The Annual Retreat between Singapore and Malaysia and the visit by Prime Minister Lawrence Wong marked the symbolization of strategic realization of mutual importance. For Lawrence, it is critical to establish a continuation of rapport and momentum with elevation of personal ties and trust and camaraderie at the highest level with his counterpart.

It is vital for Singapore to also tap into Malaysia’s model for ASEAN direction this year, especially where Singapore is also trying to establish its own pragmatic version of its foreign policy and in its quest to have its own friendshoring efforts and the tricky navigation in dealing with both China and the important ally of the US.

This is also strategic for Lawrence to establish his own set of direction and leadership style as a message to both Malaysia and the region, and using this retreat as the platform in building future resilience and understanding of the direction and intent of the top Singaporean leadership.

Singapore is also navigating a new set of geopolitical challenges, and thus trying to increase fallback on both the traditional reliance on the West and also at the same time increasing dependence on alternative powers including the entity of ASEAN.

This is where the role of Malaysia in shaping ASEAN in getting the needed economic and political returns to Singapore is capitalized on.

In Singapore’s efforts to enhance its economic dependence and fallback reshoring options, Singapore does not want to be seen as too obvious in the approach to de risk from possible retaliations or new approaches by China, and by increasing dependence and mutual interdependence with Malaysia, it serves as the needed and closest source of economic and food and energy assurance.

Although key sensitive and critical issues between both states still remain unresolved and are being handled with care, both realize that the need to transcend this systemic barrier is stronger and that this should not jeopardize the vast economic and geopolitical returns to both nations if strategic common areas of benefits are to be jointly developed.

Common Threats and Interdependent Geopolitical Settings 

The visit and the Annual Retreat set the path to strengthen future ties and set the benchmark and platform in orienting new visions and pathways of partnerships, also as the symbol that the new leadership under Lawrence is different from the past legacy of his predecessor. In the efforts to present a new independent direction of Singapore, = and increasing its resilience, and sees Malaysia as the most critical regional player and the inevitable geographical neighbour.

Singapore’s food security and supply chain interests at least in the next short-term timeline will still be at the dependence of Malaysia, and a new set of ties with Malaysia that is escaping from past legacies and traps will be crucial.

Thus, Malaysia is seen as vital to be leveraged in different policy modes, and this is also important to Lawrence in shaping domestic trust and support.

Lawrence realises that the new perception, demands and trust among the domestic audience have changed with past controversies plaguing the governance and for him to set a new governance direction, Malaysia plays a central role in ensuring continuous prosperity and security wellbeing.

Challenges remain, in the form of continuous security dilemma between both powers, and hard security wariness over bitter and contentious past disputes and issues

However, new shared threats and challenges in the region from the continuing potential flare ups in South China Sea and the Taiwan Strait and where both shared the same external security dilemma of maritime threats and big power rivalry, both will want to consolidate more effective deterrence measures and address common gaps.

Existing defence mechanisms and ventures including the Five Powers Defence Arrangements (FPDA) are seen as inadequate in providing the tangible and realistic common defence assurances and framework in dealing with the fluidity of the nature of return of traditional threats settings.

In the realm of non-traditional threats and potential returns in areas of new geopolitical facets, Malaysia’s advantage in new fields including rare earths, semiconductor, digital economy and security upper hand in geographical topography to work more closely together.

Knowing that US has enjoyed trade surplus with Singapore and thus having a new hope of positive enhancement of ties under Trump 2.0, having closer ties with Malaysia is needed for better utilization of common frameworks with the US in targeting the same sectors of joint interests both in the high value chain development and the values-based approach, and as an alternative and de-risking approach from China led initiatives.

The United States has a trade surplus with Singapore, and in 2022, the U.S. had a trade surplus of USD $38.3 billion with Singapore. In 2023, the U.S.-Singapore services trade totalled over $49 billion. U.S. services exports to Singapore hit an all-time high of $37 billion in 2023. 

The U.S. has a large presence in Singapore, with American companies supporting around 215,000 American jobs. In 2022, U.S. foreign direct investment (FDI) in Singapore was US$309.4 billion, which is more than in Mainland China, Japan, and South Korea combined. 

Although Singapore is well poised to be rest assured in economic and investment assurances from Washington, its strategic pragmatism and realisation of its own geographical limitations propelled it to venture into the need to secure its near border and neighbouring realities and scope of entanglement.

ASEAN can be used as a softener to Singapore’s approach in securing its interests, in which ASEAN is used as the more collective voice and platform in reflecting and voicing Singapore’s concerns for regional security and also the actions by external powers including China.

