Singapore, Malaysia Plan Border SEZ in Johor State

Singapore and Malaysia are partnering to create a special economic zone (SEZ) in Malaysia’s Johor state (JS-SEZ), adjacent to the Singaporean border. The joint effort is designed to foster stronger business connections and improved connectivity between the two countries, as the region combats a global economic slowdown. Malaysia have given Singapore a short timeline to agree on the zone’s key parameters.

Currently, a feasibility study is underway to determine the project’s specific focus, investor interest, and market demand. The JS-SEZ could potentially incorporate special tax arrangements and other measures to enhance the movement of goods across the borders.

READ: Special Economic Zones in ASEAN: Opportunities for US Investors

Background

In late October, the Malaysian Prime Minister, Anwar Ibrahim, conducted a two-day leaders’ retreat with Singaporean Prime Minister Lee Hsien Loong in Singapore. The 10th Singapore-Malaysia Leaders’ Retreat marked a significant milestone in their bilateral relations, which the two prime ministers aimed to leverage for mutual economic benefits. The occasion was also their first such bilateral interaction after the pandemic.

According to media reports, they are scheduled to sign a memorandum of understanding (MoU) for the next phase of the Johor-Singapore Special Economic Zone (SEZ) on January 11, 2024.

Key goals

The planned SEZ seeks to enhance the movement of goods and people across the Johor-Singapore Causeway, while also bolstering the overall ecosystem of Iskandar Malaysia and Singapore. Established in 2006, Iskandar Malaysia is the main southern development corridor in Johor. 

[The Johor-Singapore Special Economic Zone] will tap into the complementary strengths of both countries to foster economic connectivity by improving cross-border flows of goods, investments, and people. – Joint Statement, 10th Singapore-Malaysia Leaders’ Retreat

Location advantage

The Johor-Singapore Special Economic Zone is set to be established within Malaysia’s Iskandar region (formerly the Iskandar Development Region and South Johor Economic Region), with the government actively promoting it as an attractive investment destination aimed at bolstering the electronics, healthcare, and financial industries as well as business-related services.

Malaysia currently has five investment corridors (a new type of SEZ): the East Coast Economic Region (ECER), Iskandar Regional Development Authority (IRDA) for Iskandar Malaysia in Southern Johor, and the North Corridor Implementation Authority (NCIA) for the North Corridor Economic Region (NCER).

Meanwhile, the sectors of focus in Malaysia’s existing development corridors are:

• East Coast Economic Region: Tourism, oil and gas, manufacturing, agriculture, and education
• Sabah Development Corridor: Agro-based industry, tourism, logistics, and manufacturing
• Sarawak Corridor of Renewable Energy: Resource-based industry, energy, tourism
• Norther Corridor Economic Region: Modern agriculture, manufacturing and design, tourism, logistics, education, and health

Major trade and business partners

In 2022, Singapore and Malaysia ranked as each other’s second-largest trading partners, as their bilateral trade volume reached US$83.53 billion.

Additionally, during the same year, Singapore stood out as one of Malaysia’s primary sources of foreign direct investment (FDI), contributing 8.3 percent to Malaysia’s total investments for that period.

Focus on sustainable energy

Besides the Johor-Singapore SEZ, the two countries will collaborate on developing joint renewables capacity and facilitate cross-border electricity trading. Key areas of focus in this regard will be sharing of low-carbon and renewable energy technologies, carbon capture and storage, and carbon credits.

Singapore is also interested in importing renewable energy from Sarawak, a state in Malaysia. Currently it is evaluating feasibility of laying down cross-border power cables to enable electricity exchange. Already the two countries have upgraded existing power cable infrastructure for smooth energy transmission.