Special Border Economic Zone in IMT-GT and BIMP-EAGA … · 2017-11-28 · Special Border Economic Zone in IMT-GT and BIMP-EAGA Subregions Session 4: Developing CBEZ and Economic

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)

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• 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

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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

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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

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Source: Adopted from Google Maps

North Kalimantan and Sabah


Example of Possible Project Approach based on Pilot Project


Example of Possible Project Approach based on Pilot Project


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


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

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Palm Oil


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)

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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

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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



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Documents

Special Border Economic Zone in IMT-GT and BIMP-EAGA … · 2017-11-28 · Special Border Economic Zone in IMT-GT and BIMP-EAGA Subregions Session 4: Developing CBEZ and Economic