Speech
of
His Excellency Fidel V. Ramos
President of the Philippines
At the 1994 Malaysia Summit Meeting

[Delivered in Kuala Lumpur, November 22, 1994]

Polygons of opportunity

I. EAST ASIA ENTERS THE ZONES OF PEACE

OVER this past generation, we have seen how economic growth can make countries not just richer but safer. We have seen how force—which has for so long arbitrated the relationships between nations—can give way to the benign regime of mutual benefit.

In fact, for the richest and most settled portions of the globe—the democracies of Western Europe and the Americas—war has become outmoded as an instrument of competition.

Where there has been little or no growth, and even less development—as in anguished Africa—”the condition of man” still is “a condition of war of everyone against everyone.”

East Asia today I would locate in the intermediate zone between these “zones of peace” and “zones of turmoil.”

Our peoples have not entirely escaped poverty, the fear of violence or the reach of arbitrary governments. But the vigorous growth and increasing interdependence of our economies enable us to hope the time will soon come when our countries, too, enter the “zones of peace”—when our mutual security will depend no longer on arms and alliances but on peaceful commerce and integration in the East Asian community.

Growth founded on regional stability

East Asia’s amazing growth is founded on regional stability-which in turn is built on the regionwide emergence of market systems, and the recognition by all our countries of our need for regional peace if development is to continue.

Growth poles—from Hong Kong-Taiwan and South China; through Singapore, Johore and the Riau Archipelago; through Penang, Sumatra and Phuket, to Brunei Darussalam-Sarawak-Sabah-Mindanao-Sulu-Sulawesi and Manado—are teaching our local peoples the virtues of working together. And interregional trade now binds our countries all the way from Japan down to Australia.

These regional units of cooperation—increasingly known as “growth triangles”—are the building blocks of regional stability. Malaysia is a key player in propagating the growth triangles in ASEAN. Through its western states of Penang and Johore, and the eastern states of Sarawak and Sabah, Malaysia is part of all three growth triangles already organized in ASEAN.

II. GROWTH AREAS TODAY’S ENGINES OF GROWTH

Today’s engines of growth,” observes the Japanese management expert Kenichi Ohmae, are not nation-states but “regional states.”

Ohmae refers to the economic units being drawn by the new manufacturing technology—whose boundaries do not always coincide with those on political maps. In our part of the world, these natural economic units bestride national boundaries. Others are focal points within nations (like North-em Italy and Wales in England).

In the standard East Asian term, the “growth triangle” is a local zone of economic cooperation crossing national boundaries—exploiting complementarities between geographically contiguous areas of different countries to gain a competitive edge in production for export. In Kenichi Ohmae’s view, “All are defined by the logic of the market rather than the dictates of politicians.”

The role of regional statesmen

In East Asia, at least, this view is contradicted by the facts. The initiative of regional statesmen in starting up cross-border growth poles has been crucial. And the first requirement for the success of these economic alliances is the political commitment of country leaderships. In East Asia, growth triangles are as much instruments of foreign policy and national security as they are instruments of economic policy.

For instance, the Singapore-Johore-Riau Archipelago growth pole apparently took off only after President Suharto decided to allow 100 percent foreign ownership of factories on Batam Island. For Singapore, “Sijori” satisfactorily diversifies between Indonesia and Malaysia its immediate supply of business partners, foreign workers, factory space and even drinkable water.

The East ASEAN Growth Area (EAGA) the concept for which was initiated by the Philippines changed the entire focus of the relationship between Malaysia and the Philippines from the political to the economic. Once Prime Minister Mahathir Mohamad and I with the support of Indonesian President Soeharto had agreed to set aside the contentious issue of Sabah and allow the expansion of economic relations even while we worked at its resolution, trade and investment between our two countries began to expand dramatically.

Early this year, Prime Minister Mahathir came to visit, bringing 80 leading Malaysian businessmen with him. Since then Malaysian investments have boomed in my country: the Malaysian tycoon, Robert Kuok—who is now working on his fourth Shangri-La Hotel in the Philippines, has become our single biggest foreign investor. And the conglomerate Westmont alone is planning to invest 18 billion pesos in Philippine banking, power, steel, and property over the next two years.

EAGA is only one result of this renewed—and reinvigorated—economic interaction.

Deng Xiaoping and the mother of all triangles

Finally, consider how great an influence the “mother” of all our growth triangles—the great growth pole radiating from the coastal provinces of Guangdong and Fujian in Southern China; Taiwan, and Hong Kong—has had on East Asia’s political stability these past 15 years.

