Leaders' Retreat: Singapore-Johor special economic zone deal to boost flow of people, goods set to be signed in Jan 2024

SINGAPORE — Singapore and Malaysia aim to conclude and sign an agreement on the proposed special economic zone between Johor and Singapore by mid-January next year, the prime ministers of both countries said on Monday (Oct 30). 

Speaking at a press conference at the Istana following a Leaders' Retreat with his Malaysian counterpart, Prime Minister Lee Hsien Loong described the Johor-Singapore Special Economic Zone (SEZ) as a “substantial and promising project”.

It would enhance cross-border flow of goods and people as well as strengthen the business ecosystem and improve the economic attractiveness for both sides, he said.

Mr Lee and Malaysian Prime Minister Anwar Ibrahim spoke to the media following the 10th Singapore-Malaysia Leaders' Retreat — where they discussed a variety of matters including economic collaborations, outstanding bilateral issues, the Rapid Transit System Link between Johor and Singapore, as well as congestion at the land checkpoints.

The annual Leaders’ Retreat serves as a key platform for both prime ministers to discuss bilateral issues and explore new areas of cooperation.

This was the first time that both countries have held the retreat since the Covid-19 pandemic, with the last one taking place in Putrajaya in April 2019.

JOHOR-SINGAPORE SPECIAL-ECONOMIC ZONE

In response to a query from the media about the potential scale and priority areas of development for the SEZ, Mr Lee said that it would be subject to a feasibility study to gauge investor interest and market demand, but would broadly encompass three goals.

The first is to improve the flow of goods between both countries.

“Because SEZ means Special Economic Zone, it may mean special tax arrangements and bonded warehouses and therefore, more easy border flows,” Mr Lee said.

Second, the SEZ would also allow for “easier arrangements for the flow of people who have to work on both sides of the Causeway”, and that investor companies would be able to get “the right mix” of professionals, skilled workers and other general workers.

Mr Lee added that the SEZ would also enhance the investment ecosystem of both Singapore and the Iskandar region — the main southern development corridor in Johor, Malaysia. 

“For companies in Singapore, they can think of having a presence on both sides, and therefore have more flexibility and be able to do things which they couldn't do if they were only in Singapore or only in Johor. So we have great hopes,” he said.

Mr Anwar said that Malaysia would “try our best to accelerate the process”, and that he had set a short timeline to agree on the parameters for a Memorandum of Understanding (MOU) by mid-January.

“I hope that they can succeed. I don't think it’s too much of a complex problem because they have discussed excessively,” he said.

Both countries had first announced that they would set up a task force to study the establishment of the SEZ at the 16th meeting of the Malaysia-Singapore Joint Ministerial Committee for Iskandar Malaysia in July this year. 

In a joint statement by Mr Lee and Mr Anwar, the two leaders noted that Singapore is the second largest foreign investor in Iskandar Malaysia, with S$9.5 billion worth of investments committed between 2006 and June 2023.

The statement added that both leaders agreed to review the delegation arrangements for the provision of air traffic services over Southern Peninsular Malaysia, and have tasked their respective transport ministers to agree on a set of principles and outcomes to guide both civil aviation authorities to move forward "as expeditiously as possible". 

OTHER MATTERS DISCUSSED

The leaders also said that the countries’ economic agencies have signed an MOU to deepen collaborations between small- and medium-sized enterprises (SMEs) in both countries — covering the exchange of knowledge and best practices on SME development efforts, especially in the areas of digitalisation, sustainability and market access. 

The Malaysia-Singapore Business Development Fund, which was established to support collaboration between Singapore and Malaysia enterprises to jointly pursue opportunities in other countries, will also be updated.

This will provide funding support for Singapore and Malaysia enterprises to jointly pursue opportunities in third countries and conduct joint pilots in each other’s countries, especially in emerging areas such as green economy and digital economy.

The prime ministers also discussed issues pertaining to the water agreement between Singapore and Malaysia, which Mr Anwar described as “long outstanding”. 

“Our position is clear, that we have to honour the commitment and supply water from Johor to Singapore. 

“To that end, we have to work jointly to ensure that Johor would be able to enhance the capacity of the Johor River to supply both for Johor’s needs, which is also expanding… and for Singapore,” Mr Anwar said. 

“And I think instead of focusing purely on price mechanism, we should also look at the possibility of Singapore participating in a joint-effort, both in terms of a study which can be conducted immediately, and also in terms of management of Johor River — particularly with Johor State.”

Other bilateral issues pertaining to maritime delimitation, reclamation at Pedra Branca, water and airspace were also touched upon. 

“These are all important issues and we will consider them holistically and constructively, within the broader context of our overall relationship,” Mr Lee said.

“Importantly, they will not be allowed to colour and affect this overall relationship, or detract from the many positive areas of cooperation between us.

"I’m confident that our two countries can work out durable and mutually beneficial ways forward on all of these issues.”