Data Centres Electronics Among Sectors Benefit Johor Singapore Special Economic Zone Dbs
According to research conducted by DBS, the proposed Johor-Singapore Special Economic Zone (JS-SEZ) is expected to have significant benefits for the data centre, electronics, and renewable energy sectors. This zone, which aims to promote cross-border economic activities between the two states, was first announced last October during the 10th Singapore-Malaysia Leaders’ Retreat. In January, a memorandum of understanding was signed by the two countries to work on a comprehensive agreement for the JS-SEZ, with the goal of finalizing it before the next leaders’ retreat in December.
Located in Malaysia’s Iskandar region, the JS-SEZ is proposed to cover six districts (Johor Bahru, Iskandar Puteri, Pasir Gudang, Pontian, Kulai and Kota Tinggi) with a total area of 3,505 sq km. Key initiatives being explored for the zone include special tax arrangements, training incentives, passport-free clearance for smoother travel, and joint promotion events.
One of the main beneficiaries of the JS-SEZ is expected to be the data centre sector. According to DC Byte’s 2024 Global Data Centre Index, Johor is the fastest-growing data centre in Southeast Asia, with a growth rate of over 1.6GW in the last three years. This is due in part to Singapore’s moratorium on new data centres since 2019. The electronics sector in Johor is also expected to see a boost, as it has been identified as one of the 16 priority industries in the state’s economic master plan, Progress Johor 2030. Johor’s electronics manufacturing sector currently ranks third in Malaysia, after Penang and Selangor.
Renewable energy is also likely to benefit from the JS-SEZ, as it has been identified as a key area of cooperation between the two countries. This includes the two-year electricity import trial between Singapore and Malaysia, announced last year, where Singapore will import 100MW of electricity from a gas-fired power plant in Johor.
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As activity in these different sectors increases, DBS economist Chua Han Teng predicts a rise in demand for industrial properties in Johor. He also notes that the completion of the Johor Bahru-Singapore Rapid Transit System (RTS) at the end of 2026 will greatly improve connectivity between the two cities, reducing travel time to just 15 minutes and paving the way for more efficient travel.
Chua believes that the JS-SEZ offers the opportunity to leverage the strengths of both Singapore and Johor. While Singapore is land-constrained, Johor has an abundance of space, with the proposed zone being four times the size of Singapore and roughly equivalent to the combined area of China’s Shenzhen and Hong Kong. Additionally, Johor has a favorable demographic, with a population of 4.1 million (second only to Selangor) and expected to grow faster than Singapore’s over the next decade. This will result in a larger workforce, which can also benefit from lower labor costs in Johor.
On the other hand, Singapore offers strong capabilities as a financial center and business hub, making it an attractive option for businesses looking to enter the JS-SEZ. However, there are challenges that need to be addressed for the success of the zone. The Singapore Business Federation (SBF) found that the majority of businesses operating in Johor cited manpower issues and difficulties with the movement of goods between the two countries. The SBF also suggests the need for a unified one-stop service center and a specialized investment promotion agency to market the JS-SEZ and facilitate collaboration and networking opportunities for companies.
In conclusion, the JS-SEZ has the potential to bring significant economic benefits to both Singapore and Johor, particularly in the data centre, electronics, and renewable energy sectors. However, challenges such as manpower and cross-border movement need to be addressed for its success. With the cooperation and efforts of both countries, the JS-SEZ could pave the way for more opportunities and growth in the region.