Singapore, Malaysia and Indonesia: a triangle of growth or a triangle of 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.



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 to maintain the role that it has as a global city.”

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.

 

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.



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 as 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.

This story has been translated from French.