IF JOHOR LEFT MALAYSIA, WOULD IT TRANSFORM INTO AN ECONOMIC POWERHOUSE?

His Royal Highness the Tengku Mahkota of Johor has stated that if Putrajaya breaches the terms behind the Federation of Malaya, Johor as a state may be forced to secede.

His Royal Highness also took great pains to echo the feelings of misery felt by millions and declared that the Royal family was “not a part of this current mess”.

From an economic point of view, how would Johor fare if it were to go its own way?

Would it be better off or worse off?

Firstly, if Johor were to become an independent nation, it would probably be a monarchy, governed like an Emirate, as opposed to a Constitutional Monarchy. Some argue that given the experience of countries the last 10 plus years, monarchy as a form of Government may actually hold better prospects than democracy for young democracies with weak law enforcement.

From an economic point of view, Johor would really well positioned. It would probably have extensive rail and tunnel links with Singapore and the flow of goods between Johor and Singapore will be more like the flow of goods between England and France. There would probably be at least two to three high speed rail links into Johor from Singapore creating a megapolis, albeit between two different countries.

As an independent state, Johor will need its own central bank. This will enable financial intermediation and ensure greater economic progress. But it would probably need to be capitalised with a loan of about US $10 billion. From then on, the Johor as an independent country will be responsible for management of its own domestic and external trade.

However, the initial investment required to develop its own critical infrastructure is probably about USD $ 100 billion. USD $100 billion would not be so much of a problem because an independent Johor can aim for a GDP per capita of at least USD $40,000 ten years after independences. And Johor as an independent developed state could easily hold a population of 10 million ten years after independence, which means that its GDP is a staggering USD $400 billion; comparable to the entire GDP of Malaysia.

This is because certain key sectors can see massive developments in an independent Johor.

The biggest enabler for a successful will be the human talent.

Millions of extremely talented Malaysians will be willing to relocate to an independent Johor that practises equality of races in its Constitution. And Johor has produced some of the greatest leaders in the world.

The electronics manufacturing industry could see a massive boost in Johor as an independent state as it can take over Penang’s function as the high tech manufacturing hub in Malaysia. This is because if it has extensive links to Singapore, Johor can actually offer a much better value proposition for companies involved in high tech manufacturing especially in supply chain management and Human Resource redevelopment.

This will be crucial as an independent Johor will be successful so long as it exports more than it imports. And with the backing of top quality expertise, Johor can be self-sufficient in food, is self-sufficient in water but will to modify its electrical grid, so that it becomes self-sufficient in power. Energy self-sufficiency is a challenge for Johor, as it will probably require importing coal as a feedstock for its own power and utilities.

So assuming that Johor has the relevant top level policy advisors and a strong central government, strong education policy, Johor as an independent state actually holds a lot of exciting promises.

Malaysia without Johor would mean a country sharing a border with Negeri Sembilan, Malacca and Pahang. Some parts of this border cuts through virgin jungle and Johor would be required to protect its border, much the same way as the Malaysia – Thai border is protected.

But this would probably mean the demise of Malaysia as a country. Johor can survive without Malaysia, but can Malaysia survive without Johor? Malaysia will probably enter into a severe economic recession and end up as a failed state should Johor secede.

All of this because of 1MDB.

Truly 1MDB has put 1Malaysia Dalam Bahaya! - http://spin-kings.blogspot.my/