CHAPTER 4 Economic Development Strategies - Iskandar Malaysia

Section A Framework for 

Comprehensive Development 

Part 2 Development Strategies 

CHAPTER 4 

Economic Development Strategies

Economic Development Strategies 

chapter 

4 

4.1 Introduction 

This chapter outlines the economic development framework and 

strategies. The main focus of the economic component is on the 

macroeconomic framework. The chapter should also be read 

particularly in conjunction with chapter 5 on Social Development 

Strategies. Detailed proposals of the development strategies described 

here and the various strategic initiatives are also contained in the 

Economic and Social Development Plan (ESDP) for SJER. 

4.2 Macroeconomic Framework 

A. SJER Population 

The current population of SJER is estimated at 1.35 million or 

approximately 43% of the Johor state population which stood at 

3.17 million in 2005 (Figure 4.1). SJER has a multicultural society, with 

the Malays representing the majority at 48%, the Chinese as the next 

largest ethnic group at 36%, the Indians as a minority group at 9.4% and 

followed by foreign immigrant workers, estimated at 6.6% (Figure 4.2). 

SJER’s population is relatively young with those aged 15 years and 

below forming about 30% of the SJER population. The population in SJER 

is also well represented by the working-age population which accounts 

for 66% of the area’s population (Figure 4.3). 

B. SJER Economic Structure 

The total GDP (at PPP) of the SJER is estimated at USD20 billion in 

2005, or approximately 60% of Johor’s GDP (Figure 4.4). This translates 

into a current GDP per capita of about USD14,790 for SJER, which is 

higher than the Johor GDP per capita (Figure 4.5) but is only half of 

Singapore’s. 

half of the total GDP of SJER. Within the services sector, wholesale and 

retail trade is the largest component with a share of 43%, followed by 

tourism and hospitality at 17% and professional and business services 

with a share of 15% (Figure 4.6). 

The manufacturing sector is relatively large with a share of 45% of SJER’s 

total GDP in 2005. It is dominated by electrical and electronic industries 

(E&E) at 32%, followed by chemical and chemical products industries 

at 12% and food and beverages industries at 11%. These, combined 

with logistics and related services are the main economic drivers in SJER 

currently. 

An estimated 70% of total manufacturing establishments in Johor or 

some 4,266 establishments are located in SJER (Figure 4.7). The majority 

of them, or about 60%, are located within the Special Economic 

Corridor (SEC) (Figure 4.8). 

Figure 4.1: SJER Population Size (2005) – National And Regional 

Comparison 

30,000.0 

25,000.0 

20,000.0 

15,000.0 

10,000.0 

5,000.0 

(000, ) 

26,748.1 

Malaysia 

5,000.0 

4,500.0 

4,000.0 

3,500.0 

3,000.0 

2,500.0 

2,000.0 

1,500.0 

1,000.0 

500.0 

Source: Projected from Census (2000) figures 

(000, ) 

3,170.0 

1,353.2 

4,234.0 

Johor State SJER Singapore 

The two main pillars of the SJER’s economy are services and 

manufacturing, with services as the dominant sector, contributing about 

4 - 1

SECTION A 

FRAMEWORK FOR COMPREHENSIVE DEVELOPMENT 

Figure 4.2: SJER Ethnic Composition (2005) – National and Regional Comparison 

Foreigners, 6.6 

Indian, 9.4 

SJER 


Indian, 7.0 

Johor State 

Chinese, 35.8 

Malay, 48.2 

Chinese, 32.0 

Malay, 54.0 

Source: State/ District Data Bank 2005 Source: State/ District Data Bank 2005 


Indian, 7.0 


Other, 1.14 


Singapore 

Malay, 11.36 

Indian, 6.45 

Chinese, 

24.0 

Malay, 61.0 

Chinese, 62.75 

Source: Ninth Malaysia Plan 

Source: Singapore Statistic (Sing-Stat) 

Figure 4.3: Composition of Age Structure (2005) – National and Regional Comparison 

SJER 

Johor State 

3.1% 

4.4% 

66.4% 

30.5% 

63.7% 

31.9% 

64 years 

64 years 

Source: State/ District Data Bank 2005 Source: State/ District Data Bank 2005 


Singapore 

63.1% 

4.3% 

32.6% 

8.1% 16% 

75.9% 

64 years 

64 years 

Source: Ninth Malaysia Plan 

Source: Singapore Statistic (Sing-Stat) 

4 - 2

ECONOMIC DEVELOPMENT STRATEGIES CHAPTER 4 | PART 2 

Figure 4.4: Total GDP (2005) – National and Regional Comparison (in 

USD Billion PPP) 

 

 

 

276.0 

Figure 4.5: GDP per Capita (2005) – National and Regional 

Comparison (in USD PPP) 

30000 

25000 

29,937.0 

 

127.0 

20000 

 

 

 

Malaysia (a) 

33.4 

Johor 

State (b) 

20.0 

SJER (b) 

Singapore (c) 

USD(PPP) 

15000 

10000 

5000 

10,318 

10,757.0 

14,790.0 

Source: (a) Ninth Malaysia Plan (9MP) 

(b) Converted from UPEN-Johor GDP figures 

(c) International Monetary Fund/ IMF Database 

0 


Johor 

State 

SJER 

Singapore 

Source: (a) Ninth Malaysia Plan (9MP) 

(b) Converted from UPEN-Johor GDP figures 

(c) International Monetary Fund/ IMF Database 

Figure 4.6: Economic Structure (2005) – GDP by Major Economic Sectors 

GDP by Major Sectors In SJER, 2005 

Services Sector 

50.0% 

Agricultural 

3.0% 

Manufacturing 

47.0% 

Value Added of Services Industries in SJER, 2005 

Value Added of Manufacturing Industries in SJER, 2005 

Services 

Sector 

6.6% 

Tourism & 

Hospitality 

16.8% 

Medical 

Educational 

6.1% 

Transport 

related 

13.3% 

Others 

44.6% 

Electronics and 

electrical products 

32.1% 

Professional 

& Business 

14.6% 

Wholesale and Retail 

42.6% 

Food and 

beverages 

11.2% 

Chemical and 

chemical product 

12.1% 

Source: SJER CDP 2025 

4 - 3

SECTION A 


Figure 4.7: SJER: Concentration of Manufacturing Establishments in SJER and outside SJER (2005) 

100% 

90% 

23.58 23.97 

80% 

36.34 

70% 

52.24 

61.15 62.30 

60% 

(%) 

50% 

40% 

76.42 76.03 

30% 

63.66 

20% 

47.76 

38.85 37.70 

10% 

0% 

Chemicals and 

Chemicals Products 

Electrical and Electronic 

Products and 

Machinery 

Rubber and Plastics 

Products 

Other Non-Metallic 

Food Products and 

Beverages 

Johor Bahru Rest of Johor 

Fabricated Metal 

Products and 

Machinery 

Source: Johor Corporation, 2005 

Figure 4.8: Percentage Distribution of Manufacturing Industries in SJER, 2005 

KLUANG 

DISTRICT 

To Air Hitam 

To Kuala 

Lumpur 

North-South North-South North-South North-South North-South North-South North-South North-South North-South Expressway Expressway Expressway Expressway Expressway Expressway Expressway Expressway Expressway 

MUKIM 

SEDENAK 

KULAI 

INDUSTRIAL 

AREA 

6.32 

SENAI- 

KULAI 

ZONE 

To Kota Tinggi 

Legend 

Proposed South Johor Economic 

Region 

Proposed Special Economic 

Corridor (SEC) 

Proposed Development Sub-Zone 

Major Road 

Proposed Highway/ Major Road 

Mukim Boundary 

6.32 Percentage of Existing 

1501-2000 Manufacturing Industries 

Kulai 

MUKIM 

SENAI- 

KULAI 

SENAI 

INDUSTRIAL 

AREA 

KOTA TINGGI 

DISTRICT 

1001-1500 

501-1000 

101-500 

PONTIAN 

DISTRICT 

Pontian Tow n 

Pekan Nanas 

9.52 

Senai 

SENAI 

AIRPORT 

Skudai 

SKUDAI 

ZONE 

MUKIM 

JERAM 

BAT U 

MUKIM 

PULAI 

0.05 

MUKIM 

0.12 

JELUT ONG 

NUSAJAYA 

PONTIAN 

ZONE 

NUSA 

ZONE 

JAYA 

MUKIM 

SUNGAI 

KARANG 

MUKIM 

T ANJUNG 

KUPANG 

PTP 

0.02 

ZONE 

MUKIM 

T EBRAU 

46.77 

MUKIM 

BANDAR 

T ampoi 

JOHOR 

BAHRU 

T OWN 

TEBRAU 

ZONE 

23.65 

MBJB 

ZONE 

Ulu T iram 

MUKIM 

PLENT ONG 

PASIR 

GUDANG 

ZONE 

Pasir Gudang 

Proposed Senai-Desaru Expressway 

13.55 

MUKIM 

SUNGAI 

T IRAM 

TG. LANGSAT 

INDUSTRIAL 

AREA 

Pulau 

Pulau 

Ubin 

Tekong 


4.3 Global and Regional Perspectives 

A. Global Perspectives 

The world economy is expected to grow at an average of 4.9% in 2006 

and global economic growth is expected to be sustained at 4.6% per 

annum over the period between 2008 to 2011. 

