Web Stories Saturday, February 24

SINGAPORE — Mr Iman Yusoff, owner of Singapore cargo and freight company IndoBox Asia, has a warehouse in Skudai, Johor strategically located between the two Singapore-Johor land links and about 20 minutes’ drive to Senai Airport.

However, if there is one thing he wishes to see improved, it would be the time taken for vehicles to cross from Singapore to Malaysia, which can take up to two hours on average.

“During peak periods — like before a festive season — it can be four to five hours,” Mr Iman said, having opened his Skudai facility in 2021.

Indeed, the long time taken to cross the land links with Johor is a bugbear of Singapore businesses operating or looking to set up shop in Malaysia’s southern-most state.

The businesses were speaking to TODAY on the different areas that they wish can be addressed in the upcoming Singapore-Johor Special Economic Zone, for which a memorandum of understanding was signed by the Singapore and Malaysia governments on Thursday (Jan 11).

Few concrete details have been unveiled so far, including the location of the zone. 

What have been announced, though, are some “early initiatives” to be explored ahead of the zone’s setup, including a passport-free clearance for people on both sides of the border, as well as digitised processes for cargo clearance at the land checkpoints.

Entrepreneurs and business chambers who spoke to TODAY also wish for financial incentives — such as tax breaks or subsidies for business costs — and improvements to the manpower supply situation in Johor.

Commenting on the development, analysts such as Mr Song Seng Wun said that given Johor’s closeness to Singapore, many businesses would already be familiar with the business conditions in the state.

The economic consultant at financial service provider CGS-CIMB said that therefore, businesses would be most interested to see how being located in the economic zone would offer a more “seamless experience, improve productivity and overall… be more advantageous” than being outside of it.

SPEEDIER CONNECTION

The long time taken for both people and goods to travel into Johor via the land checkpoints is a common concern shared with TODAY, with some Singapore companies even looking at further locations in Malaysia to set up shop due to this reason.

Mr Malcolm Tan, chief executive officer of Singapore startup Providence Greentech, is currently in talks with the Pahang state government to open a factory in Kuantan to recycle batteries and produce new ones for hybrid and electric vehicles.

“Though Johor has got a very close proximity with Singapore, the traffic condition at the Causeway at times can be very unpredictable,” he said.

There is also a direct one-hour flight from Singapore to Kuantan, while the upcoming East Coast Rail Link would improve connectivity from Pahang’s state capital to Malaysia’s main port in Klang, he added.

Ms Zoe Zuo, managing director of Innovative Hub, which has offices in Singapore and Vietnam, currently has a branch in Petaling Jaya, Selangor.

Her company, which provides a suite of digital solutions to other businesses, is “actively considering” a new office in Johor and hopes that the future economic zone could improve connectivity with Singapore.

“It would facilitate easier travel for staff and management, and ensure more seamless business operations,” she said.

For these reasons, the business community welcomed the early initiatives to improve human and goods flow between the two sides that both countries are exploring ahead of the zone’s establishment.

For instance, Mr Iman envisioned that the digitised cargo clearance could cut down the current clearance process from between 15 and 20 minutes per lorry to under five minutes.

“You multiply that by the number of vehicles in the queue, that is a lot of time savings,” he said.

Some are also suggesting the implementation of special lanes on the two existing land links for business travel, or even a third link straight to the economic zone.

“Whether it is a physical link, or perhaps a ferry service directly to the special zone — basically businesses want greater efficiency to be located there,”  Mr Song said.

MANPOWER ISSUES

One key area of concern in operating in Johor is the supply of manpower, some businesses said.

Many Johoreans head to Singapore to work to take advantage of the stronger currency here, they noted.

While this is a boon for some businesses in Singapore, it poses a concern for those considering setting up a presence in Johor.

“To attract the relevant manpower (in Johor) to work in our plant, we may have to offer a much better than local market remuneration package. This will definitely increase our operation costs,” Mr Tan of Providence Greentech said.

Mr Song said that the upcoming Johor Bahru-Singapore Rapid Transit System (RTS) Link would make travelling daily to Singapore less onerous — a factor hindering some Johoreans from working in Singapore — hence possibly exacerbating the manpower outflow.

