The formalization of the Johor-Singapore Special Economic Zone has resulted in various deliverables, according to OCBC, although there are some missing pieces such as tax incentives.
After inking a memorandum of understanding almost a year ago, the signing of the Johor-Singapore Special Economic Zone (JS-SEZ) agreement was completed on January 7.
Some details have been confirmed including nine flagship zones across 3,500 square kilometers to promote 11 sectors. Beyond economic cooperation, Singapore and Malaysia will also focus on enhancing the movement of people and goods, talent development and the ease of doing business.
«We see some clear positives from the formalization of the SEZ,» according to an OCBC note by senior ASEAN economist Lavanya Venkateswaran.
Three Takeaways
Venkateswaran highlighted three key takeaways from the formalization of a special economic zone.
Firstly, she called the division of different zones «prudent» as this will «help develop synergies between similar industries and companies» such as locating export-dependent industries closer to ports. Secondly, the aim of developing 50 projects within five years and 100 projects within 10 years quantifies the milestones for which JS-SEZ can be measured. Thirdly, talent development is positive, especially given the focus on high skill industries like the digital economy and financial services.
«Missing Links»
However, Venkateswaran also underlined «missing links».
This includes tax incentives, such as expectations of Malaysian authorities granting a special corporate tax rate to companies undertaking new investments. Further progress on physical infrastructure is also required, most notably the Johor-Singapore Rapid Transit System (RTS) slated to be operational by end-2026. Forming the Invest Malaysia Facilitation Centre-Johor (IMFC-J) in a timely manner will be crucial to capitalize on the initial interest.
«Overall, we remain optimistic around prospects for the JS-SEZ. The tone struck by the leaders of Singapore and Malaysia not only during the press conference on 7 January but the ‘all-of-government’ effort through the process over the past year has lent credibility to efforts associated with this cross-border endeavor,» Venkateswaran added.
