The Johor-Singapore Special Economic Zone (JS-SEZ) deal — originally slated for September and then December — has been postponed yet again to the new year, as Prime Minister Lawrence Wong is down with Covid-19.
Putting pen to paper has proven elusive for leaders from both sides of the Causeway; the signing is now scheduled for January 2025, a whole year after a memorandum of understanding was inked between Singapore’s trade and industry minister Gan Kim Yong and Malaysia’s economy minister Rafizi Ramli in Johor Bahru.
Singapore requested to reschedule, said Malaysia’s Prime Minister Anwar Ibrahim on Dec 4, just days before the two leaders were due to meet at the 11th Singapore-Malaysia Leaders’ Retreat.
Wong “informed me last night that he has contracted Covid and we need to postpone the signing to January”, Anwar told the Senate in Kuala Lumpur. “He does not want to pass the infection to me and my wife.”
Both parties are “in the midst of finding new dates”, according to a Dec 4 social media post by Wong, where he shared a photo of a fruit basket sent by Anwar and his wife.
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Malaysia was slated to host the leaders’ retreat, which resumed in October 2023 after a four-year break owing to the pandemic. The 11th iteration would have seen new faces for the fourth consecutive time — former Malaysian PM Najib Razak attended the 8th edition in 2018, his successor Mahathir Mohamad attended the 9th edition in 2019, and Anwar met then-PM Lee Hsien Loong last year, where the JS-SEZ was announced.
The latest delay follows the long series of twists and turns that have characterised dealings between both countries. When contacted by The Edge Singapore, two analysts declined to comment on the postponement, opting to wait for further clarity on the matter.
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Lessons from Iskandar
The JS-SEZ is envisioned as an integrated zone for business and investment to free up the movement of people, goods and capital. The proposed JS-SEZ will span some 3,505 sq km, nearly five times the size of Singapore.
It covers Iskandar Puteri, Johor Bahru, Pasir Gudang, Kulai, Pengerang and parts of Pontian.
Analysts from UBS, CGS International, Maybank, OCBC, UOB and DBS have for months cheered the deal’s economic benefits. As early as April this year, a team of Maybank economists and analysts issued reports on the JS-SEZ, calling it a potential “game-changer”, particularly for Johor.
“There is strong impetus from both Malaysia and Singapore to make the SEZ a success, as greater economic integration, with freer movement of people, goods and capital, will open up fresh opportunities that tie in with long-term policy goals,” reads a Maybank report.
Even Swiss bank UBS, more typically seen commenting on global asset classes, has weighed in.
In an Oct 3 report by a team of analysts with its investment bank, UBS suggests that the JS-SEZ contains most of the key factors required to succeed and should be able to replicate the success of some other SEZs.
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“If executed as promised, and with bold synergies, we estimate it could add up to 50 (basis points) bps to 80 bps p.a. to Malaysia’s nominal GDP growth over the next 10 years. This, in turn, could add 100 bps to 350 bps of incremental growth to Malaysian market capitalisation over the same period.”
As interest is drummed up, analysts have made it a point to come up with a list of “actionable” suggestions: stocks that might gain from the JS-SEZ. In April, Maybank named a “winning dozen” of listed names: half are listed in Malaysia, and the six Singapore-listed beneficiaries are Frasers Centrepoint Trust , Frencken, Genting Singapore , OCBC, Sembcorp Industries and Singapore Telecommunications .
Meanwhile, DBS Group Research’s picks are Sembcorp Industries, Seatrium, Mapletree Industrial Trust , Mapletree Logistics Trust , Capitaland Ascendas REIT, Venture Corporation and Grand Venture Technology .
That said, DBS acknowledged that some sceptics had questioned if the December deadline was achievable. Its Nov 29 report was issued prior to the delay and those critics may be even more vocal now.
Furthermore, past experiences with Malaysia’s Iskandar project have also contributed to scepticism towards the JS-SEZ, notes DBS. Iskandar was conceptualised as an economic growth corridor in 2006, but progress was halted during the pandemic. It includes the heavy industrial zone Pasir Gudang, its capital city Johor Bahru, Iskandar Puteri, Kulai, Sedenak and part of Pontian town — nearly all of which have now been repackaged into the JS-SEZ.
However, unlike Iskandar, the JS-SEZ is rooted in bilateral cooperation, say DBS’s analysts. Both governments have demonstrated political will to implement the deal, unlike Iskandar, “which experienced slow progress as it was mainly driven by the Malaysian government with limited involvement from Singapore”.
One strong proponent is Johor’s Sultan Ibrahim, who wants to “produce a win-win outcome with tangible benefits for their people and businesses”. Sultan Ibrahim was elected as the Malaysian King for a five-year term from Jan 31.
The JS-SEZ will also be a lifeline for Forest City, the eightyear-old, US$100 billion joint venture between China’s Country Garden Group and the Malaysian government-backed Esplanade Danga 88.
In September, Malaysia launched a special financial zone (SFZ) in Forest City, which will be included in the JS-SEZ. Launched in 2016 to great fanfare, the Forest City project notoriously fell short of expectations. The quiet estate now plays host to cryptocurrency enthusiasts, as The Edge Singapore unveiled in October (Issue 1158: Forest City lost and found?).
Tax and visa incentives SFZ incentives, which are expected to take effect in 1Q2025, include a concessionary 15% flat income tax for skilled workers, multiple-entry visas and a reduced corporate tax rate of 5% for business services, financial technology and payment system operators.
The SFZ will also offer a 0% income tax rate for single family offices (SFOs) — a first in Malaysia. Subject to conditions, the incentive is valid for an initial 10 years, and SFOs are eligible for a 10-year extension thereafter.
Should the JS-SEZ deal arrive on schedule, the agreement would augur well for increasing cooperation between the two countries in the coming years.
Increasing connectivity would resolve much friction of movement; works to connect Johor’s Rapid Transit System (RTS) to Singapore’s Thomson-East Coast Line will begin in 2025. Passenger service on the RTS Link is expected to start by December 2026.
A successful signing in January would also add a feather to Wong’s cap as he approaches his first year as Singapore’s leader.
While market-watchers await the exact date of the postponed meeting, one hopes the Lunar New Year celebrations will not give cause to kick the JS-SEZ can further down the road.
Photos: Bloomberg, Lawrence Wong/Facebook
