The Johor-Singapore Special Economic Zone (JS-SEZ): Strengthening Connectivity

Singapore and Malaysia signed an agreement on the JS-SEZ on 7 January 2025 at the 11th Malaysia-Singapore Leaders Retreat. The JS-SEZ aims to enhance the value proposition of Johor and Singapore to jointly compete for global investments by (i) enhancing cross-border goods connectivity, (ii) enabling the free movement of people, and (iii) strengthening the business ecosystem in the region.

Key Data

The JS-SEZ covers an area of over 3,500 sq. km. This is four times the size of Singapore and about twice the size of Shenzhen in China. It will comprise nine flagship zones covering 11 different economic sectors.

These economic sectors are:

manufacturing,
logistics,
food security,
tourism,
energy,
digital economy,
green economy,
financial services,
business services,
education and
health.

Tax Incentives

Following the signing of the Malaysia-Singapore JS-SEZ agreement, the Malaysian Ministry of Finance and the Johor State Government announced a tax incentive package for the JS-SEZ in a joint press release on 8 January 2025.

From 1 January 2025, the following incentives are available to investors in the JS-SEZ:

Special tax rate of 5 % for up to 15 years for companies making new investments in qualifying manufacturing and service activities such as AI and quantum computing supply chains, medical devices, aerospace manufacturing and global services hubs.
Focus on developing flagship projects that include tailored incentives for companies in the nine flagship areas mentioned above.
Special tax rate for knowledge workers of 15 % for 10 years for eligible knowledge workers working in the JS-SEZ.
Lower entertainment taxes will be implemented by the Johor State Government from 1 January 2025.

What does the JS-SEZ aim to achieve?

Economic Cooperation

Promote and facilitate investments in the 11 economic sectors from Singaporean companies expanding into the JS-SEZ, thereby increasing economic complexity, promoting and driving digital vibrancy and technology adoption, and achieving net-zero targets in the JS-SEZ.
Promote and facilitate the expansion of 50 projects within the first five years and a total of 100 projects within the first ten years, which will bring growth to Malaysia and Singapore, with the intention of creating 20,000 skilled jobs in the JS-SEZ.
Facilitate the development of renewable energy projects and accelerate trade in renewable energy between Malaysia and Singapore.
Possible opening up of new areas for free trade zones and facilitating applications for licensed production warehouses in the JS-SEZ area.

Movement of People and Goods

Improvement of Malaysia's existing passports (e.g. the DE Rantau Nomad Pass).
Improving the movement of people and goods in phases by increasing clearance capacity, introducing automated immigration controls and introducing paperless clearance of goods.
Work to develop seamless connectivity by strengthening local transport links in Singapore and Malaysia to support the JS-SEZ.
Exploring the potential for data exchange to enhance customs processes in facilitating cross-border movement of goods, subject to both countries' requirements and regulations.

Talent Development

Attracting talent aligned with the industry's needs, including enhancing industry-related skilling and training programmes, and implementing these initiatives in collaboration with the Johor Talent Development Council (JTDC) and other relevant institutions.

Ease of Doing Business

Malaysia will establish the Invest Malaysia Facilitation Centre – Johor (IMFC-J) to serve as a one-stop shop for investment and business facilitation in the JS-SEZ.

The JS-SEZ has the potential to be a great success for both Singapore and Malaysia. If it proves successful, it could grow rapidly and offer businesses several advantages. These include smoother operations due to similar legal systems, increased profitability through lower operating costs in Malaysia, dual market access combining Johor's land resources and Singapore's technological strengths, and a more attractive environment and ecosystem for professionals due to a diversified business landscape.

From Singapore's perspective, companies with a regional headquarters in Singapore have the option of maintaining their headquarters functions in Singapore while taking advantage of the special economic zone by relocating their warehousing or manufacturing activities to Johor.