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Special Border Economic Zone
in IMT-GT and BIMP-EAGA
Subregions
Session 4: Developing CBEZ and Economic Corridors
Alfredo Perdiguero, Director (SERD)
27 November 2017
2
Outline
I. Background: SBEZ Model,
Rationale
II. IMT-GT SBEZ (Thailand-
Malaysia)
III.BIMP-EAGA SBEZ (Indonesia-
Malaysia)
3
• Near gateways to international markets; lower production and logistics costs of companies
• Objective commercial (profit maximization)
SEZ
• Attract investors in productive activities to promote subregional value chains
• Stimulate cross-border trade and investment
• Catalyst to commerce along economic corridors
• Improve social and economic welfare of population
SBEZ
SBEZ Model
4
attract investment;
transfer know how and
technology
employment and develop
skills
cross-border trade and
investment (along economic
corridors)
social and
economic
development in
border areas
reduce agglomeration around mega-
cities; balanced growth
“demonstration area”
complementarity
of resources across borders (land, capital,
labor)
utilize resources along borders
expand markets and economies
of scale
5
Level 1
SBEZ facilities on either or
both sides of the border
Level 2
Informal SBEZ collaboration cross-border
VCs and infrastructures
Level 3
Joint SBEZ facilities and supporting activities
6
Corridor System
Thai-Malaysian
Railway Systems
5
1
1
2
4
3LEGEND:
1 - Extended Songkhla-Penang-Medan Corridor
2 - Straits of Malacca Corridor
3 - Banda Aceh-Medan-Pekanbaru-Palembang Corridor
4 - Melaka-Dumai Corridor
5 - Ranong-Phuklet Ace Corridor
Thai-MalaysiaBorder
7
8
Scoping Study for the Special Border Economic Zone
in the Indonesia-Malaysia-Thailand (IMT-GT) Growth
Triangle
9
Country 1 Country 2
10
11
0 1 2 3 4
Ban Buketa - BukitBunga
Takbai - PengkalanKubur
Wang Prachan -Wang Kelian
Betong - PengkalanHulu
Padang Besar(Songkhla & Perlis)
Sadao - Bukit KayuHitam
Ban Prakob -Durian Burung
Su Ngai Kolok -Rantau Panjang
0 1 2 3 4 5
Ban Buketa - Bukit Bunga
Takbai - Pengkalan Kubur
Betong - Pengkalan Hulu
Wang Prachan - WangKelian
Padang Besar (Songkhla& Perlis)
Sadao - Bukit Kayu Hitam
Su Ngai Kolok - RantauPanjang
Ban Prakob - DurianBurung
Commercial Focus Welfare Focus
12
GREATER SULU
SULAWESI
ECONOMIC
CORRIDOR (GSSC)
• Food & Beverage
• Fisheries
• Tourism
• High value fruits
and vegetablesWEST BORNEO ECONOMIC
CORRIDOR (WBEC)
• Food & Beverage
• Education
• Tourism
• Rubber
• ICT
• Fisheries
BIMP-EAGA CORRIDORS STUDY
Industries with Potential for Corridor Value Chains
Organic and Halal
Foods
Air, road and sea connectivity
between BIMP-EAGA member
country areas is often limited.
• Road connectivity between
Borneo’s Malaysian states and
the Kalimantan provinces is
rudimentary or nonexistent.
• The Sulu Sea area has been
subject to terrorist threats,
insurgent activities, and
kidnappings.
• Air connectivity between
BIMP-EAGA territories are
often limited or require long,
indirect routings.
Precondition
Connectivity
To address the problems that have prevented a robust expansion of intra-
regional trade in BIMP-EAGA.
To address the problems that have prevented a robust expansion of intra-
regional trade in BIMP-EAGA.Project ContextProject Context
IIntra-Regional Trade
Intra-BIMP-EAGA trade in the last
10 years has remained stagnant.
• Between 2000 and 2007, intra-
regional trade relative total
trade rose from 4.5% to 6.7%
• Since 2007, however, intra-
regional trade shares have
remained virtually unchanged.
Indicator
BIMP-EAGA Intra-Regional Trade as Percent
of Total Trade
Cross-Border Trade &
Investments
Foreign investments concentrated in
large companies with vested interests in
extracting raw materials or profiting from
low-cost factors of production.
