Growth Triangles: Conceptual Issues and Operational Problems

Abstract

One of the most important developments in the world trade system in the 1990s has been the emergence and strengthening of regional trading blocs. A number of proposals have been made in the Asia-Pacific region for increased economic cooperation and tTade liberalization, but concrete achievements have been limited. Recently, however, several localized economic cooperation zones—known as "growth triangles”—have emerged in Asia. In their most basic form, growth triangles exploit complementarities between geographically contiguous areas of different countries to gain a competitive edge in export promotion. To be effective, they require close cooperation between the private and public sectors of each of the countries involved. In general, the private sector provides the capital for investment, and the public sector provides infrastructure development, fiscal incentives, and a favorable administrativeframework. Interest in growth triangles has been heightened by the success of the southern part of the People's Republic of China (PRC) in achieving high rates of growth through economic cooperation with neighboring economies. Singapore has recently moved to formalize its ties with the southern Malaysian state of Johor and the islands of the Riau archipelago in Indonesia. Discussions to create growth triangles in other parts of Asia are also underway, with plans for the Tumen River Area Development Program in Northeast Asia being the most advanced. This paper analyzes some of the major conceptual issues underlying the growth triangle phenomenon. The chapter is organized into seven parts. After the introduction, the second section provides a definition of growth triangles and discusses the ways in which they differ from oilier forms of regional economic cooperation. The third section describes the general need for the establishment of growth triangles, while the fourth section discusses the conditions necessary for their successful operation. The fifth section outlines the major costs and benefits that need to be assessed in evaluating the welfare implications of growth triangles. The sixth section discusses prospects for the development and extension of the growth triangle concept in Asia, and the final section presents the main conclusions.