Will Johor-Singapore SEZ make it this time?

The Singapore business community has identified the lack of skilled labour, the need for unhindered movement of labour and goods, and investment support as key areas that policymakers need to address, if the newly launched Johor-Singapore Special Economic Zone (SEZ) is to be successful.

These findings were shared at JS-SEZ Joint Investor Forum on July 11 in Singapore, which was organised by the Singapore Business Federation (SBF).

At the forum, the Singapore Business Working Group (SBWG) released a set of recommendations for the SEZ. SBWG was set up to gather feedback from the business community in Singapore around the SEZ.

The proposal will be shared with the Singapore government ahead of the upcoming meeting between the two governments. The research was conducted by SBF across 160 businesses.

The SEZ was announced by the governments of Singapore and Johor in January to facilitate free movement of goods and people between the two states.

The forum saw two panels – a government panel and an industry panel – which highlighted the opportunities and challenges around the new initiative.

Opportunities at this “unique point of time”

The government panel highlighted the SEZ being “different from many of the past attempts” due to the trade and digitalisation opportunities that have emerged at this “unique point of time.”

The government panelists were from Singapore’s Ministry of Trade & Industry (MTI), the Johor Economic, Tourism and Cultural Office (JETCO) and the Malaysian Investment Development Authority (MIDA).

These opportunities include a more diversified supply chain, accelerated digitalisation as a result of the Covid-19 pandemic, and Iskandar Malaysia’s recent successes.

On digitalisation, MTI’s Deputy Director, Southeast Asia & Oceania, Tay Lide, highlighted that Singapore has implemented e-submissions for cargo clearance permits ahead of time as well as QR codes for immigration clearance, easing the flow of labour and goods across the border.

“These digital solutions can unlock immense time savings, and I think businesses on both sides of the border will be able to benefit from this,” he said.

Skilled labour a persistent problem

However, the industry panel and audience questions highlighted the lack of skilled labour and infrastructure as key obstacles getting in the way of the SEZ’s potential.

Given the SEZ’s focus on the digital economy, skills development will be very important, said UOB’s Managing Director & Head of Group Foreign Direct Investment Advisory, Sam Cheong, during the panel. He highlighted the lack of skilled labour as a key challenge faced by the companies UOB has supported in entering Johor.

“More effort needs to be put into attracting and upskilling [the labour] to support the activities of the 16 economic sectors,” highlighted global audit firm RSM’s Senior Advisor, Tay Woon Teck, who was the panel moderator.

The Johor government had previously announced that the SEZ would focus on 16 sectors, which include high-value sectors such as electronics, medical, aviation, and manufacturing.

Business consulting firm IGPI also highlighted brain drain as a key issue affecting economic development in Johor.

According to SBWG's findings and sentiments shared at the forum, the brain drain problem is exacerbated by the foreign worker quotas imposed by the Malaysian government. The proposal revealed that 60 per cent of the businesses attributed the current manpower crunch to employment pass issues.

Medtech company Racer Technology’s Founder and CEO, Willy Koh, said that they may face challenges attracting management level staff in its Johor office. They may find the prospects of working in Singapore more attractive due to the wide difference in exchange rates.

Amidst the push towards more digitalised documentation, an audience member highlighted the need to consider the digital literacy of users, including drivers who may be  more comfortable handling paper documents.

Infrastructure to keep up with digital economy ambitions

The proposal by SBWG to the Singapore government also underlined the need for integrated logistics infrastructure and transportation.

Infrastructure will naturally have a longer gestation period. One of the proposed ideas worth studying is how leaders can build transport hubs and industry nodes nearer to the checkpoints to facilitate movement, said MTI’s Tay.

Streamlined and digitalised customs clearance processes, as well as dedicated lanes for SEZ travelers, were proposed to tackle traffic congestion.

Technologies like 5G and Internet-of-Things (IoT) were suggested in the recommendations presented by SBWG’s Chairman, Teo Siong Seng, to enable e-commerce trade and improve efficiency.

Political instability concerns remain, but steady data center growth

The impact of political changes on foreign investments and the continuity of business support was also raised by an audience member.

CapitaLand Development (Singapore)’s Assistant Vice President, Brian Ng, shared that his firm’s last 12 years operating in Johor has been stable despite concerns around Malaysia’s political climate.

Both CapitaLand and digital infrastructure developer K2 Strategic highlighted the trend of data centre growth in Johor over the years.

“One of our data centres opened within 12 months. I think that’s a testament of the collaboration involved between data centre operators and the local government [of Johor], and this can be facilitated through the planning with the one-stop center,” said K2 Strategic’s Senior Manager (Malaysia), Anushirwan Tun-Ismail.

The Johor government announced that a one-stop investment centre will be set up this year as a one place for businesses to go to for all their investment needs.