Friendshoring Via JS-SEZ May Elevate Malaysia, Singapore As Powerful Duo In Global Supply Chain Resilience

By Nor Baizura Basri

KUALA LUMPUR, Aug 12 (Bernama) -- The Johor-Singapore Special Economic Zone (JS-SEZ) has what it takes for Malaysia and the island-state to embrace and capitalise on friendshoring.

The partnership aims to enhance global supply chain resilience in the face of superpower rivalry and trade tensions that threaten economic uncertainty.

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While JS-SEZ will emerge as a new economic zone in Malaysia’s southern state, it enables the two neighbours, benefitting from their proximity, to unequivocally become "a powerful (economic) duo" in the Asian region.

Evidence shows that Johor has already attracted significant investments in data centre hubs and artificial intelligence (AI) related industries.

This influx of diverse investors, combined with Johor’s advantage of abundant land compared to Singapore, has led to what analysts describe as economic "explosions" and a booming business environment in the state.

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This certainly comes as no surprise as Johor bolsters its investment appeal by intensifying infrastructure development, particularly the connectivity between its capital, Johor Bahru, and the economic region of Iskandar Malaysia, which is a primary investment focus.

As an economic facilitator, the Rapid Transit System Link (RTS Link) between Johor Bahru and Singapore, scheduled to commence by Jan 1, 2027, will be a formidable boost to the JS-SEZ.

It is expected to attract investments and production facilities, turning Johor into a vital value chain supplier for global markets.

While one can attach all the positive superlatives to the JS-SEZ, a key concern is whether Johor is prepared and has the capacity for such extensive development.

National Council of Professors Fellow, Prof Dr Azmi Hassan, while acknowledging these concerns, opined that Johor is ready and capable to provide skilled workers.

“When Johor and Singapore tie up, it also means we can leverage on Singapore as a financial hub, while the island-state, which does not have adequate land, can take advantage of abundant land space in Johor,” he said.

With Singapore being a global financial centre, Malaysia can utilise this by attracting global businesses to operate in Johor, added Azmi, in response to Bernama’s queries about JS-SEZ’s prospects.

He believes that collaboration presents a clear advantage, especially with the fallout from the US-China trade war, where companies are seeking neutral investment destinations.

"Currently, businesses, for example in China, wanting to relocate might choose Vietnam. But with JS-SEZ, they might look here as the land provided is four times larger than Singapore," Azmi noted.

Prominent business-related television commentator Nordin Abdullah concurs, stating that JS-SEZ serves as a unique selling point as Malaysia, via Johor, has access to both the Pacific and Indian Oceans, offering diverse maritime transport routes.

Besides this, the special economic zone provides overland access to Asia through rail, possibly up to China, which is expected to expand in the coming years, said Nordin, who is also Malaysia Global Business Forum chairman.

"JS-SEZ is uniquely positioned for crisis resilience in terms of investment and production facilities, (whereby) you need to ensure that at all times, your product can consistently reach global markets,” he added.

Nordin also highlighted that data centres must ensure their data "can get out" to global markets.

He highlighted that Johor’s proximity to Singapore, a key node for undersea cables, enhances its appeal.

Given these economic credentials, both Investment, Trade and Industry Minister Tengku Datuk Seri Zafrul Tengku Abdul Aziz and Johor Menteri Besar Datuk Onn Hafiz Ghazi have suggested that JS-SEZ could become the "Shenzhen of Southeast Asia".

Shenzhen was declared China’s first special economic zone in 1979. It is a success story of a coastal city in the southern Chinese province of Guangdong.

Over the years, it has transformed into a modern metropolis offering a top-tier business environment. Shenzhen is known for its technical and innovation hub and is often referred to as the Silicon Valley of China.

Tengku Zafrul also said foreign investment in data centres, especially in Johor, has propelled Malaysia to the top of Asia’s fastest-growing data centre markets.

To support further growth, the minister announced that his ministry would develop special incentives for AI data centres.

From 2021-2023, Malaysia approved RM114.7 billion in investments for data centres and cloud services, creating 2,325 high-value jobs in specialised fields like data scientists, data analysts, data engineers, cybersecurity analysts and network engineers.

The Iskandar Regional Development Authority (IRDA), which promotes Iskandar Malaysia, reported that the economic growth corridor recorded about RM30 billion in investments this year, focusing on data centres, and continues to be of interest to foreign investors in the data centre sector.

Nordin said this makes Johor attractive across various factors -- land cost, electricity cost, and the cost of human capital -- providing global investors with a matrix of (favourable) criteria on which to base their decisions.

"So, if you don't tick any of the boxes, it's very hard to attract any investment. The fact that this has been done, it’s not something that has happened overnight but a culmination of perseverance.

"This represents years of hard work by the state government and federal agencies, among others. This needs to continue in terms of policy stability and strategic direction from the government," he said.

Friendshoring is reshaping global trade by prioritising partnerships, more so as global supply chains face increasing scrutiny over security and reliability. 

It is rapidly emerging as a strategic approach to mitigate risks and enhance trade efficiencies.

Comparing JS-SEZ to friendshoring, Nordin said: “What we are witnessing now is the beginning of a continued realignment of superpowers' supply chains.

"Therefore, Malaysia needs to take advantage of this process of friendshoring and ensure that these investments come to Malaysia rather than other countries in the region. This also means Malaysia must also make greater efforts in ensuring that diplomacy is managed effectively." 

Concurrently, Azmi noted that foreign investors are keenly awaiting the upcoming tabling of Budget 2025 on Oct 18, particularly regarding the incentives being offered to investors, especially in sectors Malaysia is aggressively targeting as the next engine of growth.

-- BERNAMA