Rethinking the IMS-Growth Triangle<\/p>\n
By Linda Low<\/p>\n
The IMS Growth Triangle has unique potentials and advantages.<\/p>\n
SINGAPORE: Mooted in 1989, the Indonesia-Malaysia-Singapore
\nGrowth Triangle (IMS-GT), formerly dubbed Sijori
\n(Singapore-Johor-Riau Islands) was the first subregional growth
\ntriangle in ASEAN. Growth triangles do not seem to have a
\ndistinctive theoretical construct but are rather a derivative of
\nregionalism and direct foreign investment which has been
\nmotivated by benefits in resource pooling, competitiveness,
\nmarket penetration, and product life cycle among others.<\/p>\n
Private-sector initiatives decide on location and choice of
\nactivities. Government involvement lies in developing
\ninfrastructure and expediting factor flows. If the etymology of
\ngrowth triangles is widened to metropolitan regions, these could
\ninclude trade development zones (TDZ), export processing zones
\n(EPZ), special economic zones (SEZ), bonded areas and even
\nscience and technology parks, varying in types of incentives
\nprovided to achieve specific goals, but all promoting economic
\ncooperation.<\/p>\n
Growth triangles are not unique to ASEAN: witness the Southern
\nGrowth Triangle (Hong Kong, southern China and Taiwan), the
\nUnited Nations-sponsored Tuman River Area Development Program
\n(China, Russia and North Korea) and the Yellow Sea Economic Zone
\n(China and Japan). Others in ASEAN are Indonesia-Malaysia-
\nThailand Growth Triangle (IMT-GT) and the East Asean Growth Area
\n(EAGA), Brunei, Indonesia, Malaysia and the Philippines (BIMP).<\/p>\n
ASEAN triangles, congruent with direct foreign investment and
\nmultinational corporations (MNCs), will remain conduits of
\nindustrialization complementing the Asean Free Trade Area (AFTA)
\nand the Asia Pacific Economic Cooperation (APEC) process. By
\n2003, AFTA, covering 15 product groups, would still not be a
\nfully-fledged FTA. Neither does APEC profess to be one. Both seek
\nto reduce tariffs to liberalize trade and facilitate investment,
\nlabor and technology transfers.<\/p>\n
Progress in IMS-GT:<\/p>\n
Progress seems more visible on the Indonesia-Singapore side of
\nthe IMS-GT. Activities across the Johor Straits since the British
\nera are spontaneous and market-driven. However, Indonesia-
\nSingapore relations are government-induced and involve greenfield
\nprojects ranging from the formation of the Batam Industrial
\nDevelopment Authority (BIDA) and Batam Industrial Park (BIP) to
\nIndonesia's review of its foreign ownership policy.<\/p>\n
While clearing immigration and Causeway bottlenecks were
\nproblems for Johor-Singapore, Indonesia and Singapore signed a
\nMemorandum and Joint Venture Agreement in 1990 to establish PT
\nBatamindo Investment Corporation (BIC) and Batamindo Industrial
\nManagement (BIM). The most significant Johor-Singapore policy
\nrequiring agreement at the highest level was the construction of
\nthe second link.<\/p>\n
With less resource complementation between Indonesia and
\nJohor, it would be against market forces to forge an artificial
\nthird leg. Neither is there a need for a triangular project
\ninvolving all three parties. Bilateral relations dominate and
\nserve well though all committees involve three parties,
\ncoordinated by the Joint Ministerial Committee meeting bi-yearly.<\/p>\n
Ministerial and official committees provide a framework for
\ninstitutions and processes to arbitrage ideas and projects in a
\nstructured manner. Political commitment and some politicization
\nof process and structure may give the needed push which the
\nprivate sector cannot secure unilaterally.<\/p>\n
Also in 1990, Indonesia and Singapore Coordinating Ministers
\nsigned two bilateral agreements expanding the framework for
\neconomic cooperation to Riau Province, from manufacturing to
\ntourism activities and negotiating a water contract for Singapore
\nfor the next 50 years. Joint Indonesia-Singapore overseas
\ninvestment promotion missions went to Osaka, Tokyo, Hong Kong,
\nTaiwan and South Korea. A Memorandum of Understanding (MOU) to
\ndevelop a luxurious residential-cum-resort Batam Executive
\nVillage for BIP tenants was signed in 1991. The 1992 opening of
\nBIP marked the completion of IMS-GT's first phase.<\/p>\n
An MOU in 1994 marked the second phase and official name
\nchange to IMS-GT. In 1996, West Sumatra Province, Malacca, Negri
\nSembilan and Southern Pahang were added. This should provide
\nlarger resource pooling and market potential, with the requisite
\ncoordination. Labor constraints will ease but at the expense of
\ngeographical proximity from Singapore or Johor Baru.<\/p>\n
The US$20 million Padang Industrial Park in West Sumatra
\ndeveloped by state-owned Johor Corporation and the West Sumatra
\ngovernment concretizes Johor-Indonesia cooperation, which, in
\nturn, strengthens other bilateral relations. It caters to
\nmanufacturing, production and distribution of electronics,
\ntextiles, ceramics, food products, engineering, packaging and
\nsupporting industries.<\/p>\n
Enlarged resource base and market size is no guarantee of
\ncontinued economic benefits. New markets in China, India,
\nIndochina and other ASEAN growth triangles pose competition.
