Malaysia and Singapore, ties that transcend borders. - Hindustan Times
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Malaysia and Singapore, ties that transcend borders.

ByHindustan Times
Oct 26, 2023 01:58 PM IST

This article is authored by Ravindran Devagunam, senior correspondent on foreign policy and politics, Malaysia Gazette, Kuala Lumpur.

Malaysia and Singapore enjoy a kinship that transcends the politics of the day. They are located along the highly strategic and vital Straits of Malacca. The ports of both Malaysia and Singapore transship a sizeable portion of the $ 6.17 trillion trade that traverses across the Indian Ocean.

Malaysia - Singapore relations
Malaysia - Singapore relations

Additionally, according to the Association of South East Nations (ASEAN) Development Outlook, the total combined Gross Domestic Product (GDP) of ASEAN, a regional grouping of 10 Southeast Asian nations, was effectively the fifth largest economy in the world, valued at $3.2 trillion in 2019, and is set to grow into the fourth largest by 2030. Malaysia and Singapore, together, account for nearly a quarter of this total value and are considered to be at the heart of this economic growth trajectory for this region of 700 million inhabitants.

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The Malaysia-Singapore economic partnership is underpinned by trade. Each is the other’s second-largest partner with mutual trade of well over $110 billion. In addition, Singapore is Malaysia’s second-largest foreign investor, with investments totalling over $12 billion in 2021. And, the combined GDPs of the two economies is set to reach $1.15 trillion by 2027.

There is greater emphasis on regional collaboration, particularly with recent geopolitical shifts. Malaysia-Singapore should be set to gain from this shifting global order, particularly as a gateway to ASEAN as it gears itself to become the world's fourth-largest regional economic bloc. Both countries offer excellent infrastructural bases and a crop of young, well-trained professionals, presenting excellent on-shoring opportunities for MNCs looking to relocate to the region.

Furthermore, ASEAN is set to see a 10-12% growth in the coming years, specifically on the $2 trillion that is generated from the construction and infrastructural prospects, consumer products, pharmaceuticals, healthcare and digital e-commerce sectors. Malaysia and Singapore are in a unique position to play a leading role in these particular growth sectors.

In January 2023, Malaysia and Singapore agreed to specifically collaborate in the digital and green economy spaces. This will see the neighbours jointly exploring low-carbon solutions, in particular, hydrogen and carbon capture, utilisation and storage projects. It should also see further investments in the areas of electronic payments and digital trade facilitations that would certainly benefit a large pool of micro, small and medium enterprises (MSMEs) across both countries. The business ecosystems in both countries provide for an ideal platform for these MSMEs to be able to qualify for set prerequisites to integrate to regional and global supply chains.

Malaysia offers Singapore a hinterland with adequate landmass to explore advanced agricultural prospects which is now fast becoming a key growth sector. Food security was a clarion call by all member states at the ASEAN Summit held in Indonesia in September 2023. This was especially so with a prolonged Russo-Ukraine conflict and other crisis around the world. Malaysia also offers Singapore access to reliable energy sources and abundant natural resources that can be re-exported via Singapore.

Singapore, has in the post-Covid era, embarked on an ambitious program to ramp up production of its overall nutritional needs from the current 10 percent to over 30 percent by 2030. With this effort, it is fast becoming an agri-food tech hub. Ideally, this would be another key area to establish added collaborative ventures between the two countries.

In addition, Singapore, with its liquid financial markets, offers a broad opportunity for companies looking to grow. This has become even more critical with companies wanting to rapidly expand across ASEAN. Malaysia and Singapore should explore potential collaborative ventures between the financial markets of the two economies. The creation of such a venture could essentially add to the critical mass of investors driving the overall liquidity and capital size of these markets.

Going forward, Malaysia and Singapore should re-engage on the high-speed rail link that was first proposed by Malaysia’s former prime minister Najib Razak. This ambitious project would have been the first of a kind cross-border high-speed rail link and would have provided for an additional means to commute between Kuala Lumpur and Singapore. Clearly it holds the potential to add to the vibrancy of trade and investment flow between the neighbours.

One additional area of collaboration between these neighbours could be in the broader aviation space. While both Malaysia and Singapore have competed in this very space for the past fifty years, with current trade shifts and regional alignments, it may be the right time to consider a collaborative approach to once again dominate the sector. Malaysian aviation players could establish core scale by partnering with their counterparts in Singapore. Similarly, there could be clear synergies between the airports from both countries that may allow for an extensive hub for aviation operations that could dominate the ASEAN region. Especially given the various green-field projects and brown-field, existing airport expansions, being undertaken by their ASEAN neighbours. Furthermore, this would allow for a robust cross-border maintenance, repair and overhaul (MRO) business potential. This would be a clear avenue for brain-gain, leveraging existing talent of qualified personnel hailing from both countries who have had to seek employment elsewhere in the world.

The centrality of Malaysia and Singapore to the ASEAN market in addition to the Indo-Pacific trade that get transshipped through their collective ports only proves their unique strategic positioning within the region. Continued multi-pronged collaborations between the two nations would present a wealth of possibilities not just as mutually assured growth prospects but as added opportunities for the region as a whole as well.

This article is authored by Ravindran Devagunam, senior correspondent on foreign policy and politics, Malaysia Gazette, Kuala Lumpur.

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