Read time: 4 minutes
The Johor–Singapore Special Economic Zone (JS-SEZ) is shaping up to be one of Southeast Asia’s most promising infrastructure corridors and the data center sector stands to gain significantly. With a strong bilateral policy push, cost advantages and mounting demand for scalable digital infrastructure, fund managers, developers and investors should take note.
A strategic cross-border initiative
Signed on January 7, 2025, the JS-SEZ is a landmark agreement between Malaysia and Singapore to strengthen the value proposition of Malaysia’s southern state of Johor and Singapore to compete for global investments.
This will be achieved by: (a) improving cross-border goods connectivity between Singapore and Johor; (b) enabling freer movement of people across the border; and (c) strengthening the business ecosystem within the JS-SEZ region. Companies can benefit from this enhanced connectivity for goods and people by expanding their business overseas and twinning business operations, tapping into the complementary strengths that Singapore and Johor offer.
Key features of the JS-SEZ include:
- Improved customs, immigration and transport connectivity at key immigration checkpoints.
- Fast-tracked approvals and investment incentives in targeted sectors to operate and grow within the region.
- Support under Malaysia’s Digital Economy Blueprint and National Energy Transition Roadmap (NETR).
- Tax incentives, including notably a preferred 5% corporate tax rate for up to 15 fiscal years for eligible companies and a 15% flat tax rate on eligible chargeable employment income for 10 fiscal years.
Why data centers are poised to benefit
Data centers and electronics are highlighted as key sectors likely to benefit from SEZ-linked policy support and investment flows. Johor’s positioning (connected by two land linkways and immediately bordering land-constrained Singapore) makes it an ideal spillover location for hyperscalers, colocation providers and investment funds.
- The Johor–Singapore Special Economic Zone fuses cross-border land, power, water and talent advantages, positioning Johor as the natural spillover hub for Singapore’s space-constrained hyperscalers
- Early entrants can lock in lower-cost sites, fast-tracked approvals and bilateral incentives, capturing surging AI and cloud demand before the market crowds in
- Malaysia is simultaneously prioritizing green energy adoption for new developments and sustainable data centers that meet stringent ESG targets