Singapore and Malaysia have agreed to create the Johor-Singapore Special Economic Zone ( JS-SEZ ), reflecting strengthened cross-border collaboration and promising significant economic opportunities for both nations.

Singaporean Prime Minister Lawrence Wong and his Malaysian counterpart Anwar Ibrahim witnessed the signing of the agreement on during the 11th Malaysia-Singapore Leaders’ Retreat in the Malaysian city of Putrajaya, south of Kuala Lumpur, on January 7.

The neighbouring countries share strong economic ties. In 2023, Malaysia was Singapore’s third-largest trading partner, with total bilateral trade amounting to S$123.6 billion ( US$90 billion ). In the same year, Singapore was Malaysia’s second-largest trading partner and its largest source of foreign direct investment ( FDI ), contributing 43.7 billion ringgit ( US$9.7 billion ) or 23.2% of Malaysia’s total FDI.

The JS-SEZ aims to build on this solid foundation by deepening economic cooperation across critical sectors.

Building on the memorandum of understanding signed in early 2024, the agreement outlines a massive 3,500-square-kilometre zone. The JS-SEZ will consist of nine flagship areas, focusing on 11 key sectors, including logistics, energy, and financial services.

Authorities aim to launch 50 projects within five years and 100 within a decade, creating around 20,000 skilled jobs. Other planned initiatives include renewable energy projects, talent development programmes, and infrastructure upgrades, with the Johor Bahru-Singapore Rapid Transit System ( RTS ) Link set for completion in 2027.

Despite these plans, investors await further clarity on crucial tax incentives. Lavanya Venkateswaran, senior Asean economist at OCBC, says timely infrastructure progress and the launch of the Invest Malaysia Facilitation Centre-Johor are essential for attracting investments.

Tan Teck Long, head of global wholesale banking at OCBC, is optimistic about the SEZ’s prospects, noting strong business interest even before the agreement was signed. Last year, OCBC helped 260 mid-sized enterprises from sectors such as construction, services, and manufacturing establish operations in Malaysia. It expects this figure to increase 20% in 2025.

To support this, OCBC has assembled dedicated teams, consisting of 25 experienced bankers, on both sides of the Johor-Singapore Causeway to assist businesses with advisory services and local partnerships.

Johor’s cost advantage, strategic location, and sound economic policies are key factors driving investor interest.

Tan is convinced that the JS-SEZ’s development will benefit both Singapore and Malaysia, making Johor an attractive, cost-effective hub for regional business expansion.