Multimedia Super Corridor (MSC) offering incentives to local and foreign companies has triggered a formation of super block of research and development based economic sector. This development has become an attraction to the business community across Malaysia and abroad. The purpose of this paper is to discuss the key factors that attracted the companies to move from KLMA to MSC. A questionnaire survey was carried out to collect pertinent information from companies focusing on businesses in finance, insurance and real-estate. The data collected was analyzed to identify the ranking of Bill of Guarantees offered in MSC policy as variables. The study findings suggest that the tax exemption offered by the government has been the driving force for companies to decentralize towards MSC. The study also presents the initial hindrances faced by the ICT companies i.e., accessibility issue for city clients and workers, high rental rates of the property and slow development of supportive public amenities in MSC. Key words: ICT; Knowledge based economy; multimedia super-corridor, decentralization, Policy. 1. INTRODUCTION The high living standards of Malaysia have generated many manufacturing and business employment opportunities in global business industry. The growth of towns has accelerated as a result of high population growth. Information technology has become strongly established as a supporting tool for many professional tasks in recent years. Over the last two decades, the importance of the ICT in business practices has increased significantly with more and more companies operating across geographic and cultural boundaries. Therefore, the questions of the office locations are appropriate conventional and thus, this paper explores the factors effecting the movement of information and communication technology (ICT) companies towards the Multimedia Super Corridor (MSC), Malaysia, hypothesizing that “Due to incentives provided by the MSC, global as well as local business companies are moving from the city centre towards the MSC in order to get maximum output of the advanced infrastructure and greater incentives offered by the MSC development policies”. The study objectives include the analysis and assessment of the effectiveness of existing Bill of Guarantees offered by MSC and the recommendations for future policy direction. 2. FACTORS INFLUENCING THE CHOICE OF OFFICE LOCATION State and local taxes can influence the cost of a particular location; however, numerous studies have pointed to the limited role of state and local tax rates in determining corporate location (1) but in the near past it has been seen that countries seeking businesses being off-shored are offering exemption of income tax to get more benefits of the capital investment and thus getting advantages in the job opportunities and development of overall economy on a city and regional basis (2). With regard to policy design and assessment, policy parameters are expected to affect long-run growth with an indirect impact on Foreign Direct Investment (FDI), which may be growth-enhancing. The policy regime of the host country may have a potentially important FDI determinant. To attract more FDI, the developing countries are now equipped with adequate tools and more accurate benchmarks for cross-country comparisons and policy evaluation (3). As the technologies will develop and become more sophisticated, the cities having the infrastructure that can meet the requirements of the information age will be the nucleus of the economic activities controlling the diverse operations anywhere in the world (4). General transitions in the history of societies, cities and their economies are reflected in how cities develop and how urban planning is conceived. The form and the priorities of a city-making to develop a city’s assets are different under the era of labour-intensive mass production-based industrialization from those of high-technology- focused and knowledge-based development (5). In this context, Ronald Abler (6) predicted that advances in information transmission may soon permit us to disperse information gathering and decision-making activities away from metropolitan centers and electronic communications media will make all kinds of information equally abundant everywhere. Mulgan (7) added further that cities were to be re-defined as a system for producing and switching information.