The JS-SEZ, first mooted in July 2023, is pitched as a means to transform Singapore and Johor into a greater economic area and to promote cross border trade.

Singapore and Malaysia are aiming to create 20,000 jobs and to bring 50 businesses in five years and 100 businesses in 10 years to the Johor-Singapore Special Economic Zone (JS-SEZ). 

This follows the signed agreement of the JS-SEZ on Jan 6, and the exchange of the agreement by Prime Minister Lawrence Wong and Malaysian Prime Minister Anwar Ibrahim on Jan 7 in Putra Jaya, Kuala Lumpur during the 11th Malaysia-Singapore Leaders’ Retreat. 

The JS-SEZ, which was first mooted in July 2023, was pitched as a means to transform Singapore and Johor into a greater economic area and to promote cross-border trade. It has since been positioned as a region for international investors to hedge against geopolitical risks, and a destination for Singaporean companies to expand to. 

The recent signing revealed more details on the agreement, including the setting up of nine flagship zones across 11 economic sectors. The flagship zones are Johor Bahru city centre; Iskandar Puteri; Tanjung Pelepas; Pasir Gudang; Senai; Sedenak; Forest City; Pengerang Integrated Petroleum Complex (PIPC) and Desaru. They make up a total of over 3,700 square kilometres. 

Meanwhile, the 11 economic sectors are manufacturing, logistics, food security, tourism, energy, the digital economy, the green economy, financial services, business services, education, and health. They have been drawn up to “promote and facilitate investments” from third countries and Singapore companies expanding into the JSSEZ.

Already, Singaporean companies are saying that consolidation and price competition is forcing them to look at options across the border. 

Seow Zhi Yuan, managing director of RMS Marine & Offshore Services, a marine services provider company with presence in China and Singapore, said that doing business in Johor now seems like a “must do before we get eliminated”. 

OCBC says that in 2024, it supported about 260 new mid-sized enterprises from the region, mainly from the services, construction, manufacturing and wholesale and retail trade sectors to set up their business in Malaysia. It anticipates the number to increase by 20% in 2025. 

Yet, companies surveyed by the Singapore Business Federation in mid-2024 identified several concerns around shifting their operations into Johor. This includes the movement of people and goods, an area commonly cited as a pain point. 

Both countries have said that they will focus on enhancing the movement of people and goods, talent development and the ease of doing business. 

Economists weigh in  The much anticipated signing of the JS-SEZ has been closely watched by analysts, small and medium-sized enterprises (SMEs) and investors on both sides of the border and internationally. 

It has repeatedly been touted as the next Shenzhen economic zone, and pitched as a zone where investors can tap on the sophistication of Singapore’s economy and the resources of Johor as their derisking strategy. Yet, the history of collaboration between Singapore and Malaysia has been spotty. 

“Historically, we have issues, but somehow, this time round, both sides [countries] seem a lot more serious," says OCBC’s managing director of investment strategy, Vasu Menon.

"There’s also the blessing from the King, who is from Johor, so you see the government seeing things the same way as the King, and the King sees the same way as the government,” says Menon, referring to the Yang di-Pertuan Agong, Ibrahim Iskandar.

So as long as there is political stability in Malaysia, there's a very good chance that this project will work, he adds. 

“We see some clear positives from the formalisation of the SEZ. First, the division of SEZ in different zones is prudent considering the large size of the SEZ. This will help develop synergies between similar industries and companies,” says OCBC Investment Research’s Lavanya Venkateswaran, senior Asean economist. 

She adds that the aim to develop 50 projects within the first five years and 100 projects within the first ten years quantifies the milestones that the progress of the SEZ can be measured by. Meanwhile, the focus on talent development is “positive”, says the analyst. 

With the Rapid Transit System (RTS) link set to be complete by the end 2026, the JS-SEZ is Asean’s first cross-border SEZ that could “reshape the investment landscape in Singapore and Malaysia”, according to DBS Group Research analysts in their Nov 29 note.

The analysts expect a phased JS-SEZ development, while casting a spotlight on renewables, data centres, logistics and technology as near-term beneficiaries. 

As such, they have named Venture, Grand Venture Technology Jlb, Mapletree Industrial Trust Me8u, Sembcorp Industries U96, Mapletree Logistics Trust M44u, CapitaLand Ascendas REIT A17u, ST Engineering, City Developments, Frasers Property Tq5 as a few stock picks. 

Similarly, analysts from CGS International (CGSI) in their Nov 27 note see construction, utilities, real estate and technology as the largest beneficiaries of the JS-SEZ, followed by healthcare, financial services and plantations. 

“Ground checks among our Malaysia and Singapore coverage universe indicate that Malaysia could benefit more in the near-term from JS-SEZ,” they note. Key companies within their coverage that could benefit are Eco World, Sunway Construction, Tenaga, Malakoff, YTL Power and banks such as Maybank, CIMB and RHB. 

Meanwhile, Centurion is likely to be a clear beneficiary of JS-SEZ in Singapore as it operates eight worker dormitories in Malaysia, with 66% of these located in Johor, CGSI analysts add. 

OCBC names the property sector as immediate beneficiaries, particularly residential projects on both sides of the causeway. Menon says that in time to come, healthcare, retirement homes and medical services are sectors that could flourish, but it is still early days.