In August 2023, Malaysian Prime Minister Anwar Ibrahim announced plans to designate the Forest City project in Johor as a special financial zone in order to boost the economy in the Iskandar Malaysia region. This move would offer businesses incentives such as a flat income tax rate of 15 per cent for skilled foreign workers, multiple entry visas, and fast-track entry for those based in Singapore. Anwar expressed confidence that this initiative would attract companies looking to reduce operating costs compared to Singapore.
Despite the potential benefits of the special financial zone, concerns have been raised about the possibility of tax incentives being abused by entities such as family offices. Johor economic observer Samuel Tan emphasized the importance of implementing legal frameworks to prevent money laundering and ensure transparency within the zone. Tan cited a case from 2023 where six single family office funds in Singapore, receiving tax benefits, were linked to a significant money laundering case involving 10 foreigners. He stressed the need for a conducive ecosystem in Forest City to attract knowledge workers and ensure the success of the special financial zone.
In addition to addressing potential abuses, Tan highlighted the importance of developing amenities and infrastructure in Forest City to make it an attractive location for investors to relocate. He emphasized that offering lower taxes alone is not sufficient if the quality of living and working environment does not meet expectations. Tan stated that stakeholders must create a safe, convenient, and efficient environment for businesses and individuals to thrive within the special financial zone. He envisioned Forest City as a potential prototype for future successful special financial zones in Malaysia and globally.
Tan’s vision for the success of the Forest City special financial zone involves creating an ideal environment that could serve as a model for similar initiatives in Malaysia and around the world. He emphasized the need for efficiency, transparency, and a high quality of living in order to attract investors and knowledge workers to the zone. By focusing on developing the necessary amenities and infrastructure in Forest City, stakeholders can enhance the appeal of the special financial zone and make it a desirable destination for businesses and individuals seeking a conducive environment for work and living.
The announcement of the Forest City special financial zone represents a significant step towards boosting economic growth in the Iskandar Malaysia region. By offering tax incentives and other benefits to businesses, the Malaysian government aims to attract companies looking to reduce operating costs and expand their operations. However, concerns about potential abuses and the need for a conducive ecosystem in Forest City emphasize the importance of ensuring transparency, efficiency, and a high quality of living within the special financial zone. With careful planning and development, Forest City has the potential to become a successful model for future special financial zones in Malaysia and beyond.
