Johor-Singapore Special Economic Zone: Exciting Opportunities & Challenges Ahead

Today, the leadership of Prime Ministers Anwar and Lawrence can leverage the longstanding dynamism of this complementarity. As Singapore acknowledges the land and labor limitations for achieving optimal capacity, Malaysia seeks new catalysts to move up the value chain through foreign direct investments. Meanwhile, total trade between Malaysia and Singapore has recorded an annual growth rate of 13% over the period of 2019–2023, with a total trade value of RM363 billion.

A key beneficiary of this synergy is Johor, which consistently ranks at the top for total trade and investment attraction, alongside the Klang Valley area. There is a long list of mutual benefits for both Singapore and Johor, which have been promoted before.

One must then ponder how this initiative differs from previous efforts, such as the Iskandar Malaysia project. While there has been notable progress with RM291 billion in realised investments within the Iskandar Malaysia development area, the JS-SEZ aims to broaden and better integrate the economic synergies of Singapore and Malaysia.

To start with, JS-SEZ targeted sectors are now better aligned with strategic national and state level development priorities, particularly the New Industrial Master Plan and the Johor Maju 2030 Vision, while also being supported by investment facilitation from Singaporean counterparts. Specific details on special corporate tax rates, income tax rates, tax incentives, and allowances, as well as the Global Services Hub and Pioneer Status – are intentionally designed to attract high-growth and high value-added services to the JS-SEZ.

The expectation then is for Malaysia to ensure that its infrastructure is investment-ready to attract development partners. On the other hand, the Singapore government must fulfil its part in providing funding support to facilitate the expansion of Singaporean companies and enable potential twinning operations of multinational corporations (MNCs) in Singapore and the JS-SEZ.

Perhaps the most relatable concern for citizens who commute across borders is whether the JS-SEZ can ease traffic bottlenecks, which have been notorious for waiting times of up to 14 hours at their worst. A workable model must be developed to minimize waiting times for human and vehicle traffic, as well as cargo and customs clearance.

While these issues primarily involve Johor’s state borders, the authority over immigration and customs clearance lies with the Federal government. This frustration is often apparent when determining who is at fault when inefficiencies begin to drag down productivity.

During a patrol check, Johor Chief Minister Dato’ Onn Hafiz discovered that very few immigration checkpoints were open during peak morning hours. This underscores the importance of coordination between the Federal and State governments for effective implementation of cross-border solutions, such as biometric recognition, digitalization of cargo clearance, or single-window tax clearance. Making sure that all relevant authorities align and “speak” with each other would, however, be easier said than done. A July 2024 survey of the Singapore Business Federation had highlighted that a key worry relating to sufficient manpower supply is issues related to the employment pass.

For a start, there are different expatriate categorizations and requirements from MDEC, TalentCorp, and the Ministry of Home Affairs – which, by itself, is a bureaucratic hassle to navigate. The recently launched Invest Malaysia Facilitation Centre – Johor (IMFC-J), acting as a one-stop center to streamline processes for necessary approvals, is therefore expected to encourage a whole-of-government approach on the Malaysian government’s side.

Sourcing key talent itself could also pose challenges. While starting salaries in the JS-SEZ are expected to be competitive (up to RM7,000 in select instances), many skilled workers are already employed in the Klang Valley or Singapore, making them less inclined to relocate. To avoid reliance on foreign workers as a stop-gap measure, coordinated efforts will be needed to expand the talent pool through industry-based upskilling and reskilling. This is exemplified by MOUs between Singapore Polytechnic and the Federation of Malaysian Manufacturers, Singapore’s ITE Education Services (ITEES), and the Johor Skills Development Centre (JSDC), as well as the signing of a Cooperation Note on Talent Development between Republic Polytechnic and the Johor Talent Development Council (JTDC).

While TVET upskilling and reskilling of employees has long been a topic of discussion, the shared experience of both Singapore and Malaysia leaves no excuse to delay the preparation of workers for the immediate industry challenges at hand – especially given the proximity, socio-cultural, and language similarities of the two countries.