Special Economic Zones for Shared Prosperity: Brunei Darussalam–Indonesia–Malaysia–Philippines East ASEAN Growth Area

By Asian Development Bank

Brunei Darussalam, Indonesia, Malaysia, and the Philippines need to bolster cooperation in their special economic zones (SEZ) to spur sustainable growth. This publication maps out and assesses the economic performance of SEZs across the Brunei Darussalam-Indonesia-Malaysia-Philippines East ASEAN Growth Area. It highlights challenges they face including growing competition for foreign investment, international trade disputes, and digital transformation. The publication emphasizes the need for policy makers and stakeholders to intensify strategic collaboration to make their SEZs more competitive. Against the backdrop of COVID-19, it outlines practical steps to increase the role of SEZs in boosting trade, creating jobs, and building economic resilience across the four countries.

• Language: English
• Publisher: Asian Development Bank
• Release date: Nov 1, 2022
• ISBN: 9789292697839

Book preview

Chapter 1

Introduction

Background

The Brunei Darussalam–Indonesia–Malaysia–Philippines East ASEAN Growth Area (BIMP-EAGA) was launched in 1994 by the four member nations covering the entire sultanate of Brunei Darussalam; and the provinces of Kalimantan, Sulawesi, Maluku, and Papua in Indonesia; states of Sabah, Sarawak, and the federal territory of Labuan in Malaysia; and the entire island of Mindanao and the island province of Palawan in the Philippines. BIMP-EAGA aims to address their socioeconomic development challenges and narrow their development gaps with the rest of the BIMP areas through cross-border cooperation in five strategic areas: connectivity, agribusiness, tourism, environment, and sociocultural education. Two well-defined priority economic corridors (West Borneo and Greater Sulu Sulawesi) have been designated to facilitate cross-border movement of people, goods, and the factors of production across the archipelagic subregion through physical connectivity and trade facilitation; and catalyze investment in processing and value-added production by fostering cross-border and regional value chains through coordinated strategies of special and other industrial zones along the corridors (BIMP-EAGA Vision 2025).

It is widely acknowledged that the BIMP-EAGA corridors have had noteworthy accomplishments in forging transport connectivity through sea, air, and highway links within the subregion (Lord and Tangtrongjita 2016, ADB 2019a). Notwithstanding, little is known if the participating countries have indeed coordinated special economic zone (SEZ) strategies to leverage the benefits of economic corridors and unlock the full potential of the subregional economies. With this in mind, the Asian Development Bank (ADB)—a regional development advisor to BIMP-EAGA since 2002—initiated a study in July 2019 on the collaborative approach to SEZ development and cooperation in BIMP-EAGA under ADB technical assistance 9572 at the request of the member countries. The main objectives of the study are to take stock of the BIMP-EAGA SEZs and other economic zones, assess the national and subnational policies governing economic zones, review the extent to which the BIMP-EAGA agenda of the collaborative approach to economic zones is integrated into national and subnational development agendas of the member countries, review the performance of economic corridors and zones, identify challenges, and offer recommendations for policy makers to support active clustering and specialization efforts in the subregion.

BIMP-EAGA is one of two subregional cooperation initiatives in archipelagic Southeast Asia that ADB supports, with Indonesia–Malaysia–Thailand Growth Triangle (IMT-GT) being the other. This study on SEZs and economic zones in BIMP-EAGA complements a similar study for the IMT-GT subregion. Both IMT-GT and BIMP-EAGA are government-inspired transborder cooperation with the same fundamental objective: to achieve synergetic development outcomes through cross-border cooperation. However, they have different specificities. In IMT-GT, trade and investment opportunities flow from significant differences in economic structures and comparative advantages, a critical success factor in subregional arrangements. Sumatera is abundant in labor, land, and natural resources, with emerging competitiveness in light and processing industries. The Peninsular Malaysian provinces on the west coast specialize in highly skilled manufacturing and services, while Southern Thailand is rich in resources such as marine and plantation forests. BIMP-EAGA, on the other hand, faces unique challenges of fostering subregional development cooperation between a set of local economies that are (i) peripheral and remotely located from their national capital regions (except Brunei Darussalam), (ii) marginalized in the process of development with their economies heavily dependent on natural resources, and (iii) exposed to medium to high climate change vulnerability (ADB