Envisaging Greater Johor Bahru as Malaysia’s Second Economic Capital

May I thank Datuk Syed Mohamed Syed Ibrahim, JCorp CEO, for his kind invitation for me to say a few words at the Johor Conversation 2024.

The theme for today’s conversation is “Pursuing growth through infrastructure, innovation, technology, and sustainability.”

I am impressed with the theme as it captures exactly what we need in the next phase of Malaysia’s development story.

By the end of June, my book “Second Takeoff: Strategies for Malaysia’s Resurgence” will be in the bookstores. The core idea of the book is that Malaysia grew exponentially between 1988 and 1997, lost our way in the last 25 years, and we are now presented with a great opportunity for a second takeoff.

Malaysia has a second chance because the world has now changed its course altogether, compared to the last 25 years. During the last period, the world was competing on cost and economic efficiency. Now the world cares about resilience and economic security.

Malaysia has a second chance also because the Unity Government under Prime Minister Datuk Seri Anwar Ibrahim’s leadership is determined to bring about Malaysia’s renaissance.

At the centre of the second takeoff is precisely how Malaysia can transform from a land and resource-based economy into a technology-based economy, a challenge aptly captured by today’s theme.

It is not the first time that Johor is trying to grow with new global shift and technological development. The modern Johor Sultanate is a testimony of seizing opportunities during global shifts. The founding and initial prosperity of Johor Bahru coincided with the advent of steamships which shortened the time needed to move commercial cargo, thus making Europe-oriented export-led commercial plantations – the main economic activity in Johor Bahru then – a highly profitable venture.

It is also not the first time a regional plan is being devised. The idea of SIJORI was mooted in the 1990s and the Iskandar Region was launched in 2006 with great fanfare. But the Iskandar development ended up as a property play without sufficient emphasis on creating better jobs with better pay, and a better life for Johoreans. The plan at that time was to attract the richer strata of Singaporean population to come stay, play and study in the Iskandar Region.

There wasn’t enough emphasis on building technology and innovation in Johor too.

Very few nations and cities have a second chance. Now that we have a second chance, we must do it well.

At a deeper level, Malaysia as a nation needs to celebrate the rise of secondary cities and regions. Since Independence in 1957, Malaysia as a polity has become too centralised. The full potential of Greater Johor Bahru is to emerge as the second economic capital of the nation just like Busan to Korea, Osaka to Japan, and Melbourne to Australia.

Imagine the Klang Valley, the Greater Johor Bahru, the Penang-Kulim conurbation, as the three main engines firing at once, coupled with the resource-rich Kuantan and the east coast, Sarawak, and Sabah, each acting as a catalyst, Malaysia’s growth will multiply.

Therefore, for the Johor-Singapore Special Economic Zone to succeed, we need a paradigm shift to celebrate Greater Johor Bahru as the second economic capital of the nation.

The Johor-Singapore Special Economic Zone is being proposed in the context of a much larger global shift. During the hyperglobalisation period, China was the factory of the world and Singapore was one of the world’s financial centres. Because China was so efficient and low cost then, the rest of the world experienced premature de-industralisation, including Malaysia.

Now the world is reconstructing supply chains. We are at the start of a new period. Perhaps the next twenty or thirty years will be on a similar trajectory which will see the world having more than one supply chain – maybe there will be a US-led, a China-led and an open one in the middle ground, and regional production networks becoming important again.

In this new world that we are being thrown into reluctantly, the sooner we embrace each other to form strong regions that are sticky, coherent and collaborative, the better our shared future would be. It is in such a context that the Johor-Singapore Special Economic Zone should envisage itself as a “mini common market” between Johor and Singapore, with the possibility of extending to the Riau Islands, realizing the SIJORI idea which was mooted a generation ago.

Let me briefly touch on what all these entail on the ground. The Johor-Singapore SEZ has only 3 key issues to solve: movement of people and goods, where, and what sort of incentives.

We should explore as many modes of transport as possible beyond the Causeway, Second Link, RTS and the Tebrau Shuttle, we should quickly move into making ferry rides from Puteri Harbour and Forest City to Tuas a reality. Another ferry link between Pasir Gudang and Changi would be great too. And, we should make immigration as smooth as possible, at least for frequent travelers.

When people (and goods) can move as freely as possible, it is the best incentive for SEZ. There’s no need for too many layers of incentives for investors. Nothing beats the incentives of easy movement of people and goods between Johor and Singapore.

The State Government has very boldly decided on the question of where the SEZ is. It covers the entire Iskandar Region and Pengerang.

Given that the size is huge, incentives will have to be very restrictive. As I suggested in the Johor State Assembly on 12 May, incentives should be innovative and with a breath of fresh air, such as

  1. Incentives for Malaysian workers returning to work in selected critical sectors
  1. Supply chain-based incentives especially for Malaysian companies that contribute to a strong ecosystem and a resilient supply chain. We will need clear technology roadmaps for the SEZ so that we understand the gaps in the supply chains; otherwise we are only having lots of disjointed supply chains, or worse still, not even supply chains but just firms. When we think about supply chains, we should really conceive it as a single Johor-Singapore-the Riau Islands regional supply chain/regional production network.
  1. Incentives for “control towers” such as regional headquarters, centre of excellence, and R&D centres
  1. Incentives for the state-government so that the state shares some proceeds from corporate income tax collection.

Ultimately, how we position the SEZ has a lot to do with how we position Malaysia. In a rather simplistic way, we do not see Malaysia as competing with Vietnam or as a “Vietnam+”. We see Johor complementing Singapore’s supply chain as a “Singapore at a discount.”

Again, thank you to JCorp for making this conversation possible. Let our conversations shape the future of Johor, Malaysia and the region, if not the world.

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