Do the Math
Asia is discovering that the only ‘growth triangles’ that seem to work are China’s
By Rana Foroohar
NEWSWEEK
Oct. 20 issue — For a while in the 1980s and 1990s, economic planners in Asia were inordinately fond of geometry.
THEY SPOKE GRANDIOSELY of “growth triangles,” “hubs and spokes” and urban corridors—ways of forging cross-border links that would allow smaller countries and poorer regions to attract investment and punch above their weight in the global economy. At least 50 plans were proposed, inspired by the example of the Singapore-Johor-Riau triangle that linked Malaysia and Indonesia to the Southeast Asian city-state. Development officials descended on the region, pouring millions into the Tumen River Growth Triangle, the Greater Mekong Subregion, the IMT (Indonesia-Malaysia-Thailand) Growth Triangle and the tongue-twisting Brunei Darussalam-Indonesia-Malaysia-Philippines-East ASEAN Growth Area, or BIMP-EAGA for short. “At one point it seemed like there was a guy with an attache case running around all of Asia telling people, ‘Here’s how to become a growth triangle’,” says Mike Douglass, a professor of urban and regional planning at the University of Hawaii.
Most of those grand plans—and even grander acronyms—have added up to nothing. Instead, the remarkable rise of China as an economic powerhouse is turning old thinking about what works in Asia on its head—and revealing a new formula for success in the process. The Middle Kingdom now sustains two of the world’s most successful urban corridors—the greater Pearl River Delta and the Yangtze River Delta, both of which have GDPs larger than some countries ($273 billion and $205 billion in 2001, respectively). It’s easy to see why. Both regions are free from the cross-border politics rife in the rest of Asia. The three requirements for growth—capital, labor and land—are all located in one country. The coastline provides easy transport for goods. A network of family businesses connects trading houses in Hong Kong with factories in smaller cities in Guangdong province, and Shanghai plays a similar role as a service hub, having outsourced its own manufacturing industry to smaller cities nearby. In both cases the major metropolis complements rather than competes with its hinterland, where land and labor are cheaper.
The resulting economic punch is formidable. Some 280 of the world’s 500 largest companies have a presence in the Pearl River Delta, and the economies of key cities like Shenzhen and Guangzhou are growing more than 10 percent a year. The region captures 85 percent of all foreign direct investment into China, and represents 33 percent of China’s exports. More than 40 percent of the world’s light fixtures are made in the PRD. “It’s incredible what this area produces,” says Yue-Man Yueng, director of the Institute of Asia-Pacific Studies at Chinese University in Hong Kong. “It is truly the world’s factory.”
In fact, the PRD is becoming much more than a global manufacturing center. Its exponential growth has created new wealth and a huge domestic market for the clothing, electronics and other consumer goods produced in the region. The PRD has also become largely self-sufficient—most components can now be sourced locally. Factory cities like Shenzhen and Dongguan are developing service economies of their own as banks, trading houses and accounting firms shift back-office functions and call centers there.
Hong Kong, which once prided itself on being separate from the mainland, is now hitching its hopes to Guangdong and the rest of the delta. “Hong Kong is too small a city to compete globally,” says Victor Fung, chairman of one of Asia’s largest trading groups, Li & Fung. “We need to join with the hinterland.” Recently, representatives from some of Guangdong’s fast-growing cities collaborated with InvestHK, the Hong Kong government’s investment arm, on promotions in Japan, Europe and the United States. Other Chinese regions are trying to get in on the act: the Bo Hai-Yellow Sea corridor seeks to boost the prospects of cities up north.
The outlook for such hybrids outside of China, however, remains bleak. Historically, many proposed projects made no sense—the cities and regions involved weren’t close geographically, they lacked good transportation and infrastructure links and had no real basis for cooperation. The Asian financial crisis, followed by 9/11 and a global recession, put many development plans on ice. In Northeast Asia, tensions between North Korea, Japan, China and Russia have made it difficult to agree on a basic blueprint for the Tumen River project. In the Mekong Delta, countries like Laos have been more interested in charging steep fees to use bridges and roads than in launching a new business model. For now, countries are refocusing attention on well-established metropolises like Bangkok, Kuala Lumpur and Seoul, where a critical mass of money, labor and services is already present. The new formula for success is an old one, too.
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With Alexandra A. Seno in Hong Kong, Joe Cochrane in Singapore and B. J. Lee in Seoul |
