On January 7, 2025, Malaysia and Singapore signed the Johor-Singapore Special Economic Zone (JS-SEZ) agreement to boost cooperation and investment between Johor and Singapore, utilizing their proximity for mutual growth, reports Bloomberg, CNA, and Malay Mail.
Ambitious growth targets
The JS-SEZ covers over 3,500 square kilometers, drawing inspiration from the Shenzhen-Hong Kong model, and aims to attract over 50 investment projects in five years. The agreement was signed in Putrajaya, with Malaysian Prime Minister Anwar Ibrahim and Singaporean Prime Minister Lawrence Wong highlighting the mutual benefits and strengths of both regions.
Malaysia projects the economic zone will create around 100,000 jobs and generate MYR260 billion (US$57.78 billion) annually by 2030, with investments primarily from Singaporean firms.
Strategic regional expansion
Singapore's unique geographical and economic landscape has led to the development of the "Singapore +1" strategy, which encourages businesses to establish their Asia-Pacific headquarters in Singapore while transferring manufacturing and other activities to neighboring regions like Johor in Malaysia and Batam in Indonesia. This approach has gained particular significance in space-intensive industries such as data centers, where Singapore's limited land and natural resources constrain large-scale development.
Between 2019 and 2022, the Singaporean government paused approvals for new data center investments, resulting in Johor successfully attracting 50 data center projects during this period. This development underscores Johor's increasing importance in hosting industries that Singapore cannot completely accommodate due to space limitations.
Challenges and expectations
The recent signing of the JS-SEZ agreement has further fueled interest from Singaporean companies seeking cost-effective solutions and new market opportunities. While expressing optimism, these companies emphasize the need for enhanced business-friendly policies within the economic zone, including streamlined administrative procedures, expanded tax incentives, and strengthened infrastructure to support efficient operations.
According to Bloomberg, logistical challenges persist, notably at the Johor-Singapore Causeway, which faces efficiency issues in customs clearance amid approximately 300,000 daily crossings. Meanwhile, the Kuala Lumpur-Singapore High-Speed Rail project continues to experience delays due to unresolved issues and budget constraints, affecting connectivity between the two countries.
Malaysia's Economic Affairs Minister, Rafizi Ramli, emphasized that the JS-SEZ's primary objective is to eliminate barriers to the movement of people and goods, promoting business activities. However, analysts caution that changes may be gradual, with ongoing challenges in enhancing administrative efficiency and managing investor expectations.
JS SEZ progress | |
Date | Progress |
Oct-23 | Decision made on the special economic zone |
Jan-24 | MoU signed |
Apr-24 | Discussion started |
Jul-24 | Held investment forum |
Jan-25 | Agreement signed |
Source: Malay Mail, January 2025