Nearshoring in the Johor-Singapore Special Economic Zone

At the recent Economist Intelligence Corporate Network (EICN) sessions in Kuala Lumpur and Singapore on the Johor-Singapore Special Economic Zone (JS-SEZ), we shared about how the JS-SEZ should be viewed in the broader context of the SIJORI Growth Triangle / Indonesia-Malaysia-Singapore Growth Triangle (IMS-GT) that was established in 1994.

While the JS-SEZ is one new development, there is also the Batam-Bintan-Karimun Special Economic Zone, and collectively Singapore and both SEZs should be factored as one mega-region, as was the case before.

Since 2019, Digital Districts has been building and driving the tech ecosystems in Johor and Batam together with our local partners. We see the JS-SEZ as a catalyst for Singapore-based companies to embrace nearshoring as a way to optimise their regional operations. Here are 3 key considerations for such companies:

𝟭. 𝗖𝗼𝘀𝘁 𝗦𝗮𝘃𝗶𝗻𝗴𝘀 𝗮𝗻𝗱 𝗢𝗽𝗲𝗿𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗘𝗳𝗳𝗶𝗰𝗶𝗲𝗻𝗰𝘆

Be intentional on the types of functions and roles that need to be physically in Singapore. This would typically be C-level, strategic and management functions, as well as front-office roles. For other mid-office functions and tech development teams, can they be based in Johor or Batam and still get the job done effectively? If so, companies could achieve cost savings of at least 30% on talent and other overheads. Further, being in the same or adjacent time zone facilitates real-time collaboration and faster decision-making, reducing delays and improving efficiency.

𝟮. 𝗥𝗲𝗴𝘂𝗹𝗮𝗿 𝗦𝗶𝘁𝗲 𝗩𝗶𝘀𝗶𝘁𝘀

Work out a periodic cadence for managers in Singapore to visit the teams in Johor or Batam for easier oversight and building team culture, which ensures higher standards and quicker resolution of issues.

By mid-2025, Singaporeans and other foreign travellers may be able to clear Johor land checkpoints with just QR codes without needing to show their passports. Further, the upcoming JB-SG RTS link will be able to handle 10,000 passengers per hour in each direction, while Singapore's Tanah Merah Terminal has recently been upgraded to increase its capacity by 20% to over 3 million passengers.

𝟯. 𝗧𝗮𝗹𝗲𝗻𝘁 𝗣𝗶𝗽𝗲𝗹𝗶𝗻𝗲

Build a long-term talent pipeline at the industry level. This can be done by (1) projecting the 3-5 year talent shortage, referencing roles under the Ministry of Manpower's Shortage Occupation List (SOL); (2) identifying the existing talent pools in Malaysia and Indonesia; and (3) develop Place-and-Train programs in Malaysia and Indonesia to ensure a more seamless supply of industry-ready talent for Singapore-based companies (similar to the German Vocation Training System in the Penang manufacturing industry).