Regional Economic Development in China

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

96฀ Toh฀Mun฀Heng฀and฀Shandre฀Thangavelu 6 Comparing Two Economic Regions: Indonesia-MalaysiaSingapore Growth Triangle and Pearl River Delta Region Toh Mun Heng and Shandre Thangavelu 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฀ 06฀RegEDC.indd฀฀฀96 7/3/09฀฀฀2:20:33฀PM Indonesia-Malaysia-Singapore฀Growth฀Triangle฀and฀Pearl฀River฀Delta฀Region฀ 97 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)1 ฀ 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).฀ He฀ believed฀ that฀ growth฀ in฀ an฀ economy฀ is฀ derived฀ from฀ disequilibrium฀ and฀ domination,฀ and฀ thus฀ occurs฀ unevenly.2 ฀ In฀ this฀ concept,฀ “the฀ pole”฀ is฀referred฀to฀as฀an฀industrial฀group,฀namely฀the฀motor฀industry฀or฀a฀key฀ industry.฀ By฀ means฀ of฀ re-investment฀ and฀ multiplier฀ effects฀ to฀ the฀ extent,฀ it฀ could฀ accelerate฀ regional฀ economic฀ growth.฀ Initially,฀ the฀ Growth฀ Pole฀ Theory฀was฀designed฀for฀the฀study฀of฀industry,฀however฀since฀the฀industrial฀ park฀shares฀similar฀characteristics,฀this฀principle฀can฀be฀applied฀to฀various฀ industries฀and฀economic฀zones฀as฀well.฀ Based฀ on฀ the฀ Growth฀ Pole฀ Theory,฀ Myrdal฀ (1957)฀ developed฀ the฀ Principle฀of฀Cumulative฀Causation,฀which฀states฀that฀economic฀development฀ in฀ one฀ region฀ will฀ engulf฀ another฀ region.฀ The฀ productive฀ efficiency฀ and฀ employment฀opportunities฀in฀the฀relatively฀wealthier฀areas฀will฀attract฀capital฀ and฀workforce฀from฀less฀developed฀areas.฀Also,฀the฀industrial฀production฀of฀ more฀developed฀regions฀may฀undercut฀the฀output฀from฀the฀less฀developed฀ areas.฀This฀phenomenon฀is฀known฀as฀the฀“backwash฀effect”.฀On฀the฀other฀ hand,฀ the฀ development฀ of฀ the฀ prosperous฀ regions฀ can฀ also฀ bring฀ about฀ advancement฀in฀less฀developed฀areas฀through฀the฀spread฀effect.฀This฀occurs฀ when฀ the฀ prosperity฀ of฀ the฀ developed฀ central฀ areas฀ trickles฀ down฀ to฀ the฀ 06฀RegEDC.indd฀฀฀97 7/3/09฀฀฀2:20:33฀PM 98฀ Toh฀Mun฀Heng฀and฀Shandre฀Thangavelu peripheral฀ areas,฀ creating฀ stronger฀ demand฀ for฀ raw฀ materials฀ in฀ the฀ less฀ developed฀areas.฀However,฀Myrdal฀believed฀that฀the฀impact฀of฀the฀backwash฀ effect฀will฀be฀greater฀than฀that฀of฀the฀spread฀effect.฀As฀such,฀the฀difference฀ in฀ the฀ level฀ of฀ development฀ between฀ urban฀ and฀ rural฀ districts฀ will฀ widen฀ over฀time.฀ Hirschman฀(1994)฀highlighted฀a฀different฀view฀of฀the฀growth฀pole.฀Based฀ on฀the฀growth฀pole฀principle,฀he฀advocated฀that฀prosperous฀districts฀would฀ expand฀development฀to฀idle฀ones,฀also฀known฀as฀the฀“trickle-down฀effect”.฀ In฀contrast,฀the฀polarization฀effect฀sees฀the฀movement฀of฀production฀factors฀ from฀rural฀areas฀to฀urban฀areas.฀This฀will฀lead฀to฀the฀uneven฀development฀ between฀urban฀and฀rural฀districts.฀However,฀Hirschman฀believed฀that฀the฀ trickle-down฀effect฀will฀be฀greater฀than฀polarization฀effect.฀Thus,฀contrary฀to฀ the฀idea฀proposed฀by฀Myrdal,฀Hirschman’s฀theory...