Singapore and Malaysia reunite, if only for cake
After two years of tight restrictions, the border between Singapore and Malaysia, one of the world's busiest crossings, has finally reopened
They came to hug parents, hold loved ones and cradle babies they made but hadn't met. They loaded up on cakes, grabbed cheap massages and pumped gas.
After two years of tight restrictions, the border between Singapore and Malaysia, one of the world's busiest crossings, has finally reopened. In the process, a key export resumed to the city-state's larger neighbor about half a mile across the water: people.
This is about more than tearful reunions, as heartening as they are. It's a big milestone in Southeast Asia's journey from trying to quash Covid-19 to living with the disease. The economic recovery in either country can't be complete without a relatively free flow of human capital alongside investment. Before Covid, more than 300,000 people crossed the boundary each day. As much as Singaporeans and Malaysians complain about each other, and for all the differences in politics and relative wealth, the resumption of cross-border travel has underscored just what's been missing during the peak of the pandemic.
In the hours after the border fully reopened after midnight on April 1, thousands of Singapore residents streamed across the bridge over the Strait of Johor. That brought valuable cash into Johor Bahru — and the promise of more money to come. That prospect is lifting confidence among consumers and business in the Malaysian city. Six decades after Singapore divorced Malaysia and became a republic, the two countries remain intimately linked. Singapore gets power, water and labor from Malaysia. High-rise apartments lining the Johor coast are occupied by people who work in Singapore, or did before Covid. Think of New York and New Jersey, just add passports.
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The state of Johor accounts for about 10% of Malaysian gross domestic product and has been one of the hardest hit parts of the country. Singapore was Malaysia's top source of visitors in 2019 with about 10 million arrivals. Just a fraction made it the following year, and most of those were crammed into the early months before lockdowns. "Johor suffered disproportionately," Serina Rahman, visiting fellow at Singapore's ISEAS-Yusof Ishak Institute, wrote in a report last year.
As Singapore prospered in the decades since separation, costs of manufacturing soared. Factories began to move across the water. Malaysia has land and relatively cheap labor, vital ingredients Singapore lacks, explained Teh Kee Sin, founding president of the SME Association of Johor Selatan. "The past two years have reminded us how important we are to each other," Teh said in an interview at the factory he runs that makes parts for printers, bicycles and fishing reels. "Malaysian politicians sometimes say 'Oh we don't want to be Singapore's backyard.' I say, 'What are you talking about?'"
For all the optimism, Johor is yet to see the big bucks from across the water. Many of those who came the first week were visiting family and quickly returned after the weekend, or even before. Spending isn't their first priority, small business owners sat. Revenue is up roughly 20% since the weekend, said Lim Meng Chin, owner of Hiap Joo bakery, a haunt for devotees of banana bread, which was established in 1919. That still only takes it to around 80% of pre-Covid levels. "Before Covid, they were lined up to the end of the road," he said in an interview. "Two things Singaporeans love are banana bread and fish-head curry." In KSL mall, near the border checkpoint, Ching Ching is posting job openings at her foot reflexology business. Ching says she saw lots of traffic from Singaporeans the past weekend. Price is her advantage, with an hour-long foot treatment costing 48 ringgit ($11.40), about a third of what's charged in Singapore's suburbs. "Locals rarely come here," Ching said.
There's also a backlash building. Malaysian newspapers carried front page stories Wednesday complaining about Singaporeans allegedly filling up on gas that the Malaysian government subsidizes. The Johor division of Malaysia's Ministry of Domestic Trade and Consumer Affairs said it will step up enforcement against operators caught selling the fuel to foreign-registered cars, with companies liable for fines of up to 2 million ringgit. Former Prime Minister Najib Razak, scouting for themes to advance his comeback after a corruption conviction, has highlighted the issue. A national election is due in about a year.
(Malaysia previously banned the sale of 95-RON gasoline to foreigners because that grade of petrol is subsidized for locals. Singapore sells that type at multiples of what it costs in Malaysia. Singapore wants tanks to be three-quarters full before departing the island.)
Most shops in an arcade surrounding a bus depot across the border were shuttered on a recent afternoon. Padmini Perihsamy, however, is convinced things are looking up. Her stall selling South Asian pastries reopened last weekend and did brisk business. During the peak of the pandemic, she switched to online sales and wholesale. Perihsamy is confident those kiosks will be open soon.
Until they are, this is a recovery in waiting.
Daniel Moss is a Bloomberg Opinion columnist covering Asian economies. Previously he was executive editor of Bloomberg News for global economics, and has led teams in Asia, Europe and North America.
Disclaimer: This article first appeared on Bloomberg, and is published by special syndication arrangement.
