A geographical analysis of Singapore's investments in Johor, Malaysia

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Singapore has faced many problems and constraints in the process of its economic development. Its remarkable economic development is largely attributed to an efficient and proactive government that has emphasized MNC-led industrialization and maintaining social and political stability in the national economy. The advent of globalization and regionalization has prompted the government to make adjustments in its economic policy. Emphasis is now on developing benefits from external economy to sustain its competitiveness.<br><br>As part of the regionalization strategy to develop its external wing, Singapore's direct investments abroad in manufacturing have been increasing. Singapore's trade and investments in Malaysia remain relatively important and are growing in importance especially in Johor. Cost-savings, market access and geographical proximity to Singapore are the main determinants of Singapore operations in Johor. Government policies and incentives such as regionalization are, however, found to be insignificant. It is also found that local entrepreneurship and strong functional relationship between Singapore and her firms based in Johor may help prevent the 'hollowing out' of her domestic economy.<br><br>Even though cost-saving factor is the main motivation behind Singapore's Johor operations, problems of lack of highly skilled labour and rising wages are found to be prevalent. These problems, however, have not discouraged these firms to continue their operations in Johor and there are even plans to expand their investments there in the future.