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Regional Outlook : New Economic Hubs Are Emerging in Asia : * Countries with a shortage of workers are teaming up with nations that have cheap labor. The result: profits for each.

August 27, 1991|CHARLES P. WALLACE | TIMES STAFF WRITER

BATAM, Indonesia — Here on this island of the Indonesian archipelago, a small city is rising on a plot of raw, red earth that only months ago was virgin rain forest. Instead of Indonesian names, however, the buildings carry the corporate logos for companies such as Phillips, Thomson Television and Seagate of the United States.

When it's completed, the development will actually be a massive, $300-million industrial site housing 50,000 workers. And while many companies with labor-intensive manufacturing plants have moved to Southeast Asia in recent years to take advantage of cheap labor, the Batam Industrial Park may be unique in that it is aggressively being promoted by Indonesia's southeast Asian neighbor, the island nation of Singapore.

Batam lies just 12 miles off Singapore, the most developed country in the region and one of Asia's four "dragons"--the newly industrialized lands that also include South Korea, Hong Kong and Taiwan.

Batam is one of the pillars in the creation of a Southeast Asia "growth triangle," linking the economies of Singapore, Indonesia and Malaysia. In a nutshell, the plan envisages a marriage of Singapore's technical know-how, vaunted infrastructure and wealth to the cheap labor and natural resources available in Batam and the neighboring Malaysian state of Johor.

Singapore's growth triangle concept is just one of what Sanjoy Chowdhury, a regional economic analyst at Merrill Lynch & Co., refers to as an emerging pattern of "growth pockets" or "hubs" throughout Asia.

"With the Cold War over, economics will tend to dominate Asia's cross-border transactions," Chowdhury said in an interview. "In a sense, almost every Asian economy will be involved."

According to trade experts, the ingredients for these growth pockets are similar throughout the region: A concentration of capital and expertise but a growing labor shortage in one country; plenty of workers at cheap wages and an abundance of untapped raw materials in one or more neighboring nations.

The tendency of some governments in the region to frown on the use of "imported" migrant workers makes the growth pocket approach even more appealing in much of Asia. Reservations about migrants, some analysts contend, make it unlikely that Asia will ever move toward the kind of economic unification envisioned in Western Europe by the end of 1992.

The oldest example of a growth pocket in Asia is Hong Kong, which started off as an inexpensive manufacturing center. With wages skyrocketing and labor growing short, many Hong Kong businesses ultimately moved their plants to Canton in southern China to take advantage of the number of workers there. Taiwan followed a similar pattern.

"It is almost irrelevant to talk now about Hong Kong's domestic exports," Chowdhury said, "as the distinction between goods manufactured in southern China and Hong Kong domestic exports is rapidly blurring."

Other growth pockets that Chowdhury sees on the horizon include:

* Thailand, Burma and the Indochina economies of Vietnam, Cambodia and Laos.

* A linkup between northern Sumatra in Indonesia, Penang Island in northern Malaysia and southern Thailand.

* North and South Korea.

* Northeast China and Soviet Asia.

While the Hong Kong-China-Taiwan triangle is the most developed, it mainly produces basic items such as textiles and toys. Singapore is hoping to position itself as the hub of an emerging high-tech center.

With Singapore keen to move into Vietnam once the U.S. embargo is ended there, it clearly sees the region as a manufacturing rival to Taiwan, Japan and even the United States, particularly in such areas as computers and consumer electronics.

Phillip Yeo, chairman of Singapore's state-run Economic Development Board, reckons that by transferring labor-intensive industries offshore, Singapore can maintain about 26% of its economy in the manufacturing sector but constantly upgrade its own facilities to higher and higher technology.

"Basically, Singapore's problem is one of manpower," Yeo said in an interview. "We're not short of technical manpower, but the semi-skilled workers. We need Batam and Johor to grow."

Thus, Singapore unveiled its plan in December, 1989, to encourage the creation of a growth triangle in which manufacturing companies would spin off their less advanced factories to Johor, which is linked by a causeway to Singapore, and Batam, about half an hour away by high-speed ferry.

Singaporean officials say the proximity of the two regions is the key to the plan's ultimate success--factory owners, they believe, won't tolerate more than an hour to transport components between branches of their operations.

In February, the Singapore government published its road map for future development in a book called "The Next Lap." The book said economic activity around the world was increasingly concentrated in hubs like New York and London.

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