A new economic zone four times the size of Singapore has been formed between Singapore and Malaysia’s Johor state, marking a new era of bilateral relations between the two nations, which have seen their share of ups and downs in the past six decades.
The binding agreement for the Johor-Singapore Special Economic Zone (JS-SEZ) was signed on Jan 6, nearly a year after the memorandum of understanding was inked and after two signing delays.
Politicians from Malaysia have frequently cited that the JS-SEZ is a “binding” agreement as a key reason for the project’s potential success when questioned about past failures with the Iskandar Economic Zone and the Indonesia–Malaysia–Singapore Growth Triangle.
Spanning over 3,500 sq km, the JS-SEZ is about twice the size of China’s Shenzhen — the city adjacent to Hong Kong, which is held as a SEZ model to emulate.
The JS-SEZ aims to combine Singapore and Johor as closer economic entities to promote cross-border trade. It will be positioned as a region for international investors to hedge against geopolitical risk by tapping into Singapore’s “sophisticated” market and Johor’s resources, and also a destination for Singaporean companies to expand into.
The JS-SEZ agreement was witnessed by Prime Minister Lawrence Wong and his Malaysian counterpart, Anwar Ibrahim, in Putra Jaya, the home of all federal-level government ministries and civil servants in Malaysia, on Jan 7 at the 11th Malaysia-Singapore Leaders’ Retreat.
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“We both agree that bilateral cooperation must continue to deliver concrete benefits to both our peoples, and that’s the basis on which we worked on the JS-SEZ or special economic zone,” says Wong.
“It’s an important project that will build on the complementary strengths of Singapore and Johor so that we can both be more competitive, enhance our value proposition and jointly attract more investments to our shores, and by doing so, it will create good jobs and more opportunities for our peoples,” he continues.
“Very rarely do you find two countries working as a team,” says Anwar. “You can’t see it in any part of the world where two countries decide to work together, promote both countries and attract investments.”
See also: Special corporate tax rate of 5% and worker’s tax of 15% in Johor-Singapore Special Economic Zone
Photo: Bloomberg
Funding, jobs and fiscal incentives
Few key announcements and aims surrounding the JS-SEZ agreement were unveiled this week, including the ambition to create 20,000 jobs and to bring 50 businesses in five years and 100 businesses in 10 years to the zone.
Singapore will design funding support to facilitate Singaporean companies expanding into the JS-SEZ and the potential twinning operations of multi-national companies already in the city-state and the JS-SEZ. Meanwhile, Malaysia will establish a fund to support infrastructure and set up a one-stop centre to facilitate investments.
In an interview with The Edge Singapore on Jan 6, Malaysian Minister of Economy Rafizi Ramli said that the ultimate figure of each fund will not be disclosed as both parties have agreed to design the funds according to the need of investments along the way. “A lot of the physical investments will happen on Johor’s part of the Special Economic Zone, and we have to make sure that the infrastructure is ready,” says the minister.
Nine flagship zones across 11 economic sectors will be established. The flagship zones are Johor Bahru city centre, Iskandar Puteri, Tanjung Pelepas, Pasir Gudang, Senai, Sedenak, Forest City, Pengerang Integrated Petroleum Complex (PIPC) and Desaru.
The 11 economic sectors are manufacturing, logistics, food security, tourism, energy, the digital economy, the green economy, financial services, business services, education and health. These zones have been drawn up to “promote and facilitate investments” from third countries and Singapore companies expanding into the JS-SEZ.
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In addition, the investors in the JS-SEZ will enjoy a special corporate tax rate of 5% for 15 years and a special worker’s tax rate of 15% for 10 years from Jan 1. Malaysia’s existing corporate tax rate is 24% for resident and non-resident companies.
Already, Singaporean companies are saying that consolidation and price competition are forcing them to look at options across the border.
Seow Zhi Yuan, managing director of RMS Marine & Offshore Services, a marine services provider company with a presence in China and Singapore, said that doing business in Johor now seems like a “must-do before we get eliminated”.
