Taiwan Prime Minister Lawrence Wong (left) and Malaysia Prime Minister Anwar Ibrahim (right) speak at a press conference in Ibrahim’s office. Credits: GettyImages/Vincent Thian.

Malaysian and Singaporean officials have announced that they finalised an agreement to form an SEZ on 7 January. Malaysian Prime Minister Anwar Ibrahim says the Johor-Singapore SEZ is a “unique initiative” designed to strengthen ties between the countries at a time of increasing geopolitical polarisation.

“Very rarely you find two countries working together as a team […] These two countries have a common strategy, to assist one another, to work and benefit from each other’s strengths… This is the new attitude we must have other than talking always in terms of rivalry and unnecessary conflicts,” Ibrahim added.

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Singaporean Prime Minister Lawrence Wong echoed Ibrahim’s optimism.

“Where ASEAN is concerned, we are talking about not just more trade and investment linkages, but infrastructure linkages including the ASEAN power grid. These are all good projects that Singapore will support and we hope under Malaysia’s leadership, we can make good progress,” Wong said. Malaysia is this year’s chair of the Association of Southeast Nations (ASEAN).

Malaysia hopes the initiative will bring $26bn (RM90.06bn) a year to the economy by 2030 through tax incentives in sectors such as manufacturing, aerospace, tourism, energy and healthcare. It is aiming to attract 50 projects that will employ 20,000 skilled workers within five years.

The package includes special company tax rates of 5% for 15 years and lower taxes for knowledge workers. Companies in manufacturing and services of AI and quantum computing supply chains, medical devices and aerospace manufacturing can benefit from the low 5% corporate tax.

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While Singapore has one of the lowest corporate income tax rates in the region at 17%, companies in Malaysia pay between 15% and 24%.