KUALA LUMPUR: The proposed establishment of the Southern Thailand Special Economic Zone is expected to significantly boost the local economy by attracting investments and fostering economic activities, experts say.

They also say this would then indirectly lead to a boosting of the Malaysian economy, especially in border states, in particular Kelantan.

Associate Professor Dr Norlin Khalid from Universiti Kebangsaan Malaysia's Faculty of Economics and Management said this is made possible by the plan to include private sector and start-up companies in the SEZ.

She said their inclusion could diversify the industrial base beyond the rubber and food sectors, creating jobs and increasing economic output.

"The enhanced infrastructure and commercial developments, such as the proposed commercial area along Sungai Golok, will further stimulate economic growth and development in the region," she told the New Straits Times.

Earlier, Prime Minister Datuk Seri Anwar Ibrahim that the establishment of the Southern Thailand Special Economic Zone may include private sector and start-up companies, besides rubber and food sectors.

This was discussed during his meeting with Thai Foreign Minister Maris Sangiampongsa.

Norlin said the proposed SEZ is expected to significantly benefit Kelantan by enhancing its manufacturing sector.

As of 2022, she added, Kelantan's economic activities comprised 71 per cent services, 20.8 per cent agriculture, 4.8 per cent manufacturing, 1.8 per cent construction, 1.4 per cent mining, and 0.2 per cent import duties.

"This enhancement aims to transform the region's low-value-added upstream industries, such as rubber and food, into high-value-added downstream industries, thereby boosting economic growth and diversification in Kelantan.

"Additionally, the rise in demand for goods and services related to SEZ operations can indirectly stimulate job growth in Malaysian businesses."

In addition to boosting local economy, incorporating start-ups into the SEZ can drive innovation and technological advancement, contributing to the overall economic growth of the region, said Norlin.

"Start-ups are often agile and can quickly adapt to market demands, which can introduce new products and services, increase competition, and improve efficiency.

"This can lead to a more vibrant and dynamic economic environment, attracting further investments and creating a positive feedback loop for growth.

"According to my estimates, a 1.0 percentage point (ppt) increase in gross fixed capital formation will raise the nominal gross domestic product by 0.05 ppt and employment by 0.07 ppt."

Meanwhile, Universiti Teknologi Mara's SME Development and Entrepreneurship Academy coordinator Mohamad Idham Md Razak said partnering with private sector start-ups is likely to maximise investments and activities in SEZ in southern Thailand.

Despite this, efforts must be in place to attract more private start-ups to the Southern Thailand SEZ.

"This includes proper technical infrastructures and logistic support are needed to construct a solid framework for enterprises.

"Secondly, an appealing financial incentive system in the form of tax exemptions, grants and subventions can considerably cut down the initial set up cost of start-ups.

"Thirdly, business-enabling administrations comprised of simplified company registration and permit procedures will ease the business operation."

However, both experts warned of potential challenges that could come up during the implementation of the SEZ with private sector start-ups, such as bureaucratic hurdles and political flux as well as access to skilled labours.

Idham said to retain the private start-ups in the economic zone, the government has to develop clear and consistent policies.

"However, increased bureaucratic red tape and political flux can easily complicate the implementation of such policies.

"Moreover, integrating private start-ups into the economy to allow a seamless exchange of goods, labour and services among private firms and government authorities is also a challenge.

"Training a workforce with the requisite skills and securing financial resources are fundamental challenges to this," he said.

https://www.nst.com.my/news/nation/2024/08/1088135/southern-thailand-sez-set-boost-local-malaysian-economy-say-experts