Malaysia can presumably create the two immigration-free zones in the southern city of Johor Baru, as mentioned in an earlier posting, but how will the move affect Singapore?
Should Singapore endorse the Malaysian plan or should it protect its self interests first?
Assuming that the JB zones can be created with or without Singapore's cooperation or endorsement, will it lead to an influx of businesses and residents to JB from Singapore? Should Singapore then block on its end the flow of residents or businesses to the southern tip of Malaysia although the biggest Singapore FDI is already in Johor? (An example of what the Singapore government did to prevent Singaporeans from going to JB to buy cheaper petrol is the three-quarter tank rule.)
At the macro level, it will definitely be a good thing for both countries if there is real economic union between Malaysia and Singapore atlhough they split in 1965.
The two countries can be a stronger economic entity in the global arena if they can cooperate on many fronts, instead of resorting to a zero-sum competition. For example, Singapore's PSA Corporation should cooperate with Port of Tanjung Pelepas in Johor to create a bigger port player in the region instead of undercuting each other. There are many other instances.
Singapore should perhaps look at the new opportunities in JB as an enlargement of its hinterland in Malaysia. Having a bigger chunk in Malaysia could be cheaper than reclaiming land to enlarge the physical island!