Rethinking the IMS-Growth Triangle
Rethinking the IMS-Growth Triangle
By Linda Low
The IMS Growth Triangle has unique potentials and advantages.
SINGAPORE: Mooted in 1989, the Indonesia-Malaysia-Singapore Growth Triangle (IMS-GT), formerly dubbed Sijori (Singapore-Johor-Riau Islands) was the first subregional growth triangle in ASEAN. Growth triangles do not seem to have a distinctive theoretical construct but are rather a derivative of regionalism and direct foreign investment which has been motivated by benefits in resource pooling, competitiveness, market penetration, and product life cycle among others.
Private-sector initiatives decide on location and choice of activities. Government involvement lies in developing infrastructure and expediting factor flows. If the etymology of growth triangles is widened to metropolitan regions, these could include trade development zones (TDZ), export processing zones (EPZ), special economic zones (SEZ), bonded areas and even science and technology parks, varying in types of incentives provided to achieve specific goals, but all promoting economic cooperation.
Growth triangles are not unique to ASEAN: witness the Southern Growth Triangle (Hong Kong, southern China and Taiwan), the United Nations-sponsored Tuman River Area Development Program (China, Russia and North Korea) and the Yellow Sea Economic Zone (China and Japan). Others in ASEAN are Indonesia-Malaysia- Thailand Growth Triangle (IMT-GT) and the East Asean Growth Area (EAGA), Brunei, Indonesia, Malaysia and the Philippines (BIMP).
ASEAN triangles, congruent with direct foreign investment and multinational corporations (MNCs), will remain conduits of industrialization complementing the Asean Free Trade Area (AFTA) and the Asia Pacific Economic Cooperation (APEC) process. By 2003, AFTA, covering 15 product groups, would still not be a fully-fledged FTA. Neither does APEC profess to be one. Both seek to reduce tariffs to liberalize trade and facilitate investment, labor and technology transfers.
Progress in IMS-GT:
Progress seems more visible on the Indonesia-Singapore side of the IMS-GT. Activities across the Johor Straits since the British era are spontaneous and market-driven. However, Indonesia- Singapore relations are government-induced and involve greenfield projects ranging from the formation of the Batam Industrial Development Authority (BIDA) and Batam Industrial Park (BIP) to Indonesia's review of its foreign ownership policy.
While clearing immigration and Causeway bottlenecks were problems for Johor-Singapore, Indonesia and Singapore signed a Memorandum and Joint Venture Agreement in 1990 to establish PT Batamindo Investment Corporation (BIC) and Batamindo Industrial Management (BIM). The most significant Johor-Singapore policy requiring agreement at the highest level was the construction of the second link.
With less resource complementation between Indonesia and Johor, it would be against market forces to forge an artificial third leg. Neither is there a need for a triangular project involving all three parties. Bilateral relations dominate and serve well though all committees involve three parties, coordinated by the Joint Ministerial Committee meeting bi-yearly.
Ministerial and official committees provide a framework for institutions and processes to arbitrage ideas and projects in a structured manner. Political commitment and some politicization of process and structure may give the needed push which the private sector cannot secure unilaterally.
Also in 1990, Indonesia and Singapore Coordinating Ministers signed two bilateral agreements expanding the framework for economic cooperation to Riau Province, from manufacturing to tourism activities and negotiating a water contract for Singapore for the next 50 years. Joint Indonesia-Singapore overseas investment promotion missions went to Osaka, Tokyo, Hong Kong, Taiwan and South Korea. A Memorandum of Understanding (MOU) to develop a luxurious residential-cum-resort Batam Executive Village for BIP tenants was signed in 1991. The 1992 opening of BIP marked the completion of IMS-GT's first phase.
An MOU in 1994 marked the second phase and official name change to IMS-GT. In 1996, West Sumatra Province, Malacca, Negri Sembilan and Southern Pahang were added. This should provide larger resource pooling and market potential, with the requisite coordination. Labor constraints will ease but at the expense of geographical proximity from Singapore or Johor Baru.