Future world output growth is expected to be driven by improved 

productivity growth in the advanced economies and continued robust 

growth in the developing countries. Developing countries are expected 

to achieve an average annual growth rate of 6.3% where many are 

expected to undergo internal restructuring, institutional and regulatory 

adjustments. In contrast, the more advanced economies are expected 

to grow by an average 2.8% annually. World population has reached 

6.5 billion in 2000 and is expected to rise to 7.9 billion by 2025 according 

to the United Nations (Figure 4.9). 

B. Global Foreign Direct Investments (FDIs) 

Global FDI inflows have risen by 2% from USD632.6 billion in 2003 to 

USD648 billion in 2004 (UNCTAD, World Investment Report 2005). While 

FDIs to developed countries declined by 14%, inflows to developing 

countries rose by 40% to reach USD233 billion in 2004. The key recipients 

of global FDIs are the USA, UK and China. 

FDI into the Asia-Pacific region recorded a significant annual increase 

of 55% in 2004. The increase was attributed to an overall favourable 

conditions in Asia, particularly in China and India. China, Hong Kong 

and Singapore are the key recipients albeit with the trend of inward 

FDIs being unevenly distributed continuing. China has been the most 

significant destination for FDIs over the past five years. 

C. Asian and ASEAN Perspectives 

Growth in the Asian region is expected to be robust, fuelled by 

economic growth in China and India. China is projected to grow by 

9.0% to 9.5% annually and India at 7.3% annually in the medium term. 

Economic growth in the Association of Southeast Asian Nations (ASEAN) 

region has benefited its members, and this is reflected in the rise of 

real income in each country. Malaysia stands out with the highest per 

capita income at purchasing power parity (excluding Singapore which 

is considered a developed economy) (Figure 4.10). 

Figure 4.9: Prospects for World Population Growth, 2025 (in million people) 

100% 

31 

33.1 

35 

38.9 

40.8 

90% 

812.5 

905.9 

1006.9 

1228.3 

1344.5 

80% 

70% 

60% 

50% 

3675.8 

3905.4 

4130.4 

4553.8 

4728.1 

40% 

30% 

20% 

10% 

0% 

522.9 

315 

728.5 

2000 

561.4 

330.6 

728.4 

2005 

598.8 

346.1 

725.8 

2010 

667 

375 

715 

2020 

696.5 

388 

707.2 

2025 

Europe North America Asia Africa Oceania 

Source: UN, Dept of Economic and Social Affairs, Population Division, World Population in 2003 (New York 2004) 

4 - 5

SECTION A 


Figure 4.10: Gross National Income Per Capita (USD) (PPP) of Selected Asian Countries, 2003 & 2004 

35,000 

30,000 

GNI per capital (USD) (PPP) 

25,000 

20,000 

15,000 

10,000 

5,000 

China 

Hong Kong 

0 

Singapore 

Korea 


Thailand 

Indonesia 

Philippiness 

India 

2003 2004 

Source: World Bank, ‘World Development Report’, 2005 and 2006 

During the period 2006-2007, the newly industrialised countries in Asia 

are expected to experience strong growth of between 4.5% and 5.2% 

annually. The ASEAN 4 countries (Indonesia, Malaysia, Philippines and 

Thailand) are also expected to sustain growth at more than 5% per 

annum in 2006 and 2007. Within ASEAN, Malaysia is expected to grow 

at 6% annually over the 2005-2020 period as a result of growth in the 

agricultural, manufacturing and services sectors. 

ASEAN accounts for 4% of global FDI flows in 2004. Singapore is the main 

recipient; taking 62% of FDIs into ASEAN, with Malaysia coming second 

with an 18% share, and Vietnam in third at 6.3%. 

The volume of trade (exports and imports) between ASEAN and the 

world rose from USD589 billion in 2000 to USD763 billion in 2004, showing 

an annual average growth rate of 6.7%. Within ASEAN, trade volume 

has also increased tremendously from USD167 billion in 2000 to USD222 

billion in 2004, representing an average annual growth rate of 7.4%. 

D. ASEAN, AFTA and Other FTAs 

The ASEAN Free Trade Area Agreement (AFTA) is one of the many 

bilateral and multilateral trade arrangements arising from world trade 

liberalisation. Through AFTA, the ASEAN countries have been easing 

towards complete trade liberalisation, with tariffs brought down to 

five or zero percent for a wide range of products among the ASEAN 4 

countries in 2005. 

ASEAN is also forging ahead with bilateral trade agreements with 

countries outside ASEAN. One such arrangement is the ASEAN+3 (China, 

Korea and Japan) economic and trade cooperation. It has led to a 

Framework Agreement between ASEAN and the Republic of Korea, 

expected to come into effect in 2006. 

4 - 6


Others trade agreements include the ASEAN-Japan Comprehensive 

Economic Partnership, which commenced in April 2005, and the 

Framework Agreement for an ASEAN-China Free Trade Area (ACFTA) 

in 2002. Since 2003, ASEAN trade with China has been growing rapidly, 

exceeding the USD100 billion mark in 2004. 

ASEAN is also actively looking at establishing other economic ties with 

more countries. Among them are Russia and India. The first ASEAN- 

Russian Federation Summit was held in December 2005, and the ASEAN- 

India Free Trade Area (AIFTA) is currently under negotiations. 

The US is also interested in setting up bilateral FTAs with individual 

countries of ASEAN in view of the fact that two-way trade between 

ASEAN and the US has increased considerably to USD123 billion in 2003. 

Thailand is among the first to do this (2004), followed by Singapore 

(2005) while Malaysia began negotiations in 2006. 

4.4 The Singapore – Indonesia Factor 

and ports in the region and throughout the world. Key industry clusters 

that it is pursuing include electronics, engineering, chemicals, life 

sciences, education and healthcare, communications, media, leisure 

and tourism, transportation and logistics. 

Population growth prospects for Singapore indicate that its current 

population would rise to 5.4 million by 2025 1 . Its GDP is targeted to grow 

at between 3.7% per annum to 4.6% per annum from now to 2025, 

implying its GDP in USD (PPP) could reach USD262 billion to USD312 billion 

by 2025. This would translate to per capita GDP of USD57,800 at current 

prices. 

Singapore has nearly reached the physical limits of both sea-front 

land and sea space. Its strategy is believed to be to transfer the 

development of its more labour and land intensive and lower value 

added industries to Johor and Batam, mainly through the growth 

triangle (IMS-GT) and the Johor-Singapore-Indonesia (JSI) node. This 

would enable it to take advantage of the much larger land resources 

offered by Johor and Indonesia (primarily Riau Islands). 

Johor’s closest international neighbours are Singapore and Indonesia. 

The development within these countries will have significant impact on 

the development of SJER. 

A. Singapore 

Singapore is now one of Asia’s most developed economies. It has an 

estimated population of about 4.2 million (2005) and a GDP of USD127 

billion (at PPP). Its per capita GDP is estimated at USD29,936 in 2005, or 

almost three times that of Malaysia at USD10,318. 

The strategic thrusts of Singapore’s economy are all geared towards 

orientating it to the global arena as well as to enhance human 

resources, to nurture innovation, to promote national teamwork, and 

to reduce economic vulnerability. To achieve this goal, Singapore 

has adopted the cluster strategy in its development thrust into the 21 st 

century, emphasising the need to develop high-tech and high valueadded 

manufacturing and services sectors to be the twin engines of 

growth. 

B. Indonesia 

Indonesia has the largest population and economy in ASEAN, making it 

an important factor for Johor and SJER in their future growth directions. 

At present, Indonesia is an important source of labour supply for Johor’s 

manufacturing and services sectors. Scope for future cooperation 

could lie in logistics, especially in the development of air links between 

Sumatra and Senai and in other growth areas such as tourism, agroprocessing, 

construction and port services. 

Indonesia’s population of 223 million in 2005 is expected to rise to 280 

million in 2025. Its’ GDP of USD899 billion (at PPP) in 2005 is targeted to 

grow at 6% per annum to reach USD2,829 billion by 2025. By then, its per 

capita GDP is expected to rise from USD3,700 to USD10,000. 

Of interest to Johor is the forging of stronger economic ties with Batam 

and Bintan Islands and other parts of Riau province and the rest of 

central and Southern Sumatera. 

It has developed a world-class transportation and telecommunications 

infrastructure, facilities and services to link the city-state with major cities 

1 Recent reports indicated that this target population has been 

raised to 6-7 million by 2020. 

4 - 7

SECTION A 


4.5 National and State Perspectives 

A. National Population 

Malaysia’s national population of 26.75 million (2005) is expected to 

increase to 28.96 million in 2010 and to 39.5 million by 2025 (Figure 4.11). 

The projected average annual growth rate between 2000 and 2010 is 

2.1%. While there is no official projection for Malaysian population for 

year 2025, it is assumed that the growth rate between 2005 to 2025 will 

on average be 2.0% as the natural growth rate is expected to decline. 

But as the proportion of foreign population in Malaysia is expected 

to increase, especially among the more skilled professional and 

managerial category, the 2.0% percent growth rate seems reasonable. 

Labour force is estimated at 11.29 million in 2005 and is projected to rise 

to 12.41 million in 2010, supported by a higher labour force participation 

rate of 67.3% as opposed to the current rate of 66.7%. The higher overall 

rate is due to increased male and female labour force participation 

rates. 

In the long term, the overall participation rate could reach 70%, 

supported by a continuously rising female labour force participation 

rate. Employment is expected to rise at an average annual rate of 1.9% 

to reach 17.2 million in 2025. A total of 5 million new jobs would have to 

be generated to meet demand for employment. 

