Singapore and Malaysia exchange Agreement on the Johor-Singapore Special Economic Zone
In a historic move, Singapore and Malaysia exchanged an Agreement on the Johor-Singapore Special Economic Zone (“JS-SEZ”) on 7 January 2025 at the 11th Malaysia-Singapore Leaders’ Retreat. On 8 January 2025, the Johor State Government and Malaysia’s Ministry of Finance announced a tax incentive package for the JS-SEZ effective 1 January 2025. Both are dealt with in this article.
Spanning an area that will include the Iskandar Development Region and Pengerang, the JS-SEZ Agreement aims to strengthen the value proposition of Johor and Singapore to compete for global investments together by (i) improving cross-border goods connectivity between Singapore and Johor, (ii) enabling freer movement of people, and (iii) strengthening the business ecosystem within the region. The JS-SEZ will offer twinning opportunities for businesses in Singapore to establish operations in Johor and expand their business overseas, tapping on the complementary strengths of Singapore and Johor.
Key elements of the Agreement
Under the Agreement, Malaysia and Singapore will cooperate in the areas set out below.
Economic co-operation
- Promote and facilitate investments in 11 economic sectors from third countries and Singapore companies expanding into the JS-SEZ, which enhance economic complexity, promote and advance digital vibrancy and technology adoption, and achieve net-zero aspirations in the JS-SEZ. The 11 sectors are manufacturing, logistics, food security, tourism, energy, the digital economy, the green economy, financial services, business services, education, and health.
- Create 20,000 skilled job opportunities in the JS-SEZ through promoting and facilitating the expansion of projects that will bring growth to Malaysia and Singapore. The target is 50 projects within the first five years and a cumulative 100 projects within the first 10 years.
- Facilitate the development of renewable energy projects to accelerate renewable energy trading between Malaysia and Singapore.
- Consider the development of new areas for free zones and facilitate applications for licensed manufacturing warehouses in the JS-SEZ.
Movement of people and goods
- Enhance Malaysia’s existing passes (e.g. the DE Rantau Nomad Pass) to encourage vibrancy in the JS-SEZ.
- Enhance the movement of people and goods in phases by increasing clearance capacity and implementing automated immigration lanes and paperless clearance for goods.
- Develop seamless connectivity by strengthening local transport links in Singapore and Malaysia.
- Study the feasibility of encouraging more commercial vehicles to use the Second Link.
- Explore the sharing of data to enhance customs processes in cross-border movement of goods.
Talent development
- Attract talents aligned with industry needs to the JS-SEZ, including by enhancing industry-ready skills training and education programmes in collaboration with the Johor Talent Development Council and other relevant institutions.
Ease of doing business
- The establishment of the Invest Malaysia Facilitation Centre - Johor (“IMFC-J”) to act as a one-stop centre in facilitating investments and businesses in the JS-SEZ. The IMFC-J will coordinate from end-to-end the investment process including applications and approvals.
To support the JS-SEZ, Malaysia and Singapore will continue to explore new areas of co-operation, such as enhancing market access of financial institutions. Both countries will also work towards refreshing the Joint Ministerial Committee for Iskandar Malaysia (“JMCIM”). The refreshed JMCIM will reinforce bilateral co-operation on other fronts such as transport and the environment.
JS-SEZ incentive package
On 8 January 2025, Malaysia announced a tax incentive package for the JS-SEZ that is designed to drive high-value investments into Johor, attract quality investments in key sectors, and promote the creation of higher-income jobs.
Effective 1 January 2025, investors in the JS-SEZ are eligible for a suite of incentives, including:
- Special corporate tax rate: Companies undertaking new investments in high growth and high value-added activities within the JS-SEZ, such as AI 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 will be allocated to businesses operating in certain flagship zones in the JS-SEZ.
- Special tax rate for knowledge workers: There will be a special tax rate of 15% for up to 10 years for eligible knowledge workers working in the JS-SEZ.
It was also announced that the Johor State Government introduced lower entertainment duties starting from 1 January 2025.
Further details on the tax incentives and the flagship zones will be announced in due course.
Early initiatives
In the lead-up to the exchange of the Agreement on the JS-SEZ, Singapore and Malaysia launched several initiatives including:
- passport free QR code clearance at Singapore’s land checkpoints with Malaysia since March 2024.
- establishment of IMFC-J, a one-stop shop which will streamline and expedite the process for companies looking to establish in or expand to the JS-SEZ.
- partnerships to strengthen cooperation in technical and vocational education and training initiatives to meet industry demands.
- streamlined customs procedures for land intermodal transshipments from 1 January 2025 whereby traders apply for a single transshipment permit with Singapore Customs for land intermodal transshipments, instead of two separate permits required previously.
Reference materials
The following press releases are available on the websites of the Singapore Ministry of Trade and Industry www.mti.gov.sg and Malaysia Ministry of Finance www.mof.gov.my:
