KUALA LUMPUR, Aug 16 — The agreement for the Johor-Singapore Special Economic Zone (SEZ) is now expected to be finalised by the end of this year, according to sources.

Despite its potential to attract new investments, boost trade, and create jobs, some difficulties in ironing out the project’s details have delayed the original Malaysian deadline, sources who did not want to be named told The Straits Times.

Some of the issues include disagreements over contributions to a "facilitation” fund for companies entering Johor and the lack of skilled workers, the sources said.

Malaysia and Singapore are currently in discussions to create a joint or "facilitation” fund to support Singaporean companies expanding their operations in the Johor-Singapore SEZ.

There is also a push to set numerical goals for the number of Singaporean businesses establishing a presence in the SEZ.

"There are many challenges to get this passed. For instance, what should be the fair share of contribution of funds between both the countries,” one source was quoted as saying.

However, determining a fair contribution to the fund by both countries is a significant hurdle. Additionally, ensuring a steady supply of skilled workers for companies in the SEZ is a key negotiation point, the report was quoted as saying.

To differentiate this project from the Iskandar initiative, the focus will be on developing training programmes to produce skilled workers in Johor who can meet the demands of industries like artificial intelligence and renewable energy, the source was quoted as saying.

It was also revealed that the talks will take place until the 11th Singapore-Malaysia Leaders’ Retreat which is due to be held in December.

In January, Malaysia and Singapore signed a memorandum of understanding aimed at concluding the deal by the end of 2024. In July, Economy Minister Rafizi Ramli said the agreement was expected to be signed in September.

Yesterday, Johor Menteri Besar Datuk Onn Hafiz Ghazi said Malaysia and Singapore were scheduled to hold a three-day workshop on August 28 to 30 aimed at finalising most of the agreement, paving the way for its drafting.

The legal requirements of the agreed proposals will have to verified by both the Malaysian and Singaporean governments.

The SEZ, formally unveiled in October 2023 during Prime Minister Datuk Seri Anwar Ibrahim’s visit to Singapore for the 10th leaders’ retreat, is designed as an integrated business and investment zone aimed at facilitating the movement of people and goods across the border.

The project is expected to encompass Iskandar Malaysia and Pengerang, covering 3,505 square kilometres in southern Johor — an area more than four times the size of Singapore.