Johor-Singapore Special Economic Zone driving growth

With its strategic vision and collaborative framework, it holds the promise of unlocking new growth opportunities for the two countries and the broader region.

December 23, 2024

6 mins

Corporate & investment banking

Originally published in The Business Times (the article title has been revised to fit SC.com editorial guidelines)

As Malaysia gears up to assume the chairmanship of ASEAN in 2025, the launch of the Johor-Singapore Special Economic Zone (JS-SEZ) stands to underscore the region’s commitment to economic integration and dynamism.

Mak Joon Nien, chief executive officer of Standard Chartered Bank Malaysia, highlighted the longstanding economic ties between Malaysia and Singapore, with Singapore being Malaysia’s second-largest trading partner and Malaysia ranking as Singapore’s third-largest.

“The introduction of the SEZ will further strengthen this relationship, and allow both countries to leverage their strengths collaboratively,” said Mak, the first Malaysian CEO of the country’s oldest operating bank, which has been present since 1875.

Mak described the SEZ as a “win-win” opportunity, where Malaysia offers key resources such as renewable energy, land and emerging talent, while Singapore contributes technology and expertise.

He likens this partnership to a successful marriage. “Much like my wife, who hails from Singapore, and I, from Malaysia, we grow collaboratively by leveraging our individual strengths.”

With its strategic vision and collaborative framework, the JS-SEZ holds the promise of unlocking new growth opportunities for Malaysia, Singapore and the broader region.

He noted that the SEZ is a game-changer, potentially bolstering both economies and driving strategic cooperation that has a multiplier effect across the region.

“Prospects for ASEAN remain attractive in light of the ongoing global political uncertainties, and the SEZ is well-positioned to capitalise on it, with Malaysia’s 2025 ASEAN chairmanship providing further impetus,” he said.

Interconnected economic corridor

He envisions the SEZ will drive seamless connectivity between the two countries, which will create a robust and interconnected economic corridor that enhances the movement of goods and people.

“For instance, moving goods from Changi to Johor should be no different to moving goods from Changi to Jurong,” he said.

Mak acknowledged the Malaysian government’s efforts to support the success of the JS-SEZ. These include realigning Johor’s weekend holidays, the 4-km Rapid Transit System Link, and the introduction of a passport-free immigration clearing QR code system – all of which are improving cross-border movement.

The InvestMalaysia portal and Johor Super Lane further showcase the commitment to facilitating investments and trade.

However, he noted that the long-term success of the SEZ hinges on the seamless integration of regulatory frameworks, financial incentives, and the free movement of people and goods.

A regional hub in the making

“The zone offers a unique proposition. Malaysia will maintain independence in its financial sector, focusing on becoming a regional Islamic banking hub while attracting global business services and family offices to the JS-SEZ, via the special financial zone (in Forest City),” said Mak.

For foreign banks such as Standard Chartered, which has deep roots in both Malaysia and Singapore, the anticipated influx of fresh investments and robust economic activity presents a significant opportunity.

With operations across 52 markets, Standard Chartered is “well-positioned” to foster cross-border initiatives, such as one-stop banking, and services as a platform for inbound and outbound investment, he added.

Growing interest

Since an official memorandum of understanding was signed in Johor Bahru to formalise the establishment of the JS-SEZ in January this year, Johor has garnered strong interest from investors and business owners.

For instance, Johor’s property sector has already witnessed steady growth. In the first half of 2024, total property transaction values in Johor rose more than 40 per cent from a year earlier, reaching nearly RM22 billion (SGD6.7 billion), dominating Malaysia’s overall transaction value.

Standard Chartered Malaysia, meanwhile, received a significant number of inquiries from its international network, said Mak, who is optimistic that this interest will continue to grow.

With rising interest from investors and business owners, the JS-SEZ is expected to drive significant economic benefits, including higher income levels and job creation, which will in turn address the persistent brain-drain issue faced by Malaysia.

“It will also drive greater cost efficiencies for Singaporean – or other international – businesses operating in the JS-SEZ, as there will be higher margins arising from Malaysia’s lower operating expenses,” he added.

High-growth sectors

The JS-SEZ is expected to drive growth in several key sectors. Among the most promising are the electronics and semiconductors sector; healthcare and wellness; and technology services.

He noted that the relocation of supply chains to Johor, particularly for electronics and electric, as well as semiconductor industries, could create a broader ecosystem supporting data centres and high-tech industries.

With enhanced accessibility between the two borders, Mak also sees good potential growth for Malaysia’s healthcare and wellness sectors, tapping cost-effective advantages, while advanced healthcare facilities continue to attract medical tourists.

Additionally, with Singapore’s ageing population, Johor could become a hub for senior-living and retirement services, he added.

Restrategise for next-phase growth

Both Malaysia and Singapore have seen substantial investment growth over the past five to 10 years, with Malaysia experiencing strong double-digit increases in total approved investment in 2023.

“The establishment of the JS-SEZ will provide clarity and focus for both foreign direct investments and domestic investments across the value chain, facilitating the next phase of growth for both countries,” he added.

To continue developing, Singapore must address its capacity constraints and high living costs, which place it among the world’s most expensive cities.

He noted that this will involve shifting its business focus towards research, development and services to attract new investments that optimise resources.

For Malaysia, the opportunity lies in leveraging its renewable energy, land, and skilled workforce to attract and cultivate new industries – particularly in manufacturing and services.

Mak said this strategy will enable Malaysia to diversify its economic portfolio and ascend the value chain, creating a spillover effect that promotes knowledge transfer and employment opportunities, ultimately helping to reverse the brain-drain issue.

Source: The Business Times © Singapore Press Holdings Limited. Permission required for reproduction.