Figure 4.11: Long-Term Prospects in the Supply and Demand for Labour in Malaysia, 2005-2025 

45,000.0 

40,000.0 

39,549.3 

35,000.0 

30,000.0 

28,960.0 

26,748.1 

(in '000) 

25,000.0 

20,000.0 

16,880.0 

18,420.0 

17,173.0 

17,814.0 

23,678.0 

15,000.0 

10,000.0 

10,894.8 11,290.5 

11,976.0 

12,406.8 

5,000.0 

- 

3.5 % 3.5 % 4.0% 

2005 2010 2025 

Unemployment Employment Labour Force Working Age Population Population 


4 - 8


4.6 National Economic Structure 

The Malaysian economy registered real GDP growth of 5.3% in 2005, 

brought about by a strong growth of 7.3% in the services sector. A major 

contribution to the growth came from the expansion of the tourism 

industry which impacted strongly on the wholesale and retail trade and 

on the hotels and restaurants sub-sectors. 

Ethnic composition shows that Bumiputeras made up 54% of the 

population; the Chinese 32%, Indians 7% and non-citizens, 6%. The 

state population is expected to rise to 3.5 million in 2010. By 2025, the 

state population is projected to increase to 5 million. This represents 

an average growth rate of 2.3% which means that the growth rate for 

the 2000 to 2010 period will be sustained by natural growth rate and in 

migration from within and outside Malaysia. 

The Ninth Malaysia Plan has targeted an average annual economic 

growth rate of 6% up to 2010. Although long term national growth 

targets are unclear given global uncertainties and risks, the government 

is likely to aim for an achievable growth scenario in the long term. A 

possible target growth rate of 6% could be assumed from 2011 to 2025. 

Employment is targeted to rise from 1.3 million in 2005 to 2.21 million by 

2025. The rate of growth is higher in Johor at 2.9% per annum compared 

to the national growth rate. The labour force would increase to 2.28 

million as a result of rising labour force participation rate in Johor. 

A. Johor State Population 

The current Johor state population of 3.17 million is relatively young, with 

median age estimated at 25 years. Dependency ratio is also low at 57%, 

indicating a sizeable working population capable of supporting the 

young and the aged in the state. 

Figure 4.12: Long-Term Prospects in Demand and Supply of Labour Force in Johor, 2005-2025 

6,000.0 

5,000.0 

5,000.0 

4,000.0 

(in '000) 

3,000.0 

2,000.0 

1,262.8 

1,309.8 

2,019.5 

3,170.0 

1,468.0 

1,516.0 

2,262.7 

3,460.0 

2,213.4 

2,281.9 

3,182.6 

1,000.0 

0.0 

3.6% 

3.2% 

2005 2010 2025 

3.0% 

Unemployment Employment Labour Force Working Age Population Population 


4 - 9

SECTION A 


B. Johor Economic Structure 

Johor achieved a GDP growth rate of 8.1% in 2004 and 6.5% in 

2005. Both the manufacturing and services are key sectors of equal 

importance in the state economy. Future trends indicate that services 

will emerge as the largest source of GDP growth in Johor. 

Between 2001 and 2005, Johor received manufacturing investment 

proposals totalling RM19.0 billion, of which approximately 70% were to 

be located within the SJER. Between 1994 and 2005, the average ratio 

of FDI to total investment was 70%. These manufacturing investments 

(2001-2005) are expected to generate a total of 117,993 new jobs. 

sectors. It alone accounts for about 50% of the total value added of the 

manufacturing sector within SJER. 

Spatial distribution of manufacturing clusters in SJER shows that the E&E 

cluster is dispersed from Tebrau, Majlis Bandaraya Johor Bahru (MBJB), 

Pasir Gudang, Senai-Kulai and Skudai zones while the petrochemical 

industries are concentrated in Pasir Gudang and MBJB zones. 

The oil palm processing and oleo-chemical industries are highly 

concentrated in Pasir Gudang and the other chemical industries are 

found mainly in Pasir Gudang, Tebrau and MBJB zones. 

Johor aims to be fully developed by 2020. This is to be achieved through 

structural transformation. Services would increase its share to more than 

56% while that of manufacturing would decrease from the current share 

of 44% and stabilise at 37% by 2025 (Figure 4.13). 

The target growth rate of Johor GDP for the period 2005-2025 is 7% 

although under the Ninth Malaysia Plan period (2006-2010), its economy 

is targeted to increase at 6.2% per annum. Under this growth scenario, 

its per capita GDP would more than double, rising from USD10,800 in 

2005 to USD25,800 by 2025. 

The plastic industries and food processing industries are dispersed in 

Tebrau, MBJB, Senai-Kulai, Pasir Gudang and Skudai-Kulai zones. 

In the services sector, the key sectors are international logistics and 

related services, tourism and related services. Tertiary education and 

international medical services are already in existence and do export 

their services to other parts of the state and the country and overseas. 

But their influence on SJER’s economy at present is rather limited. The 

educational and health service industries have the potential of being 

developed into major drivers to the SJER’s economy. 

Over the longer term it is expected that Johor’s GDP will grow above 

the national average growth rate. Its share of national gross output 

meanwhile is also expected to rise from 12.4% in 2005 to 14.9% in 2025. 

4.7 SJER Economic Structure 

The two main economic growth sectors in SJER currently are 

manufacturing and services. 

The key sectors in the manufacturing sector that drives the SJER 

economy are electrical and electronic (E&E), chemical and chemical 

products (petrochemical, plastics, oleo chemicals) and food processing 

sub-sectors (Figures 4.14 and 4.15). They contribute 60% of the total 

value-added in manufacturing. 

These key sectors lead to the emergence of supporting or induced 

sectors such as retail, wholesale, hotels, restaurants and finance. In 

manufacturing, the induced sectors include fabricated metal products, 

non-metallic products and transportation equipment. 

Figure 4.13: Comparison of Long-Term Structural Changes in GDP of 

Malaysia and Johor, 2025 

100% 

90% 

80% 

70% 

60% 

50% 

40% 

30% 

20% 

10% 

0% 

67.6% 

24.2% 

8.0% 


56.1% 

37.3% 

6.6% 

Johor 

The electrical and electronic sector (E&E) is the dominant sector 

with the highest concentration of workers among the main industrial 


Primary Secondary Services 

4 - 10


Figure 4.14: Key Drivers and Induced Sector Activities in SJER 

Economy 

KEY SECTORS (Exporting) 

A 

a1 Electrical/Electronic 

a2 Chemical and Chemical 

Products 

a3 Food Processing 

60 (%) 

B 

b1 Logistic and related 

services 

b2 Tourism 

b3 Tertiary Education 

b4 Specialist Medical 

services 

30 (%) 


4.8 Strategic Economic Thrusts (SET) 

SUPPORTING AND INDUCED SECTORS 

(Local Market) 

C 

c1 Fabricated Metal Products 

c2 Non-Metallic products 

c3 Transport Equipment 

c4 Publishing, Printing and Paper 

Products 

c5 Wood Products and Furniture 

c6 Clothing 

c7 Others 

40 (%) 

D 

d1 Retail and wholesale trade 

d2 Finance 

d3 Construction 

d4 Utilities 

d5 Local Government 

d6 Primary and Secondary Education 

d7 Health services 

d8 Professional business and 

domestion services 

70 (%) 

A combination of seven strategic economic development thrusts is 

needed to accelerate growth of SJER during the CDP period. The thrusts 

are as follows : 

SET 1. Strengthen the Existing Main Economic Drivers and Diversity Into 

New Economic Growth Sectors 

SET 2. Strengthen Supporting Industries and the Basic Foundation 

SET 3. Strengthen International Linkages 

SET 4. Build on Existing Strength in Respect of Resource Endowment and 

Lever on Singapore’s Strength 

SET 5. Optimise Spatial Distribution of Economic Activities 

SET 6. Adopt the Cluster Approach 

SET 7. Provide the Right type of Incentives and Support 

SET 1. Strengthen the Existing Main Economic Pillars and Diversify Into 

New Growth Sectors 

Diversification shall be achieved by including four additional ‘pillars’ 

to further strengthen the main ’pillars’ as shown in Figure 4.15. This is to 

attain greater long term growth and stability for the SJER economy. The 

four new ‘pillars’ are proposed to be healthcare, educational services, 

financial services and creative industries (Figure 4.15). 

Increase in both local and foreign direct investment (FDI) into the 

existing and new main pillars is required. While before 1986, the official 

policy was to attract FDI by offering incentives based on employment 

and investment size, the Promotion of Investment Act of 1986 began to 

emphasise technological upgrading. 

Now, with the tightening of the labour market and the need to 

enhance competitiveness in a more globalised market through increase 

in productivity and rapid movement up the value chain, the Ninth 

Malaysia Plan currently places emphasis on driving innovation through 

the application of knowledge and technology. Accordingly, the FDI 

that the government now wishes to attract are those that are able to 

bring high technology, drive innovation and increase productivity. 

Local entrepreneurs, including SMEs must play a major role in the 

development of SJER. Large local companies and SMEs need to 

synergise with one another as well as with the large multinational 

companies (MNCs) and SMEs. SMEs are required to build the supply 

chain requirements of both MNCs and large local companies within 

SJER. 