\nCoordinating ministers must ensure the subregion's attractiveness
\nand promote Asean and non-Asean investors alike. The improvement
\nof infrastructure, telecommunications, power generation, road,
\nair and sea links and the reduction of administrative redtape and
\nbottlenecks have become imperative. Market forces will guide
\ninvestors to the growth triangle that suit them best.<\/p>\n
Benefits from IMS-GT reach beyond participating countries. It
\nhas enhanced ASEAN economic cooperation to warrant its upgrading
\ninto an ASEAN project in 1993. ASEAN has also started functioning
\nas a subsystem in international relations to promote Asia Pacific
\neconomic cooperation. With IMS-GT highly profiled and publicized,
\nthe pressure to succeed, however defined, is high.<\/p>\n
Issues and challenges:<\/p>\n
The challenge facing the IMS-GT is intense competition from
\nASEAN and non-Asean projects including the Greater Mekong Scheme.
\nBeyond regionalization, globalization is a larger and more potent
\nforce compounded by technology to engender a borderless, seamless
\nworld. Competition for investors and MNCs and markets becomes
\nmore intense.<\/p>\n
Although only two ASEAN members are in the Greater Mekong
\nScheme, ASEAN has identified two projects involving a trans-Asian
\nrailway link from Singapore to Kunming and a gas pipeline linking
\nASEAN with Cambodia, Laos and Myanmar to signal its interest. The
\nthinking is that ASEAN or non-ASEAN triangles are not zero sum
\ngames as spillovers and wider partnerships lock in regional
\neconomic cooperation and goodwill.<\/p>\n
In such a spirit, ASEAN states act directly as collaborators
\nand indirectly as \"guarantors\" for areas where investors and MNCs
\nare hesitant. IMS-GT participation in other ASEAN and non-ASEAN
\ngrowth triangles should thus produce \"coopetition\" defined as
\ncooperating with a business competitor in an attempt to improve
\nboth parties' performance.<\/p>\n
Political competition among growth triangles is, however,
\nharder to handle. Conflicts between Singapore and Malaysia can
\nspill over to IMS-GT. After all, IMS-GT fundamentally rides on
\nbilateralism, not trilateralism and Singapore-Malaysia
\nbilateralism is currently the strongest side of IMS-GT. Unlike
\nIMT-GT or the Greater Mekong Subregion (GMS) which have Asian
\nDevelopment Bank (ADB) backing, there is no external modulating
\ninfluence in IMS-GT.<\/p>\n
Malaysia and Singapore could be an unbeatable duo twinning in
\ninformation technology, telecommunications, port and airport
\nhubs. Head-on competition between them would not be exemplary, if
\nnothing else. Hopefully, a more tripartite IMS-GT may dilute
\nnationalism with regionalism.<\/p>\n
Prospects and policy implications:<\/p>\n
Though the prospects for IMS-GT remain favorable, some stock-
\ntaking and re-engineering of the concept would be useful. Greater
\npolitical commitment and public sector initiatives and policies
\nmust continue to assure private sector confidence, since its
\nfirst-comer advantage is diluted as MNCs have more choices and
\nvarieties in other Asean and non-Asean growth triangles. New
\ncapitalist centers advocating liberalization, deregulation and
\nprivatization have created a supercompetitive era and a global
\nshakeout from which no industry or country can be immune.<\/p>\n
As such, stakeholders in the IMS-GT have to reinforce its
\nintrinsic features with higher skills, information highways and
\nnetworks, efficiency and proven track record notably represented
\nby Singapore and Johor as the leading nodes. The IMS-GT has
\ngarnered sufficient experience and prowess in industrialization
\nand restructuring to inject its catalytic influence on other
\ngrowth triangles and subregions. It has leadership qualities
\nwhich should be exploited positively.<\/p>\n
Congregating around the Straits of Malacca, the IMS-GT has
\nunique potentials and advantages. Maintaining safe, secure and
\nefficient passage through the Straits offers business
\nopportunities in transport and communications.<\/p>\n
The writer is an Associate Professor at the Department of
\nBusiness Policy, National University of Singapore.<\/p>",
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