5 - Co-operation within a Narrower Framework: Growth Triangles in ASEAN

Summary

The Emergence of Growth Triangles

The emergence of growth areas in Southeast Asia is best seen against the broader context of increasing economic integration in the region. As the rise of the newly industrializing economies (NIEs) shifted the location of industries from high-cost to low-cost countries, investments and technology became more interdependent, resulting in production linkages and increased intra-industry trade flows. As a result, East and Southeast Asian economies came closer together regardless of formal institutional ties.

ASEAN economies are among the beneficiaries of the investmenttrade nexus driving economic integration in Southeast Asia. The fastpaced growth of ASEAN economies required that development processes go beyond national Limits to free the constraints posed by domestic Growth Triangles involve economic co-operation based on encouraging specific and limited linkages of complementary economic activities across borders. It is a pragmatic response to the practical problems of formal economic integration among nations that require fundamental changes in national institutional and administrative arrangements, as with NAFTA, the EC, or AFTA. Growth Triangles, as sub-regional economic co-operation modes, need not involve entire countries, but simply adjacent areas within countries that have complementary capabilities and resources.

The concept is essentially a simple one: link adjacent areas with different factor endowments and different comparative advantages — such as differences in the levels of technology, labour (quantity and quality), natural resources, financial capital — to form a sub-region of economic growth that is driven by market dynamics. The intention is to have specific linkages across borders, rather than just complementarities in respective national economic structures. Sub-regional economic co-operation essentially involves initiatives in limited or localized economic integration that create transborder “economic neighbourhoods”. In its various forms, it has a number of characteristics:

Sub-regional economic co-operation tends to be consistent with the evolution of “natural economic linkages” among neighbouring countries, building on increasing formal and informal local trade and investment linkages. It “goes with the flow” in the very real sense, both responding to and facilitating emerging transborder economic activities.

Since Growth Triangles are limited in both substantive and geographic scope, the political and economic complexities (and related risks) are generally more manageable than those associated with more formal and extensive regional arrangements or “blocs”.