It began with Deng Xiaoping’s vision of substituting development for class warfare as post-Mao China’s highest order of business. China’s leap to modernization by importing foreign equipment and technology on a large scale began with Deng’s decision to normalize relations with the United States and then with Japan—and also to thin out the Chinese forces that had been massed on the coast opposite Taiwan for 30 years.

These diplomatic and military preparations were completed in December 1978—only 17 months after Deng’s third reinstatement to political power. Deng then proposed setting up “special economic zones” in which foreign investment would be allowed on concessionary terms. The rest is history—which even the Tiananmen massacre of 1989 could not disrupt.

The political change in China—and East Asia—has been even more dramatic than the economic. By degrees—according to Sir Richard Evans, British Ambassador to China from 1984 to 1988—Deng Xiaoping substituted an optimistic for a pessimistic view about the possibility of the world’s remaining at peace. He began to talk of conciliation instead of the encouragement of revolution in speaking about China’s approach to regional conflicts and civil wars, and about “opening to the outside world” instead of self-reliance in discussing China’s international economic relations. He dropped Leninism altogether, arguing that, far from making conflict between them inevitable, the economic relationships between the rich countries of the North and the poor countries of the South created an interdependence which made it both possible and desirable for them to collaborate.

Growth triangles in ASEAN

The concept of the “growth triangle”—the phrase was coined by then Deputy Prime Minister Goh Chok Tong in December 1989 in referring to Sijori—fits in nicely with ASEAN’s customary approach to any regional problem—being modest, informal, unbureaucratic; tentative, subtle and flexible.

Sijori is not without its teething problems. But it has worked well enough to encourage two more growth poles in ASEAN. One—agreed on initially between Prime Minister Mahathir and President Soeharto—will link Penang with Sumatra and Southern Thailand. The other—initiated by the Philippines—will tie together Brunei, Malaysian Borneo, Mindanao-Sulu and the East Indonesian islands of Sulawesi and the Moluccas. In the eighteenth century this was a unified trading area, led by the maritime state of Sulu.

A fourth Southeast Asian growth zone—linking parts of Myanmar, Laos, Thailand and China—is also apparently starting up, with some help from the Asian Development Bank.

The growth-triangle concept has taken hold because it is a controlled experiment in regional cooperation—whose adverse effects (if any) can be limited to the triangle, but whose beneficial results can subsequently be applied to the economy as a whole. It offers the benefits of regional integration—without great loss of economic sovereignty.

Export zones with synergy

The growth triangles differ from the straightforward export-processing zones in that they can exploit economies of scale and integrate the comparative advantage of every member-country. They are export zones with the synergy that comes from mixing various corporate cultures and resource endowments.

The exchange is straightforward. The investing countries provide capital, technology and management skills. The receiving countries provide labor—both skilled and nonskilled—the land and other natural resources.

Investments in the growth triangles come largely from the region itself—from East Asia’s own newly industrializing economies and from Japan, which is scrambling to relocate its labor-intensive manufacturing offshore—to lower-wage economies—under the pressure of the rising yen.

The greatest benefits necessarily accrue to the most industrially mature partner. But even the poorest partner gains in practical terms—in job generation; skills development, technology transfer; not to mention the infusion of industrial disciplines among local work-people. Radiations from the growth pole catalyze development in other sectors of the larger national economy.

Triangles ensure against world blocs

Not just ASEAN but all the East Asian countries now regard regional cooperation as a means of both enhancing their development and ensuring themselves against unhealthy changes in the world’s economic climate. Growth triangles are an easily organized way of protecting themselves against trade blocs in the developed countries—without committing prematurely to the all-or-nothing venture of forming formal trade blocs of their own.

In this sense, the growth triangles are actually miniature versions of the trading blocs that have formed in Western Europe and in North America. Flexible, low-cost, fast-track, uncomplicated and well-focused, they can be started off quickly and with little fuss—while formal trading blocs need gestation periods that run into the decades.

What is more, growth triangles require no changes in national concepts of sovereignty, administration or national preferences. They do not completely engage national prestige; they require no elaborate political commitments to neighbor-states. Governments can enter into them with minimum political risks.

For Singapore and Malaysia, growth triangles are a way of keeping up their competitiveness as export platforms despite rising wages and shortages of land, work hands and infrastructure. For Indonesia, Thailand and my own country—as eventually for Vietnam—they are a means of speeding up development, generating jobs and importing technology.

Thawing the cold war in Northeast Asia

Even in Northeast Asia, the growth-triangle concept promises to thaw the last icebergs left over from the Cold War. Only in this part of the world does the Cold War power configuration—of Russia, China and North Korea on the one hand, and the United States, Japan and South Korea on the other—still hold. Now that the urgent issue of nuclear proliferation has been set aside, confidence-building mechanisms set down by the six powers themselves can begin to work toward the only lasting resolution of Northeast Asian instability—the eventual reunification of the two Koreas.

