Integration with the Region

Speaker, Southeast Asia is about 680 million people and a US$4 trillion economy. And it is young where we are old – median age of Malaysia and Indonesia around 31; Vietnam, 34; the Philippines, 27; against our own citizens' median of nearly 44.

But youth is a window, not a promise. A demographic window buys a country growth, more workers, not wealth. Since 1990, fewer than one in three of the world's middle-income economies has made it to high income. The rest are stuck. The region has perhaps 15 to 20 years to get rich before it grows old.

Singapore did climb that ladder by hosting, taking in large amounts of foreign investment to make goods and services for foreign markets. But it is now hitting a limit. The markets everyone leaned on are being weaponised. The Association of Southeast Asian Nations (ASEAN) still trades with itself only about a fifth as much as it trades with the world – 21%, against the European Union's 60%. And about three-quarters of our exports depend on external demand, just as the great powers begin wielding access to their markets as instruments of coercion. A region that produces mainly for markets it does not control can be squeezed at will.

And the ground under our own strategy is shifting too. Our hub model carries an assumption: that the gradient between Singapore and its neighbours in competence, in institutions, in trust is permanent. It is not.

Penang firms today do nano-level vision inspection that the world's chipmakers buy. A Penang chip designer, SkyeChip, listed this year 95 times oversubscribed, the largest Malaysian initial public offering in 16 years. Vietnam is climbing the ladder.

For the region, this is great news. For a Singapore whose business model is to be the main place in the region where things work, it is a deadline. Because a hub, unlike an owner, can be bypassed. Indonesia or Vietnam, at even half their potential, has the demographic weight to become the heart of Southeast Asia. And we have to outrun potential resurgent nationalisms that could close doors around us.

A Singapore that is merely a well-run waypoint – hosting, brokering, never owning anything together with its neighbours – will find that the region learns, in time, to route around it.

So, we should help build a Southeast Asian market of genuine middle-class consumers – we do not have one at scale today – because a market we help build is far less likely to be closed to us.

And we need Singaporeans and Singaporean firms to own a real piece of the value chains that serve it. To be essential to the region and to share in what the region earns. We must build a deeper, more structural integration with Southeast Asia.

Part of what stops us is a posture. In my maiden speech, I asked why Singapore and Malaysia could not build an Airbus together – one enterprise, owned on both sides, the way France and Germany anchored theirs.

I know the truer hesitations. It is not necessarily that our neighbours cannot execute. Penang's equipment firms and Selangor's chip designers put that to rest. The real reasons are older: memories of past issues, from water to the railway lands; a reflex to keep control of anything that matters; and a fear of bets stranded across a border if politics turn.

But if one is sceptical that the gradient between Singapore and our neighbours will last – and I am – then joint industrial policy is what a country should build while the gradient still favours it.

I believe the strongest path to owning things together runs through our closest neighbour, Malaysia. Malaysia's industrial strategy now deliberately targets the design end of semiconductors, setting up the region's first IC-design park in Selangor. The integration is happening anyway – by drift. Two hundred and forty-five million checkpoint crossings last year, three-quarters of them by land. New instruments in front of us: the Johor-Singapore Special Economic Zone (JS-SEZ), and the Johor Bahru-Singapore Rapid Transit System Link (RTS Link). If we get them right, we can prove a model of structural bilateral integration that we can extend. I will discuss three points.

First, on the JS-SEZ. This economic zone lets two governments run inside the bounded space and experiment. The zone has been a blank slate many have piled their hopes onto. Some ideas put to me were high-tech food-growing zones, an ASEAN Friendship Hospital in Johor, an integrated medical hub on the Shenzhen-Hong Kong model.

But hopes need us to bring the zone into greater focus.

First, where, exactly, is the zone? Nine flagship areas have been announced, described at the level of districts; I have not seen a consolidated boundary map. If one exists, we should publish it.

