In a landmark move to strengthen economic ties, Singapore and Malaysia have agreed to drive investments in 11 key sectors such as manufacturing, logistics, and energy, and made plans to expand 50 projects in five years, and 100 projects within 10 years.

The establishment of the new Johor-Singapore Special Economic Zone (JS-SEZ) will also, among other things, create 20,000 skilled jobs, and strengthen cross-border cooperation with the establishment of a one-stop centre to facilitate investments and businesses in the zone.

To streamline the movement of people and goods, Singapore and Malaysia will increase clearance capacity, introduce automated immigration lanes, and implement paperless goods clearance in phases.

The agreement for the JS-SEZ was inked on Monday (6 Jan) by Singapore’s Trade and Industry Minister Gan Kim Yong and Malaysia’s Economy Minister Rafizi Ramli.

The exchange of the SEZ document took place during the 11th Malaysia-Singapore Leaders’ Retreat on Tuesday (7 Jan) in Putrajaya, and was witnessed by Singapore’s Prime Minister Lawrence Wong and Malaysian Prime Minister Anwar Ibrahim.

PM Wong said at a press conference: “We both agree that bilateral cooperation must continue to deliver concrete benefits to both our peoples, and that is the basis on which we worked on the Johor-Singapore SEZ.”

He added: “It is an important project which 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. And by doing so, it will create good jobs and more opportunities for our peoples.”
 

PM Wong said that when the agreement was negotiated, both sides actively engaged stakeholders to ensure that the SEZ would have the conditions to help businesses grow together for the longer term.

PM Anwar described the SEZ as a “unique initiative” as it was rare to see two countries collaborating as a team to promote mutual economic growth and attract investments.

“This initiative not only brings clarity to economic policies, but also ensures a well-structured approach to social investment concerns. Both governments are being selective to ensure that investments align with future needs and priorities,” he said.
 

Competing for investments together

The SEZ agreement aims to strengthen the value proposition of Johor and Singapore so that both sides can compete for global investments together, said Singapore’s Ministry of Trade and Industry (MTI) in a statement on Tuesday.

This will be done through improving cross-border goods connectivity between both jurisdictions, enabling freer movement of people, supporting talent development, and strengthening the business ecosystem within the region.

The SEZ covers an area of more than 3,500 square kilometres, roughly four times the size of Singapore.

It comprises nine flagship zones: Johor Bahru; Iskandar Puteri; Tanjung Pelepas and Tanjung Bin; Pasir Gudang; Senai-Skudai; Sedenak; Forest City; Pengerang Integrated Petroleum Complex (PIPC); and Desaru. These nine regions will enjoy tax incentives under the agreement.

The first six zones are already part of the Iskandar Malaysia SEZ; the JS-SEZ thus expands upon this by including Forest City, PIPC, and Desaru.

The two governments will jointly finance the JS-SEZ. Malaysia’s Ministry of Economy will establish a JS-SEZ Infrastructure Fund to build facilities as needed.
 

Economic collaboration

Both countries have agreed to cooperate on initiatives in several areas.

In the area of economic cooperation, Singapore and Malaysia have agreed to promote and facilitate investments in 11 economic sectors: manufacturing, logistics, food security, tourism, energy, the digital economy, green economy, financial services, business services, education, and health.

Both sides have agreed to promote and facilitate the expansion of 50 projects within the first five years, and 100 projects within the first decade.

Singapore and Malaysia will facilitate the development of renewable-energy projects to accelerate renewable-energy trading between the two countries. They will also consider developing new areas that can become free zones.

On its part, Malaysia will establish the Invest Malaysia Facilitation Centre-Johor – a one-stop centre to facilitate investments and businesses in the zone.

Both sides also agreed to boost local transport links, explore using the Second Link for more commercial vehicles, and consider data-sharing to improve customs clearance.
 

Other initiatives

Malaysia will enhance its existing foreign-worker passes, such as the DE Rantau Nomad Pass, which gives non-IT and non-digital foreign talent earning a minimum monthly income of US$5,000 (S$6,742) clearance to live in Malaysia for up to 12 months in the first instance. The minimum income requirement for non-IT and non-digital talents is set at US$60,000 a year.

On talent development, both countries will enhance industry-ready skills-training initiatives and education programmes.
 

Separately, both countries will work towards refreshing the Joint Ministerial Committee for Iskandar Malaysia to support the ambition and implementation of the JS-SEZ.

This refreshed committee will reinforce bilateral cooperation on other fronts, such as transport and the environment, said Singapore’s MTI and Malaysia’s Ministry of Economy in a joint statement.

These new initiatives build on others that were launched in the lead-up to the formalised agreement. For instance, passport-free QR code clearance has been in force at Singapore’s land checkpoints with Malaysia since last March.

Customs procedures for land intermodal transhipments have also been streamlined so that traders need only apply for a single permit with Singapore Customs, instead of two separate permits.

Malaysia and Singapore will continue to explore new areas of cooperation in support of the objectives of the JS-SEZ, they said in the joint statement.

This includes exploring enhanced market access of financial institutions, subject to the laws and regulations in both countries.

Malaysia will provide a tax incentive package for the JS-SEZ, including granting a special corporate tax rate to companies that undertake new investments in high-growth and high value-added activities within the zone.

The SEZ was officially announced in October 2023, during PM Anwar’s visit to Singapore for the previous retreat. Both countries then signed a memorandum of understanding last January to finalise an agreement to set up the zone by the end of 2024.

The agreement was set to be signed in December, but had to be postponed after PM Wong tested positive for COVID-19.
 

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