Hence for Singapore, the platform of Malaysia and ASEAN can be seen as necessary in serving as an added fallback option, where Singapore also does not want to be seen as being too aggressive in taking a direct strong response to China and others in expressing concerns on regional power postures.

For Singapore, the Special Economic Zone will be beneficial in breaking away from its own geographical limitations and barriers, where the extended land and economic zones in Johor will enable Singaporean firms to use that as a new hub for its expansion into the region and the world.

It serves as a needed hub for global expansion and as a consolidation of its status as the premier shipping hub and in securing its supply chain resilience.

This is also vital for Singapore to increase its food, energy and supply chain security in getting the needed assurances for its long-term security in areas of low politics, and this Special Zone is used as a trust building platform for better overall ties between both nations.

As Singapore is reaching its economic maturity and saturation point, it is vital for it to continue to seek for the needed near shore capacity in diversifying its core areas and to provide for the continuous need to feed its increasing demands of its domestic audience, and in preparing for a greying nation and the new challenges of the inter-generational and demographic challenges.

In accommodating the new political landscape and demand, Lawrence realizes that conventional economic and socio-economic policies will need new revisions and tweaks, in both facing the renewed external headwinds and uncertainties and in facing the changing domestic demographic and political demands and expectations, away from the Lee era.

This will be used as a platform to foster greater trust and confidence level and as a confidence building measure in using this as transcending the previous structural bilateral issues.

By using low politics and increasing connectivity, people-to-people ties, the increased speed and ease of doing business, investments, and easier cross-border facilitations, both nations can use this means as the transcending factor in dealing with the current thorns and issues in bilateral relations.

An Investment and Insurance for the Future 

Both Malaysia and Singapore remain each other’s second-largest trading partners, with bilateral trade amounting toUSD78.59 billion (RM360.12 billion) from January to November 2024, a 6.7% increase over the same period in 2023. This year also marks 60 years of diplomatic ties.

For Malaysia, this zone can be capitalized to tap into Singapore’s entrenched status as the premier shipping hub and its status as the premier financial and services center.

Knowing that Malaysia cannot do this alone or package this investment hub using Malaysia’s advantages and offerings alone, tagging Singapore as a complete package will offer more benefits and attractions to foreign investors by using Singapore's complementary offerings and branding in this regard.

With more than 1000 similar economic and investment zones in ASEAN, this Johor-Singapore Special Economic Zone will need to stand out in capturing the needed unique factor by factoring in the existing status of Singapore and also the vast new potential of Johor and Malaysia and the geographical card. This also includes the potential and new openings of the critical sectors and technologies where both nations are keen to develop in either joint capacities or within their own national strategic developments.

These include areas of critical minerals, new energy transition, Artificial Intelligence, digital economy and green economy and services and new financial models.

This special zone also serves as a needed alternative and fallback option for Malaysia as an exit gateway for the decentralization of its economic dependence on traditional external economic powers including China, and it serves as a message that this model of effective neighboring economic partnership can be the salvation and as a parallel new investment and economic passageway without the baggage of external factors that might influence domestic and foreign policy considerations and political fallout.

Malaysia also needs the critical and strategic high skilled labor, talents, knowledge creation, transfer of technologies and the needed capital in line with the economic transition and energy transition of the country and in parallel of the momentum over the years in positioning Malaysia as the growing regional and global hub for key sectors including on digital transformation, high technology hubs and forward advancement platforms for critical sectors on key minerals, semiconductors and others.

By having this renewed initiative, it is hoped to create more spillover impact and getting the needed injection of external inflow of the needed capacities and also in getting the local settings in producing the needed skilled and high skilled talents and human capital, and in incentivizing local SMEs as well as local workforce, and in raising income levels and in improving social mobility and holistic living status.

This zone also must be streamlined and connected to the existing economic zones and parks and in line with the combined impact of the National Semiconductor Strategy and the New Industrial Masterplan.

In the end, both nations realize the inevitable fact that both cannot run away from their geographical and neighboring factual reality, and that both realize that if one is in trouble or faces renewed threat settings, it will in actual fact cause direct and indirect effects on the other, whether in economic or security threats.

As such, as much as both will want to priorities each national interests and advantages, both realize that one’s future resilience, interests and security capacity and wellbeing also predominantly depend on the other, and naturally will not want the other to suffer instability, chaos or facing security threats that will have interlinked domino effects.

Collins Chong Yew Keat has been serving in University of Malasia. His areas of focus include strategic and security studies, America’s foreign policy and power projection, regional conflicts and power parity analysis. He is a regular contributor in providing Op-eds and analytical articles for both local and international media on various contemporary global and regional issues. The views and opinions expressed in this article are those of the author.