6 - Comparing Two Economic Regions: Indonesia-Malaysia-Singapore Growth Triangle and Pearl River Delta Region

Summary

INTRODUCTION

With the success of the “miracle growth” of the East Asian Tigers by adopting openness or export-oriented strategies, several developing countries including China and India are also adopting the strategy of openness as part of their economic and industrial development. As part of the such strategy to attract multinational corporation investment, most countries develop special economic zones or export processing zones. In line with domestic industrial policy, countries have embarked on several regional economic cooperative arrangements to promote trade with neighbouring countries. The key idea of these regional economic arrangements is to increase the synergy within the region and to create greater economic spillovers. Multinationals could take advantage of different endowments of regional countries and create greater spillover in technologies and international networks. Several prominent examples of growth triangles include the IMS Growth Triangle (Singapore, the Malaysian state of Johor, and Batam Island in Riau, Indonesia) and the Pan Pearl River Economic Zone (including Guangdong Province of China, Hong Kong and Macau).

The Pearl River Delta (PRD) Economic Zone accounted for almost 10 per cent of China's GDP and more than a third of total trade in 2005. The rate of growth of GDP in the PRD is higher than the national growth rate. One of the objectives of this chapter is to identify the factors contributing to the sterling economic performance recorded in the PRD, and reflect on how the Indonesia-Malaysia-Singapore Growth Triangle (IMS-GT), and in particular the Batam, Bintan, Karimun (BBK) SEZ, can possibly adopt some of the strategies and emulate. The Singapore, Indonesia, Johor (SIJORI) growth triangle and Pearl River Delta region will be discussed further in the later sections. The theoretical foundation for the formation of such regional zones will be explored in the next section.

REGIONAL ECONOMIC DEVELOPMENT THEORIES

Researchers and scholars have propounded several theories of economic growth and development over the last few decades, the earliest of which is the Growth Pole Theory introduced by French scholar François Perroux (1950).