11/5/2018 Singapore, Malaysia and Indonesia: a triangle of growth or a triangle of inequality?

- Equal Times

Singapore, Malaysia and Indonesia: a

triangle of growth or a triangle of
inequality?

NEWS

By Philippe Revelli
4 October 2016

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LABOUR POLITICS & ECONOMY SINGAPORE MALAYSIA INDONESIA INEQUALITY

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A kilometre-long bridge links the island of Singapore and the city of Johor Bahru in Malaysia.
Near the bridge, café terraces on Meldrum Walk in the city’s Bandar district are crowded on
Friday evenings. Many customers are Singaporeans here to let their hair down. The owners of
the hotels, bars and restaurants are Malaysian, and much of their workforce is Indonesian,
some undocumented.

It’s a neat illustration of the division of labour between these countries under the guise of
economic cooperation.

The idea of a ‘growth triangle’ was first mooted in the late 1980s and came into being in
December 1994, when a memorandum was signed, founding the Indonesia-Malaysia-
Singapore Growth Triangle (IMS-GT). Its three points are Singapore, Johor Bahru and
Indonesia’s Riau Islands.

The agreement encouraged processes already under way, but was neither a detailed treaty nor
a development programme with a planned schedule. Lee Hsien Loong, who became
Singapore’s prime minister in 2004, spoke of ‘promoting and facilitating cross-border business
relations’.

The initiative was presented as an example of regional development in a globalised world in

which borders were becoming obsolete, and as a way of enhancing the value of each
participant’s attributes in capital, land and workforce.


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11/5/2018 Singapore, Malaysia and Indonesia: a triangle of growth or a triangle of inequality? - Equal Times

The project was conceived in the back rooms of Singapore’s Economic Development Board.
Between 1987 and 1994 Singapore had double-digit annual growth. Its businesses felt
constrained, and with almost no unemployment, the strong demand for labour drove wages up.

So a symbiotic scheme seemed a promising way to alleviate the pressing need for space,
labour and natural resources.

Singapore had the capital, a skilled workforce, cutting edge

technologies, business infrastructure and access to a global
market. Malaysia had a semi-skilled labour force,
intermediate technology, basic infrastructure, land and
natural resources. Indonesia had an unskilled workforce,
elementary technology, and an abundance of raw materials
and unexploited land.




The Malaysian tiger, across the narrow waterway from the Singaporean dragon, was also
getting hungry. Johor Bahru was becoming a major industrial centre and despite long-standing
political tensions between the countries (due partly to historical conditions that led to
Singapore’s independence in 1965), Malaysia’s government was unwilling to spurn
Singaporean investment.

Indonesia, then under the dictatorship of General Suharto, knew its oil windfall was dwindling.
The International Monetary Fund and the World Bank had prescribed economic structural
adjustments for it.

Triangle advantages

The growth triangle, known as IMS-GT, provided an opportunity to utilise the location of the
Riau Islands — a meeting point of trade routes connecting Asia, Australia, Europe and the
Middle East, near Singapore but with plentiful cheap labour.



Twenty years later Singapore has the highest concentration of billionaires per square kilometre
on the planet, the second-biggest container port after Shanghai and is the fourth most
important financial market after London, New York and Hong Kong.

Milica Topalovic, an associate professor at the Singapore-ETH Future Cities Laboratory, said:
“Without the regional perspective it would be a lot more difficult, if at all possible, for Singapore
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to maintain the role that it has as a global city.”
11/5/2018 Singapore, Malaysia and Indonesia: a triangle of growth or a triangle of inequality? - Equal Times

Bloomberg journalist Sharon Chen wrote of the Triangle: “Combine the dominant forces of the
21st-century economy — globalisation and urbanisation — and the result is a metropolis that
crosses borders, cultures and currencies”, although she omitted the fact that in 2015 half a
million Singaporeans (out of 5.5 million) were living below the poverty threshold.



On the Malaysian side, local businesses and the property market are booming thanks to a
Singaporean clientele who can rent or buy property and shop much more cheaply than at
home. Chen writes that “with cheaper land plentiful in southern Malaysia, money is pouring
across the border.”

Singapore has invested US$3.4 billion in the Iskandar Malaysia project, which includes free
trade industrial and port zones, residential complexes and business centres. This massive
project, launched in 2006, covers an area three times that of Singapore, and is intended to
attract US$100 billion in investment and create 800,000 jobs by 2025.

Each day, 150,000 Malaysians cross into Singapore to work,

but Johor Bahru has not settled for merely being a working-
class suburb of its rich neighbour. As well as industry
(electronic components, petrochemicals, shipbuilding), it has
two port terminals — Pasir Gudang and Tanjung Pelepas —
integrated with the Iskandar project, which compete directly
with Singapore’s ports.




