THE Johor-Singapore Special Economic Zone (JS-SEZ) is more than a property play and can create real integration between the economies of Singapore and Malaysia. The state government is also considering lessons from past experiences to come up with strong legal agreements and political commitments, as well as clear targets, for the JS-SEZ to be successful.
These were the main points brought up in the dialogue session titled “A new growth catalyst” at The Edge-HSBC JS-SEZ Forum 2025.
“The focus is very clear on creating jobs, populating the area, industrialising the area and going beyond just pure economic cooperation,” said Lee Ting Han, Johor State Executive Council chairman of investment, trade, consumer affairs and human resources.
“The agreement has been signed; so, [now] it is more about the execution level. How can we get it right this time around, taking in all the experiences of the past?”
Much has been learnt from the Singapore-Johor-Riau (Sijori) Growth Triangle of 1989, which sought to integrate the economies of Singapore, Malaysia and Indonesia, as well as from Iskandar Malaysia, established in 2006 as an investment corridor.
Measures are being put in place to prevent mistakes of the past, such as by increasing the 2% levy on foreign property purchases to 3%, to curb property speculation, said Lee.
To further cement the collaboration between Singapore and Malaysia, joint promotions to attract investments into the JS-SEZ are also being conducted.
“One of the early efforts that have been done was in April, together with Singapore’s Ministry of Trade and Industry (MTI) and Miti (Ministry of Investment, Trade and Industry) Malaysia. We organised a joint forum in Johor and we’ll be doing another round in Singapore at the end of the year,” Lee said.
This collaboration goes beyond the efforts to attract foreign investors, said Deputy Minister of Miti Liew Chin Tong. To ensure that the JS-SEZ truly uplifts the economy of both countries, there is also an effort to introduce a joint industrial policy that can nurture the growth of local innovative technology companies, much like Samsung in South Korea.
“This will take a bit of effort, because both sides have to agree that there is a need not just to attract investors but to create companies that are owned by Malaysia, and to move from thinking of just financial incentives to industrial policy,” said Liew.
There should also be a change in mentality to move away from relying on foreign direct investments to driving technological development.
“We have a unique set of advantages. Both Singapore and Malaysia have above 20% of manufacturing [contributing to] their GDP, which is rare in most places and for such advanced societies,” said Liew.
“Malaysia and Singapore combined have very interesting capabilities across industries, such as in metal fabrication and semiconductor [manufacturing]. This is the time for us to think about integrating our supply chain and our financial markets as much as possible to create the next Huawei or Samsung as a joint effort,” said Liew.
Ultimately, the JS-SEZ will help move Malaysia up the value chain. There is a lot of interest in the JS-SEZ from Malaysia and Singapore businesses already, observed Datuk Omar Siddiq, CEO of HSBC Malaysia.
The signing of the agreement between the two countries for the JS-SEZ provided certainty to businesses. The harmonisation of policies is another positive move that is appreciated by businesses, especially on issues such as the movement of people between the two countries.
“The key thing where [both the governments of Malaysia and Singapore and state government of Johor] will make a difference is if we can ensure that the collaboration is institutionalised,” said Omar.
“If you create these conditions, the small and medium enterprises are the ones that will benefit the most by having good businesses come in to develop deep ecosystems and, ultimately, present this value-added offering to the world, where all boats are lifted in the rising tide.”
JS-SEZ should spur innovation
Throughout the session, many parallels were drawn between the JS-SEZ and the Hong Kong-Shenzhen partnership. In the latter case, however, both cities are under the same administrative country. As the JS-SEZ involves two countries, different approaches have to be taken.
“Both countries have specific political, economic situations that we have to handle carefully. What Singapore wants is a research and development centre, a finance hub. Are we okay with accepting that we’ll be doing manufacturing operations only, or is there some form of deeper collaboration that we can work on? We hope that eventually we’ll come to a middle point,” said Johor State Executive Council’s Lee.
There is also a lesson to be learnt from Shenzhen and Hong Kong’s model of collaboration. Liew observed that Shenzhen eventually surged to become a larger economy than Hong Kong because “Shenzhen has the technology and became the technology capital in China”.
Therefore, the ownership of technology and innovation must be emphasised in the JS-SEZ.
“When we think about whatever we want to do in the future, you cannot separate innovation from manufacturing. The US found it out the hard way, when they separated innovation from manufacturing. In Johor and Singapore, we are [in a] quite good [position] to start a new journey, because both countries have manufacturing, and we have the potential in innovation,” said Liew.
With the JS-SEZ, Malaysia can also look beyond having only Kuala Lumpur as an economic capital, and recognise other cities in the country that have the potential to drive economic transformation.
Liew cites Australia as an example. In addition to Sydney, Melbourne is recognised as the country’s second economic capital and Perth is its resource capital.