4 - 11

SECTION A 


Figure 4.15: Present and Future Structure of SJER Economy 

The Vision 

SJER Economy 

“Strong, Diversified, Dynamic and Global” 

The 

Main 

Pillars 

Electrical 

and 

electonics 

Petro 

chemical 

and 

oleo 

chemical 

Food and 

agro 

processing 

Logistic 

and 

related 

services 

Tourism 

Health 

services 

Educational 

services 

Financial 

services 

ICT & 

Creative 

industries 

(Five existing “Pillars” shall be reinforced) 

(Four new “Pillars” to be added) 

Strong supporting industries (metal products, engineering, non-metallic, manufacturing related services (MRS)) 

Support 

systerm 

Strong supporting industries (education, R&D, government, private and social institutions, communication and 

coordination system ) 

World-class professionals and technical work force 

Basic 

Foundation 

Excellent physical, infrastructures, including IT 

Excellent working and living environment 

Stable political, social environment 


SET 2. Strengthen Supporting Industries and the Basic Economic 

Foundation 

The main pillars of the economy are underpinned by numerous 

supporting industries, most of which are SMEs. These have to be 

strengthened in order to ensure that the key industries are able to 

develop without undue constraints. 

It is also important to strengthen supporting institutions (public, private 

and social) and the basic ‘hard’ and ‘soft’ infrastructural foundation 

upon which economic growth is dependent. 

4 - 12 

Soft infrastructure includes skilled human resources, good public safety, 

good governance, law and order, quality environment and other 

amenities that improve the overall quality of the business, working 

and living environment. The hard infrastructure refers to public utilities, 

transportation network, etc. 

With respect to the ’hard’ infrastructure provision, a vital component is 

the enhancement of international connectivity, especially in respect 

of air transportation. While progress continues to be achieved at Senai, 

to reach a critical mass in terms of international connectivity will be 

attained only over a relatively long period. As such, the enhancement


of connectivity through the larger international logistic nodes of 

Singapore and Kuala Lumpur is still to be given high priority over the 

short and medium term. 

Human resource development is another key component of this 

thrust. In addition to enhancing the capacity and capability of the 

educational and training institutions, a liberal policy with respect to 

foreign skilled and professional workers needs to be adopted. Critical 

gaps that has appeared and shall appear in the local supply must be 

quickly filled by the importation of foreign skills and expertise. 

With respect to the provision of ‘soft’ infrastructure, SJER should take full 

advantage of the resources that it is well endowed with such as land 

and labour. For instance, strong emphasis should be placed on the 

provision of ‘parks and gardens’ to offer a unique living and working 

environment and lifestyle that fully exploits the availability of space in a 

manner that those less endowed with land cannot provide. 

The long term objective must be to equip the whole of SJER with a 

‘world class’ hard and soft infrastructure. The implementation, given 

limited resources, must however be in phases. An important strategy is 

to identify high impact projects that can be implemented over the short 

term (up to three years) without incurring high cost and within certain 

strategic zones where a complete world class infrastructure can be 

provided within a period of three to five years from now. 

SET 3. Strengthen International Linkages 

Industries within SJER need to strengthen their position within the global 

value chain in order to obtain market access, reap the benefits of 

economies of scale and benefit from technology and innovations. 

This thrust for SJER is part of the overall national thrust as contained in the 

Ninth Malaysia Plan which stresses on the importance of strengthening 

strategic integration with the global economy. 

The Ninth Malaysia Plan stated that; 

“in the rapidly changing global environment and the increasing trends 

towards growing strategic alliances and networking among a number 

the national players, it will become imperative for Malaysian investors 

to form greater partnership with foreign affiliates, as well as venture 

out on their own, to make inroads into targeted growth areas both at 

home and abroad. This will enable Malaysian industries to become a 

crucial part of the international economic chain and produce goods 

and services that create new demand and market opportunities. In 

this regard, initiatives to facilitate these industries to meet these new 

challenges will include: 

■ Facilitating investment in new sources of industrial growth and 

wealth creation that require extensive global partnering to reap 

economies of scale, expend exports and increase access to 

markets. 

■ Promoting the expansion of FDI in the country as well as facilitating 

joint ventures and strategic alliances between Malaysian firms 

and MNCs. 

■ Assisting domestic industries to enhance core competencies, 

especially in ICT design and engineering skills as well as 

management and technical expertise to benefit from regional 

and international production networks. 

■ Developing and pursuing high standards of product quality and 

service performance to sustain market share and create new 

market opportunities; and 

■ Building the necessary infrastructure and facilities including 

dedicated industrial parks in specific locations that have the 

potential to attract investment.” 

SET 4. Build on Existing Strength in Respect of Resource Endowment and 

Lever on Singapore’s Strength 

Being located contiguous to Singapore, and being part of the strongest 

regional agglomeration node that is centred in Singapore that extends 

to Johor mainly SJER and the Batam and Bintan islands in Indonesia, the 

Johor-Singapore-Indonesia (JSI) node in short, the international linkages 

of SJER to the rest of the world are largely with and through Singapore. 

The linkages with Singapore (Figure 4.16) are mainly as follows: 

A. Manufacturing Sector 

■ Vertical linkages – This type of linkages currently exist mainly in 

the Electrical and Electronic sector. In this case, the value added 

and more skill- and knowledge- intensive activities are located 

in Singapore while SJER contains the lower value added and 

4 - 13

SECTION A 


manufacturing end of the value chain. 

■ Consumption linkages are also important since SJER exports 

consumer products to Singapore and Johoreans do shop in 

Singapore and make use of the airlines and other services in 

Singapore. 

■ Horizontal/parallel developments have also developed within 

SJER. They are mainly resource-based industries such as petrochemical, 

oleo-chemical, and some components of food 

and agro-processing industries that that process raw materials 

obtained from Johor and other parts of the country for the 

domestic and export market. 

■ Horizontal development and integration in high technology 

industries has yet to take place. 

■ Unlike those Malaysian workers that reside in Singapore who 

are mainly in the skilled professional and managerial class, the 

majority of commuting workers are unskilled and semi-skilled 

(general workers and machine operators). 

■ Only 16% are skilled workers – 10% are employed as technicians 

and 6% in managerial or administrative positions. 

The major attraction for these workers is the wage differential between 

Singapore and Johor. The salary differentials for Malaysian workers in 

Singapore could range from at least two to three times higher than that 

in Johor. The phenomenon has enabled Johor, especially SJER to keep 

its unemployment rate low. 

Figure 4.16: Horizontal and Vertical Linkages within the Johor- 

Singapore-Indonesia (JSI) Agglomeration Node (Present 

and Future) 

B. Service Sector 

Linkages with Singapore are strong for Tourism and Logistics, while 

tourism is largely a complementary development. For Logistics, 

Singapore sea port is still an important outlet for exports from SJER and 

Changi airport is an important international gateway for SJER residents 

and visitors. However, both PTP and Senai Airport are developing as 

largely horizontal system to those in Singapore. 

While vertical and consumption linkages such as in E&E industries, 

logistic services, tourism, food and agro processing industries will 

continue and strengthen, future focus will be on further horizontal 

developments, especially in high technology, knowledge-based as well 

as resource-based industries. This will include educational and health 

services, niche financial services and the ICT & creative industry. (Figure 

4.16). 

C. Human Resource Linkages with Singapore 

Electrical & 

Electronics 

and Other 

Industries 

Food & Other 

Agricultural Product 

Other Product 

Petrochemical & Oleochemical 

Food & Agro Processing 

Logistic Service Systerm 

Education & Health 

Niche Financial Services 

ICT and Creative Industries 

Logistic Service System 

Petrochemical 

Pharmaceutical 

Financial/Other Services 

Electronics/ 

Electrical 

Products 

Tourism Products 

Logistic and 

Other Services 

SJER 

Singapore 

JSI 

AGGLOMERATION 

NODE 

It is estimated that 150,000 Malaysians are working in Singapore. Of this, 

about 41,000 are commuting daily (mostly from areas within SJER). In 

1989, the total number was around 24,000. About 51% of the commuting 

workers are employed in the E&E industries. 

Their main characteristics are: 

■ 60% of the commuters are Johor-born. 

4 - 14 

KEY 


Existinc Parallel/Horizontal 

Development Regional 

and Global Market 

Future Parallel/Horizontal 

Developement 

Vertical, Horizontal and 

Consumption Linlkages 

Batam 

Indonesia


▼ Positioning SJER within the JSI Node and Internationally 

Given the above linkages and the strength of Singapore with respect 

to the provision of hard and soft infrastructure especially its international 

connectivity, manufacturing related services and other supporting 

industries and SJER’s relative weakness in these areas, it is clear that a 

principal strategic thrust is to complement and leverage on Singapore’s 

strength while building vigorously on SJER’s own strength such as the 

resource endowment in respect to land, labour and other natural 

resources. (Figure 4.17) 

Figure 4.17: Singapore and SJER – Leveraging on The Strength of 

Singapore and Developing Own Strength 

Singapore 

SJER 

A1 

STRENGTH 

Hard and Soft Infrastructure 

• Highly efficient integrated global logistic 

system 

• Strong supporting industries including MRS 

• Excellent internal infrastructure 

• Good supply of skilled workforce 

• Highly efficient and strong government 

support 

• International lifestyle 

• Good security 

• Good environment quality 

B1 

RELATIVE 

Hard and soft Infrastructure 

Lack of: 

• Highly efficient integrated global logistic 

system 

• Excellent internal infrastructure 

• Good supply of skilled workforce 

• Highly efficient and strong government 

support 

• International lifestyle 

• Good security 

• Good environment quality 


SJER has to strengthen the hard and soft infrastructure and supporting 

industries and institutions to combine these with its inherent strength in 

natural resources including land and labour to develop a strong, highly 

diversified, dynamic and globally orientated economy. 

