Malaysia and Singapore Reunite After 60 Years with New Economic Zone
On the 60th anniversary of Singapore gaining independence from Malaysia, or Malaysia expelling Singapore, the two nations are uniting once again by launching a bold initiative that brings them together. Last week, Malaysia and Singapore signed an agreement to establish the Johor-Singapore Special Economic Zone (JS-SEZ) in Malaysia’s southern Johor state, just north of Singapore. The project is more than a symbol of reconciliation decades after their split; it aims to transform their bilateral relationship by fostering cross-border investment, facilitating the movement of goods and people, and leveraging each country’s unique strengths to deepen economic integration.
As Asia’s business significance grows for Western nations, Singapore emerges as the most viable option, particularly with Hong Kong now fully under China’s control. Meanwhile, both China and India have risen as global powerhouses but remain entangled in unresolved political disputes. Businesses from both countries may view Singapore as a neutral venue for collaboration. These factors create a favorable investment climate for both Singapore and Malaysia. While Singapore faces challenges with limited space and rising costs, Malaysia offers its land and infrastructure to complement Singapore’s global appeal. Together, the two nations are poised to achieve a significant economic boost through the new special economic zone. Proposals for the JS-SEZ include a passport-free immigration clearance system, collaboration on renewable energy, and streamlined business approvals.
Singapore Prime Minister Lawrence Wong emphasized that the JS-SEZ will create high-quality jobs for citizens of both nations and attract significant international investment. He highlighted that both governments have worked closely with stakeholders to establish conditions that support long-term business growth, underscoring the value of collaboration in securing global investments. Malaysian Prime Minister Anwar Ibrahim described the initiative as a groundbreaking effort that enables both countries to leverage their strengths and deepen ties in a world increasingly divided by geopolitical tensions. Johor’s Chief Minister, Onn Hafiz Ghazi, stressed the importance of capitalizing on the opportunities provided by the agreement, noting that the benefits of the JS-SEZ would extend beyond Johor Bahru, driving economic growth and boosting tourism across the state.
In the long run, the zone is expected to attract diverse investments, with developed nations and China continuing as key sources of FDI in ASEAN. In the short term, Southeast Asia, including Malaysia, has gained from the “China Plus One” strategies employed by global companies, which shift some production from China to other emerging markets. However, the long-term viability of these advantages depends on major powers maintaining a cooperative stance toward smaller and middle powers engaging with their rivals. If this cooperation declines, FDI may face notable setbacks, particularly in the short to medium term.
Singapore and Malaysia appear poised for closer cooperation with ambitious projects in the future. Singaporean Prime Minister Lee and Malaysian Prime Minister Anwar have invited proposals for a high-speed rail connection between the two countries. Anwar emphasized that the project should be led by the private sector with minimal government involvement, a stark contrast to the earlier plan that was scrapped in 2021 due to disagreements. It is ironic that, 60 years after their separation, both nations are now taking significant steps to strengthen their relationship.
This collaboration reflects a forward-thinking vision for the region. As China and India reestablish themselves as global economic powerhouses in the 21st century, both are poised to compete for soft power and investment opportunities in Southeast Asia, a region historically tied to their influence. Malaysia and Singapore, with their strategic location and strong relationships with both superpowers, are well-positioned to draw Western investments. By offering a streamlined and business-friendly environment, they present an appealing alternative to the complexities businesses often encounter in China and India.