Second, what does a Singapore company receive inside the JS-SEZ, over and above the new federal baseline? Malaysia's New Incentive Framework took effect for manufacturing on 1 March. If the federal incentives are as good as the zone's, there is nothing special about the zone.

Third, I believe we should soon sort out, with our Malaysian counterparts, one standard operating procedure to enter the zone and one rulebook. Right now, there are multiple agencies and points of contact. On the Malaysian side, there is the Iskandar Regional Development Authority, Invest Johor, the Malaysian Investment Development Authority (MIDA) and the Invest Malaysia Facilitation Centre Johor (IMFC-J). On the Singapore side, we have the Economic Development Board (EDB) one-stop centre. We need policy clarity and joint rules of the road over how companies can enter the zone, whether from Malaysia or Singapore, so that the private sector can plan for it.

With a joint rulebook, we should measure joint success. In my view that means EDB or the Ministry of Trade and Industry (MTI) should be responsible for total key performance indicators (KPIs) over the JS-SEZ, not just the Singapore-originated investments alone.

Of course, a large degree of self-interested thinking is inevitable and even desirable. The instinct in parts of our Government may be to keep the high-value activity here and let the rest go. This is not wrong. But if we want the unfolding of a richer, more complex, more diverse value chain within a 60-kilometre radius than would currently be possible in 10 or 20 years, we will need to take a more collaborative approach.

What gets measured gets managed. I believe we should grade ourselves, EDB and the Ministry on the SEZ's success.

Next, we face a strategic question. If the zone is meant to be more than just a new method of foreign direct investment, but to foster a vibrant set of Singaporean and Malaysian businesses, in pursuit of broadening the middle class, does it actually build on the current set of bilateral strengths? The foremost candidate for such an industrial deepening is semiconductors. But here, using the instrument of the zone may be an impedance mismatch, as in my view Penang's semiconductor cluster is unlikely to relocate beyond the Klang Valley.

So, we will need a broader set of instruments. What can we hope for from semiconductors as joint industrial policy?

In Singapore, we host. Our IC-design strength is mostly the design centres of foreign firms on our soil. We have not grown a chip-design champion of our own, and we sold our indigenous foundry, Chartered Semiconductor.

Meanwhile, Malaysia is building some of what we lack. Its National Semiconductor Strategy puts indigenous IC design – about half of a chip's value-added – at the centre, with RM25 billion behind it and a 60,000-engineer training goal. Selangor's IC-design park, the largest in Southeast Asia, turns out hundreds of designers a year; the Penang design house whose listing I described came out of this push; and Singapore's own state-linked capital is already backing Malaysian design start-ups.

We have more reason to complement each other than to compete. Singapore hosts what the region's designers require: wafer fabs to prototype on, advanced packaging, capital and customers. They hold some of what we require: design talent, by the hundreds, at a fraction of our cost. Neither side has a complete owned upstream stack alone.

First, I believe MTI should foster a design-to-fab-to-packaging chain that runs through Singapore – access and equity as one instrument: structured prototyping on the fabs hosted here and packaging lines, tied to a stake for our investors, public and private.

Since we sold Chartered, we have no fabs of our own. So, first, we should allow Research, Innovation and Enterprise (RIE) funds to lease or rent Singapore-based fab lines so that we can put real silicon in front of the region's designers.

While those fabs are still under construction, we should supplement investments to expand directable fab capacity where possible, prioritising Singapore businesses but open to Malaysian ones as well. This, I think, is the best way to validate the viability of a chip design ecosystem while giving it the best chance of success – iterative prototyping feedback inside the same regional corridor, especially if one is understandably hesitant for a full-scale US$15 to US$20-billion two-nanometre fab rebuild.

Second, the talent pipeline: our universities, the Nanyang Technological University and National University of Singapore, should seek to set up an embedded institute in the Selangor cluster carrying a joint credential, with firms operating on both sides of the zone sponsoring net-new training places whose employment options are exercisable in Johor, Selangor or Singapore, producing new engineers for the region.

