The president of the United States announced on April 2 the implementation of "reciprocal tariffs" on all trading partners. Under this new policy, the tariffs imposed by other countries on American goods will be mirrored at roughly half the rate by the US. For example, Malaysia currently levies a 47% tariff on American products; hence, the US will enact a 24% tariff on Malaysian goods. This move is poised to reshape global trade dynamics and supply chains.
In response, Malaysia's Trade, Investment and Industry Ministry has swiftly engaged with US authorities, seeking solutions that uphold free and fair trade principles while emphasising that it is not considering retaliatory tariffs. In this challenging global landscape, Malaysia must enhance its ASEAN standing and become an attractive investment destination. Achieving this requires a collaborative effort between the government and businesses to strengthen their positions.
Recently, I was invited to the 12th Guangdong Provincial Congress in Guangdong, China. The discussion focused on leveraging the unique advantages of overseas Chinese in terms of capital, technology, management and networking to boost investment and business initiatives. This includes attracting high-end talent and gathering innovative resources, particularly emphasising the Guangdong-Hong Kong-Macao Greater Bay Area.
When discussing the history of overseas Chinese investment in China, the Shenzhen Special Economic Zone, established in 1980, stands out. This zone was the first in China to encourage foreign investment by granting greater autonomy in reform and opening up. It transformed Shenzhen from a small border county into a technology-driven international city. Its GDP skyrocketed from $270 million RMB in 1980 to $3.46 trillion RMB in 2023, increasing over 10,000 times and setting a global standard for economic zones. In 2019, China's State Council issued the Outline Development Plan for the Guangdong-Hong Kong-Macao Greater Bay Area, designating Shenzhen alongside Hong Kong, Macau and Guangzhou as core engines for developing the 56,110-square-kilometre Bay Area.
Back home, the Johor-Singapore Economic Zone, a collaboration between the Malaysian and Singaporean governments, has looked towards the Shenzhen Economic Zone as a benchmark since its inception. The Johor Mentri Besar and officials from Malaysia's Investment, Trade and Industry Ministry have formed delegations to Shenzhen to study its successful collaboration with Hong Kong to develop the Johor-Singapore Economic Zone.
Covering a total area of 3,588 square kilometres, the Johor-Singapore Economic Zone is equivalent to four Singapores. It has set several key objectives, including implementing 50 projects in the first five years and accumulating 100 development projects within ten years. This aims to improve the business ecosystem and resource flow, creating approximately 20,000 skilled jobs in the first five years to benefit both countries. Plans include using QR codes for cross-border travel and building a light rail, expected to open by December 2026, enhancing connectivity.
The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM) and the Singapore Chinese Chamber of Commerce & Industry are also highly focused on the economic zone's development. They have established a joint committee to meet regularly, promoting business, trade and cooperative investment opportunities in South-East Asia, Singapore, Malaysia and the Johor-Singapore Economic Zone from a private sector perspective. They aim to stimulate development and investment, with banks collaborating to provide financial solutions and consultancy services to investors.
Currently, the biggest issue facing the Johor-Singapore Economic Zone is the shortage of technical and high-tech talent. Continuous policy coordination is also a significant challenge to ensure seamless business operations, trade facilitation, land use rights and swift government approvals. Although the tax incentives provided by both governments are attractive, they are insufficient to lure investors if these issues remain unresolved.
As Malaysia assumes the ASEAN chairmanship this year, ACCCIM has organised delegations to ASEAN countries for study and exchange. It is evident that neighbouring countries, including Thailand, Vietnam and Indonesia, have introduced various incentives in recent years to attract foreign investment. These efforts present formidable competition for the Johor-Singapore Economic Zone.
With the gradual implementation of the Global Minimum Tax (GMT) and impacts from US reciprocal tariffs, the allure of tax incentives for foreign investors is diminishing. Therefore, to attract foreign investment, we must ensure international competitiveness in talent supply, business convenience, government administrative efficiency, supply chain integrity and logistics fluidity.
Regarding the supply chain, our SMEs must be ready to welcome these investors. Even if they cannot become direct partners, they must possess sufficient competitiveness to benefit from the zone's development. Over the years, our SMEs have repeatedly complained about losing market share due to competition from foreign enterprises and have called on the government to raise barriers to foreign entry. However, as an open economy, Malaysia cannot and should not impose too many restrictions on foreign investment, as this would only drive investors to neighbouring countries and not benefit Malaysia's long-term economic development.
SMEs need to enhance their competitiveness in various areas, including finance, technology and markets, but ultimately, talent is the most crucial factor. Regardless of how well the infrastructure is built or how much is invested, people are needed to execute and manage operations.
It is a harsh reality, but we must acknowledge that despite Malaysia's superior rankings in business convenience and international competitiveness compared to Indonesia, the Philippines and Vietnam, the total inflow of direct investment is far less than these countries. Malaysia has long been in a precarious position; we cannot compete with Vietnam and Indonesia in terms of low labour costs and supply, yet we fall short of Singapore and China in high-tech talent supply. Talent is Malaysia's most urgent issue to address.
We often talk about emulating China's strategy of "overtaking on a curve" by adopting advanced technologies to achieve leapfrog development. However, what Malaysia might truly need is to "shift gears to overtake." Our education system, government and private sector management must undergo transformative reforms. Our talent pool must not only possess the latest scientific knowledge and skills but also problem-solving, communication, innovation and empathy capabilities. With enough talent, the government can improve coordination and efficiency across departments and with local governments, ensuring policy consistency and smooth communication. Enterprises can then keep pace with the times, take risks and strengthen innovation and R&D. These changes cannot be realised with mere slogans or plans but require genuine determination and action.
Only by meeting these conditions can the Johor-Singapore Economic Zone establish a robust foundation for growth, positioning itself as ASEAN's equivalent of Shenzhen. Just as the Shenzhen Special Economic Zone once spearheaded China's economic rise, this region has the potential to drive Malaysia's economic development, realising the vision of a "Resurgent Malaysia."
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this article was published on Star Biz dated 7th Apr 2025
Written by:
Datuk Koong Lin Loong JP
• Managing Partner, Reanda LLKG International
• Treasurer General cum Chairman of SME Committee, The Associated Chinese Chambers of Commerce and Industry of Malaysia (ACCCIM)