EAGA shows promise along with host of problems

EAGA shows promise along with host of problems

MANILA (Reuter): The East ASEAN Growth Area (EAGA) offers many
investment opportunities but is hampered by the depletion of
natural resources, poor infrastructure and a lack of skilled
labor, a study released yesterday said.

The study, funded by the Asian Development Bank (ADB),
referred to the area as "the last frontier of Southeast Asia".

The area, formed in 1994, comprises Brunei, Indonesia's
provinces of East and West Kalimantan and North Sulawesi,
Malaysia's eastern states of Sabah, Sarawak and Labuan and the
southern Philippine islands of Mindanao and Palawan.

It aims to increase trade, investment and tourism among the
common border areas of the four countries.

The study identified the following sectors as areas for cross-
border investments: fertilizers, paper and paperboard, transport
equipment, clothing, food and live animals, iron and steel, crude
materials other than fuels, chemical elements and compounds,
mineral fuels and animal and vegetable oils.

ASEAN, the Association of Southeast Asian Nations, groups
Indonesia, Malaysia, Singapore, Thailand, the Philippines, Brunei
and Vietnam.

But the study also pointed to several stumbling blocks which
could stall the East ASEAN growth.

One was the strain on natural resources.

"Forest resources, although offering promising economic
potential, are at a critical point of exploitation in Indonesia
and Malaysia," it said.

Infrastructure

Another concern was the lack of infrastructure.

"(The) EAGA's physical infrastructure is often inadequate,
costly to use and, as regards transportation links, generally
oriented towards the national capital," said the ADB.

The four countries have been trying to address the lack of air
and sea infrastructure by expanding air linkages, sea transport
and shipping services.

Another infrastructure constraint, said the ADB, was
inadequate and erratic power supply in many locations, and high
power prices especially in Sarawak.

Human resources were also a problem as most of the area's sub-
regions were sparsely populated and labor skills often lag behind
urban centers, the study said.

The population of EAGA is estimated at 30 million in 1995 and
projected to grow at an annual rate of 2.5 percent to reach
around 44 million by 2010.

"Educational attainment levels are low, the majority of the
working age population in most sub-regions have received a
limited primary school education, or no formal education at all,"
the ADB said.

The ADB said that as some regions of the EAGA suffer labor
shortfalls, other members such as Indonesia and Mindanao which
both have a labor surplus have been filling the gap.

Other issues that need to be addressed were appreciating real
exchange rates, trade restrictions in the form of tariff and non-
tariff barriers and a lack of investment incentives in some
regions, the ADB said.