As we know, North Korea in late October concluded an agreement with the United States aimed at stabilizing the political situation in the Peninsula—and opening the door to investment in the relatively impoverished North by South Korean—and ultimately, multinational—corporations (wages in North Korea are only one-tenth what they are in the South).

It seems likely North Korea’s peaceful integration in the East Asian economy will also come about through growth triangles—controlled experiments in the market economy which (for a still-totalitarian state) have the additional virtue of confining in both scope and depth the degree of the foreign intrusion.

Pyongyang has already designated an export zone close to the Chinese border. And it is likely the South Korean chaebol will not lag far behind the diplomats. The Northeast Asian growth poles will link up North China, the two Koreas, Japan and Russia’s Far Eastern territory of Siberia.

Already China and Japan have become the biggest trading partners of Russia’s Far East; together they account for more than 70 percent of Russia’s total foreign trade in Northeast Asia. Work underwritten by both the Asian Development Bank and the United Nations Development Program is beginning on a cooperative program for developing the Tumen River delta, in the strategic coastal region where the North Korean, Russian and Chinese borders converge. Japan, South Korea and even Mongolia are also investing in this area development program.

Improving efficiencies of the growing triangles

Within ASEAN, we in the Philippines hope the growth triangles will foster habits of cooperation that would lead to the unification of Southeast Asia.

In the East ASEAN Growth Area, we have already expanded air and sea linkages between Zamboanga in Western Mindanao and both Labuan and Sandakan in Borneo and Manado in North Sulawesi.

Some 800 businessmen got together in the First East ASEAN Business Convention in Davao City earlier this month. Robert Kuok’s Shangri-La is building its fourth Philippine resort hotel on an island off Davao City; a Westmont affiliate firm has the controlling interest in the publicly owned National Steel Corporation in Mindanao.

The Philippine Government is investing heavily in infrastructure for Mindanao—in seaports, airports, roads and highways, communications, electric power—to prepare it for full participation in the East ASEAN Growth Area.

Fostering equality of benefits

The problems of the Singapore-Johore-Riau growth triangle apparently arise from its failure so far to spread the perceived benefits from the collaboration in a way that satisfies every partner. For instance, a Malaysian paper on Sijori noted that “many are of the opinion that the Growth Triangle is nothing more than a corridor managed by Singapore.”

The study, done in 1991, may be dated; but it did express the fear that development in Johore might be achieved at the expense of other regions of the Federation. It was apprehensive that the dominant partner might shift both its “sunset” and pollutive industries to the weaker ones. It raised eventual problems of political loyalties and ethnic balance.

These political and cultural apprehensions are even more difficult to allay than administrative complications, such as the leakage from duty-free zones into the larger economy.

In some cases, even the labor-cost differentials between the national components of a growth triangle can seem exploitative. For instance, the wage differential between Hong Kong and Guangzhou in 1989 was almost 7 to 1; between Singapore and Batam, by contrast, it was less than 4 to 1.

Complementary—as opposed to competitive—relationships by definition denote an unequal partnership, at least in resource endowments. But these resource endowments can of course be changed by State policy. Every participant in a growth triangle must obviously make its own cost-benefit analysis—and then endeavor to optimize the benefits its participation brings in. (Some of these benefits—for instance, the stimulus to entrepreneurship, scientific and technological education, and the national work-ethic—will obviously be long-term and difficult to quantify.)

Decisions recently made by the 18 leaders of APEC—in Boor, Indonesia—should speed up both the pace of free trade in the region and intensify cooperative efforts to develop more effectively the human resources of our countries through education and skills-training. Fully free and open trade will be in place by the year 2020-ten years earlier (2010) for the industrialized economies of the Asia-Pacific.

On my suggestion, the APEC Summit agreed to incorporate in apec’s work plan for developing the region’s human resources concrete measures to protect the rights of workers; develop and upgrade their skills, taking into account the changing requirements of markets, and afford them the opportunity to seek the highest return for their efforts.

The future of growth triangles

In summary, we in the Philippines regard the East ASEAN growth poles as the building blocks of both regional stability and Southeast Asian integration.

I believe firmly that we in Southeast Asia have no alternative to eventual unity if only because—separately—our ten countries in the region cannot stand up to the intense competition of the emerging global economy, and the multipolar Realpolitik that might yet replace the relatively simple power configuration of the Cold War period.

When—not if—this time comes, our entire region will become part of a larger Southeast Asian growth area, working in synergy with China and Japan, the countries of Northeast Asia and the entire Asia-Pacific Basin in one great growth pole of the larger world community.