UPDATE 1-S'pore, Malaysia govt firms agree $1.2 bln Iskandar project

(Adds details, economist comment)

SINGAPORE Oct 23 (Reuters) - Singapore government-linked firm Ascendas will help build a $1.2 billion industrial park in Malaysia's Iskandar economic zone, boosting an area Malaysia has been promoting aggressively, in a sign of improving ties between the neighbours.

Ascendas, whose projects include the Singapore Science Park and the International Tech Park in Bangalore, India, said on Tuesday it will team up with Malaysia's UEM Land Holdings to develop a 519-acre (210 hectare) site that will cater to industries including electronics and pharmaceuticals.

Ascendas will hold a 60 percent stake in the joint venture, while UEM Land, whose main shareholder is Malaysian state investor Khazanah Nasional, will take the remaining 40 percent. The park will be in Nusajaya, a part of Iskandar near a bridge connecting Singapore and Malaysia.

"UEM Land sees this joint venture as an important and timely milestone as it kickstarts the second wave of catalytic projects (in Nusajaya)," CEO Wan Abdullah Wan Ibrahim said in a statement.

Malaysia has been trying to attract companies to Iskandar, a 2,200 square kilometre (850 square mile) economic zone three times the size of Singapore, separated from the wealthy Southeast Asian city-state by a narrow strip of water.

Singaporean firms were lukewarm about Iskandar when the zone was set up in 2006, and interest picked up only after the two countries signed a broad agreement in 2010.

Firms that have moved to Iskandar said the zone's attractions include labour and electricity costs that are half that of Singapore's, as well as industrial land that can be purchased for a fraction of the price.

"Iskandar fits well into Singapore's need to regionalise to overcome domestic supply constraints," said Kit Wei Zheng, an economist at Citigroup.

"Malaysia is also looking to revive private investment so there is a convergence of economic interests," he added. ($1 = 1.2217 Singapore dollars) (Reporting by Kevin Lim; Editing by Daniel Magnowski)