Singapore and Malaysia shares a long history and one of the world’s busiest land borders. This close link has increasingly intertwined the fates of both economies in recent years. To deepen this connection, the new Johor-Singapore Special Economic Zone (JS-SEZ) was signed during the recent Malaysia-Singapore Leaders’ Retreat on 7 January 2025.
The primary goal of this initiative is to boost economic interactions and transactions across their border. It is expected to create good jobs for people and business opportunities across both sides of the causeway.
What Is A Special Economic Zone?
A Special Economic Zone (SEZ) is a designated area within a country where the business, trade, and legal regulations differ from the rest of the nation. This concept gained prominence in the 1980s when China, amid its economic liberalisation and opening to international markets, established SEZs in certain areas, particularly along its southern coast.
These SEZs, notably in cities like Shenzhen, Shantou, and Zhuhai, played a pivotal role in attracting foreign direct investment (FDI) to China. This influx of investment was a major factor in transforming the country into one of the leading global manufacturing powerhouses.
In the context of Singapore and Malaysia, the Johor-Singapore Special Economic Zone (JS-SEZ) marks the start of a collaboration to strengthen connectivity, jointly compete for global investments, create jobs and drive innovation that will benefit both Singapore and Malaysia.
What Benefits Will The Johor-Singapore Special Economic Zone Provide
A key focus is the Johor-Singapore Special Economic Zone will be to facilitate “seamless and expedited” movement of goods between the two countries. When it was first mooted, then Prime Minister Lee Hsien Loong mentioned initiatives like special tax arrangements and the use of bonded warehouses. Bonded warehouses are facilities where goods can be stored without being subjected to import duties, thereby facilitating smoother trade.
Another significant area of proposed cooperation is the simplification of travel for citizens of both countries. In the works is the introduction of a passport-free, QR code-based clearance system at both sides of the land checkpoints between Singapore and Malaysia. Aimed at easing congestion at the busy Causeway checkpoints, this could greatly benefit frequent travellers and workers, reducing travel time and inconvenience.
Additionally, a crucial infrastructure project, the 4-kilometer Rapid Transit System (RTS) connecting Johor Bahru (JB) in Malaysia and Singapore will commence operation in December 2026 – linking Woodlands North in Singapore to Bukit Chagar in JB.
A Brighter Future, Together
The Johor-Singapore Special Economic Zone (JS-SEZ) is a crucial step towards deepening the economic ties between Singapore and Malaysia – which are understandably each others top 3 largest trading partners.
Between January to November 2024, bilateral trade reached a notable US$79 billion between the two countries – a 6.7% increase over the same period the year before. This growth was driven by higher trade in electrical and electronic products, machinery, equipment and parts, and chemicals and chemical products.
For Malaysia, Singapore was its largest foreign investor in 2023, contributing US$9.52 billion to Malaysia’s FDI.
The JS-SEZ aims to emulate the success of China’s renowned SEZs, creating a vibrant business ecosystem that is attractive to international investors and skilled workers. This initiative is poised to enhance the existing robust economic relationship and position the JS-SEZ as a global hub of innovation, trade, and industrial growth, further elevating Singapore’s and Malaysia’s global economic standing.
With greater business opportunities that rely on a presence in both Johor and Singapore, local banks such as OCBC is well-positioned to help SMEs and multinationals tap into the JS-SEZ. With over 90 years of experience, OCBC already has a suite of solutions to facilitiate cross-border business activities, including a single account overview for both Singapore and Malaysia operations, transparent FX fees and services, as well as competitive business insurance solutions.
Awarded “Bank of the Year in Malaysia 2024” by The Banker, OCBC has set up a dedicated team of experienced bankers in both Johor and Singapore to support business growth plans, including advisory services to start and grow in the two markets, as well as tapping on its established network to connect businesses with suitable partners in the JS-SEZ.
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