JS-SEZ – tax incentives and talent imperatives
27 Jan 2025
MALAYSIA is set to redefine its economic trajectory with the establishment of the Johor-Singapore Special Economic Zone (JS-SEZ).
This groundbreaking initiative highlights the nation’s commitment to attracting high-value investments, fostering innovation and driving sustainable economic growth.
By leveraging its strategic proximity to Singapore and offering a comprehensive suite of tax incentives, the JS-SEZ aims to position Johor as a premier global hub for advanced industries and services.
Key tax incentives
Effective Jan 1, 2025, investors in the JS-SEZ gain access to a robust package of tax incentives designed to attract global players from cutting-edge industries.
These key incentives include:
> Special corporate tax rate: New investments in qualifying activities – such as artificial intelligence, quantum computing supply chain, medical devices, aerospace manufacturing and global services hubs – are eligible for a 5% tax rate for up to 15 years.
> Flagship development incentives: Tailor-made incentives for businesses operating in designated flagship areas.
> Preferential tax rate for knowledge workers: Eligible knowledge workers can enjoy a 15% personal income tax rate for 10 years, incentivising talent retention and attraction.
Strategic flagship zones and sectoral focus
The JS-SEZ encompasses nine flagship zones, an expansion from Iskandar Malaysia’s initial five zones.
These include Johor Baru City Centre, Iskandar Puteri, Tanjung Pelepas-Tanjung Bin, Pasir Gudang, Senai-Skudai, Sedenak, Forest City, Pengerang Integrated Petroleum Complex and Desaru.
Each zone focuses on high-growth industries such as logistics, digital services, healthcare, education and tourism, while prioritising emerging sectors including aerospace, medical devices, electrical and electronics, chemicals and pharmaceuticals.
Talent imperatives to drive success
The JS-SEZ is expected to create 20,000 skilled jobs and attract 50 high-impact projects within five years, with ambitions to scale to 100 projects within a decade.
To support these goals, the Johor Talent Development Council (JTDC) has been established to spearhead efforts in talent attraction, development and retention.
By collaborating with universities, vocational training centers and industry stakeholders, the JTDC aims to create a dynamic talent ecosystem that aligns with current and future industry needs.
This initiative ensures a sustainable pipeline of skilled professionals, enhancing the region’s appeal to investors seeking a dependable and capable workforce.
By integrating talent development with industry demands, the JS-SEZ will strengthen its positioning as a hub for innovation, high-value manufacturing and advanced services.
To drive talent development and ensure long-term success in the JS-SEZ, the following strategies are recommended:
> Competitive salary packages: Offering starting salaries of RM4,000 for diploma holders and RM5,000 for degree holders will make Johor an attractive destination for talent, while mitigating brain drain to neighbouring regions.
However, careful financial planning is still essential to manage the sustainability of these premium wages.
> Enhanced internship programmes: Extending internships to six months or longer allows students to gain meaningful hands-on experience and develop practical skills, enabling them to contribute effectively in their future roles.
> Dedicated talent council: Establishing a council to streamline collaborations between the JTDC, educational institutions and industry stakeholders will foster a cohesive and dynamic talent ecosystem.
> Collaboration with education and training institutions: Strengthening partnerships with universities, technical and vocational education and training centres, and industries is crucial to ensure skill development aligns closely with industry-specific demands.
> Customised training programmes: Sector-specific training modules enriched with advanced technologies and global best practices, are critical to building workforce expertise in priority sectors such as aerospace, medical devices, electrical and electronics, chemicals and pharmaceuticals.
Charting a path to sustainable long-term value creation
The JS-SEZ represents a transformative step in Malaysia’s journey towards becoming an economic powerhouse within Asean.
By fostering collaboration, aligning talent development with industry needs and implementing robust support systems, Johor is well-positioned to attract high-value investments and elevate its global competitiveness.
However, success will hinge on agile execution, responsiveness to industry trends and a steadfast focus on sustainability.
With these strategies in place, the JS-SEZ has the potential to become a thriving centre of innovation, creating long-term value for Malaysia and the region.
Ng Fie Lih is executive director, Johor-Tax, KPMG Malaysia. The views expressed here are the writer’s own.
Source: The Star
