20 Years on: The Electronics Industry in the SIJORI ‘Growth Triangle’

Abstract

In the early 1990s, Singapore, the Malaysian state of Johor, and the Indonesian island of Batam sought to leverage their proximity, differing comparative advantages, and good logistics connections to market themselves as an integrated unit. Despite the initial enthusiasm surrounding the so-called SIJORI Growth Triangle, there is little recent research on how and whether these territories continue to be linked economically. Focussing on the electronics sector, this paper looks at the two ‘non-core’ regions of Johor and Batam to see how they are faring and where their investment come from. Salient findings include: • Following an initial period of parallel growth, Batam and Johor are on very different trajectories — negative in the former and positive in the latter. • While Batam is clearly losing ground to Johor for investment from firms based in Singapore, both locations have been hit by a decline in investment from Japan. In Johor’s case, this has been compensated for by more Singaporean firms setting up operations. In Batam, this has not been the case. • Batam’s decline appears to be linked to periods of labour unrest and bureaucratic dysfunctions that have accompanied Indonesia’s decentralization reforms. • In Johor’s case, the increase in Singaporean investment pre-dates the launch of the Iskandar Malaysia region and appears to be occurring spontaneously. • While the outlook for Johor is relatively positive, investment from Singapore tends to be in lower-tech products than had been the case with earlier Japanese operations, indicating a potential decrease in complexity and value-added.