The goal of the new special economic zone created by Malaysia and the city-state is to fill the respective gaps through the complementarity of the two economies to attract investment
By Emanuele Ballestracci
The Johor Strait is the natural border separating the southernmost region of the Malaysian peninsula, Johor, from the city-state of Singapore. The distance between the two coasts is just over a kilometer at the lowest points but, despite this, there are only two land links. The two causeways “Causeway” and “Tuas Link” date back to 1923 and 1998, respectively, and are reputed by most to be insufficient to handle the more than 350,000 people who make the cross-border transit every day. Much of this human flow are residents of the Malaysian regional capital of Johor Bahru (JB), commuting workers who travel to Singapore to enjoy the high salaries the metropolis offers. This journey takes an average of 3 hours total, and in the most extreme cases the home-work commute can reach 7 hours total, leaving at 4 a.m. or returning at 11 p.m. Conversely, Singaporeans travel to the other side of the Strait to spend a weekend away or purchase real estate, all at decidedly favorable prices and currency exchange.
The Strait thus tells of two profoundly different faces of Southeast Asia: on one side a metropolis symbolic of modernity, efficiency and prosperity; on the other a decidedly more modest and chaotic region. Suffice it to say that Johor's GDP per capita stands at $8,600, while Singapore's is a good ten times that amount. Despite these huge differences, the two regions are deeply interdependent, especially economically, so much so that they have been conceptualized as a single “Straits Mega City-Region.” Indeed, Johor provides Singapore with basic necessities such as water resources and agricultural products, cheap labor, and ample space to lease Singaporean manufacturing. Conversely, Singapore's availability of capital, its state-of-the-art airport, and its huge port, the second busiest in the world, stimulate the development of Johor's local economy and connect it to global value chains.
Pursuing greater economic integration was therefore a natural response to their respective needs for growth and structural characteristics. The two governments have especially encouraged this process since 1989, when the triangular growth partnership agreement “SIJORI” was launched jointly with Indonesia. The idea behind it was to attract investment through the promotion of Singapore, Johor and the Indonesian Riau Islands as if they were a single destination. Indeed, the complementarity of the three territories, which were already well-connected infrastructurally, would have offered both links to global value chains and financial markets and cheap land and labor. Subsequently, in 2006 Malaysia launched the “Iksandar Malaysia” economic corridor project, which, taking advantage of its geographic proximity to Singapore, was supposed to attract investment to Johor Bahru as well as areas close to the border with the city-state. This top-down initiative by the Kuala Lumpur government has been successful in stimulating local development, despite some glaring failures such as the Forest City megaproject, now a ghost town.
The process of economic integration is now more than ever encouraged by the cross-strait executives. Indeed, the agreement to establish the Johor-Singapore Special Economic Zone, JS-SEZ, was signed last Jan. 7 at the 11th “Retreat between the Leaders of Malaysia and Singapore.” Its rationale is always the same: to fill the respective gaps through the complementarity of the two economies to attract investment. Not only that, the agreement also aims to optimize cross-border connectivity to enable greater movement of goods and people, as well as strengthen the business ecosystem within the region. In the area of cross-border mobility, a number of key projects had already been launched in recent years. In fact, the “RTS Link” rapid transit system is expected to be completed in 2026. This is a 4-kilometer light rail that will travel between the Singaporean underground station at Woodlands North and the Malaysian aboveground terminus at Bukit Chagar, near the Johor Bahru checkpoint, completing the journey in just 6 minutes. A new border document control system is also being tested from January 2024 that will allow the use of QR codes instead of physical passports, enabling faster transits.
Despite their differences, Johor and Singapore thus continue to strengthen their ties through joint infrastructure and projects, confirming the crucial role of cooperation in the development of Southeast Asia.
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