Chairman’s Note

Private and Confidential
For SIIA Corporate Members and Advisors
February 2025

Johor-Singapore Special Economic Zone

There is much buzz around the Johor-Singapore Special Economic Zone (JS-SEZ) which the leaders of Singapore and Malaysia discussed at their bilateral retreat on 6 Jan 2025, reaching an agreement to jointly attract global investments into the economic zone. Investors and businesses are showing interest to harness the potential opportunities. Some expect the JS-SEZ to be a potential game changer.

Let me be clear that I too am hopeful about increasing synergy; in fact, I refer to it as “JuSS-EaZy” to signify much easier links. Yet, there are factors to evaluate. My views should not be read as negative, but rather indicating the work needed to reach fuller potential. I am writing this note to you as our corporate member and friend, and I kindly ask that this be kept confidential.

1. Evaluating the Buzz: There is much synergy to be gained by developing Johor’s land, resources and other assets to link more closely with Singapore, which continues to attract foreign investment from many sources. While some border on hype, others voice fears that high-cost Singapore could “hollow out”, much like how today’s Hong Kong compares to thriving Shenzhen. Singapore’s approach to JS-SEZ will seek to maximize gains in a win-win way, while looking to protect Singapore’s interests and avoiding any negative impacts. The JS-SEZ includes broadly to 11 sectors and nine-flagship zones, but the emphasis is on project-by-project implementation. It will remain to be seen of what specific projects are agreed upon by both sides.

2. What’s New? Some sceptics will note the precedents of SIJORI (proposed by Singapore’s then PM Goh Chok Tong) and Iskandar. Both began with promise but have not fully succeeded. What may be new is the increased interest of foreign investors, given the American trade war against China. This has made more MNCs seek out alternatives, and the JS-SEZ could be an alternative. Trump’s tariff targets however have been unpredictable, causing investor uncertainty.

3. Johor’s Ambitions: There are matters on which Johor and the Malaysian Federal government are undertaking to improve the attraction of Johor, including issues such as customs clearance and border congestion. This is quite separate from the JS-SEZ. Perhaps the most significant of these is the Johor Bahru-Singapore RTS link, to provide a faster mode of mass transport and reduce border congestion at the Causeway. Plans to further expand the light rail connections from the RTS to other areas in Johor are also not under the JS-SEZ, and the implementation will be by Johor and Malaysia. On Malaysia’s side, there are many ambitious projects in locations such as Forest City, Sedenak and Desaru or Sunway’s new and large mixed development project, next to the RTS stop.

4. First Projects: With the JS-SEZ operating on a “project-by-project” basis, the approach taken in managing and implementing early and specific projects will be key. Attention should be given to efforts to attract new “Queen Bee” multinational corporations (MNCs) and/ or to see such firms expand existing lines. The JS-SEZ will jointly market to such companies, with EDB leading the effort on the Singapore side and leveraging its strong ties and reputation with MNCs. From the Johor side, Invest Malaysia Facilitation Centre Johor (IMFC-J) has been created as EDB’s counterpart. But it will be critical for the Malaysian agency to prove it can truly serve as a “one-stop centre”. It will need to facilitate not only between Singapore and Johor, but perhaps even more importantly deal with differing interests on the Malaysian side — between federal and Johor state agencies, as well between differing commercial and political interests.

5. The role of SMEs: Small-and-medium enterprises (SMEs) in Singapore have not been specifically identified as a target focus under the JS-SEZ. But the SMEs would still have interest to move their operations because of cost pressures, especially those who already have some part of their lines in Malaysia. Enterprise Singapore will likely provide support and the shift of SMEs will grow more organically, depending on Johor’s implementation and efforts to ease red-tape.

6. Border crossing: There are hopes for expedited border crossing procedures and for travelling time to be reduced. Security concerns however remain on both sides. Increasing import duty collections and meeting tax revenue targets are also of importance to Malaysian customs. The JS-SEZ may arrange for special lanes or other schemes and authorities are aware of similar approaches in other special zones. However, this will probably follow the priority projects identified, rather than being open to all. The bigger task remains, therefore, to speed up and make border crossing quicker and more certain for all other users.

7. Other Concerns: To support the new investments attracted to the JS-SEZ, there will need to be resources of skilled manpower. There is competition within Malaysia and many skilled workers are already deployed in Selangor (Klang Valley) or Penang, and some may not be keen on relocating to Johor. The alternative is to bring skilled manpower from abroad, but this could raise concerns and doubts about the benefits of the JS-SEZ to the resident Johor population. Available resources may also pose problems. Data centres, which some believe will be a key sector for the SEZ, rely on power and water consumption, and Johor faces a challenge to ramp up and still provide sufficient supply at viable prices.

I share these points as my personal observations, arising from the SIIA’s work on the JS-SEZ. A special policy paper on the potential of the JS-SEZ will be launched in Q2 2025, with additional points and more in-depth analysis by our team, led by our Council Member, Manu Bhaskaran. The SIIA plans to continue to work on this topic in 2025, as the JS-SEZ develops and the first projects are announced. If there are insights and perspectives you might wish to share, please let us know.

Yours sincerely,

Simon Tay
Chairman