The US$20 million Padang Industrial Park in West Sumatra developed by state-owned Johor Corporation and the West Sumatra government concretizes Johor-Indonesia cooperation, which, in turn, strengthens other bilateral relations. It caters to manufacturing, production and distribution of electronics, textiles, ceramics, food products, engineering, packaging and supporting industries.
Enlarged resource base and market size is no guarantee of continued economic benefits. New markets in China, India, Indochina and other ASEAN growth triangles pose competition. Coordinating ministers must ensure the subregion's attractiveness and promote Asean and non-Asean investors alike. The improvement of infrastructure, telecommunications, power generation, road, air and sea links and the reduction of administrative redtape and bottlenecks have become imperative. Market forces will guide investors to the growth triangle that suit them best.
Benefits from IMS-GT reach beyond participating countries. It has enhanced ASEAN economic cooperation to warrant its upgrading into an ASEAN project in 1993. ASEAN has also started functioning as a subsystem in international relations to promote Asia Pacific economic cooperation. With IMS-GT highly profiled and publicized, the pressure to succeed, however defined, is high.
Issues and challenges:
The challenge facing the IMS-GT is intense competition from ASEAN and non-Asean projects including the Greater Mekong Scheme. Beyond regionalization, globalization is a larger and more potent force compounded by technology to engender a borderless, seamless world. Competition for investors and MNCs and markets becomes more intense.
Although only two ASEAN members are in the Greater Mekong Scheme, ASEAN has identified two projects involving a trans-Asian railway link from Singapore to Kunming and a gas pipeline linking ASEAN with Cambodia, Laos and Myanmar to signal its interest. The thinking is that ASEAN or non-ASEAN triangles are not zero sum games as spillovers and wider partnerships lock in regional economic cooperation and goodwill.
In such a spirit, ASEAN states act directly as collaborators and indirectly as "guarantors" for areas where investors and MNCs are hesitant. IMS-GT participation in other ASEAN and non-ASEAN growth triangles should thus produce "coopetition" defined as cooperating with a business competitor in an attempt to improve both parties' performance.
Political competition among growth triangles is, however, harder to handle. Conflicts between Singapore and Malaysia can spill over to IMS-GT. After all, IMS-GT fundamentally rides on bilateralism, not trilateralism and Singapore-Malaysia bilateralism is currently the strongest side of IMS-GT. Unlike IMT-GT or the Greater Mekong Subregion (GMS) which have Asian Development Bank (ADB) backing, there is no external modulating influence in IMS-GT.
Malaysia and Singapore could be an unbeatable duo twinning in information technology, telecommunications, port and airport hubs. Head-on competition between them would not be exemplary, if nothing else. Hopefully, a more tripartite IMS-GT may dilute nationalism with regionalism.
Prospects and policy implications:
Though the prospects for IMS-GT remain favorable, some stock- taking and re-engineering of the concept would be useful. Greater political commitment and public sector initiatives and policies must continue to assure private sector confidence, since its first-comer advantage is diluted as MNCs have more choices and varieties in other Asean and non-Asean growth triangles. New capitalist centers advocating liberalization, deregulation and privatization have created a supercompetitive era and a global shakeout from which no industry or country can be immune.
As such, stakeholders in the IMS-GT have to reinforce its intrinsic features with higher skills, information highways and networks, efficiency and proven track record notably represented by Singapore and Johor as the leading nodes. The IMS-GT has garnered sufficient experience and prowess in industrialization and restructuring to inject its catalytic influence on other growth triangles and subregions. It has leadership qualities which should be exploited positively.
Congregating around the Straits of Malacca, the IMS-GT has unique potentials and advantages. Maintaining safe, secure and efficient passage through the Straits offers business opportunities in transport and communications.
The writer is an Associate Professor at the Department of Business Policy, National University of Singapore.