PETALING JAYA: The economic benefits that can be derived from the Johor-Singapore Special Economic Zone (JS-SEZ) will be far-reaching, according to economists and industrialists.
They expressed confidence that the combination of Johor’s abundant resources with the financial and tech prowess of Singapore will make it an attractive investment hub for years to come.
“This will truly make it a gamechanger,” Malaysia Semiconductor Industry Association (MSIA) president Wong Siew Hai told FMT Business.
Wong pointed out that Malaysia has an abundant supply of land and ready access to human capital.
“Combine that with the access to investment capital and technology that Singapore has and it will be hard to beat,” he said.
Malaysia and Singapore announced on Jan 11 that they will be working together to create a new special economic zone (SEZ) in Johor.
A memorandum of understanding for the JS-SEZ was signed by economy minister Rafizi Ramli for Malaysia and trade and industry minister Gan Kim Yong for Singapore.
Cumulative investments from the deal are expected to amount to RM636 billion by 2030.
The JS-SEZ is also expected to boost trade between Malaysia and Singapore.
Wong pointed out that with the JS-SEZ in place, multinational corporations (MNCs) will no longer have to choose between Malaysia and Singapore in their investment plans.
“The JS-SEZ will combine the best of both countries in one location,” he said.
The electrical and electronics (E&E) sector is expected to feature significantly in the JS-SEZ. It attracted RM29.3 billion in investments in 2022, the highest for any sector.
Wong noted that in the E&E sector, Malaysia and Singapore are also key players in the semiconductor value chain.
Singapore was the highest contributor of foreign direct investment (FDI) to the manufacturing sector in Johor in 2022.
That year, it accounted for RM9.61 billion of the RM14.6 billion investment that the state received.
The JS-SEZ is modelled after Shenzhen, the Chinese city established in 1979 to serve as an alternative investment destination to nearby Hong Kong.
In the four decades since it was made an SEZ, Shenzhen has transformed itself from a small city with a population of about 300,000 into a high-tech international metropolis of 17 million people.
Wong said the Johor economic zone could take a similar trajectory.
“Key to the success of JS-SEZ is the framework inside the definitive full-fledged agreement between both countries and then the implementation of the agreement,” he said.
“All input from relevant stakeholders in both countries must be considered, especially from the private sector. After all, JS-SEZ is meant to appeal to investors, both foreign and domestic,” he added.
Economist Shankaran Nambiar said the JS-SEZ will serve the needs of Malaysia in generating employment and contributing to the gross domestic product (GDP).
“It will also serve Singapore’s investment goals and this will work in favour of our plan to develop Johor as an investment hub,” Shankaran, who is with the Malaysian Institute of Economic Research (MIER), told FMT Business.
He said the quality of FDIs in the JS-SEZ could reflect the kind of investments that Singapore is looking to base in Johor.
Malaysia attracted FDIs amounting to RM309.4 billion in 2021 and RM264.6 billion in 2022.
Singapore was the fourth largest investor in Malaysia in 2022. Its RM13.5 billion investment that year underscores the robust economic ties between the two countries.
Johor topped the ranks in FDI received that year with RM70.6 billion, underscoring its appeal as an investment destination and potentially paving the way for economic growth through the JS-SEZ.
Attempts by FMT Business to reach out to Johor menteri besar Onn Hafiz Ghazi were unsuccessful as at press time.