By reducing its weaknesses (Figure 4.17, quadrant B1) and combining it 

with its strengths (Figure 4.17, quadrant B2) and improving access to the 

strengths of Singapore, SJER can offer the ‘best’ combination to attract 

A2 

RELATIVE 

Resource Endowment 

• No raw material 

• Small income market 

• Small labour pool 

• Shortage of land 

• High cost of living 

B2 

STRENGTH 

Resource Endowment 

• Good suply of raw material 

• Access to large labour market 

• Low cost of living 

• Plentiful supply of land 

potential investors. Given its resource endowment and large home 

market base, SJER has the potential to eventually develop into a more 

stable economic entity. 

▼ Strengthening the Economic Linkages within the JSI Node and to 

Other Major Global and Regional Agglomeration Nodes 

SJER, by virtue of its contiguity with Singapore, and the linkages and 

opportunity for leveraging as described, must strengthen its position 

within the JSI node which has the potential to develop into a strong and 

outstanding international agglomeration node. 

From the point of view of international investors seeking to locate their 

production, management, control, procurement, distribution centres 

and other service centres east of Suez, especially within the Asia- 

Pacific region, the JSI node is a major option among other competing 

international nodes which include Hong Kong – Shenzhen, Sydney, 

Bangkok, Manila and even Dubai and Bangalore. 

As investors tend to select among major agglomeration nodes rather 

than countries, a strategic stance for SJER to take in the global arena is 

to compete as part of a JSI node rather than “going it alone.” 

Figure 4.18: Development Perspective within JSI – Further 

Development of Horizontal/Parallel and Vertical Linkages 

Form & 

Integration 

within JSI 

Horizontal/ 

Parallel 

Development 

Vertical and 

Demand 

Linkages 


Existing Main Exporting Industries 

That Must Be Developed Further 

Manufacturing 

• Petrochemical 

• Oleochemical & Biodiesel 

• Agro products & Food 

Processing 

Services 

• Integrated International 

Logistical Services 

Electrical and Electronics Industries 

Food 

Logistic 

Tourism 

New International Oriented 

Industries Need to be Developed 

Attract Larger ‘Development 

“Flagship” Firms’ to Create New 

Products in: 

• Electrical/ Electronics 

– Development of high end 

component of value chain and 

more value network 

• Creative Industries 

• International Health Services 

• International Educational 

Services 

• Entrepot Business 

• Produce more high end 

products 

• Enhance complementarities 

4 - 15

SECTION A 


▼ Site for High Technology and Knowledge Based Dynamic Clusters 

The main drawback at present is that SJER is viewed as the low cost 

hinterland to Singapore where cheap resources and cheap labour can 

be obtained for the low-end manufacturing activities. This image must 

change. 

SJER must strive to build itself as a dynamic sub-set of the larger and 

stronger international JSI node. It must develop its own character and 

strength and be able to attract and support the development of 

dynamic and high technology industrial clusters. 

SJER can achieve this given its resource endowment and its willingness 

and ability to invest heavily to upgrade its hard and soft infrastructure 

to a world class standard, at least to the level already attained by 

Singapore. 

▼ International Positioning of SJER 

The International Positioning of SJER can therefore be seen as consisting 

of four tiers 

TIER ONE – Positioning among Regional and Global Nodes 

SJER should present itself as an integrated part of a strong, high profile 

and internationally visible and marketable JSI node to attract major 

global flagship companies in the higher technology industries by 

offering more skilled workforce and expertise. It should also complement 

developments with other major nodes and regions via sourcing and 

outsourcing. 

TIER TWO – Positioning within the Johor-Singapore-Indonesia node 

SJER shall: 

■ Develop as a major subset within the strong JSI node and global 

node. 

■ Strive to attain a seamless physical integration and maximum 

international accessibility within the JSI node but must also be able 

to spotlight on its unique character and develop its own strength. 

■ Develop strong synergistic economic relationship within the 

JSI Node through vertical integration while developing its own 

horizontal/parallel industrial clusters. 

TIER THREE - International Positioning of Major Industrial Clusters 

Each of the major industrial clusters needs to be clearly positioned within 

the international context. For instance, the E&E cluster needs to position 

itself to develop horizontal clusters with strong linkages to the global 

chain and not remain at the low end tail of the Singapore cluster. 

TIER FOUR – Positioning of its major firms and major institutions in relation 

to firms and institutions within SJER, Malaysia, JSI Node and the Regional 

and Global setting. 

This would include key players such as PTP, Senai Airport, main public 

institutions of higher learning, and health care centres. In addition, 

world-class facilities and companies in various sectors including leisure 

and tourism, ICT and creative industries needs to be targeted. 

SET 5. Optimise Spatial Distribution 

To meet the efficiency and equity objectives of the Plan by focussing 

development on the South Economic Corridor and the northern node 

at Senai-Kulai. This subject has been discussed in the chapters on 

the Physical Plan of SJER while in the socio-economic context, the 

relevance of this strategy particularly in ensuring growth with equity is 

also discussed further in the chapters on the Socio-Economic aspects of 

development. 

■ Create strong direct and indirect linkages with other major 

regional and global development nodes. 

■ Capitalise on its relatively strong resource endowment to 

develop its own unique character and enhance its competitive 

advantage within the regional and global settings. 

4 - 16


Figure 4.19: International Positioning of SJER within the SJI Regional Node 

Bangkok 

Thailand 

Bangalore 

India 

Hong Kong 

Shenzhen 

Dubai 

UAE 

Northern 

Corridor 

Eastern 

Corridor 

Shanghai 

China 

Klang 

Valley 

Manila 

Philippines 

SJER 

Other 

JSI REGIONAL 

DEVELOPMENT 

NODE 

Singapore 

Batam 

Sydney 

Major Regional 

Development Nodes 


SET 6. Adopt the Cluster Approach 

A cluster can be defined as a geographically proximate group of 

interconnected companies and associated institutions in a particular 

field, linked by commonalities and complementariness. Clusters may 

take varying forms depending on their level of maturity. They can 

include end products and services, suppliers of components, parts, 

machinery, financial and professional services and other related 

activities. It can also include specialised infrastructure providers, 

government and other institutions providing specialised training, 

education, information, research and technical support. 

The advantage of clustering can be summarised as follows: 

“Hard” Benefits of Clusters 

Asset 

Local supply chains 

Specialised workforce 

Specialised services 

Choice of inputs 

Range of firms 

“Soft” Benefits of Clusters 

Asset 

Association 

Trust, Loyalties 

(social capital) 

Learning 

Benefits 

Design efficiencies 

Higher productivity 

Faster and easier access 

Lower costs, higher quality 

Joint ventures, network opportunities 

Benefits 

Collective vision, planning, influence 

Inter-firm collaboration and networks 

Technology transfer and 

innovation, tacit knowledge and 

know-how 

4 - 17

SECTION A 


The clusters within SJER currently are mostly not well developed. The 

most developed is the E&E cluster which as noted, is actually an integral 

part of the Singapore E&E cluster, though the part within SJER occupies 

the lower end of the value chain. 

□ amount RM600 million 

□ quality investment in “knowledge-incentive, labour saving, high 

technology” involving R&D, intellectual property development, 

and human capital enhancement 

Cluster upgrading and development is therefore a major objective 

of SJER development policy and strategy. The main thrust is the 

transformation of truncated and embryonic clusters into a dynamic 

set of clusters able to generate its own innovation and increase 

productivity. 

The main strategic component of this thrust is the enhancement of 

the network cohesion in each cluster so that all firms and institution in 

the private and public sectors connect and coordinate smoothly their 

demand and supply requirements. 

An important initiative to attain this systemic cohesion is the formation 

of cluster associations for each of the major industrial clusters. The 

membership of this association shall be opened to all those in the 

private and government sectors, education, training and R&D 

institutions, other intermediary organizations that are involved directly or 

indirectly in the supply and demand of related products and services. 

SET 7. Provide Right Type of Incentives and Support 

• Incentives 

Strong incentives currently exist under the Cyber City/Cyber Centre Bill 

of Guarantees (BoG) and Free Zone Act 1994. The Ninth Malaysia Plan 

also proposes more focused Incentives for High Value Added Industries 

such as: 

i. Pre-Package Incentives to encourage: 

□ R&D, technology transfer, job creation (especially E&E digital 

context, biotechnology) 

□ existing industries to diversify into high-end industries as well as 

related services 

□ strategic Investment Incentives for New Growth Area 

ii. Skill Upgrading Incentives (under – Pre-Package) 

The objective is to upgrade skills especially in the SME sector in 

areas such as ICT integration, utilization of bioinformatics, virtual 

engineering service for high end design activities (Total allocation 

RM463 million) 

iii. MRS Industry 

□ Logistics, business services etc 

□ Soft Loan RM220 million 

iv. Automation Fund 

v. Industrial Adjustment Fund 

Given the proposed Cyber Cities and Cyber Centres for SJER and the 

existence of a Free Zone near Tanjung Pelepas, generous incentives 

are and shall be available within SJER. The package incentives are 

also available for companies in SJER that meet the qualifying criteria. 

Additional incentives for SJER have also been proposed and is 

elaborated further in Chapter 6. 

