KUALA LUMPUR, Jan 11 — Investment, Industry and Trade Minister Datuk Seri Tengku Zafrul Aziz said today Malaysia continues to view Singapore as one of its most important trading partners as the two neighbours signed a milestone agreement to develop a special economic zone (SEZ) this morning.

Tengku Zafrul said that Malaysia has capitalised on Singapore’s soaring rent and property costs in the last few months as more multinational companies are forced to leave the island republic and move across the strait to Johor Baru where land and rent is much cheaper.

The move was an example of how interdependent the two South-east Asian economies are, he said.

"I am a firm believer that what happens in Singapore is benefiting Malaysia, look at data centres and all the headquarters but because of various other cost factors, they build their operations in Malaysia... it’s an example of the strong relationship between the two countries.

"And that’s going to ease the movement not of just goods and services, but also people,” he told CNBC in a recent interview.

Malaysia and Singapore today agreed to jointly develop the SEZ in the southern Malaysian state of Johor.

The two neighbours will work towards enhancing the cross-border flows of goods and people, as well as strengthen the business eco-system within the SEZ to support investments, according to Malaysia’s Economy Ministry and Singapore’s Trade and Industry Ministry.

The move comes as Prime Minister Datuk Seri Anwar Ibrahim pledged to strengthen ties with Singapore as part of a diplomatic pivot that marked a great departure from Putrajaya’s past policies towards its southern neighbour, which can sometimes come as hostile.

Anwar and his Singapore counterpart Lee Hsien Loong were both present at the signing of the SEZ memorandum of understanding.

Anwar and Lee later graced the ceremony to celebrate the installation of the Rapid Transit System Link (RTS Link) portion that connects Johor Baru and Singapore over the straits. This is the first time the two leaders had met on the project site.

Putrajaya said the ceremony reflected the commitment of both countries to realise the multi-billion ringgit project that would link Bukit Chagar, Johor Baru and Woodlands North, Singapore through a rail four kilometres long.

Also present at today’s ceremony were Transport Minister Anthony Loke and Singapore Acting Minister for Transport Chee Hong Tat as well as Johor Menteri Besar Datuk Onn Hafiz Ghazi.