KUALA LUMPUR (Aug 12): Johor is set to be the next growth engine for Malaysia, driven by two high-impact projects, namely the Johor-Singapore Special Economic Zone (JS-SEZ) and the Special Financial Zone (SFZ) in Forest City, according to RHB Research.

The research house pointed that government-led catalytic developments as well as an influx of foreign and domestic direct investments will help to lift the construction, data centre, energy, petrochemicals, industrial and tourism sectors, in addition to a positive spillover to the property market.

“We believe that Johor’s economic growth will continue to surpass the national average, fuelled by its robust manufacturing sector, sustained strength in its services industry, advantageous location and well-developed infrastructure, as well as supportive policies from both state and federal governments. Johor has a well-developed infrastructure that includes ports, airports, road network and utilities, complemented by competitive business operation costs,” RHB said in its Johor Market outlook report on Monday.

Currently, Johor ranks as the third-largest economic contributor in Malaysia — behind Selangor and Kuala Lumpur — and second largest contributor to Malaysia’s trade.

The state accounts for 9.5% of the country’s gross domestic product (GDP). About 29% or RM753.1 billion of national total trade in 2023 came from Johor.

In recent years, RHB said Johor’s GDP growth has outpaced the national average, expanding by 4.1% year-on-year (y-o-y) in 2023, compared to Malaysia’s 3.6% y-o-y growth, driven by the services and manufacturing sectors, which contribute 84% of Johor’s GDP.

“Johor’s services sector has experienced the fastest growth among Malaysian states over the past five years. Several economic and demographic factors fuel the services sector there — consumer spending and retail trade are buoyed by a rising middle class and increasing per capita income,” it added.

Meanwhile, major ports like the Port of Tanjung Pelepas (PTP) and Johor Port provide excellent connectivity for export and import activities, with PTP standing out as one of Malaysia’s busiest ports and largest trans-shipment hubs, handling a significant portion of the nation's container traffic and serving as a key gateway for regional and global trade.

“Johor continues to be a leading investment destination in Malaysia for 2023, attracting significant interest from domestic and international investors.

The state’s appeal is driven by its robust infrastructure such as ports and road networks while being well-equipped with utilities services as well as abundant labour.

“In 2023, the Malaysian Investment Development Authority (Mida) approved 751 projects in Johor totalling RM43.1 billion — accounting for 13% of the national figure. These projects are expected to create 19,053 new jobs,” the research house added.

On the other hand, Johor's manufacturing output in 2023 grew by 2.8% y-o-y, surpassing the national average of 0.7%, driven by a diverse sector portfolio including electrical and electronics, automotive, and petrochemicals, with significant foreign direct investment in the Iskandar Malaysia region bolstering its industrial parks and multinational presence.

“This flagship economic zone is designed to attract high value industries and global investors, offering tax incentives, specialised business parks, and a business-friendly regulatory environment,” it said.

Besides, the ongoing RTS Link project in Johor, with an estimated investment of RM3.7 billion, was 77.6% completed as of May 2024 and is on schedule to begin operations by early 2027. This cross-border rail service, spanning some four kilometres, will connect Bukit Chagar (Malaysia) to Woodlands (Singapore), accommodating up to 10,000 passengers.

Additionally, the RTS Link is poised to be a game changer, boosting cross-border traffic and leveraging the "SGD factor" to benefit Johor's local real estate sector, including housing, retail and hospitality.

Demand for rental properties and housing in Johor's central region is expected to rise significantly, with new investments likely to enhance long-term affordability.

“Major developers remain confident on the long term outlook with Johor continuing to be an important market.” it said.