Cross-Border 'Growth Triangles' Promote Prosperity in East Asia
International Herald Tribune
November 30, 1994
Fidel V. Ramos 

The writer is president of the Philippines. - In Europe there are focal points for economic growth within nations, such as northern Italy or Wales. In East Asia, zones of economic cooperation that straddle national boundaries are making a major contribution to growth and stability in the region. Often called "growth triangles," such zones exploit complementarities between geographically contiguous areas of different countries to gain a competitive edge in production for export. The growth triangle concept has taken hold because it is a controlled experiment in regional cooperation whose adverse effects, if any, can be limited to the triangle, but whose beneficial results can subsequently be applied to the national economy as a whole. It offers the benefits of regional integration without great loss of economic sovereignty. The initiative of regional statesmen in starting up cross- border growth poles has been crucial. And the first requirement for the success of these economic alliances is the political commitment of national leaders. In East Asia, growth triangles are as much instruments of foreign policy and national security as they are instruments of economic policy. For instance, the growth pole linking Singapore, the southern Malaysian state of Johore and the Riau Archipelago in Indonesia apparently took off only after President Suharto agreed to allow 100 percent foreign ownership of factories on Indonesia's Batam Island. There have been teething problems. But the arrangement has worked well enough to encourage other growth triangles in Southeast Asia. One, agreed to initially by Prime Minister Mahathir bin Mohamad of Malaysia and President Suharto of Indonesia, will link Penang and other parts of northern Malaysia with southern Thailand and Sumatra in Indonesia. The more recent East ASEAN Growth Area draws together Brunei, the east Malaysian states of Sabah and Sarawak, Mindanao and Sulu in the southern Philippines and Sulawesi and Manado in Indonesia. In the 18th century, this was a unified trading area led by the maritime state of Sulu. The East ASEAN growth zone, initiated by the Philippines, has changed the entire focus of the relationship between Malaysia and the Philippines from political to economic. Once Prime Minister Mahathir and I, with the support of President Suharto, agreed to set aside the contentious issue of [the Philippines' claim to part of] Sabah and allow the expansion of economic relations even while we worked at the problem's amicable resolution, trade and investment between our two countries began to expand dramatically. Another East Asian growth zone linking parts of Burma, Laos, Thailand and China is also taking shape, with some help from the Asian Development Bank. The "mother" of all growth triangles in East Asia radiates from Hong Kong and Taiwan to the southern China coastal provinces of Guangdong and Fujian. It has had a great influence on the region's political stability in the last 15 years. The southern China-Hong Kong-Taiwan growth pole began with Deng Xiaoping's vision of substituting economic development for class warfare as the highest order of business in post- Mao China. The mainland's leap to modernization by importing foreign equipment and technology on a large scale began with Mr. Deng's decision to normalize relations with the United States and then with Japan - and also to thin out the Chinese forces that had been massed on the coast opposite Taiwan for 30 years. These diplomatic and military preparations were completed in December 1978, only 17 months after Mr. Deng's third reinstatement to political power. He then proposed setting up "special economic zones" in which foreign investment would be allowed on concessionary terms. The rest is history, which even the Tiananmen massacre of 1989 could not disrupt. The growth triangles in East Asia differ from national export- processing zones because they can exploit economies of scale and integrate the comparative advantage of every member country. They are export zones with the synergy that comes from mixing various corporate cultures and resource endowments. The exchange is straightforward. Investing countries provide capital, technology and management skills. Receiving countries provide land, other natural resources and labor, both skilled and unskilled. Investments in the growth triangles come largely from the East Asian region itself - from newly industrialized economies such as Singapore, Hong Kong, Taiwan and South Korea, and from Japan, which is scrambling to relocate its labor-intensive manufacturing offshore to lower-wage economies under the pressure of the rising yen. The greatest benefits necessarily accrue to the most industrially mature partner. But even the poorest partner gains in practical terms as a result of job generation, skills development, technology transfer and the infusion of industrial discipline in the local work force. Radiations from the growth pole catalyze development in other sectors of the larger national economy. For Singapore and Malaysia, growth triangles are a way of sustaining the competitiveness of their exports despite rising wages and increasing shortages of land and workers. For Indonesia, Thailand and the Philippines, and eventually for Vietnam, they are a means of speeding up development, creating jobs and importing technology. All East Asian countries now regard regional cooperation as a means not just of enhancing their development but of ensuring themselves against unhealthy changes in the world's economic climate. Growth triangles are an easily organized way of protecting themselves against trade blocs in the developed countries, without committing prematurely to the all- or-nothing venture of setting up formal trade blocs of their own. In this sense, growth triangles are actually miniature versions of the trading blocs that have formed in Western Europe and North America. Flexible, low-cost, fast- track, uncomplicated and well-focused, they can be started quickly and with little fuss. Formal trading blocs need gestation periods stretching over many years. Growth triangles require no changes in national concepts of sovereignty, administration or national preferences. They do not completely engage national prestige because they require no elaborate political commitments to neighboring states. Governments can enter into them with minimum political risks. International Herald Tribune.

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