“Imagine if this country was driven not by one main engine but by four or five engines, with the semiconductor cluster in Penang and Kuala Lumpur, the resource capital of Sarawak in Kuching, and Johor as the economic driver for new integration with Singapore, creating a new generation of technology companies,” said Liew.
“If we are able to have this common view within Malaysia, then I think the JS-SEZ will succeed. Malaysia will see a major leap forward.”
Welcoming new industries
An underlying strength of the JS-SEZ is its strategic location in one of the world’s busiest shipping lanes, as well as its modern infrastructure, including ports, airports and trains.
“Within six hours, you can access close to 1,700 million people and many markets covering North Asia, South Asia and Australasia. [We also have many] linkages [and] modern infrastructure, with access to ports in both Singapore and Johor, airports and train systems that link all the way up into Southeast Asia,” said HSBC Malaysia’s Omar.
The access to talent, rule of law and a wide availability of English speakers are other plus points for foreign investors.
Growing interest in the JS-SEZ shows that there is already strong and active cooperation between Johor and Singapore and businesses. Multinational companies have also integrated their suppliers in Johor to their global supply chain.
“The proposition put forward is that this is a place where new industries can come, new supply chains can be built and institutionalised, and existing supply chains can also be developed. Some of the areas we talk about — such as digital and green, food security, tourism, healthcare and manufacturing — are the real things that the world needs,” said Omar.
Meanwhile, with the ongoing US-China trade tensions and growing adoption of the “China+1” strategy by manufacturers, the JS-SEZ is well positioned to capitalise on shifting global trade dynamics.
“It’s not about trying to skirt regulations or find a way around trade barriers. It is about what makes sense, from a profit-driven motive. That’s exactly what the JS-SEZ is capturing through its nine focus areas, and what is being aimed at in the agreement,” said Omar.
Liew cautioned, however, that the “China+1” strategy should not be seen as an opportunity for Johor to become a mere transshipment point for Chinese exports to the US. Instead, he emphasised, Johor and Singapore should position themselves as a hub for global companies seeking to diversify their manufacturing bases beyond China.
“We do not just want to be a location for others. We want to create something that will last us into the future, and that will see this region [grow and benefit] the next generation,” said Liew.
Attracting high-skilled workers to Malaysia
The establishment of the JS-SEZ also raises concerns about talent outflow from Malaysia to Singapore — a key issue highlighted by panellists during the dialogue session.
According to Liew, the issue lies not in a lack of talent, but in low wages. He believes that if Malaysian workers are offered sufficiently competitive salaries, more will choose to stay and build their careers within the country.
“There are 1.1 million Malaysians working in Singapore. Singapore doesn’t have to be the hub for everything; some of the work can be relocated. If you pay Malaysians two-thirds of what Singapore offers, people who are not married to Singaporeans or those who do not have kids studying in Singapore will happily work and reside in Johor,” said Liew.
He likened the situation to a cycle in which Malaysia hires unskilled migrant workers while exporting its own talent to Singapore as cheap labour — an unsustainable and undesirable economic model. Instead, he argued, greater effort should be made to build local companies capable of creating high-value jobs.
“We must start incentivising Malaysian and Singaporean companies to build technological companies here. Or, when we attract foreign investors, we would like to see a lot more localisation of the supply chain. At some point, we would like to see more Malaysian companies owning some of these technologies,” said Liew.
“In my conversations with developers, especially those of industrial parks, I keep telling them they shouldn’t be thinking of just selling land. This is a time, a rare occasion in history, when Malaysia and Singapore can come together and own or partially own some of the technology.”
Malaysia and Singapore will need to engage each other in their industrial policies to support the growth of local technology companies capable of adapting to an evolving global landscape, he added.
Lee agreed with Liew’s concerns, acknowledging that the wage gap could exacerbate the brain drain from Johor to Singapore, especially with the upcoming Johor Bahru-Singapore Rapid Transit System potentially easing cross-border movement. He noted, however, that they were approaching the issue with a different lens.
The Malaysian government has already rolled out upskilling and reskilling initiatives for local workers, aiming to position the JS-SEZ not as a springboard for talent outflow, but as a hub that retains and attracts skilled professionals. For example, workers who have undergone upskilling could be incentivised to return to Malaysia and apply their expertise to strengthen local businesses.
“We are seeing that when our talents go to Singapore; it is a stepping stone for them to go to countries like Australia or the UK. But, we have seen some of our talents coming back to serve Malaysia, particularly in high-end manufacturing, composition manufacturing or sectors that require skills,” said Lee.
“In Johor, we have a collaboration with the Ministry of Human Resources. TalentCorp will be publishing a quantitative salary framework to provide guidance in salary ranges for the 11 promoted sectors in the JS-SEZ.”
