Malaysia, Singapore to hold Leaders’ Retreat in October, proposed special economic zone on the agenda: Johor chief minister

Mr Onn Hafiz said that he was “delighted and excited” with the prospect that the SEZ would come to fruition as it would strengthen ties between Johor and Singapore.

The Machap state assemblyman added that the SEZ would benefit Johor greatly, citing how the state can follow the example of the city of Shenzhen in China which transformed from a poor fisherman’s village to an international metropolis in four decades after it opened a special economic zone in 1980.

He said that the population of Shenzen had grown from 300,000 to 17 million people in that timespan, with its Gross Domestic Product (GDP) reaching RMB 2.42 trillion (US$332 billion), even eclipsing that of Hong Kong. 

“In just four decades, Shenzhen has become the third largest city in China. Shenzhen is proof that the Johor-Singapore SEZ can bear fruit for the state of Johor. It requires the support of all parties, especially from the Singapore and Malaysian federal governments,” he said.

Mr Onn Hafiz added that the SEZ’s main objective was to ease movement of people, service, and goods between both countries.

He also said that the electronics, pharmaceutical, automotive, agriculture, and renewable energy industries stood to benefit from the economic zone.

He outlined for the SEZ agenda to be successful, both governments should offer incentives to promote business activity such as special multiple visa entries, green lanes, special tax incentives, exemptions of business licences, good infrastructure and a supply of skilled workers.

Mr Onn Hafiz added that the strategic position of Johor, its international ports, and the availability of land to develop ensured that the state was in a good position to make the SEZ a success.

“While we have all these plans, I however do not want to promise the moon and the stars because it requires the cooperation and agreement of both Malaysia and Singapore,” he said.

CNA has contacted Singapore authorities for clarification on Mr Onn Hafiz’s comments, as well as details on the SEZ, in terms of its areas of focus as well as its geographical scope.

In July, following the 16th meeting of the JMCIM, Singapore’s National Development Minister Desmond Lee told reporters then that the idea of a special economic zone would bring “a lot of benefits” to people in Singapore, Malaysia and Johor.

Mr Lee said the task force studying the Johor-Singapore special economic zone would first have to draft its TOR and broad areas of collaboration.

SEZs refer to geographically delimited areas within a country’s borders that offer well-developed industrial spaces with special legal regimes, rules, institutional environments and incentives.

Many Association of Southeast Asian Nations (ASEAN) member states have implemented such zones to attract investments, create jobs and encourage exports.

These zones include export processing zones, free trade zones, technology parks and digital free trade zones.

In July, Mr Anwar announced that the government would be designating the multi-billion-ringgit Forest City project as a special financial zone to spur the economy in Iskandar Malaysia.

Iskandar Malaysia itself is the southern state’s main development corridor that spans four major districts – Johor Bahru, Iskandar Puteri, Pasir Gudang and Kulai.

He outlined that the zone would offer businesses incentives to set up operations, such as a flat income tax rate of 15 per cent for skilled foreign workers compared to 30 per cent elsewhere, multiple entry visas as well as fast track entry for those who are based in Singapore.

Trade and economy policy expert Deborah Elms of the Asian Trade Centre told CNA that there are “literally thousands of SEZs” globally, with a variety of configurations.

But at its heart, the premise of SEZs is to foster growth and support a specific geographic location with jobs by allowing deviations from certain kinds of regulations that might apply outside of these zones, she added.

“As a simple example, most SEZs do not have to pay tariffs on imported products used in manufacturing within the zone. This can make exports which are created inside a zone much more competitive,” said Ms Elms, adding that some provide concessions to spur investment through free or low-cost infrastructure such as power, water and logistics sites.

She also noted that SEZs have had a mixed report card, with some being extremely successful in creating productive ecosystems, good jobs, higher investment, and more exports.

“Others are less successful, especially those which are located in areas with limited links to the broader economy, insufficient labor or insufficient skilled labour,” added Ms Elms.