Johor Singapore Special Economic Zone

On 7 January 2025, the governments of Singapore and Malaysia signed a formal agreement on the establishment of on a special economic zone (SEZ) in the southern Malaysian state of Johor (the Johor Singapore Special Economic Zone (JS-SEZ)), aiming to support investment and free up movement of goods and people between the two countries. This is good news and we expect much high-value investment in sectors such as manufacturing, tourism, renewable energy and logistics.

What is a Special Economic Zone (SEZ)? 

A SEZ is a specific area in a country allocated by a government to receive special business and tax incentives. The purpose of a SEZ is to stimulate economic growth and typically includes various tax incentives, customs benefits and investment opportunities for potential investors.

Examples of SEZ’s in Asia include the SEZ in Shenzhen, the Incheon Free Economic Zone in South Korea, the BBK Free Trade Zone covering Batam, Bintan and Karimum, and Clark Freeport and Special Economic Zone in the Philippines.

Johor Singapore Special Economic Zone (JS-SEZ)

In short, the JS-SEZ will cover nine designated flagship areas in Johor, including the Iskandar Development Region, Forest City Special Financial Zone and the Pengerang Integrated Petroleum Complex (PIPC) and is aimed at improving cross border goods connectivity between Johor and Singapore, enhancing movement of people and strengthening the overall business ecosystem within the region.

Malaysia and Singapore continue to maintain robust economic connections. In 2023, Malaysia was Singapore’s third largest trading partner with total bilateral trade amounting to S$123.6 billion. Meanwhile, Singapore was Malaysia’s second largest trading partner and Singapore was Malaysia’s largest source of foreign direct investment contributing RM 43.7 billion or 23.2% of Malaysia’s total FDI.

Key focus of the JS-SEZ

The key focus of the JS-SEZ is as follows:

• Key sectors. The key economic sector focus areas are manufacturing, logistics, food, tourism, energy, the digital economy, the green economy, financial services, business services, education and health. The JS-SEZ aims to support the expansions of 50 projects in the first five years and a cumulative 100 projects in its first decade.
• Provision of tax incentives. Malaysia will provide a tax incentive package for JS-SEZ which is slated to include the granting of a special corporate tax rate to companies that undertake new investments in high growth and high value-added activities within the JS-SEZ.
• People and Goods. A key focus of the JS-SEZ is to also promote and facilitate the movement of people and goods between Johor and Singapore. This includes enhancing customs processes and strengthening local transport links between the two nations. Further, with an aim of creating 20,000 skilled jobs, JS-SEZ also aims to attract talents aligned with the industry needs.

On a related note, several early and promising initiatives between two nations have already been introduced. Notably, this included in March 2024, the introduction of a passport free QR code clearance at Singapore’s land checkpoints with Malaysia which has allowed for a reduction in congestion and improved flow of traffic.

The JS-SEZ is an ambitious initiative from Singapore and Malaysia which will further solidify the two countries economic ties and

represents a landmark collaboration between Singapore and Malaysia, poised to significantly enhance economic ties and regional development. The potential for substantial growth and investment returns makes this an exciting opportunity for investors. As the JS-SEZ progresses, it promises to usher in a new era of economic prosperity and cooperation between the two nations.

The Singapore office of global law firm Clyde & Co operates as a hub, supporting clients with diverse business interests, including in key sectors such as transportation, terminals, ports, logistics, commodities, insurance, energy, and infrastructure. Our firm has been advising global companies on foreign direct investment into both Malaysia and into Singapore for decades (working seamlessly with our associated office in Kuala Lumpur), and please do let us know if you would like to explore these great new opportunities with us.