4.9 FUTURE GROWTH SCENARIO, 2005-2025 

A. Indicative Targets 

The future development scenarios, expressed in terms of indicative 

“targets” such as total population, total GDP, average income as 

reflected in GDP per capita within SJER and the immediate catchment 

area that includes SJER itself plus other parts of Johor State, and 

Singapore, are necessary to attain the critical mass for the eventual 

development of SJER into a major growth node within the national, JSI 

and international context (Figure 4.19). 

4 - 18


The attainment of the critical mass will render viable many costly 

physical and social infrastructure proposals including the proposed fast 

train from Kuala Lumpur to other parts of Malaysia, internal fixed track 

transportation system, the provision of various public goods such as 

regional parks and various recreational facilities such as museums, art 

galleries, libraries and theatres. 

B. Attaining the Critical Mass 

The total population of 5 million projected for Johor, with a total GDP 

of about USD129 billion (PPP) or a projected per capita GDP of about 

USD25,800, should provide a large enough catchment for Senai Airport, 

enabling it to attain a passenger flow of around 10 million per annum or 

more. 

Taking the projected population of Singapore and Johor in 2025 which 

is expected to reach about 10 million or more and a passenger flow of 

at least 60 to 70 million for Changi annually, Senai can by then justify its 

position as the second regional airport, given the limited land and air 

space in Singapore. 

the political will to push development to a level where the momentum 

of growth and the critical mass could be attained to sustain rapid 

development. 

▼ Population Growth Targets, 2005-2025 

Johor population is targeted to grow from 3.17 million in 2005 to 3.46 

million under the Ninth Malaysia Plan. From 3.46 million in 2010, the state 

population is expected to increase to 3.9 million in 2015, 4.4 million in 

2020, and to 5 million by 2025. By then, the size of Johor population will 

be about the same as Singapore’s projected population (Figure 4.21). 

From 2005 to 2025, the state population is targeted to grow at an 

average annual growth rate of 2.3% (the same growth rate attained 

over the decade from year 2000 to 2010. A higher population growth in 

the state is anticipated beyond 2010 because of derived impact from 

targeted economic growth in SJER. 

The future scenario for SJER should include: 

■ A well developed, internationally and internally integrated, strong 

and efficient logistic system giving it a high level of national and 

international accessibility and internal mobility, 

■ A strong base for vertically and horizontally integrated dynamic 

manufacturing and service clusters. With well developed external 

linkages to major regional and global development nodes. 

■ A sizeable foreign residents (about 12-15%) with high skills and 

income would render viable the various international class social 

and educational, health, recreational and other facilities that 

are necessary for an international class ‘life style’ which is vital to 

attract and retain the inflow of international investment and highly 

skilled managerial and professional workforce. 

To attain these would require considerable efforts in terms of planning, 

investment, management from both the private and public sectors and 

4 - 19

SECTION A 


Figure 4.20: Future Scenario of SJER, 2025 – Critical Mass for Transportational Linkages and Interrated Diversified Manufacturing and Service Activities 

Enhanced air, sea, rail 

and road links to the rest 

of Malaysia 

Proposed Fast train 

from Kuala Lumpur 

(a) 

Stronger air and sea 

links to other ASEAN and 

East Asian countries 

Strengthen air/sea links 

to Sumatra and other parts 

of Indonesia 

(c) 

Tg. Pelepas 

2nd crossing 

Critical mass for Senai to be the second 

airport of the region by 2025 - Sea 

port to build strong domestic cargo and 

strong international services 

South Johor 

Johor Port 

3rd crossing 

Stronger air and sea links 

to East Malaysia and 

Kalimantan 

Critical mass for the 

development of more 

diversified vertical and 

horizontally integrated 

manufacturing and 

service activities 

Well diversified resource 

and knowledge based 

manufacturing and 

service industries 

(b) 

Strong road and rail 

linkages to Singapore 

Changi Airport 

Population (2025F) 

GDP (PPP) USD billion (2025F) 

Johor 

SJER 

Singapore 

Johor & Singapore 

SJER & Singapore 

5.0 Million 

3.0 Million 

5.4 Million 

10.4 Million 

8.4 Million 

Batam 

Johor 129.1 

SJER 93.3 

Singapore 312.0 

Johor & Singapore 441.1 

SJER & Singapore 405.1 


4 - 20


Figure 4.21: Development Scenario - A Comparison of Population Growth, 2005-2025 

45,000.0 

12,000.0 

40,000.0 

35,000.0 

30,000.0 

25,000.0 

20,000.0 

15,000.0 

10,000.0 

26,748.1 

39,549.3 

10,000.0 

8,000.0 

6,000.0 

4,000..0 

2005 2025 

5,000.0 

3,170.0 

3,000.0 

4,300.0 

5,400.0* 

7,470.0 

10,400.0 

5,653.2 

8,400.0 

5,000.0 

2,000.0 

1,353.2 


2005 2025 

Johor State South Johor Singapore Johor State & 

Singapore 

South Johor & 

Singapore 

Projected Population (000’) 

2005 

2025 

Average Annual 

Growth Rate (%) 


26,748.1 

39,549.3 

2.0 

Johore 

3,170.0 

5,000.0 

2.3 

SJER 

1,353.2 

3,000.0 

4.1 

Singapore 


4,300.0 

7,470.0 

5,400.0 

10,400.0 

1.1 

1.7 


5,653.2 

8,400.0 

2.0 

Notes: *This projection is based on UN forecast and appears to include foreigners since the based year figure data did 

include foreigners. But a recent article on Singapore population seems to indicate that targeted figure for year 2020 has 

been drastically in increased to 6-7 million. 


The proportion of non-citizens is expected to increase from 6% in 2005 to 

11% by 2025. The population in SJER is targeted to expand at an annual 

rate of 4.1%, thereby reaching 1.54 million in 2010, 1.91 million in 2015, 2.4 

million in 2020, and 3.0 million in 2025 (Figure 4.22). 

Growth will be fuelled mainly by migration into SJER, not only from 

neighbouring districts in Johor, but also from other parts of Malaysia, 

and from other countries. The proportion of foreigners is expected to 

increase, especially in the more skilled professional and managerial 

category, from the present 6.6% to between 12% – 15%. The population 

in SJER will represent 60% of the state in 2025, making it the dominant 

economic region in Johor. 

4 - 21

SECTION A 


Figure 4.22: Projected Population in Johor and SJER, 2005-2025 

6,000,000 

5,000,000 

4,000,000 

3,170,000 

3,460,000 

Population 

3,870,400 

4,399,700 

5,000,000 

35 

30 

25 

20 

26 

25 

28 

Median age (years) 

32 

30 

28 

27 

29 

33 

30 

3,000,000 

3,000,000 

15 

2,000,000 

1,000,000 

1,353,200 

1,536,900 

1,912,600 

1,396,200 

10 

5 

2005 2010 2015 2020 2025 

SJER Johor State 

0 

2005 2010 2015 2020 2025 

SJER 

Johor State 


A. Future Population Profiles, 2005-2025 

In SJER, the current median age is estimated to be 26 years and it is 

anticipated to rise to 33 years by 2025 (Figure 4.22). This is expected to 

be slightly higher than that for Johor which is estimated at 30 years. The 

higher median age shows that in SJER, the in-migration of workers, highly 

skilled and educated, would result in a trend towards an older, more 

matured population structure. 

In line with international and national trends, the share of the aging 

population would also increase. In Johor, its share is projected to rise 

from 4.4% in 2005 to 10% by 2025. In SJER, its share would rise from the 

present 3% to 9% by 2025 (Figure 4.23). 

Figure 4.23: Age Structure of Population of SJER and Johor, 2005-2025 

(%) 

100.0 

90.0 

80.0 

70.0 

60.0 

50.0 

40.0 

3.1 4.0 

66.4 67.3 

SJER 

5.6 7.8 9.0 

68.0 

68.4 68.0 

(%) 

100.0 

90.0 

80.0 

70.0 

60.0 

50.0 

40.0 

Johor State 

4.4 5.2 6.7 8.2 10.0 

63.7 65,4 64.3 64.2 63.7 

30.0 

30.0 

20.0 

10.0 

30.5 

28.8 

26.5 24.3 23.0 

20.0 

10.0 

31.9 

29.4 

28.7 27.6 26.4 

2005 2010 2015 2020 2025 

64 Years 

2005 2010 2015 2020 2025 

64 Years 

4 - 22 

Source: SJER CDP 2025


▼ Labour Force and Employment Growth Targets, 2005-2025 

The size of the working-age population in Johor State is expected to 

increase from 2.0 million in 2005 to 2.3 million in 2010, and to 3.2 million 

by 2025. About 64.0% of them would be in SJER. This means that by 2025, 

SJER would have around 2 million people in the working-age group. 

The working-age population in SJER would increase progressively from 

about 900,000 in 2005 to 1.3 million in 2015 and 2.0 million in 2025. The 

expansion of the working-age population in both Johor and SJER would 

lead to a rapidly growing labour force and hence, a relatively large 

group of people seeking employment especially when the labour force 

participation rate (LFPR) is projected to increase significantly to 72% by 

2025. Reflecting the profile of a developed economy, people above 64 

years in SJER is expected to remain in the workforce in the future and 

continue to work. 