Third, I believe we should recognise in law a Malaysia-Singapore business entity, defined by a minimum stake on each side – 30-30, 40-40, 50-50 – and give it closer-to-local, pseudo-local treatment in both countries' grants, financing and procurements. When people from both countries own part of the same success, each has reason to grow its own capability rather than to poach it. We should seek to create rails that work for a recognised category of bilateral joint firms across the two countries, and crowd in the private sector.

Fourth, in service of crowding in, we should reactivate the Malaysia-Singapore Business Development Fund. It was set up in 2004 for exactly this, enhanced in 2023, relaunched in 2024. As far as I know, it has not been used. So, we should give it a fresh purpose: competitive seed awards into the first recognised Malaysia-Singapore ventures – many small bets, fast answers.

Next and third, on the RTS. Integration will arrive as a train in 2027, up to 10,000 passengers an hour each way. Walk our heartland shops today and you can feel the dread coming. The provision shop, the Traditional Chinese Medicine shop, the noodle stall, the barber, the tailor. They read the same reports we do. There is gallows humour in those shops now about the RTS and what it will do to Singapore retail; and a question: "When the RTS opens, what will happen to us?"

DBS puts the leakage at $1.5 to $2.1 billion a year – 3% to 4% of retail sales, everyday with food and personal services hit hardest. Eleven million Singaporean trips into Johor in the first seven months of last year alone validate this.

The Government's answer so far is to make retail more attractive at home – visual-merchandising programmes, placemaking grants, neighbourhood centre upgrades, vouchers to spend at home. I support these initiatives. But we should be honest with ourselves: for a generation of retailers, it will make little difference.

I believe we can offer a different deal. Johor is planning the Elevated Autonomous Rapid Transit (e-ART) system as a dispersal network out of Bukit Chagar, and I speculate that transit-oriented development will be done in the vicinity of their 32 stations. If so, I propose we invest in that plan: as part of the JS-SEZ bargain.

Singapore should take an equity stake in some of these transit-oriented developments the line creates – Bukit Chagar and the 32 e-ART stations – and negotiate, in the same deal, reserved positions for our small retailers inside those developments, inside the podium of those malls.

This has happened before. When Singapore and Malaysia resolved, in 2010, the 20-year impasse over the 1990 Points of Agreement on the railway lands, it was not settled in cash but in co-ownership. Khazanah and Temasek formed a joint company, 60:40, and built Marina One and DUO in the city centre. I am proposing a similar instrument.

The footfall these developments capture is largely from Singapore, so the deal has logic on both sides: Johor gains a committed capital partner for a network it is building anyway; we gain a share of where our own spending lands and a place in it for the retailers that spending leaves behind.

Thus, we can give every exposed small retailer who rents rather than owns their premises – on the order of 40,000 provision shops, eateries, personal-care operators and so on – a tradeable entitlement: a priority claim on a reserved position in these developments, to take up or assign to another small operator. Or for those who would rather not move, a cash floor drawn now or set against rent – enough to fund a real relocation or a year of rent. It should go to the tenant and not the owner of the unit since the renter carries lost footfall with nothing to fall back on.

Retail is a more protected part of Malaysia's economy, so the Ministry of Foreign Affairs and MTI would need to negotiate this within the same bargain. Since Malaysia has already carved foreign firms into Forest City, it is not unprecedented.

We speak about the stakeholder economy. We can seek this compact if it is possible, for our small retailers. This is a better deal than the fait accompli they currently await.

Speaker, in closing, I do not pretend any of this is inevitable or easy. Foreign economic relations are always challenging, with reduced control and increased unpredictability. But we are in a unique moment, where the threat and leverage of market closure from the biggest powers are foremost on our minds. And we are also reaching the limits of our growth on 750 square kilometres.