• Border areas lack integrated hard and
soft infrastructure.
• SMEs lack knowledge about how to
participate in value chains.
• Project feasibility studies are
proprietary to large investors
(company or individual investment
groups).
• Non-monetarized investment goals
are government driven, rather than
balanced with other stakeholder
groups (SMEs, local households,
NGOs)
Driver
BIMP-EAGA Border Area Development and Value Chains
14
Source: Adopted from Google Maps
North Kalimantan and Sabah
BIMP-EAGA Border Area Development and Value Chains
Example of Possible Project Approach based on Pilot Project
BIMP-EAGA Border Area Development and Value Chains
Example of Possible Project Approach based on Pilot Project
BIMP-EAGA Border Area Development and Value Chains
Project Components for Pre-Feasibility Study
Economic Profiles
Government Objectives.
Economic Analysis of
Traded Goods
Economic Analysis of
Traded Services
Program Design5
Cost-Benefit Analysis6
Non-Monetarized Project Appraisal
7
Overall Program Appraisal
& Execution Strategy8
Components of Sabah-North Kalimantan Pre-Feasibility Study:Components of Sabah-North Kalimantan Pre-Feasibility Study:ExampleExample
BIMP-EAGA Border Area Development and Value Chains
Example from Sabah-North Kalimantan Pre-Feasibility Study
Overall program appraisal, including
program EIRR and other matrices,
non-monetarized project rankings,
and implementation strategy
Consultations with Governments
of Indonesia and Malaysia
Fieldwork: SWOT analysis, non-
government stakeholder
consultations, industry site visits
Economic analysis, cross-border
supply and value chain designs
Monetarized project appraisal,
infrastructure requirements, cost and
benefits estimates, and gap analysis
Non-monetarized project goals,
stakeholder ratings, and project rankings
Step Two
Step One
Step Four Step Six
Step FiveStep Three
1 2 3 654
1 Month1 Month 2 Months 2 Months 1 Month1 Month
8 Months to Completion8 Months to Completion
18
Palm Oil
BIMP-EAGA Border Area Development and Value Chains
Results: Monetarized Project Benefits Sabah-North Kalimantan
3.7%3.7%
18%18%
Wood
ProductsFisheries
TVET
Medical
Tourism
18%18%
20.5%20.5%
22%22%
25.5%25.5%
Wood
Products
20%20%Fisheries
Palm Oil16.5%16.5%
Sabah: Overall program
Economic Internal Rate of
Return (EIRR) = 22.6%
North Kalimantan: Overall
program Economic Internal Rate
of Return (EIRR) = 22.1%
Note: Percentage figures in boxes refer to Economic Internal Rate of Return (EIRR)
19
BIMP-EAGA Border Area Development and Value Chains
Connectivity Impact Analysis for Sabah-North Kalimantan
$318
$62
-$256
With Road Without Road
Difference
North Kalimantan – Impact of Cross-
Border Road Construction on Program's
Economic Net Present Value (US$ million)
Sabah – Impact of Cross-Border Road
Construction on Program's Economic Net
Present Value of Trade in Goods (US$ million)
Beyond Inward Looking Strategies will Require Deeper Changes
20
Business as usual… ...or a bolder approach?
Export-driven strategy � Primarily extra-regional
� Expanded to intra-regional value chains
� Value added to newly emerging products
� Infrastructure supporting cross-border
connectivity
� Regulstory facilitating mechanisms
Development strategy � Provincial or state-wide
� Focus on collaboration with cross-border
networks of productive activities, buiding on
interrelated sets of activities within a cluster
framework
Scope of non-monetarized
program goals
� Broad-based and self-contained
� Independent of intra-regional trade
expansion strategies
� Fully integrated into project selection processes
� Stakeholder groups from local populations and
SMEs engaged in identification and selection of
projects
Mobilization approach
� Mostly passive
� Governments and development
institutions count on private-sector-
driven trade and investment strategy
� Engaged and active
� Governments and development institutions take
accountability of support to cross-border value
chains through soft-hard infrastructure
commitments
Export multiplier goal 2x 6x
BIMP-EAGA Border Area Development and Value Chains
BIMP-EAGA Border Area Development and Value Chains
21
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