The proposed Johor-Singapore Special Economic Zone (JS-SEZ) is expected to bring about significant benefits for industries such as data centres, electronics, and renewable energy, according to DBS research. The JS-SEZ was first announced in October last year during the 10th Singapore-Malaysia Leaders’ Retreat, and a memorandum of understanding was signed in January to work on a full-fledged agreement for the zone, to be finalised by December.
Located in Malaysia’s Iskandar region, the zone is proposed to cover six districts, including Johor Bahru, Iskandar Puteri, Pasir Gudang, Pontian, Kulai, and Kota Tinggi, with a total area of 3,505 sq km.
Initiatives being explored for the zone include special tax arrangements, training incentives, passport-free clearance, and joint promotion events. Specific details on the industries and incentives for the zone are yet to be disclosed, but DBS economist Chua Han Teng believes the data centre sector will be the prime beneficiary, which will, in turn, benefit technology service firms. According to DC Byte’s 2024 Global Data Centre Index, Johor is the fastest-growing data centre in Southeast Asia, with an increase from less than 10MW in the last three years to over 1.6GW.
Johor’s electrical and electronics sector, identified as one of the 16 priority industries in the Progress Johor 2030 economic master plan, is also expected to benefit from the JS-SEZ. The state’s electronics manufacturing sector is currently the third-largest in Malaysia, behind Penang and Selangor.
Renewable energy is also likely to receive a boost from the JS-SEZ, as it has been identified as a key area of cooperation. The establishment of the zone could deepen existing collaborations, such as the two-year electricity import trial between Singapore and Malaysia, which was announced last year. Under the agreement, Singapore will import 100MW of electricity from a gas-fired power plant in Johor.
The JS-SEZ is expected to stimulate the demand for industrial properties in Johor as activity in these different sectors increases. The completion of the Johor Bahru-Singapore Rapid Transit System (RTS) by the end of 2026 will significantly boost connectivity between the two cities, reducing travel time to 15 minutes.
DBS economist Chua adds that the JS-SEZ offers the opportunity to leverage the strengths of both Singapore and Johor. One of Johor’s strengths is its space, with a proposed area four times the size of Singapore and equivalent to the combined area of China’s Shenzhen and Hong Kong. Johor also has favourable demographics, with a population of 4.1 million in 2023, making it Malaysia’s second most populous state after Selangor. Additionally, the city-state offers strong capabilities as a financial centre and business hub.
The JS-SEZ is expected to appeal strongly to Singaporean businesses, with a survey by the Singapore Business Federation (SBF) earlier this year finding that of the 160 firms surveyed, 93 found Johor attractive, while 50 already have operations there. However, the success of the JS-SEZ will also depend on its ability to address challenges faced by Singaporean businesses operating in Johor, such as manpower and movement of goods issues.
The SBF survey found that a majority of companies cited challenges related to employment passes and sourcing skilled workers, as well as unclear and inconsistent customs rules and logistical challenges. Suggestions to improve cross-border movements included special immigration lanes and automated clearance using biometrics. Businesses also highlighted the need for a unified one-stop service centre to assist investors, and Johor has taken steps to address this by establishing the Invest Malaysia Facilitation Centre in December 2023.
Singaporean businesses have also proposed a joint investment promotion agency and business platform to facilitate collaboration and networking opportunities for companies entering Johor.