It would be a shame if the JS-SEZ and the tenor of our future cooperation with Malaysia were predominantly foreign direct investments-led, instead of being in service of tackling the true strategic challenges of the decade.

The creation of a true middle class in Southeast Asia. An integration of our country, to be indispensable to the future economic geometries of our neighbours. An imperative to increase the complexity and diversity of our value chains. And the fostering of a stakeholder economy and the search for a better bargain for our pioneering generations. This is the model of integration I believe we should seek with the region – one that best maximises the 15 to 20 years Southeast Asia has before it ages out of its demographic dividend.

Sir, to me the key question of this Motion is: how do we ensure deeper integration with the region and in fact, not just ASEAN but Malaysia which is additive and not substitutive? And how do we ensure that integration does not simply move activity from Singapore to somewhere else, but also creates value in Singapore and our partners which would otherwise not be captured?

Singapore has always been open to the world. I think, in the transport Motion, many of you have already said that. And with investment competition intensifying and supply chains reconfiguring, we must keep building our capabilities, strengthening our businesses and anchoring higher-value activities here in Singapore. The JS-SEZ, the Batam-Bintan-Karimun region and the Vietnam-Singapore Industrial Parks are all examples that show how we work with our immediate neighbours to enlarge economic space for our companies and workers. This was something that the Member Edward Chia had said earlier on in his speech.

But let me first give an overview about the JS-SEZ. It spans about 3,500 square kilometres, it includes Iskandar Development Region and Pengerang. I wanted to point out to the Member that, in fact, the boundaries of the JS-SEZ are available online.

But the whole point about the JS-SEZ is about creating value together that neither side would have created or captured alone. Singapore has strong connectivity, trusted institutions, deep financing, technology, professional services, headquarters (HQ) functions and a skilled workforce. Johor, on the other hand, offers land production capacity and other complementary strengths.

But when we combine these strengths well, the Johor-Singapore region becomes more competitive than either side would be on its own.

The Member talked about whether there being so many different touch points, but in fact, if you look at it on the Malaysia side, there is, as he mentioned, the IMFC-J, which facilitates and supports companies investing in the zone, such as coordinating approvals and applications across Malaysian authorities at the federal, state and local levels.

In Singapore, we also have a joint JS-SEZ Project Office, which helps Singapore and Singapore-based companies explore twinning opportunities in the JS-SEZ. I have gone to many of these workshops and both offices work hand-in-hand together to facilitate investments coming through to Johor, to the zone; and from Singapore to the zone.

Both sides have also introduced measures to reduce friction and improve connectivity, including in immigration clearance, customs facilitation and cargo processes.

The refreshed Johor-Singapore Cooperation Ministerial Committee, co-chaired by Minister Chee Hong Tat and Malaysian Minister for Economy Akmal Nasrullah, will also provide strategic oversight for broader cooperation including the SEZ.

On the reason why we are pursuing this and how this is a core strategy in integrating with the region, the JS-SEZ is all about tapping our complementary strengths for a win-win outcome. The JS-SEZ is focused on the Johor-Singapore corridor and building on the respective incentives and schemes offered by each country. Both countries are working on introducing practical solutions like smoother cross-border flow of goods and people.

In Singapore, for Singapore companies, the true value is being able to twin operations: keeping the HQ functions, financing, innovation, branding and higher-value functions in Singapore, while using Johor's complementary strengths to scale more competitively.

I understand the concerns also that deeper integration could move activities out of Singapore. But I think as the Member alluded to, we cannot also accommodate every activity within Singapore. Instead, our approach has and always been to keep Singapore as a key node while helping our companies scale and build resilience so that we can compete globally.

This means organising practical and meaningful activities across both sides of the Causeway, so we can continue to play to our strengths as a financial, transportation and tech hub, and also to anchor HQ functions, R&D, intellectual property, talent development and other high value activities here.

