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Establishment of the Johor-Singapore Special Economic Zone (JS-SEZ) (Malaysia)

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January 2025

Establishment of the Johor-Singapore Special Economic Zone (JS-SEZ) (Malaysia)

Author: Yuan Yao Lee

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Publisher: Nagashima Ohno & Tsunematsu

Journal / Book: NO&T Asia Legal Review No.94 (January, 2025)

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*Please note that this newsletter is for informational purposes only and does not constitute legal advice. In addition, it is based on information as of its date of publication and does not reflect information after such date. In particular, please also note that preliminary reports in this newsletter may differ from current interpretations and practice depending on the nature of the report.

Introduction

On 7 January 2025, the governments of Malaysia and Singapore executed the Johor-Singapore Special Economic Zone (JS-SEZ) agreement during the 11th Malaysia–Singapore Leaders’ Retreat held in Malaysia. This landmark event followed the signing of the Memorandum of Understanding entered into between the two governments on 11 January 2024. The JS-SEZ represents both nations’ shared vision to further strengthen economic cooperation by leveraging on geographical proximity, economic complementarities, and cross-border synergies.

Malaysia and Singapore are each nation’s key trading partner. In 2023, Malaysia ranked as Singapore’s third-largest trading partner, while Singapore was Malaysia’s second-largest trading partner.※1 For reference, the bilateral trade between the two nations reached USD79.58 billion in 2023, and between January and November 2024, it grew by 6.7% year-on-year, totaling USD78.59 billion.※2 Such growth was contributed by, amongst others, higher trades in electrical and electronic products, machinery, and chemicals products.

With both nations’ longstanding and bilateral relations, it is contemplated that the JS-SEZ will further improve cross border flow of goods and people and strengthen the business ecosystem of both nations. In this regard, the JS-SEZ is expected to allow both countries to tap on their complementary value propositions to, amongst others, drive innovation, enhance productivity, compete for global investments, and drive economic growth.

1. JS-SEZ Coverage and Project Targets

The JS-SEZ occupies 3,571 sq km of land (which is approximately 4 times the size of Singapore) across southern Johor, and such special economic zone will encompass 9 flagship zones with the following nature of activities:

Flagship Zones \| Nature of Activities	Business Services	Digital Economy	Education	Energy	Financial Services	Food Security	Health	Logistics	Manufacturing	Tourism
(i) Desaru			●			●	●			●
(ii) Forest City					●
(iii) Iskandar Puteri	●	●	●				●		●	●
(iv) Johor Baru City Centre	●	●					●
(v) Pasir Gudang				●				●	●
(vi) Pengerang Integrated Petroleum Complex				●				●	●
(vii) Sedenak	●	●	●	●		●	●	●	●	●
(viii) Senai-Skudai		●	●					●	●	●
(ix) Tanjung Pelepas-Tanjung Bin				●				●	●

The Malaysia Minister of Economy mentioned that the nation has a target of 50 new high-value projects in the JS-SEZ in the next 5 years, followed by a total of 100 projects in the next 10 years.※3

2. Government Incentives

On 8 January 2025, the Johor State Government and the Malaysia’s Ministry of Finance announced a tax incentive package for the JS-SEZ that would be effective from 1 January 2025, in a bid to enhance Malaysia’s competitive landscape, foster economic growth, drive high-value investments into Johor. Subject to further details of the tax incentives and relevant flagship zones, that will be released in due course, the salient terms that were reported about such incentives are as follows:

Special Corporate Tax Rate: Companies undertaking new investment in qualifying manufacturing and services activities, such as Artificial Intelligence and Quantum Computing Supply Chain, Medical Devices, Aerospace Manufacturing and Global Services Hub, will benefit from a special tax rate of 5% for up to 15 years.
Flagship Development Focus: Additional tailor-made incentives are allocated to businesses operating in certain flagship areas in JS-SEZ.
Special tax rate for knowledge workers: Special tax rate of 15% for 10 years for eligible knowledge workers working in JS-SEZ.

3. Other Main Support from the Governments

Some additional key initiatives that were reported to support the implementation of the JS-SEZ are as follows:

Malaysia will establish a fund for infrastructure development in order to facilitate and expedite investments into the JS-SEZ, with Singapore also providing funding to facilitate investments in the JS-SEZ. It has been proposed that Malaysia’s infrastructure development fund would be set at Ringgit Malaysia 5 billion (approximately USD1.1 billion) initially, and this fund size may be increased depending on the return on investment.※4
Malaysia has also established the Invest Malaysia Facilitation Centre-Johor which will act as a one-stop center that provides consultation services and facilitates application processes for investor approvals, complementing the existing advisory service centre at the Malaysian Investment Development Authority (MIDA).

Conclusion

The establishment of the JS-SEZ while representing a significant milestone in Malaysia–Singapore relations also opens up opportunities for foreign companies and investors in specified sectors to operate in the JS-SEZ with attractive tax benefits, paving the way for enhanced investment, and regional economic development. With robust incentives and collaborative governance, the JS-SEZ is set to become a model for cross-border economic cooperation. The relevant authorities of both Malaysia and Singapore have indicated that more updates on the JS-SEZ would be announced in due course.

Endnotes

*1
Joint Statement by PM Lawrence Wong and PM Dato’ Seri Anwar Ibrahim at the 11th Malaysia-Singapore Leaders’ Retreat on 8 January 2025.https://www.mfa.gov.sg/Newsroom/Press-Statements-Transcripts-and-Photos/2025/01/Joint-Statement-at-the-11th-Malaysia-Singapore-Leaders-Retreat

*2
Ibid.

*3
https://www.thestar.com.my/news/nation/2025/01/07/js-sez-targets-50-high-value-projects-within-five-years-says-rafizi

*4
https://www.businesstimes.com.sg/international/asean/malaysia-proposes-rm5-billion-infrastructure-fund-johor-singapore-sez-economy-minister

January 28, 2025

This newsletter is given as general information for reference purposes only and therefore does not constitute our firm’s legal advice. Any opinion stated in this newsletter is a personal view of the author(s) and not our firm’s official view. For any specific matter or legal issue, please do not rely on this newsletter but make sure to consult a legal adviser. We would be delighted to answer your questions, if any.

Download full text（PDF）

Establishment of the Johor-Singapore Special Economic Zone (JS-SEZ) (Malaysia)

Introduction

1. JS-SEZ Coverage and Project Targets

2. Government Incentives

3. Other Main Support from the Governments

Conclusion

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