The New Johor Prosperity

A new world order is emerging as the old one is crumbling. Understanding the context of the new world order, which comes with a new set of considerations, imperatives and assumptions would help us to move Johor forward more steadily.

The modern Johor Sultanate is a testimony of seizing opportunities during global shifts. Historically, 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.

For almost half a century, neoliberal ideas of free market, limited government and reduced public spending as espoused by Milton Friedman in the 1950s and 1960s and further promoted by Margaret Thatcher and Ronald Reagan in the 1980s, have dominated the minds of decision-makers. 

Free market concepts were supported by the advent of containerisation of shipping and ever larger ships, making sea freights increasingly affordable while financial liberalisation resulted in proliferation of financialisation.

Taken together, on this side of the world, the high point of the unfettered globalisation era was that China became the factory of the world while Singapore one of the select few global financial centres. There was not much role for Johor (and even Malaysia) except to supply cheap labour to Singapore and engage in some low productivity manufacturing.

The backlash against globalisation, especially anger over job losses and suppression of wages due to deindustrialisation in the developed world, resulted in populist uprising in the forms of Brexit and the election of Donald Trump as the United States president.

Covid-19 pandemic and the war in Ukraine signalled the end of the “just-in-time” era, replaced by “just-in-case” production and management. Instead of efficiency, risk (and de-risking) is now being considered the most important factor in decision-making.

In the context of Johor, it means that China is no longer the only factory of the world, and Singapore needs a hinterland for production in the new era. This is Johor’s new opportunity to rise as an important economic hub, just like it was in the late 19th and early 20th centuries.

The proposed Johor-Singapore Special Economic Zone is a great opportunity for new deals to be agreed upon, and for equations to be reached.

To achieve this, four mindset shifts are needed.

The first mindset shift required is that Greater Johor Bahru must not be seen as the periphery of Peninsula Malaysia but rather as the nation’s second economic capital, just like Melbourne to Australia, Osaka to Japan, and Busan to Korea.

Before Independence, cities like Penang and Ipoh were equally as vibrant as Kuala Lumpur while the state of Johor was very rich when compared to other states in the Peninsula. Independence brought with it a Kuala Lumpur-centric development model with single party rule by a very dominant prime ministerial system.  

The federal political and bureaucratic leadership will have to embrace the idea that the growth of the Greater Johor Bahru, Sarawak, or Penang-Kulim semiconductor cluster, is good for the nation, and that these regions, and their state governments, should be given more devolved powers to determine outcomes on the ground.

The second mindset shift is that a genuine partnership between Singapore and Johor will have to be forged. The ideas that were developed in the early 1990s such as SIJORI (Singapore-Johor-Riau Islands) should be revisited with new perspectives.

The regional partners, Johor and Riau Islands, should aspire to be near-peers to Singapore and not just servicing the needs of Singapore. For Johor specifically, intense technology policies should be pursued to build a robust technology and innovation scene.

To do so, the new phase of attention on Johor should not be allowed to degenerate into a property play like the Iskandar Region development in the 2000s. The focus should be on technology and innovation like Shenzhen.

And, there should be a very strong emphasis on creating global champions from among Malaysian technology companies, with genuine partnership with Singaporean and Indonesian firms.

The Johor-Singapore Special Economic Zone and a new SIJORI should be about the clustering effort of the entire region with the aim of unleashing potentials of every part, and not just for the periphery to support Singapore’s economic requirements.

The third mindset shift is to note that supply chain resilience and supply chain security are very important in this new era. The old idea of economic efficiency has given way to economic security. To develop the economy now is to develop supply chains, and to make them resilient and secured.

There is no point to just attract foreign investments if they are linked to an ecosystem or activities that would jeopardise water security or energy security, which in turn threatens supply chain resilience and supply chain security for all other industries in the region. The case in point is data centres that consume energy and water yet not creating job opportunities for Malaysians.

The fourth mindset shift is to put workers at the centre of economic development. The neoliberal idea focuses on shareholders and diminishes the roles of all other stakeholders.

The new Johor prosperity will have to be premised on Johorean and Malaysian workers living a purposeful working lives with decent jobs and better wages. Johor and Malaysia will have to use all policy tools available to push up wages, and create industries that have more value for both corporations and  their workers.  The new Johor prosperity will have to be built upon a new set of assumptions, with clear understanding of what the new world order looks like. Modern Johor, with its experiences in navigating global shifts since the founding of Johor Bahru in 1858, will rise again in the new time, just like it did previously.

This piece is first published in The Edge Special Magazine “Johor: Ready For The Big Leap”.

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