Reporter’s Notebook: Singapore and Malaysia Team Up to Build the ‘Shenzhen of Southeast Asia’

At a recent high-level conference, trade officials from Singapore and Malaysia revealed an update and a new incentives package for the Johor-Singapore Special Economic Zone (JS-SEZ), a cross-border development project launched just over six months ago to attract foreign investment and offer businesses new opportunities in Southeast Asia [para. 1]. The JS-SEZ is strategically situated at the Malaysia-Singapore border, capitalizing on Malaysia's lower operation costs and Singapore's advanced logistics and favorable tax regimes, particularly targeting Chinese firms that face high costs, land scarcity, and expensive utilities in Singapore itself. Marketed as "Southeast Asia's Shenzhen," the JS-SEZ has emerged as a priority destination for Chinese companies seeking overseas expansion [para. 2].

The zone’s creation is rooted in the complementary strengths of both countries. Since the planning of Malaysia’s Iskandar economic zone in 2006, improved connectivity with Singapore was cited as a vital advantage, as over 400,000 people already commute daily between the two sides. Building on their Memorandum of Understanding (MoU) signed in January 2024 and a formal agreement in January 2025, Singapore and Malaysia have elevated their collaboration to create the world’s first cross-border special economic zone. The JS-SEZ is expected to expand across 357,000 square kilometers—encompassing the Iskandar region and neighboring areas—organized into nine flagship zones targeting 11 core industries [para. 3].

Following the MoU, the project office received more than 1,000 inquiries, underlining significant business interest. Officials underscored their focus on attracting investments in advanced manufacturing, logistics, green industries, and digital services [para. 4]. Singapore's Deputy Prime Minister Gan Kim Yong highlighted the synergy: Johor provides scale, land, and industrial capacity, while Singapore contributes capital, connectivity, and an innovation ecosystem. Since its inception, Singapore-based companies have pledged S$5.5 billion (US$4.07 billion) in investments to the JS-SEZ, with questions remaining about Chinese-owned firms’ portion of that total [para. 5].

Malaysia’s Minister of Investment, Trade and Industry, Tengku Zafrul Aziz, announced a raft of incentives: a 200-billion-ringgit (US$42 billion) strategic investment fund offering financing at rates as low as 0.5%; a 1:1 risk-matching scheme; the upgrading of cross-border business development funds for SMEs; a 65-billion ringgit budget to train 25,000 workers in AI, business services, and semiconductors; fast-track seven-day business licensing for “non-sensitive” industries; and a new Investor Pass offering multiple-entry visas for up to 12 months [para. 6][para. 7][para. 8][para. 9].

Nevertheless, the “Shenzhen-style” experiment faces several challenges. The most pressing is cross-border bottlenecks: the current border crossings see 570,000+ trips daily, with commutes sometimes exceeding two hours. The upcoming Johor Bahru-Singapore Rapid Transit System (RTS) Link, now 56% complete and expected to open by the end of 2026, will cut travel to only five minutes between the two countries [para. 11]. Additionally, favorable financial policies are a boon for small and medium-sized companies: borrowing 10 million ringgit in the zone would cost just 50,000 ringgit annually in interest, far below Singapore's average [para. 12]. Talent development is also emphasized, though officials acknowledge cultivating a skilled workforce is a longer-term goal [para. 13].

Investor concerns about congestion, labor shortages, and whether Malaysia can replicate Singaporean efficiency remain unresolved, but both countries are committed to the zone's success [para. 14]. Rising labor costs in Singapore underpin the drive for a cross-border collaboration, as Singaporean officials stress their priority remains raising citizens’ living standards—hence the launch of the JS-SEZ to balance business competitiveness and societal welfare [para. 15][para. 16][para. 17]. [Summary of paragraph content and markers embedded above.]