The Services sector will be the major source of employment in SJER. It 

would increase its share of total employment from 56% in 2005 to 63% by 

2025. This is higher compared to the 55% share envisaged for Johor. 

The Manufacturing sector remains important, maintaining its share at 

about 39% of employment but its demand for workers would change, 

moving towards more knowledge-intensive and higher skilled workers 

as the clusters undergo internal restructuring and up scaling in terms of 

technology and capital investment. 

▼ Economic Growth Targets, 2005-2025 

Total GDP for Johor, as a whole, is targeted to reach USD129 billion (PPP) 

or RM235 billion (at constant 2005 price) in 2025. Its targeted growth 

takes into consideration the Ninth Malaysia Plan’s target of 6% GDP 

growth for Malaysia during 2005-2010 (Figures 4.25 and 4.26). 

The expanding labour force demands a higher economic growth 

in SJER, especially in the creation of jobs and in keeping down the 

unemployment rate to a range of 3% to 4%. 

This means that employment in SJER needs to increase at an average 

annual growth rate of 4.3% during the period 2005-2025. The rate has to 

be higher than for Johor which is expected to experience an average 

annual growth rate of 2.9% during the same period. 

Based on the targeted growth rate, employment in SJER is projected to 

increase to 752,100 in 2010, 928,500 in 2015 and to 1.4 million by 2025. 

This projected growth would also raise the employment level in Johor 

(Figure 4.24). 

Figure 4.24: Total Employment in Johor State and SJER, 2005 - 2025 

2,500,000 

2,213,400 

2,000,000 

1,923,600 

1,671,900 

1,500,000 

1,453,100 

1,262,900 

1,427,900 

1,000,000 

928,500 

1,150,700 

500,000 

752,100 

10,400 

2005 2010 2015 2020 2025 



4 - 23

SECTION A 


Figure 4.25: Economic Growth and Structure of Johor and SJER, 2005 – 2025 

USD (BBillion) 

140.0 

120.0 

100.0 

80.0 

60.0 

40.0 

20.0 

GDP of Johor State and SJER (USD PPP) 

129.1 

89.8 

93.3 

62.8 

45.2 

63.5 

33.4 

43.1 

29.0 

20.0 

2005 2010 2015 2020 2025 


100.0 

90.0 

80.0 

70.0 

60.0 

(%) 

50.0 

40.0 

30.0 

20.0 

10.0 

Economic Structure of SJER 

50.0 

53.8 

57.6 

61.1 65.0 

5.0 

4.2 

3.6 

2.8 

2.3 

42.0 

39.3 36.5 34.0 

31.0 

3.11 2.7 2.3 2.1 1.8 

2005 2010 2015 2020 2025 

Agriculture etc Manufacturing 

Construction Services 


Figure 4.26: GDP (PPP)(in USD billion), 2005 and 2025 

1000.0 

500.0 

900.0 

879.0 

450.0 

2005 2025 

441.1 

800.0 

400.0 

405.3 

700.0 

600.0 

500.0 

350.0 

300.0 

250.0 

312.0 

400.0 

300.0 

200.0 

276.0 

200.0 

150.0 

100..0 

129.1 

93.3 

127.0 

160.4 

147.0 

100.0 

50.0 

33.4 

20.0 



Singapore 

South Johor & 

Singapore 

2005 

2025 




276 

876 

6.0 

Johor 

33.4 

129.1 

7.0 

SJER 

20.0 

93.3 

8.0 

Singapore 

127.0 

312.0 

4.6 


160.4 

441.1 

5.2 


147,0 

405.3 

5.2 


4 - 24


Options for alternative growth paths were considered for both Johor 

and SJER taking into consideration the targeted growth of SJER. The 

long-term growth rate adopted for Johor for the period 2005-2025 is an 

average of 7% per annum. 

share is expected to decline from the present 42% to 31% – a pattern 

consistent with present-day structures of developed economies where 

services such as insurance, finance, professional services and other 

services dominate their economies. 

Growth of GDP in SJER is targeted at a minimum of 8% per annum 

during the period 2005-2025. This would raise SJER’s GDP from its current 

level of USD20 billion to USD93.3 billion by 2025 or almost five times its 

current level. In Ringgit terms (at constant 2005 price), this means that 

GDP in SJER would rise from RM35 billion in 2005 to RM163 billion by 2025. 

In terms of internal structure, the services sector in SJER would increase 

its current share of 50% to 65% by 2025 while the manufacturing sector’s 

In the process of restructuring, many of the manufacturing activities will 

undergo many changes leading to the emergence of manufacturingrelated 

services (MRS). 

Per capita GDP in SJER in 2025 is expected to double, rising from USD 

14,790 in 2005 to USD31,100 in 2025. It would be 1.2 times that of the 

state per capita GDP in 2025 of USD25,800 (Figure 4.27). 

Figure 4.27: GDP per Capita (USD), 2005 and 2025 

25,000 

22,225.4 

GDP PER CAPITA (PPP), 2005 

57,777.8 

20,000 

2005 2025 

47,261.9 

15,000 

41,298.1 

10,000 

10,318 

25,818.0 

31,100.0 

29,936.9 

21,664.0 

26,311.1 

5,000 

10,757.0 

14,790.0 



Singapore 

South Johor & 

Singapore 

2005 

2025 




Johore 

SJER 

10,318.0 

10,757.0 

14,790.0 

22,225.4 

25,818.5 

31,100.0 

3.9 

4.5 

3.8 

Singapore 


29,936.9 

21,664.0 

56,111.1 

41,298.1 

3.3 

3.3 


26,311.1 

47,261.9 

3.0 


4 - 25

SECTION A 


Economic growth is accompanied by improved labour productivity. 

In Johor, the average annual growth rate in productivity for Johor is 

estimated at 4% per annum (Figure 4.28). 

In SJER, labour productivity is expected to double within the period 

2005-2025, rising from RM57,122 in 2005 to RM113,808 in 2025. The 

average increase in labour productivity is 3.5% per annum. This higher 

productivity levels should lead to higher per capita GDP for both Johor 

and SJER (Figure 4.29). 

Targeted developments in SJER are expected to provide mutual 

benefits to the outlying areas, in particular, the rural areas. The provision 

of urban-based jobs (potentially with higher incomes) releases pressures 

on agricultural land to provide employment and stable income, leading 

to higher agricultural productivity levels and returns on land. 

(RM) 

Figure 4.29: SJER - Labour Productivity & Per Capita GDP (RM) at 2005 

Constant Price 2005 and 2025 

120,000.0 

100,000.0 

80,000.0 

60,000.0 

40,000.0 

20,000.0 

48,383 

25,766.3 

Per Capita GDP (RM) 

Labour Productivity 

56,116 

23,567 

JOHOR 

67,011 

28,946.9 

82,624 

35,124.6 

106,126 

46,980.0 

(RM) 

Figure 4.28: Comparison of Labour Productivity Growth in Johor and 

SJER (at Constant 2005 price) 2005 and 2025 

120,000 

100,000 

80,000 

60,000 

40,000 

20,000 

57,122 

48,383 


67,233 

56,116 

80,858 

67,011 

96,274 

82,624 

113,808 

2005 2010 2015 2020 2025 

SJER 

Johor State 

106,126 

(RM) 

120,000.0 

100,000.0 

80,000.0 

60,000.0 

40,000.0 

20,000.0 

2005 2010 2015 2020 2025 

SJER 

113,808 

Per Capita GDP (RM) 

Labour Productivity 

96,274 

80,858 

67,233 

57,122 

54,168.7 

46,232.4 

39,253.9 

32,858.5 

25,766.3 

2005 2010 2015 2020 2025 


4 - 26


▼ Investment Requirement 

A. Total Investment 

The total investment required to attain the Johor State and SJER 

projected growth in GDP is estimated based on incremental capital 

output ratio (ICOR) for Malaysia . 

The results are given in Figure 4.30(a) and Figure 4.30(b). A total of 

about RM47 billion will be required between 2006 and 2010 to attain the 

projected growth rate of 8% for SJER and about RM61 billion to attain 

a growth rate of 7% for Johor. Over the subsequent 5 year period, the 

corresponding figures are expected to increase to about RM73 billion 

and RM91 billion respectively. 

B. Manufacturing Sector 

Out of the total of about RM47 billion in investments required for SJER, 

almost RM16 billion will be needed directly (excluding investment in 

related infrastructure) for the manufacturing sector. This will be an 

increase over the 2001 – 2005 figure of about RM13.3 billion (Figure 

4.31(a) and Figure 4.31(b)). 

Assuming that the historical 70% average ratio of FDI to local investment 

is maintained in the manufacturing sector (Table 4.9), SJER shall need to 

target about RM11.3 billion in FDI in manufacturing sector over the five 

year period. 

However, since the actual implementation rate is only about 70% – 80% 

of “approved” investment value, a much higher target of ‘approved’ 

investment value must be targeted for 2006 – 2010 period. In other 

words, to attain an actual FDI target of RM11.3 billion in the 2006-2010 

period, a target for FDI approvals of between RM14 billion to RM16 

billion is required over the period. This will be an increase of about 50% 

over the total FDI approved between 2001 and 2005 which was about 

RM9.3 billion. 

It is clear that a much more aggressive and vigorous promotional 

effort to improve the enabling factors, including the hard and soft 

infrastructure, is necessary over the next five years. The major strategic 

thrusts and initiatives proposed in this chapter and other chapters are 

designed to attain this objective. 

