Corporate Singapore has long moaned about high real estate costs and the lack of affordable labour – problems that the Johor-Singapore Special Economic Zone (JS-SEZ) is expected to tackle.
On Jan 6, Singapore and Malaysia inked a formal agreement to establish the JS-SEZ to attract businesses in every thing ranging from manufacturing, to health and to digital. With a land area four times that of our tiny island-state, the JS-SEZ opens up the possibility for Singapore companies to set up in Johor Bahru.
In May, a convenient light rail transit system connecting Singapore and JB was announced. Slated for launch end-2026, the JB-Singapore Rapid Transit System (RTS) Link will be able to serve up to 10,000 commuters during peak periods for every hour and in each direction, with a journey time of about five minutes. This should significantly reduce congestion along the Causeway and reduce travel times between JB and Singapore.
While lowering costs and increasing efficiency should be golden words to corporate leaders’ ears, every conversation I have had with business owners or CEOs have so far started with a grimace and ended with a groan.
Clearly, the JB-Singapore story is more than cost reduction and transport efficiency.
Competition with Singapore
The closer linkage may offer opportunities, but it also presents formidable competition to Singapore – at least in the short term.
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RM1 is currently worth 30 Singapore cents. For Singaporeans, the favourable exchange rate means that prices are lower in Malaysia. Already, many are making day trips to JB to stock up on diapers, enjoy cheap meals and get pampered in a spa.
And they are there not just for basic necessities. They are also going to Malaysia for health check-ups and simple medical treatments. Pharmaceuticals, too, are cheaper across the Causeway.
Business owners in Singapore are worried that this will hollow out local demand in supermarkets, food and beverage (F&B) outlets and other specialised services.
If the product is something that Singaporeans can buy in JB and carry home, it appears they are already doing it. As Singaporeans enjoy their days off across the Causeway, the dollars they would have spent at home otherwise is now being converted into ringgit (and if they fail to declare it, the purchases are not attracting goods and services tax).
This has already happened in Hong Kong, where residents eat and play on weekends in nearby Shenzhen for half the cost. Hong Kong, as I have heard, is a thriving metropolis five days a week but a ghost town come Saturday.
A more divided Singapore?
The supply of land in Johor should ease commercial and industrial real estate prices here, which should have an eventual knock-on effect on residential real estate, making housing more affordable for first-time Singaporean homeowners.
But as one business leader pointed out, if a guy loses his job or has to shutter his business, he will not be able to buy a house anyway.
Also, existing homeowners will not be celebrating property prices coming down. Cost of living issues – so central to the discussions during the recent General Election and already exacerbated by the US tariffs – could loom even larger in the national consciousness.
Middle and lower-income Singaporeans have been talking about buying a retirement home in Malaysia where housing is cheaper and savings stretch further.
With JB becoming such an efficient commute away, will more than just silver-haired Singaporeans relocate? Working individuals, while continuing to be employed in Singapore for higher salaries, may consider commuting from homes in Forest City.
Singapore businesses, to retain customers, may move with them. Such businesses could enjoy cost savings and offer lower prices in JB. However, the same products and services would not become cheaper in Singapore where the savings do not apply. This cannibalisation of a company’s own business may lead it to bifurcate offerings between high-end Singapore stores and more basic shops across the Causeway. Think premium CS Fresh versus Cold Storage’s standard fare.
If their Singapore offerings become more high end, the less well-off would simply shop in Malaysia. Local outlets may increasingly cater principally to the well-heeled, likely to comprise a larger component of expatriates and uber-wealthy new citizens or permanent residents.
If our country becomes a place where only the rich can afford to work and live, but the everyday Singaporean can only travel in to work, that may have an impact on the fabric and cohesiveness of our society.
Will we see a “two-speed Singapore” with a hollowing out of the middle and lower middle income demographic? And even if this does not happen at significant scale, will the everyday Singaporean start to feel less rooted in their home country?
Intentional policies for social cohesion
The issue is a complex one.
Sure, Singapore needs to address property prices. Rent is becoming an untenably high portion of business costs; and citizens need access not just to affordable public housing, but the ability to aspire to upgraded homes.
If the JS-SEZ ameliorates that problem, this would be a good long-term outcome. Likewise, productivity enhancements from efficiency of the RTS Link should be embraced.
But in the near term, there will be discomfort and discombobulation.
As the JS-SEZ and RTS Link come into operation, Singapore businesses and landlords will be affected. This may result in more precarious businesses failing or choosing to relocate offshore. That will in turn have an impact on their employees’ livelihoods.
So far, there has not been much discussion on this – but I think it is an issue that needs to be unpacked and tackled openly.
We need to assess and address the implications that the new linkages will have in the short term, even while celebrating anticipated future upsides for big corporates and small businesses.
On the employment front, upskilling and training need to be core. Singapore will have to accelerate its development into a higher-up-the-value-chain hub, especially in the services sector, where compensation packages are most attractive.
Local businesses also need to upgrade to stay creative and relevant. This could be in the form of curating new concepts or offering innovative experiences unique to Singapore.
The consequences to our social fabric must not be less front-of-mind.
We need intentional policies to build community cohesion and make Singaporeans feel that this, here, is – and always will be – our home.
On the business front, this could entail holding space for local entrepreneurs, F&B startups or small businesses. If a home-grown clothing label starts to feel squeezed out by big-name international brands, they will decamp offshore.
On the community side, we must be purposeful in building a local identity – be it ever so diverse and messy – with shared spaces and events to enjoy and build cohesion and belonging.
The economic benefits of JB-Singapore collaboration will take time to be felt, and in the near term, individuals and businesses will be economically discomfited.
Let us not allow that uncomfortable adjustment to lead to a more divided Singapore community.
The writer is joint managing partner at TSMP Law Corporation