I give you two practical examples. Old Chang Kee, which is a food manufacturer in Singapore, has operated a production facility in Gelang Patah since 2016, complementing its Singapore operations and supporting its retail outlets in both markets. South Korea's SPC Group, the parent company of Paris Baguette and Shake Shack, houses its Southeast Asia HQ, innovation centre and training centres in Singapore, while operating its production base in Johor.

And then we move into semiconductors which the Member had talked about quite significantly. Singapore is a key node in the global semiconductor value chain. We account for one out of five in every semiconductor equipment manufacturing and one out of 10 of semiconductor chips. And we will keep strengthening Singapore's position as a key node in this global semiconductor value chain by attracting quality investments and anchoring higher-value activities here.

Our strategy is not to replicate what is being done in Johor or Penang, but to work with Malaysia on complementary activities that strengthen the regional ecosystem for semiconductors, which is a very fast and evolving sector.

Another example here to illustrate this point is STMicroelectronics which anchored its Asia Pacific HQ and wafer fab operations in Singapore, complemented by assembly and test operations, including high reliability automotive packaging in Johor. Their wafers fabricated in Singapore directly feed into packaging and qualification in Malaysia, enabling STMicroelectronics to bring products to market faster.

The Member also talked about how we measure these investments or what are the KPIs for the JS-SEZ. Well, the JS-SEZ must deliver real investments, business activity and jobs. Singapore and Malaysia have jointly agreed to attract 50 projects in five years and 100 projects in 10 years. It has so far garnered significant and strong business interest. Last year, Johor recorded its highest ever approved investments, with over 70% of those investments attributed to the zone. Since signing the Memorandum of Understanding in January 2024, Singapore and Singapore-based companies have committed over $5.5 billion in investments into Johor.

So, we are not just focused on the headline investment numbers but whether the JS-SEZ expands the overall pie for the region and for Singapore and Johor together competing for investments.

On the RTS Link, I chair the RTS Link Taskforce to help Singaporeans and businesses benefit from the RTS Link. We have been widely engaging residents, merchants, trade associations, landlords and other stakeholders.

Based on the feedback we have received, we are working on measures to further rejuvenate our heartlands, help our businesses become more competitive, transform, pivot and work with the private sector to promote business and commerce on both sides. Some of the work has already begun on the ground. We have spoken to the private sector players on both sides. And I think this is something which we can promote further to ensure that commerce flows on both sides. We will be sharing our findings and recommendations later this year.

But I think we should be clear about the broader point. The way to respond to greater connectivity is not to retreat from competition, as the Member had alluded to; but to help our businesses to compete more effectively. Competition does not just come across from the Causeway. Already, it comes from digital platforms, international brands, AI-enabled services, e-commerce and changing consumer preferences.

On his suggestions about different deals with the Malaysians, I think it is within their jurisdiction. I think we do what we can under the auspices of the JS-SEZ to ensure that our companies can invest there confidently and also anchor strong and high value activities here, complementing both Singapore and Malaysia, Singapore and Johor.

Sir, the issue that we talked about this entire day is in fact not whether we should integrate with the region, but how we integrate with the region. The test is not whether every activity must be located here – of course, that would be unrealistic with our constraints – but whether Singapore remains where the highest value functions are anchored, where important decisions are made, where we can build capabilities and where we ultimately can create good jobs for Singaporeans.

And if a company does choose the Johor-Singapore region instead of another location elsewhere in Asia and anchors its HQ functions, financing, innovation and R&D activities in Singapore, then I think that is additive integration. And if our companies can use Johor as a complementary base to scale, serve larger markets and strengthen their regional competitiveness while retaining their core capabilities here, that is also additive integration. And if our region as a whole becomes more attractive to global investors and Singapore captures the higher-value parts of that value chain, that is also additive integration.

This is the approach, Mr Speaker, that we are taking to ensure that regional integration benefits Singapore and Singaporeans.

*Question put, and agreed to.*

*Resolved, "That Parliament do now adjourn."*

Adjourned accordingly at 7.23 pm.