SE Asian neighbours create economic triangle

Singapore, Jan 24: Neighbours Singapore, Malaysia andIndonesia have a history of squabbling. Land, boundaries, workers andwater have been among the points of contention.

But singed by the competitive heat of fast-growing China and Indiaand frustrated by the glacial pace of Southeast Asia's economicintegration, the three are trying to put old grudges aside for the sakeof their own prosperity.

Indonesia has created a special economic zone on its Riau islandsbetween Singapore and Indonesia, while Malaysia has amulti-billion-dollar plan to develop industry in its southern Johorstate bordering Singapore.

One aim is to attract foreign investment and stop it heading offto China or India. Another is to encourage firms already in Malaysia,Singapore and Indonesia to expand in the neighbourhood rather thanelsewhere.

For tiny Singapore, strapped for land and labour after years ofrapid economic expansion, the plans would mean access to cheap workersand land right on its doorstep.

The Malaysian and Indonesian developments are in areas seven timesbigger than Singapore with a combined population of more than 2 million.

''It's about how to be competitive with China and India,'' said KKesavapany, director of the Institute of Southeast Asian Studies.

''You need to have a cheaper alternative. Why not take advantageof this when it's just next door?'' Indonesia and Malaysia -- neglecteduntil recently by investors because of a history of policy flipflopsand corruption -- hope the plans will bring major investment, partlylured by the proximity of Singapore's efficient infrastructure andfinancial services.

New Relations?

Similar projects on Indonesia's Riau islandsfaltered previously because foreign investors complained about legaluncertainties, red tape and corruption.

The Asian financial crisis in 1997/1998 also put a brake on the developments.

But with new leaders appointed in Singapore, Malaysia andIndonesia in the past three years, relations between the trio haveimproved and added to hopes the plans can be successful this time.

Singapore and Indonesia plan to jointly develop manufacturingzones on the Riau islands. Singapore will bring some of the economicefficiency on which its economy is built to help attract foreigninvestors.

Tiong Woon, a transport engineering company that has outgrown itshome base of Singapore, has already bought a 64-hectare plot on one ofthe islands, Bintan, a short ferry hop from Singapore.

''Proximity to Singapore was a major factor,'' said Daniel Ong,Tiong Woon's corporate development manager. ''We could stay near to themajor oil rig builders, nearer to our clientele.'' After previous falsestarts, hopes are high that the countries may get it right this time.

''We may see a renewed burst of growth,'' said Manu Bhaskaran, an economist at Centennial Group in Singapore.

Some Doubts

Malaysia is seeking 5 billion in investment over 20years in manufacturing and services, such as health care and eduction,for Johor Bahru, a city on the Malaysian side of a narrow sea dividewith Singapore.

Thousands of Malaysians already trek across a causeway between thetwo countries every day to work in Singapore, where foreign workersmake up 27 percent of the workforce.

Malaysia hopes its plan will generate more of a two-way flow of workers.

Singapore has welcomed the move, although Prime Minister Lee HsienLoong said it had received ''mixed signals'' from Malaysia oninvestment opportunities.

Sceptics warn progress could be slow given the prickly relations of the past.

To many Singaporeans, Johor Bahru has a reputation for corruptpolice and violent crime. Recent heavy rains and flooding havehighlighted weak infrastructure.

''You've got to have the infrastructure,'' said Joseph Tan, aneconomist at Standard Chartered, adding that Singapore is already atransport and finance centre.

''I can't see a compelling enough reason for multinationalcompanies to make the cross to Johor.'' Political bickering in Malaysiacould also derail the plans.

Former long-term Prime Minister Mahathir Mohamad blasted thegovernment for trying to turn the southern tip of Malaysia into''foreign land.'' But some other politicians see it differently.

''It will give more breathing space to the foreign investors andbusinesses located in Singapore,'' Shahrir Samad, a leader of theruling United Malays National Organisation and a Johor Bahru Member ofParliament, told Reuters.

Reuters>