Singapore and Malaysia aim to sign a memorandum of understanding (MOU) for the Johor-Singapore Special Economic Zone (SEZ) next January, leaders of both countries said at an annual retreat on Monday (30 Oct 2023).

Responding to reporters at a joint press conference, Singapore Prime Minister Lee Hsien Loong said there is an ongoing feasibility study to determine investor interest and market demand.

Discussions on the SEZ have been extensive, said Malaysian Prime Minister Anwar Ibrahim, adding: “We’ll try our very best to accelerate the process – we’ve given a very short timeline to get them to agree on the perimeters and sign the MOU by January 11.”

PM Lee said the SEZ should improve cross-border goods flows, which may mean special tax arrangements and bonded warehouses; and the flow of people who work on both sides, with SEZ investor companies also “able to get personnel they need”.

The SEZ should also enhance the ecosystem of the Iskandar development region, he added. In a joint statement later on Monday, the leaders welcomed the progress made by the work groups of the Joint Ministerial Committee for Iskandar Malaysia, ranging from industrial cooperation to transportation links.

Singapore is Iskandar Malaysia’s second-largest foreign investor, with S$9.5 billion or RM33 billion worth committed between 2006 and June 2023.

Anwar is on a two-day visit to Singapore for the 10th Singapore-Malaysia Leaders’ Retreat. This retreat is Anwar’s first since he was sworn in as prime minister nearly a year ago.

At the joint press conference, PM Lee said both leaders had “very productive and substantive discussions”.

Bilateral relations are strong, he added, particularly on the economic front.

“In an increasingly uncertain post-pandemic world, we need to enhance our cooperation, in particular our economic links and our people-to-people ties,” he said.

Noting the signing of framework agreements on the digital economy and the green economy in Anwar’s introductory visit this year, he said both countries will build on this to pursue further “win-win cooperation”.

On Monday (30 Oct 2023), both countries signed an MOU for further cooperation between their small and medium enterprises (SMEs). This covers the exchange of knowledge and best practices, especially in digitalisation, sustainability and market access. It will also involve joint activities, such as business matching and events to facilitate partnerships between SMEs from both countries.

They also inked an update to the Malaysia-Singapore Business Development Fund for partnerships to pursue opportunities in third countries. It will support joint test-bedding and pilot projects in areas such as the digital and green economy. This is on top of providing for joint missions, feasibility studies, and target-specific due diligence in third countries.

Said PM Lee: “Within ASEAN, Singapore and Malaysia are working closely to strengthen regional collaboration and the centrality of ASEAN, especially in the emerging areas of digital and green economies.”

Bilaterally, both countries are strengthening cooperation on renewable energy and pursuing cross-border electricity trading. Malaysia’s federal government will help accelerate discussions for Singapore to import renewable energy from Sarawak, said the statement.

The two countries are also making “good progress” to strengthen connectivity, said PM Lee. The Rapid Transit System Link – their third land link – is on track for completion by end-2026.

The leaders also discussed efforts to alleviate congestion at land checkpoints, with Singapore introducing initiatives for smoother cross-border travel and redeveloping Woodlands Checkpoint to increase its capacity.

The joint statement acknowledged progress in other areas, such as deeper links between both countries’ startup scenes; promoting cross-border tourism; transboundary environmental issues; combating transnational crime; and exchanges in higher education.

Both leaders also discussed outstanding bilateral issues, including maritime delimitation, reclamation at Pedra Branca, water and airspace.

These important issues are being considered “holistically and constructively” within the broader context of the relationship, said PM Lee.

“Importantly, they will not be allowed to colour and affect this overall relationship, or detract from the many positive areas of cooperation between us,” he said. “I’m confident that our two countries can work out durable and mutually beneficial ways forward on all these issues.

On airspace, the leaders agreed to review arrangements for air traffic service provision over Southern Peninsular Malaysia. They tasked their respective transport ministers to agree on a set of principles and outcomes to guide their civil aviation authorities “to move forward as expeditiously as possible”.

Anwar stressed Malaysia’s commitment to making a “serious attempt at settling most of the outstanding issues”.

On the issue of water, he said: “Instead of focusing purely on a price mechanism, we should also look at the possibility of Singapore participating in a joint effort, both as a study which can be conducted immediately and also in terms of management of Johor river, particularly with Johor state.”

It is “clear” that Malaysia must honour its commitment and supply water from Johor to Singapore, he said, adding that both countries must work together to enhance capacity, given Johor’s expanding needs.

Asked if the Israel-Hamas conflict would have spillover effects on investments or bilateral relations, Anwar stressed the importance of the common position held by Singapore and Malaysia: “Singapore and Malaysia supported the UN (United Nations) resolution on this ceasefire – that to me is very critical for now – and humanitarian assistance.”

PM Lee agreed that both countries have condemned the violence and human tragedy involving civilians and innocent victims. While Singapore and Malaysia’s respective diplomatic situations with Israel and the Palestinian Authority are not identical, there is no reason for that to cause any difficulty in bilateral relations, he said.

The annual leaders’ retreat is a key platform for the PMs to discuss bilateral issues and explore new areas of cooperation. It was paused during the Covid-19 pandemic, with the previous one hosted by Malaysia in Putrajaya in April 2019.

In their statement, the leaders said the high volume of bilateral visits and exchanges since borders reopened in April 2022 demonstrates a commitment to maintaining communication and continually investing in this relationship, amid increasing geopolitical complexity and uncertainty. The next retreat will be held in Malaysia in 2024.

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