On 6 January this year, Singapore and Malaysia inked a formal agreement to establish the JS-SEZ to attract businesses in everything from manufacturing, to digital, to health. The JS-SEZ opens up the possibility for Singapore companies to set up in Johor Bahru (JB), with the JS-SEZ land area four times that of our tiny island state.

Corporate Singapore has long moaned about high real estate costs as well as lack of affordable labour. The JS-SEZ should tackle both those problems.

In May, it was announced that there will soon be a convenient light rail transit system (RTS) connecting Singapore and JB. The RTS Link will be able to serve up to 10,000 commuters during peak periods, for every hour and in each direction, and is targeted to commence service end 2026. This should significantly reduce congestion at the two Causeway checkpoints and reduce travel times between JB and Singapore.

Media and analysts’ reports have been enthusiastic. Lowering costs and increasing efficiency should be golden words to corporate leaders’ ears. Yet every business owner or CEO I speak to about the JS-SEZ or RTS Link starts with a grimace and ends with a groan.

Clearly the JB-SG story is about more than cost reductions and transport efficiency.

Competition with Singapore

The closer linkage may offer opportunities but it also presents formidable competition to Singapore, at least in the short term.

The Malaysian ringgit is currently worth 30 Singapore cents. With the favourable exchange rate, prices are lower in Malaysia.  Already many Singaporeans are making day trips to JB to stock up on diapers, enjoy cheap meals and get pampered in a spa.

And it’s not just basic necessities. Locals are going to Malaysia for health check ups and simple medical treatments. Drugs, too, are cheaper across the Causeway.

Business owners in Singapore are worried that this will hollow out local demand for supermarkets, F&B outlets and even more specialised services. If the product is something Singaporeans can buy in JB and carry back home, it appears they are already doing it. As Singaporeans enjoy their days off across the Causeway, the money they would have spent here is now converting into Ringgit (and if they fail to declare it, the purchases are not attracting goods and services tax).

This has already happened in Hong Kong, where residents eat and play on weekends in nearby Shenzhen for half the cost. Hong Kong, as I hear it, is a thriving metropolis five days a week, but a ghost town come Saturday.

Impact: A More Divided Singapore?

The supply of land in Johor should ease commercial and industrial real estate prices here, which should have an eventual knock-on effect on residential real estate, making housing more affordable for first time Singaporean homeowners.

But as one business leader pointed out, if a guy loses his job or has to shutter his business, he won’t be able to buy a house anyway. Also, existing homeowners will not celebrate property prices coming down. Cost of living issues – so central to the discussions during the recent General Election, and already exacerbated by the US’s global tariffs – will be writ even larger in the national consciousness.

Middle- and lower-income Singaporeans have been talking about buying a retirement home in Malaysia where housing is cheaper and savings stretch further. With JB becoming such an efficient commute, will more than just silver-haired Singaporeans relocate? Working individuals, while continuing to be employed in Singapore for higher salaries, may consider commuting from homes in Forest City.

Singapore businesses, to retain customers, may move with them. Such businesses could enjoy cost savings and offer lower prices in JB. However the same products and services would not become cheaper in Singapore where the savings do not apply. This cannibalisation of a company’s own business may lead it to bifurcate offerings between high-end Singapore stores and more basic shops across the Causeway. Think premium CS Fresh versus Cold Storage’s standard fare.

If the Singapore offerings become more high end, the less well-off will shop in Malaysia. Local outlets may increasingly cater principally to the well-heeled, likely to comprise a larger component of expatriates and uber wealthy new citizens or permanent residents.

If our country becomes a place where only the rich can afford to work and live, but the everyday Singaporean can only travel in to work, that may have an impact on the fabric and cohesiveness of our society. Will we see a “two-speed Singapore” with a hollowing out of the middle and lower middle income demographic? And even if this does not happen at significant scale, will the everyday Singaporean start to feel less rooted in their home country?

The Fix

The issue is a complex one.

Sure, Singapore needs to address property prices. Rent is becoming an untenably high portion of business cost and citizens need access not just to affordable HDB housing, but also the ability to aspire to upgraded homes.

If the JS-SEZ ameliorates that problem, this would be a good long term outcome.

Productivity enhancement from efficiency of the RTS Link should similarly be embraced.

BUT.

In the near term, there will be discomfort and discombobulation.

As the JS-SEZ and RTS Link come into operation, Singapore businesses and landlords will be affected. This may result in more precarious businesses failing or choosing to relocate offshore. That will in turn have an impact on their employees’ livelihoods.

Thus far, we have not had many community conversations or media commentary on this. But I think it is an issue that needs to unpacked and tackled openly. We need to assess and address the implications the new linkages will have in the short term, even while celebrating anticipated future upside for big corporates and small businesses.

On the employment front, upskilling and training need to be core. Singapore will have to accelerate its development into a higher-up-the-value-chain hub, especially for services, where compensation packages are most attractive.

Local businesses also need to upgrade to stay creative and relevant. This could be in the form of curating new concepts or offering innovative experiences unique to Singapore.

Consequences to our social fabric must not be less front-of-mind.

We need intentional policies to build community cohesion and make Singaporeans feel that this, here, is and always will be our home.

This could entail, on the business front, holding space for local entrepreneurs, F&B startups or small businesses. If a homegrown clothing label starts to feel squeezed out by only big name international brands, they will decamp offshore.

On the community side, we must be purposeful in building a local identity –be it ever so diverse and messy – with shared spaces and events to enjoy and build cohesion and belonging.

The economic benefits of collaboration with JB for Singapore as a whole will take time to be felt. In the near term, individuals and businesses will be economically discomfited.  Let’s not allow that uncomfortable adjustment to lead to a more divided Singapore community.