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Making the Johor-Singapore Special Economic Zone work

Making the Johor-Singapore Special Economic Zone work

23 Jan 2024

By Ong Kian Ming

The signing of the memorandum of understanding (MoU) on the Johor-Singapore Special Economic Zone (JS-SEZ) between Malaysia and Singapore on Jan 11, 2024, was well received on both sides of the border. The intention behind the JS-SEZ is to re-catalyse economic development in Johor under the leadership of prime ministers Datuk Seri Anwar Ibrahim and Lee Hsien Loong, with a new mandate and fresh ideas. The imminent installation of the Sultan of Johor as Malaysia’s new King also provided fresh impetus for a new cooperation narrative between the two countries, one where Johor plays a key role. However, a few key elements are needed to facilitate these good ideas and effective implementation, especially given the lack of details in the MoU.

First, the role of the Johor government must be explicitly outlined. It is not surprising that the first initiative listed in the press statement by Singapore’s Ministry of Trade and Industry (MTI) was the establishment of “a one-stop business/investment service centre in Johor to facilitate the application process for various approvals and licences necessary for Singapore businesses to set up in Johor”. This is clearly a pain point for Singapore businesses wanting to invest in Johor and being able to overcome it should be a priority for the JS-SEZ. Its resolution must involve the local and state governments in Johor.

Second, the private sector must play a meaningful role in designing and implementing the MoU. Many government-linked companies (GLCs) in Malaysia and Singapore are waiting to see how they can align with the direction set by the MoU. There are opportunities for these GLCs to cooperate with one another — similar to how Malaysia’s Khazanah Nasional has collaborated with Singapore’s Temasek on joint development projects in Iskandar Malaysia and Marina Bay, Singapore — and for these GLCs to cooperate with private partners from either side of the border. A well-designed MoU framework, with investments from a few “anchor” GLCs (including entities belonging to the Johor government) will provide guidance for such collaborations. If done well, this has the potential to further unleash human and financial capital in both countries.

Third, if not already in place, there needs to be a well-thought-out framework to discuss the finer details of the JS-SEZ at the working level involving the right agencies and ministries so that creative and potentially game-changing ideas can be discussed, filtered and brought up to the ministerial level.

The hard work of executing the plan outlined in the MoU lies with both countries’ civil services. For example, to facilitate passport-free travel between Johor and Singapore, both immigration authorities, together with their ministries of home affairs, must jointly discuss the parameters of this initiative. Other agencies and ministries can be brought to the discussion table depending on the mandate discussed between the two ministers in charge — Rafizi Ramli for Malaysia and Gan Kim Yong for Singapore. Once that mandate is clear, both ministers and their ministries must coordinate and avoid working in silos within their own government and between the national governments.

Fourth, there must be measurable key performance indicators (KPIs) for the projects and parties identified. For example, passport-free travel for citizens of both countries ideally would be implemented by end-2025, in time for the rollout of the Johor Bahru-Singapore Rapid Transit System (RTS) linking JB and Woodlands in 2026. Notionally, a pilot design could be tested in late 2024 or early 2025, perhaps in conjunction with the rollout of the Malaysian Digital ID with the relevant tech agencies (Ministry of Science, Technology and Innovation in Malaysia and Government Technology Agency in Singapore) working in close collaboration. Another example: timelines for the joint development of smart and green industrial parks with state-of-the-art data centres and deployment of artificial intelligence (AI) capabilities in autonomous vehicle testing between Malaysian and Singapore GLCs can be spelled out by the relevant parties. A final example would be to allow for the easier deployment of fintech solutions safeguarded by financial sandboxes in both countries, approved by Bank Negara and the Securities Commission Malaysia, and the Monetary Authority of Singapore.

Last, the processes of discussion and implementation must be well defined. It would be a good signal to the market if regular, say quarterly, updates by both ministers on the MoU’s progress and key initiatives could be made. If anything, these updates can provide internal and external pressure for relevant stakeholders to take concrete steps.

It is interesting that Singapore MTI’s press release mentioned seven exploratory initiatives “apart from the agreement”, including a one-stop business/investment service centre in Johor, the adoption of digitised processes for cargo clearance at the land checkpoints and joint promotion events between Johor and Singapore to promote trade and investments into the JS-SEZ.

This is a clear sign that Singapore wants to push ahead with certain initiatives as part of “beefing up” the MoU so concrete collaborations can be undertaken to build up trust and momentum in bilateral cooperation. Malaysia should look at this as an opportunity to put concrete proposals on the table even as the finer details of the MoU are being ironed out.

The initial excitement over this phase of bilateral cooperation, illustrated by the popular “wefie” of smiling prime ministers Anwar and Lee wearing hard hats on the day the MoU was announced, is palpable. The weight of expectations shows that ministers Rafizi and Gan have their work cut out for them.

Ong Kian Ming was an associate senior fellow at ISEAS-Yusof Ishak Institute and director of the Philosophy, Politics and Economic (PPE) programme at Taylor’s University, Malaysia. He is a former deputy minister of international trade and industry. This commentary first appeared on ISEAS-Yusof Ishak Institute’s blog, Fulcrum.

Source: The Edge Markets