OCBC says that in 2024, it supported about 260 new mid-sized regional enterprises across services, construction, manufacturing and wholesale and retail trade sectors to set up their business in Malaysia. It anticipates the number to increase by 20% in 2025.
The Causeway congestion problem
A key issue many raise is the movement of people and goods across the Causeway, infamous for its jams. Singapore and Malaysia have agreed to smoothen the flow of people and goods so that business can be done more easily.
Therefore, all eyes are on the development of the Rapid Transit System (RTS) between Johor and Singapore, which was temporarily halted in 2018 and restarted in 2021.
The RTS, slated for completion by the end of next year, has been cited as a key reason to stay bullish on the JS-SEZ as this new transport mode could “reshape the investment landscape in Singapore and Malaysia”, says DBS Group Research.
Malaysia has already started trying to resolve causeway congestion issues. It announced that a QR code immigration clearance would be expanded to Singaporeans and other foreign passport holders by the middle of next year.
Meanwhile, Singapore says that those travelling through the bus halls at Woodlands and Tuas checkpoints will soon be able to enjoy passport-less immigration clearance, even as a new checkpoint five times the size will soon be built.
Malaysian PM Anwar Ibrahim joined by other members of his party at the inaugural Forum Ekonomi Malaysia in KL on Jan 9. Photo: Maybank.
Malaysia’s might
After the end of the 11th Malaysia-Singapore Leaders’ Retreat, Malaysia promptly hosted the inaugural Forum Ekonomi Malaysia (FEM), a one-day conference in the heart of Kuala Lumpur city centre on Jan 9.
According to Minister of Economy Rafizi Ramli, the forum’s purpose is to have a platform to set the economic direction of Malaysia for the year and track policy progress openly and transparently. Malaysia Madani, which has been Anwar’s political slogan since he came into power in 2022, focuses on good governance, sustainable development, and racial harmony.
Another “less obvious” purpose of FEM is the need for Malaysia to adopt an increasingly globalist approach to policymaking, says the minister. He highlights that the global environment is currently headed towards a protectionist environment and countries that are small, open and non-aligned, like Malaysia and other Asean states, need to collaborate.
Under Anwar, Malaysia’s economy has tracked progress. For one, the country registered a record US$74 billion in approved FDIs in 2023 — the highest in its history. Its economy grew by 5.3% in 3Q2024, headline and core inflation remained stable, while the ringgit regained its strength.
His ambition for Malaysia to stake a stronger position is clear. “We are seeing a divergence opening, and that is the rare opportunity to recalibrate policy positions towards economic pluralism, cooperation across multilateral platforms, and decisions infused with a moral conscience,” says Anwar in his opening address at FEM.
He adds that Malaysia’s chairmanship of Asean in 2025 comes at an opportune moment. The lion’s share of global growth will stem from a combined contribution from Asean, India and China.
“With a shifting world economic order, an empowered Asean, and a stable Malaysia means we are no longer satisfied with playing the spectator. We must, therefore, take up the mantle to chart the path forward in three leadership domains,” he adds.
This year, he wants to double down on Malaysia’s geographical centrality as a conduit for electricity, talent and supply chain diversification while further building its positions in oil and gas and the semiconductor industries. “It’s our neutrality and openness for partnership that makes us a natural hub for all,” says Anwar.
See also:
- Johor-Singapore Special Economic Zone agreement signed by S'pore and M'sian leaders in KL; nine flagship zones set up
- Singapore and Malaysia aim for 20,000 jobs and 50 businesses in five years in Johor-Singapore Special Economic Zone
- Special corporate tax rate of 5% and worker’s tax of 15% in Johor-Singapore Special Economic Zone
- Wide-ranging Johor-Singapore SEZ a boost to several counters from both countries
- Johor's data centre boom – or bust?
- Revival of Johor-Singapore SEZ: New era of growth?
- Banks eye a slice of Malaysia's prosperity, but can everyone benefit?
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