Economic Cooperation Zones Create New Asian Geometry

Triangles of growth promote trade, limit risks of collapse from instability

IN Asia's post-cold-war world, a new geometry of boundaries is taking shape as more nations create markets that defy national borders.

In one corner of Asia is the ``southern growth triangle,'' the name for a new economic zone that cuts across the borders of Singapore, the southern Malaysian state of Johor, and the Riau Islands of Indonesia.

Then there is ``Greater China,'' which includes southern coastal China, Taiwan, and Hong Kong, where hundreds of millions of ethnic Chinese have created the fastest-growing economic area in the world.

Another emerging economic shape is forming around the oval Japan Sea, where the five nations of Russia, China, Japan, and the two Koreas are opening doors to each other that were shut only a few years ago.

Yet another market contour may emerge along the southern Mekong River, which ties together the former adversaries of Thailand, Cambodia, Laos, and Vietnam.

In effect, the ``little tiger'' economies of Asia (Hong Kong, Singapore, South Korea, and Taiwan) and other would-be tigers are trying to cooperate to make themselves more powerful on world markets.

``There's a new competition in Asia - chasing after scarce capital,'' says Lee Tsao Yuan, deputy director of the Institute of Policy Studies in Singapore. ``Countries are discovering that they must cooperate to make themselves more attractive for foreign investment.''

Unlike Europe, Asian nations have little modern experience with open economic borders or joint infrastructure that supports investment. After all, the region is home to four of the remaining five communist-run nations, which are still experimenting with free markets, let alone porous borders or cross-border projects.

But it is just because China, Vietnam, and other closed-market countries are opening up that the map of Asia is being redrawn along the lines of economic strength. The new markets, especially China, are taking much of the foreign investment that in the past might have gone to the six noncommunist countries of the Association of Southeast Asian Nations. ASEAN includes Indonesia, Singapore, Thailand, the Philippines, and Malaysia.

``We are creating growing regions within ASEAN that will focus the attention of foreigners outside ASEAN to the area which can provide competitive and comparative advantages in some cases,'' says Malaysia's minister of international trade and industry, Seri Rafidah Aziz.

THE most common phrase to describe these new sub-regional zones is ``growth triangle,'' which was coined in 1989 by Singapore's then-deputy prime minister, Goh Chok Tong.

``It's a bandwagon,'' says J. Malcolm Dowling, an economist with the Asian Development Bank (ADB) in Manila. ``All the governments are eager to support this trend. Nations are groping for ways to cooperate and take advantage of the fact that they are growing fast.''

But he warns, ``it may all go into the ocean'' if there is not the right ``natural'' mix of capital, labor, land, and resources. Governments cannot force markets to cooperate, he says.

The Singapore government, however, has been the driving force behind the ``southern growth triangle,'' which gives the small island-nation more ``economic space.''

Cramped for land and short on cheap labor, Singapore helped to set up agreements and infrastructure to enable its own companies and multinationals to establish factories on nearby islands in Indonesia and across a causeway in southern Malaysia.

For a growth triangle to work, says Dr. Lee, it must have ``complementary'' factors. Singapore brings managerial capability, finance, transport, and telecommunications, while Johor and Riau offer everything else.

Each morning, for instance, dark-suited Singapore businessmen can be seen taking a ferry to Batam Island, where young women brought from Java work for low wages in industrial parks. The businessmen can quickly pass through immigration checkpoints with a computer ``smart card.''

``The first and foremost lesson is that growth triangles are primarily an economic, and not political concept,'' Lee states. ``Merely politically motivated growth triangles won't fly.''

Two more triangles are in the works within ASEAN. One, tagged the northern triangle, encompasses southern Thailand's Kra Isthmus, northern Malaysia, and the Indonesian island of Sumatra. The area's 26 million people are mainly Muslim, but the commercial center, like Singapore, is Penang Island, which is largely Chinese. Leaders of the three countries have endorsed the plan.

An eastern triangle is being planned that would tie together eastern Malaysia, northern Indonesia, and southern Philippines, or the islands of Sulawesi, Borneo, and Mindanao respectively.

Growth triangles offer lower political and economic risks compared with a trading bloc approach, says ADB Vice President William Thomson. ``Should anything go wrong, the consequences can be largely restricted to the areas concerned.''

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