Bintan and Batam, in the Riau Islands, have secured most of the Triangle investment that has
come Indonesia’s way. Bintan, an hour by ferry from Singapore, has specialised in tourism.
Holiday villages and luxury hotels cover 23,000 hectares in its north. Visitors arrive at an
international airport scheduled to be fully operational by 2017 and designed to handle 3.5
million visitors a year.

Batam has become an industrial centre. Many businesses have relocated the 20 kilometres
from Singapore, as regulation is lighter and wages significantly lower. They still benefit from
Singapore’s free trade agreements, especially with the US.



The entire Riau archipelago has been a free trade zone since 2007. Almost 600 companies
have set up in the 13 industrial parks run by Batam’s industrial development authority, including
electronic companies (Sanyo, Panasonic, Siemens, Sony, Toshiba and Epson) and naval
dockyard suppliers. They employ 300,000 workers, two-thirds of them women.

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11/5/2018 Singapore, Malaysia and Indonesia: a triangle of growth or a triangle of inequality? - Equal Times

Migrant magnet

The boom has attracted a huge influx of migrants from other parts of Indonesia. Batam’s
population has risen from tens of thousands to two million in 30 years. It has gone from an
island of fishing communities to full urbanisation, constantly under redevelopment.

Property prices have risen so far that a significant proportion of residents can no longer afford
decent housing and tens of thousands of families are forced to squat in insanitary conditions.




New migrants arrive daily, drawn by the myth of fortunes to

be made. But with several candidates chasing every job
vacancy, many get left behind and are sucked into the grey
economy and prostitution, which is also booming.
Recruitment agencies are mainly based in Java and
Sumatra, making it hard for island locals to access regular
employment.




Traditional fishing has been killed off by a combination of factors: building activity and shipyards
along the coast, the destruction of mangrove forests, the pollution of coastal waters by
industrial waste, and the volume of shipping in the Malacca and Singapore straits.

Some fishermen and water-taxi owners who have lost their sources of income have become
involved in small-scale piracy or joined criminal gangs targeting bigger prizes. This has made
the region a global hotspot for maritime crime. Almost 200 acts of piracy were recorded in
2015, including several oil tanker hijackings in the straits.



It doesn’t help that economic prospects do not look good. Shipyard order books are empty, and
the Jakarta Post has suggested that businesses are prepared to relocate to other countries in
the region where wages are even lower and the workforce more biddable.

Unions have been active — and often combative — in one-

third of companies in Batam since the beginning of this
century.


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11/5/2018 Singapore, Malaysia and Indonesia: a triangle of growth or a triangle of inequality? - Equal Times



Professor Toh Mun Heng of the National University of Singapore Business School has
predicted a 5.7 per cent annual growth rate for the IMS-GT in 2013-20. But its well-established
hierarchy is unlikely to change.

Singapore currently has the world’s third-highest GDP per capita (after Qatar and Luxembourg)
— US$83,066 (purchasing power parity). Malaysia lags far behind (US$26,638), though it is in
turn far ahead of Indonesia (US$10,651).

Over a decade ago, geographer Nathalie Fau explained that these disparities are not the result
of dysfunctions within the Triangle but are fundamental to it: “At the micro-regional level, [IMS-
GT] typifies the principles of the international division of labour.

[It exploits to its] advantage the geo-economic hiatus created by national borders. Its operation
relies on the existence of gradients, which are economic (labour costs, level of industrialisation
and size of the service sector), demographic (availability of labour) and political (protectionism
or free trade) among the countries bordering the straits”.



The hope of growth shared fairly among partners is illusory, as are the promises of a territory
without borders. New internal demarcation lines have been added to national borders. Goods
manufactured in the Riau Islands cannot be transported freely to the rest of Indonesia, as there
are sales restrictions on products from the free trade area, to protect local producers.

Free movement of goods and services – but not people

People do not enjoy the same freedom of movement between the triangle’s points as goods
and capital.



The vast tourist zone of Lagoi in Bintan is an autonomous enclave, according to researchers
Michele Ford and Lenore T Lyons. Its only link to the main city on the island, Tanjung Pinang, is
a narrow, poorly maintained road with checkpoints and armed guards to turn away
undesirables.

Until the early 1980s, inhabitants of Riau used to go to

Singapore regularly to shop or visit relatives, but such trips
became rare as the gulf in standards of living widened.

Then, after the 1997-1998 financial crisis, Singapore toughened border controls to deter
immigration by thousands of unemployed workers, and did so again after 9/11, ostensibly as5/6
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11/5/2018 Singapore, Malaysia and Indonesia: a triangle of growth or a triangle of inequality? - Equal Times

part of the War on Terror.

Ford and Lyons found that “ultimately, it has been economic differences, rather than border
controls, that have strengthened the barriers to cross-border movements.” Of Bintan, they
concluded: “Despite the promises of the IMS-GT, life under the Growth Triangle is more about
enclosure than it is about mobility.”




This article was originally published in Le Monde diplomatique, republished here with the
permission of Agence Global.

This article has been translated from French.

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