Kedah state authorities have unveiled plans for a duty-free complex at Bukit Kayu Hitam, just over the border from Sadao district in Songkhla, hoping to lure Thais across the border to spend money there.
There is also a more ambitious idea to build a logistics centre close to the border with Thailand, although the location has not been decided, Kedah state chief Mukhriz Mahathir told Bernama news agency.
The proposed hub would import products and materials from Thailand to produce halal foods certified by Malaysia to sell to Malaysian consumers and export to other countries. It would also distribute Thai and local products to the domestic market and sell Malaysian products to Thailand.
"We are studying it now. I can see that these activities will turn northern Kedah into a fast-paced growth area in sectors that are different from those in southern Kedah,'' Mr Mahathir said. The southern part of the state is being developed as a recreation area, mainly to serve local tourists from Penang state.
The state government is controlled by the United Malays National Organisation, the political party led by Malaysian Prime Minister Najib Razak, the dominant party in the government.
Kedah state also borders Yala province.
Somporn Siriporananon, chairman of the Songkhla Chamber of Commerce, said on Friday that Malaysia is aggressively developing its northern border with Thailand and looking to reap the benefits.
The plan for value-added halal food using products imported from Thailand was a clear example, he noted.
Thailand had long planned to set up a halal production centre in the southern region, almost two decades ago, but nothing ever came of it.
"The insurgency is still spoiling the investment atmosphere in southern Thailand,'' he admitted.
That was not the only problem, he said, and pointed to the lack of interest from governments to implement the plan and encourage investors to the southern border area with better incentives than other, safer regions.
Other investment projects in the southern border provinces were also moving slowly, hamstrung by the same problems, he complained.
The Halal project in Kedah follows a similar project, importing para (rubber tree) wood from Thailand and then adding value to export the products to third countries, the Songkhla trade chairman said.
Para wood is a key export from Songkhla to Malaysia, mainly through the Sadao border. Other main frontier crossings in the province are the checkpoint in Padang Besar in Sadao district and the checkpoint at Ban Prakob in Na Thawee district.
Exports include machinery and spare parts and rubber gloves. Total trade between the southern province and Malaysia last year was 486 million baht.
The Kedah project could put Malaysia in direct competition with Songkhla in luring investors to the area, Mr Somporn warned.
"When Malaysia makes a move, all parties from the private sector to the government and academics go in the same direction, and speak in one voice,'' he said. That was so very different from Thailand, he commented.