JOHOR, the southern state of Malaysia, is poised to become the nation’s next economic powerhouse, attracting significant investments and driving growth across diverse sectors.

With its strategic location, advanced infrastructure, and a diverse economic landscape, Johor is set to transition into a supercharged growth phase, and projected to surpass the national average gross domestic product (GDP) growth in the coming years.

It comes as no surprise that US-based technology giant, Microsoft recently announced its commitment to expand its cloud computing and artificial intelligence (AI) services in Johor, with an investment totaling US$2.2bil over the next four years in Malaysia.

This underscores the state’s growing importance as a data centre hub, not only in Malaysia but also within South-East Asia’s digital economy.

Johor’s proximity to Singapore, a global financial and technology hub, further enhances its appeal for data centre operations, offering companies the advantage of lower operational costs while maintaining strong ties to Singapore’s economic ecosystem.

 Mohd Rashid anticipates that RHB Group will be able to attract investors from high-tech manufacturing and information and communications technology sectors, which are crucial for driving innovation and economic progress.As Singapore faces tightening regulations and land scarcity, Johor has emerged as an attractive alternative for tech giants.

In fact, recent data shows that Johor has seen nearly 2GW of new data centre capacity, driven by foreign and domestic investments.

This surge is underpinned by the state’s state-of-the-art infrastructure, including reliable energy sources, advanced telecommunications networks, and a proactive regulatory environment that encourages business growth.

Projected economic growth The recent high-impact projects such as the Johor-Singapore Special Economic Zone (JS-SEZ) and the Forest City Special Financial Zone (SFZ) are poised to spur Johor towards becoming the most economically-developed state in the country.

The SEZ not only facilitates trade and tourism but also solidifies Johor’s role as a strategic base for multinational companies, further buoyed by the revival of massive infrastructure projects like the High-Speed Rail (HSR) and the Rapid Transit System (RTS) Link between Johor Baru and Singapore.

The Johor Baru-Singapore Rapid Transit System (RTS) Link project, which is 83% completed as of July 2024, is a catalytic project that will boost connectivity between the two countries and is expected to begin operations by early 2027.

The potential resurrection of the KL-Singapore High Speed Rail (HSR) will further expand the greater Johor hinterland in the decades ahead.

Meanwhile, the government’s announcement of the Special Financial Zone (SFZ) in Forest City on Aug 25, 2023 aims to boost investment and attract foreign investment.

Key incentives include a special income tax rate of 15% for skilled workers, the provision of multiple entry visas or fast entry of workers from Singapore, and access to high-quality infrastructure.

Future outlook

The trajectory of Johor’s economy is set towards remarkable growth, driven by strategic investments and infrastructural advancements.

With the burgeoning data centre industry at its core, Johor is expected to attract further investments in high-value sectors, establishing new businesses and diversifying its economic base.

This economic diversification creates a resilient economy capable of withstanding global economic fluctuations.

For a dynamic state like Johor, it is important that the financial sector is robust and well equipped to support its growth.

RHB Bank, for one, is instrumental in fostering Johor’s economic growth through innovative financing solutions that support a wide range of industries, including the rapidly expanding data centre sector.

The banking group is well-equipped to serve the diverse requirements of businesses and individuals as it has an extensive network of over 35 branches and approximately 1,700 self-service terminal machines in major cities in Johor.

Its group managing director and group chief executive officer Mohd Rashid Mohamad says the bank’s commitment to facilitating business growth and infrastructure development in Johor underscores the strong synergy between financial support and strategic economic planning.

“Identified as a key growth area under RHB’s Together We Progress 2024 (TWP24) corporate strategy, Johor’s vibrant economy, driven by commendable consumer spending power and enhanced connectivity with Singapore, offers significant opportunities for growth.

“The upcoming completion of the RTS by end 2026 further enhances this potential.”

Facilitating investments

Mohd Rashid highlights that their recent event Invest Johor – which attracted over 500 domestic and foreign investors, business leaders, state agencies and government-linked companies – further enhanced its role as a crucial banking partner, fostering relationships, and facilitating investments that drive economic development.

“This initiative not only aligns with our strategic goals but also positions RHB to leverage the economic expansion and increased financial activities in the region.”

He opines that Johor will continue to grow and prosper, becoming a key economic hub in the region by creating an environment that attracts diverse and high-value investments.

In particular, Mohd Rashid anticipates that RHB Group will be able to attract investors from high-tech manufacturing and information and communications technology (ICT) sectors, which are crucial for driving innovation and economic progress.

He points out that the electronic contract manufacturing, primarily in downstream value chain activities producing plastic moulding injection, box-building and packaging, is a firmly established, successful manufacturing sub-sector in Johor.

The EMS sub-sector in Johor is well-positioned to grow its existing back-end activities portfolio and expand towards higher-value added activities of the value chain such as research and development, Integrated Circuit (IC) design, and wafer fabrication, given its competitive advantage in terms of cost and has an established track record.

“RHB is ready to facilitate some of these investments by providing comprehensive financial solutions and insights.

“Our strong relationships with both local and international clients enable us to support and guide them as they navigate the investment opportunities presented by Johor’s SEZ.

“With Johor’s potential for further development in industrial and property sectors, we anticipate increased demand for capex or project financing, particularly from mid to large companies.

“As more foreign companies establish their presence in Johor, we recognise the need for treasury solutions, leveraging our deep understanding of the local landscape to provide holistic advisory services,” Mohd Rashid adds.

He also aims to capture opportunities in investment banking activities, including initial public listings, as the local business community in Johor evolves.

“The rise of environmental, social and governance (ESG) initiatives presents significant opportunities, especially in the renewable energy sector and sustainable infrastructure development.

“Our team is equipped to support clients in sustainable capital raising activities, reflecting our commitment to responsible banking practices.”

He said RHB will continue to focus on small and medium-sized enterprises (SME) financing, emphasising key growth sectors such as tech and agrifood.

The banking group will also leverage the growth of affluent individuals in Johor and Singapore, to expand its affluent segment through premier banking and wealth management services.RHB Group has been at the forefront in offering innovative financing solutions to its customers and in this case, the banking group helps fund Johor’s infrastructure and catalytic projects.

“In view of the large-scale funding requirement, we would recommend exploring an infrastructure bond by way of financing solutions to fund the infrastructure and catalytic project.

“Some of these infrastructure bonds can be expanded to include environmental and social factors to accommodate the growing demand in sustainable financing.”

Johor’s strategic location, coupled with its ambitious infrastructure projects and supportive financial institutions like RHB Bank, makes it a prime investment destination.

As the state embarks on this path of economic revitalisation, it is set to become a central hub in South-East Asia, attracting investments and businesses that will drive its growth for years to come.

https://www.thestar.com.my/news/nation/2024/10/03/malaysias-next-economic-powerhouse