Business chambers also noted that enterprises in Johor are subjected to Malaysia’s quota on foreign manpower.

Mr Ang Yuit, president of Singapore’s Association of Small and Medium Enterprises (ASME), said: “If Singaporean companies are able to have access to very favourable foreign manpower quotas, that would help greatly.”

Mr Victor Mills, chief executive of Singapore International Chamber of Commerce, said that insufficient manpower is a challenge that “every economy faces”.

To tackle this, Singapore and Malaysia can collaborate to develop talent and leverage technology to complement manpower, he added.

Mr Azhar Othman, deputy president of the Singapore Malay Chambers of Commerce and Industry, suggested providing “special benefits” or grants for Singaporean companies to train local Johoreans and address any skills gap among residents there.

Not all Singapore businesses see manpower as a big issue in Johor, though. 

Mr Vishal Vijay, director of strategic investments at Agrocorp International, said: “(Johor Bahru) has access to a skilled workforce due to the existing manufacturing sector there.”

For this reason, on top of easy access to natural resources and raw materials, his company signed a joint venture in 2023 to set up a protein extraction plant in Johor Bahru, which is expected to be up and running by the first quarter of 2026.

Mr Iman of IndoBox said that the unwillingness of some Singapore companies to pay competitive wages is the reason they find it difficult to find workers.

“Let’s say you’re paying a Malaysian worker S$3,000 in Singapore, you don’t expect to pay them RM3,000 (S$860) in Johor. Maybe you pay them RM6,000, which is equivalent to under S$2,000 you still save about 30 per cent,” he said.

Though still lesser than what they would get in Singapore, Malaysians generally would find it acceptable to receive such a pay working in Johor as they would also save on costs incurred if they were to work in Singapore, he added.

FINANCIAL PERKS, OTHER ISSUES

The business community also would like to see financial incentives when operating in the economic zone. 

“Specific investment attraction incentives within the zone would be great, such as tax effects and capex (capital expenditure) relief,” Mr Vijay of Agrocorp said.

Mr Iman of IndoBox noted how the Singapore Government offers various grants to local businesses to lower costs or encourage productivity, and suggested extending them to enterprises in the special economic zone.

Mr Lee Ting Kiat, southern region branch chairman of the Malaysian International Chamber of Commerce and Industry (MICCI), suggested lower tax rates and incentives “for employees and business owners alike”.

“With the higher disposable income, it will attract talents and more workers,” he told TODAY.

Mr Ang of ASME said that one challenge faced by Singapore businesses in Johor is infrastructure quality, which he describes as “not very homogenous” and location-dependent. This “reduces the interest” among some Singapore businesses to operate there.

Mr Lee of MICCI also proposed fast-tracking the approval process or reducing the number of licence applications needed to minimise “red tapes” when setting up a business in Johor.

WHERE MAY ECONOMIC ZONE BE LOCATED, WHO WOULD BENEFIT?

The business community generally agreed that connectivity and readiness of infrastructure would be among the key determinants of the actual location of the economic zone.

“For this, we think the flagship zones of Iskandar Malaysia, particularly in Iskandar Puteri, Senai and Johor Bahru town are ideal to fulfil the needs of a diverse set of businesses,” Mr Lee of MICCI said.

On what business industries can be expected in the zone, economist Selena Ling said that manufacturing is one example of a sector that could benefit from being there.

“With the carbon tax hike (in Singapore), the more energy-intensive companies may also be considering to relocate some lower value-add economic activities nearby and focus their attention on higher value-add activities,” said the head of treasury research and strategy at OCBC.

Economist Chua Hak Bin from Maybank said that healthcare is one industry “worth exploring” besides the “often highlighted” ones such as manufacturing and renewable energy.

“(This is) given Singapore’s aging population, high healthcare costs and manpower shortage, particularly for nurses,” Dr Chua added.

Mr Song believes that the zone could appeal to enterprises from across all industries, depending on how locating their operation — or parts of it — there would affect their bottomline.

“Ultimately, businesses are very practical. You put something on the table, they’ll look at it and do the sums and ask, ‘What is the value proposition for me to be in the zone?’”
 

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