RM million 

Figure 4.30(a): Estimate of Capital Investment Required to attain a 

GDP Growth Rate of 7%, Johor State (at constant 2005 

price) 2005 and 2025 

250,000 

200,000 

150,000 

100,000 

50,000 

ICOR (at3.00) 

61,316(USD 16,753) 


RM million 

91,482(USD 24,995) 

140,697(USD 38,442) 

227,895(USD 56,476) 

2006 - 2010 2011 - 2015 2016-2020 2021-2025 

Figure 4.30(b): Estimate of Capital Investment Required to attain a 

GDP Growth Rate of 8%, SJER(at constant 2005 price) 

2005 and 2025 

180,000 

160,000 

140,000 

120,000 

100,000 

80,000 

60,000 

40,000 

20,000 

ICOR (at3.00) 

47,098(USD 12,868) 


RM million 

73,533(USD 20,091) 

107,115(USD 29,266) 

155,172(USD 42,397) 

2006 - 2010 2011 - 2015 2016-2020 2021-2025 

Figure 4.31(a): Estimate of Investment Required in Manufacturing 

Sector in Johor State, 2005-2025 (at Constant 2005 

price) 

35,000 

30,000 

25,000 

20,000 

15,000 

10,000 

5,000 

22,704 

15,120 

6,584 


RM million 

26,370 

18,723 

7,547 

28,770 

20,427 

2006 - 2010 2011 - 2015 2016-2020 2021-2025 

Johor State FDI Local 

Figure 4.31(b): Estimate of Investment Required in Manufacturing 

Sector in SJER, 2005-2025 (at Constant 2005 price) 

25,000.0 

20,000.0 

15,000.0 

10,000.0 

5,000.0 

15,892.8 

11,284 

4,608.9 


18,459.0 

13,106 

5,353.1 

20,139.0 

14,299 

8,343 

5,840.3 

32,220 

22,554.0 

22,876 

16,013 

2006 - 2010 2011 - 2015 2016-2020 2021-2025 

SJER FDI Local 

9,344 

6,540.7 

4 - 27

SECTION A 


▼ Balancing Development Between SJER and The Rest of Johor 

It is clear that development within SJER will have profound implications 

on the rest of Johor State. For this reason, the issue of equity 

considerations is raised in chapters relating to social and holistic 

development in order to address the need to balance the targeted 

growth in SJER with developments in the surrounding areas outside it. 

The rapid development of SJER and its higher average wage rate will 

continue to draw labour and population away from the rest of Johor 

State resulting in a population growth rate of only 0.5%. This will be 

accompanied by a rapid growth in productivity especially in the nonplantation 

agricultural sector which is targeted for modernisation and 

rapid productivity growth over the Ninth Malaysia Plan. 

Average wage rate and income will grow more rapidly in the rest of 

Johor State than in SJER, albeit from a lower base. The faster the growth 

in productivity within the area outside SJER, the faster will be the growth 

in GDP per capita for the area and the more rapidly the income gap 

between SJER and the rest of Johor will close, and the faster will be the 

overall growth rate for Johor State as a whole (Figure 2.32). 

Since the rest of Johor is still very much dependent on plantation 

agriculture (palm oil and rubber) and since productivity growth in 

this sector is not likely to be very rapid, a conservative estimate of 

productivity growth for the rest of Johor at 4.1% is projected assuming 

rapid productivity growth in the non-plantation agricultural sector and 

other sectors including manufacturing and services. This growth rate is 

higher than the 3.5% productivity growth rate projected for SJER. 

However, should productivity growth rate for the area outside SJER 

be pushed to about 6.1% and GDP per capita at 6.5%, the per capita 

income gap will be considerably narrowed by 2025 (from 56% in 2005 to 

94.5% in 2025) and Johor GDP can grow at 7.6% if the growth of SJER is 

maintained at 8% (Figure 4.32). 

USD (PPP) 

Figure 4.32: GDP per Capita (PPP) of SJER and Rest of Johor, 2005 

and 2025 (at constant 2005 price) 


16,000 

14,000 

12,000 

10,000 

8,000 

6,000 

4,000 

2,000 

14,790 

SJER 

8,288 

Rest of Johor 


USD (PPP) 

35,000 

30,000 

25,000 

20,000 

15,000 

10,000 

5,000 


31,100 

GDP per 

capita 

Growth Rate 

SJER : 3.8% 

20,774 

GDP per 

Capita 

Growth Rate 

of R of J : 4.7% 

JS:4.5% 

GDP Growth 

Rate for 

JS: 7.0% 

4.10 The ‘With” and “Without” SJER Scenario 

26,542 

GDP per 

Capita 

Growth Rate 

R of J : 6.0% 

JS: 4.9% 

GDP Growth 

Rate for JS : 

7.4% 

29,411 

GDP per 

Capita 

Growth Rate 

R of J : 6.5% 

JS:5.0% 

GDP Growth 

Rate of JS: 

7.6% 

R of J : Rest of Johor 

JS : Johor State 

Strong efforts are needed to enhance the quality of hard and soft 

infrastructure within SJER. This will aggressively promote SJER as an 

efficient economic development node among local and foreign 

investors, and will accelerate economic development and income 

growth not only within SJER but also in the rest of the State. The South 

Johor Authority (SJA) is a proposed new regulatory, planning and 

planning approval facilitation entity which will be created to be the 

principal vehicle that will regulate SJER development and facilitate 

the highest degree of coordination between the State and Federal 

Governments, and between various government institutions, the private 

sector and the educational and training institutions. The strong regional 

focus and the cluster strategies facilitate close systematic interactions 

among the key stakeholders and enabling agencies. In addition, 

a commercial and investment vehicle, the South Johor Investment 

Corporation Berhad (SJIC), to drive the development of key catalyst 

projects, will be incorporated with key Federal and State investment 

agencies, Khazanah Nasional, EPF and KPRJ as shareholders 

An aggressive development drive and efficient coordination are 

needed to attain the targeted growth rates. The necessary rapid 

upgrading of the strategic and critical hard and soft infrastructure, 

including the enhancement of public sector efficiency will be 

achievable with the existence of close and strong support from the 

Federal Government, via the new authority to be created. 

4 - 28


Close coordination among various government agencies, educational 

and training institutions, and other industries can be facilitated by this new 

entity. This will coordinate an efficient development of human resource 

to facilitate existing local industries to move up the value chain, and to 

adopt more efficient technology, innovate and attract new investors in 

high technology industries. 

Without this, the potential loss in the future of low-end labour-intensive 

assembly industries (as experienced by Johor where about 15,000 jobs 

were lost between 2002 and 2005 through company closures) may not 

be fully compensated quickly enough by new high technology and 

higher value added industries. This is especially so given the strong and 

increasing competition from lower cost countries such as China, Vietnam, 

the Philippines and Indonesia. 

Table 4.1: Growth Rates / Selected Economic Indicators 

Indicator 

2005-2025 

GDP Growth 

Rate 

GDP Per Capita 

Growth Rate 

Productivity 

Growth 

Employment 

Growth 

Unemployment 

Rate 

Population 

Growth 

Note 

With SJER 

Without SJER 

With SJER 

Without SJER 

With SJER 

Without SJER 

With SJER 

Without SJER 

With SJER 

Without SJER 

With SJER 

Without SJER 

Johor 

State (%) 

7.0 

5.5 

4.6 

3.4 

4.0 

3.0 

2.8 

2.3 

(3.5)-3.0 

(3.5)-6.2 

2.3 

2.1 

Note: Figures in bracket refer to unemployment rate in 2005 

Source: Economic and Social Aspect Report, 2006 

Table 4.2: With and Without SJER Intervention 

SJER (%) 

8.0 

6.0 

3.8 

3.0 

3.3 

1.7 

4.3 

3.0 

(2.2)-2.1 

(2.2)-5.2 

4.1 

2.9 

Rest of 

Johor (%) 

5.2 

4.7 

4.7 

3.5 

4.2 

2.8 

0.9 

1.8 

(4.8)-4.6 

(4.8)-6.7 

0.5 

1.4 

The consequences are likely to be difficulties in attaining and maintaining 

a high level of local and foreign investment required to stimulate the 

growth of dynamic clusters. To attain accelerated growth within SJER, 

a total investment of around RM60 billion will be required over the next 

five years. This will require not only enhanced inflow and more efficient 

allocation of public sector fund, but also aggressive promotion of private 

investment. The total inflow of FDI over the next five years (2006-2010) 

must be enhanced by about 40-50 percent higher than the amount 

attained over the 2000-2005 period, assuming that the proportion of local 

investment will not be dramatically increased. 

With Sjer 

Without SJER 

Population Size 3.0 Mil 2.3 Mil 

GDP (PPP) in USD billion 93.3 64.1 

GDP per capita (PPP) in 

USD 

31,100 26,694 

Labour Force 1.46 Mil 1.16 Mil 

Employment 1.43 Mil 1.0 Mil 

Unemployment 1.8% 5.2% 

Employment Productivity in 

USD Mil PPP 


30.5 25.1 

Table 4.3: Projected Benefits of SJER 

2005 2025 

Population Size 1.353 Mil 3.0 Mil 

GDP (PPP) (in USD Million) 20 93.3 

GDP per capita (PPP) in 

USD 

14,790 31,100 

Labour Force 0.624 Mil 1.46 Mil 

Employment 0.610 Mil 1.428 Mil 

Unemployment 3 - 4% 1.8% 

Jobs Created -Not Applicable- 817,500 


4 - 29

CHAPTER 4 Economic Development Strategies - Iskandar Malaysia

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