The Johor–Singapore Special Economic Zone and RTS Link could raise real incomes across Peninsular Malaysia, although the gains are likely to be uneven. At ACI’s latest webinar, “Beyond the Causeway: Spatial Impacts of the Johor–Singapore Economic Zone and Rail Link,” researchers presented new simulation evidence on how the two projects could reshape economic activity across Singapore and Peninsular Malaysia.

Using a dynamic spatial general equilibrium model calibrated to Singapore and Peninsular Malaysia, the study simulated how the JS-SEZ and RTS Link could affect real wages, population, and output across space. The findings suggest that better connectivity, lower trade costs, and stronger productivity in the Johor-Singapore corridor can raise real incomes across all regions, partly by reducing prices for consumers. However, the gains are unlikely to be evenly distributed, as population and output are expected to move more strongly toward the Johor-Singapore corridor as it becomes more economically attractive, with neighbouring states feeling this shift most.

The study also found that the two policies reinforce each other. The SEZ supports investment, production, and trade by improving productivity and reducing trade frictions, while the RTS Link makes cross-border movement faster and more predictable by lowering the cost of cross-border movement and service access. When simulated together, the two policies generate larger welfare gains than when introduced separately.

These results point to a wider policy challenge. The JS-SEZ and RTS Link can create economy-wide gains, but complementary policies may be needed to spread the benefits more widely. These include investments in skills, housing, infrastructure, local business participation, and regional connectivity beyond the core corridor.

Key Highlights:

1. Real incomes rise across all regions.
The simulations show real income gains across Peninsular Malaysia, partly because cheaper trade and better connectivity can lower prices for consumers.

2. Workers and production move more strongly toward the Johor-Singapore corridor.
Real incomes rise across all regions, but workers and production will move more strongly toward Johor and Singapore as the corridor becomes more economically attractive.

3. Nearby states face sharper adjustments.
States closer to Johor may feel the strongest pull as firms expand and workers move south. This could place more pressure on neighbouring states to retain people, investment, and production.

4. The SEZ and RTS Link work better together.
The SEZ raises productivity and lowers trade costs, while the RTS Link makes cross-border movement and service access easier. When simulated together, they generate stronger gains than either policy on its own.

5. The size of the gains depends on how well the wider system adjusts.
When domestic mobility frictions are reduced, Johor draws workers from a wider national pool and the pressure on nearby states is less concentrated. Under a stronger upper-bound scenario, the gains are much larger, which makes complementary policies on skills, housing, infrastructure, local firms, and wider regional connectivity especially important.

By Adam ROMZI and SONG, Yunlong