Special Economic Zone agreement signed; 20,000 jobs to be created

The new Johor-Singapore Special Economic Zone (JS-SEZ) in Malaysia is expected to create 20,000 skilled jobs for people on both sides of the Causeway.

The zone for business and investment, covering the Iskandar Development Region and Pengerang, also aims to support the expansion of 50 projects in the first five years, and a cumulative 100 projects in its first decade.

Prime Minister Lawrence Wong and his Malaysian counterpart Anwar Ibrahim witnessed the exchange of the agreement on Jan 7 during the 11th Malaysia-Singapore Leaders’ Retreat in Putrajaya.

Speaking at a joint press conference, PM Wong said the JS-SEZ will create good jobs and more opportunities for the people of both countries.

“When negotiating the agreement, both sides have actively engaged stakeholders to ensure that the JS-SEZ has the conditions to help our businesses grow together for the longer term,” he said.

“The greater potential for the JS-SEZ is not just about Singapore businesses going to Johor, but it’s about both sides working together to attract new investment projects globally,” he added.

PM Wong said the project is an important one 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”.

Datuk Seri Anwar said the JS-SEZ is a unique initiative, as “very rarely you find two countries working together as a team”.

Both countries are led by governments that are politically stable, with clear economic policies, he added.

Beyond financial incentives, these characteristics will attract businesses and investments to the new economic zone, Mr Anwar said.

The agreement will improve the flow of goods and enable freer movement of people between Singapore and Johor. It will also strengthen the business ecosystem within the region.

In 2023, Malaysia was Singapore’s third-largest trading partner, with total bilateral trade amounting to $123.6 billion. That year, Singapore was Malaysia’s second-largest trading partner.

Singapore was also Malaysia’s largest source of foreign direct investment (FDI) in 2023, contributing RM43.7 billion (S$13.3 billion), or 23.2 per cent of Malaysia’s total FDI.

Johor is a key investment destination for Singapore companies – it recorded RM31 billion in FDI in 2023, with Singapore and the US as the manufacturing sector’s main investors.

The Republic and Malaysia will promote and facilitate investments in 11 economic sectors from Singapore and other countries.

These sectors are manufacturing, logistics, food security, tourism, energy, the digital economy, the green economy, financial services, business services, education and health.

They will also work on projects to accelerate renewable energy trading between Malaysia and Singapore.

To ease the movement of people and goods, Malaysia will enhance its existing passes such as the DE Rantau Nomad Pass for qualified foreign digital nomads.

Local transport links in Singapore and Malaysia will also be strengthened.

To attract talent to work in the JS-SEZ, industry-ready skills training and education programmes will be enhanced.

Malaysia will establish the Invest Malaysia Facilitation Centre – Johor to act as a one-stop centre in facilitating investments and businesses in the JS-SEZ.

Both countries will also look into enhancing market access of financial institutions.

Malaysia will provide a tax incentive package, which includes a special corporate tax rate for companies that make new investments in high-growth and high-value-added activities within the JS-SEZ.

Both countries will also work towards refreshing the Joint Ministerial Committee for Iskandar Malaysia to support the ambition and implementation of the JS-SEZ. In addition, the joint committee will reinforce bilateral cooperation in other areas like transport and the environment.

Several early initiatives have already been launched based on business feedback, including passport-free QR code clearance at Singapore’s land checkpoints with Malaysia since March 2024.

The JS-SEZ was officially announced in October 2023 during Mr Anwar’s visit to Singapore for the 10th Leaders’ Retreat.

Singapore and Malaysia had inked a memorandum of understanding in January 2024, targeting a deal by the end of the year.

In July 2024, Malaysian Economy Minister Rafizi Ramli said the final agreement was expected to be inked in September.

This, however, did not materialise as negotiations continued over several sticking points.

Besides the agreement on the JS-SEZ, both sides also exchanged six MOUs at the Leaders’ Retreat to boost cooperation in areas such as higher education and urban development.

The retreat began on Jan 6 with Mr Anwar hosting PM Wong to dinner at Rumah Tangsi.

PM Wong had an audience with Sultan Ibrahim, King of Malaysia, at Istana Negara before an official welcome ceremony and a delegation meeting at the Perdana Putra complex. The joint press conference was followed by an official delegation lunch.

 

In an interview with the Singapore media to wrap up his visit, PM Wong said the agreement, which sets out the broad parameters for the JS-SEZ, was just the beginning.

“How far we can go in terms of making the SEZ a success, really, in the end depends on businesses and how businesses respond.

“As far as we can see, there’s a lot of interest on the Singapore side,” he said.

PM Wong believes businesses will respond positively when the implementation details work well. They will start thinking of ways to configure their operations to capitalise on the strengths of both Johor and Singapore, he added.

“Some parts can be done in Johor, some parts can be done in Singapore, but you operate seamlessly between the two entities, and you are able to synergise much more effectively,” he said.

The bigger attraction is attracting new investments, which will be a big plus for both sides, he said.

Along the way, there will be areas that can be improved on, he added. “And so we also need some degree of responsiveness to continuous feedback from the business community.”

He said: “And both sides are committed to doing so – engaging the business community closely, working closely with them, and tracking progress in terms of new investments, new jobs created.”

Mr Lennon Tan, president of the Singapore Manufacturing Federation, said the JS-SEZ’s vision is aligned with manufacturers’ needs.

The inclusion of tax incentives, streamlined processes and infrastructure plans address cost and scalability challenges faced by manufacturers, he said.

“While the vision is promising, manufacturers would benefit from detailed timelines for infrastructure development and policy roll-outs,” he added.

Mr Tan said logistics and transportation are likely to see immediate benefits as trade volumes grow.

In the next two to three years, he also expects increased interest and investments from regional manufacturers.

In five to 10 years, he believes the JS-SEZ could evolve into a high-value manufacturing hub, contributing to Asean’s economic integration.

“By addressing manufacturers’ evolving needs and maintaining a commitment to innovation and sustainability, the JS-SEZ has the potential to become a model for cross-border economic zones worldwide,” Mr Tan said.

Mr Teo Siong Seng, chairman of the JS-SEZ Singapore business working group of the Singapore Business Federation (SBF), said SBF hopes the agreement “heralds a new era of enhanced economic integration between Singapore and Johor”.

“We are encouraged by the early initiatives that would immediately help address the three key pain points Singapore businesses faced operating in Johor – availability of labour, movement of people and goods, and investment facilitation,” he added.

Local firm Old Chang Kee has two retail outlets and a production facility in Johor. It plans to extend the range and volume of its snacks manufactured in its Johor facility.

“We believe the JS-SEZ may alleviate short-term rent and cost pressures in Singapore,” said Mr Philip Chow, the company’s director for Malaysia operations. 

“But (it) may also result in longer-term increased competition for Singapore retail businesses, especially those in the personal services and F&B (food and beverage) industries.”