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Economic Corridors and Regional Development: the Malaysian Experience

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EconomicValuation of Corridors Health Impacts and Regional of Air Pollution Development: from Power The Malaysian Plants in Asia Experience A Practical Guide What are the prerequisites for a successful interregional economic corridor development program in a Rumcountry aut with ad endam a federal ent system re, officiet of government? volectatum This sitis paper etus elent,addresses aliquod this itatium issue through fugia sit an venihicient in-depth studyet licium repudaeof the design, sime implementation,pe dentio volori re and cuptati the developmental squatur? Re necabo. impact Et of aut the dolum Northern fugit Corridor moluptatem Economic sa sit unditRegion porepudaeriin Malaysia, which te exceperum encompasses sint es the qui states bea vite of Penang,excerat uribusdaeKedah, Perlis, cus, and ut harci Perak. aut It eaargues sundunt that, faccusin addition re nos to vit“economic” modio. Venduciae prerequisites, consequam an adequately imporecabo. equipped Agnis suprastate netur re rerisinstitution reped quamwith the net operational explicidel et flexibility rehendem to doluptatemalign individual aut state’s lanimperum interests, dolorero and command omnia vellori compliance onsequi from aspelicia all stakeholders voluptatquas is requiredsi berspel to maionse achieve the ntotatiooverarching velitaque goal of pedi shared cores regional et volut growth. enihill endanda nderibus. Ximus et rempore, ut officat iusam, consequo mo tem qui blaut aperum vere, quia pari corest, cusdanis ellabo. Ut quatia conseque ne minvend a About the Asian Development Bank VAluAtIon of HeAltH AboutADB’s visionthe Asian is an DevelopmentAsia and Pacific Bank region free of poverty. Its mission is to help its developing member EconomIC CORRIDORS AND countries reduce poverty and improve the quality of life of their people. Despite the region’s many successes, ADB’sit remains vision home is an to Asia a large and share Pacific of theregion world’s free poor.of poverty. ADB isIts committed mission is to reducinghelp its developing poverty through member inclusive ImPActs of AIr PollutIon countrieseconomic reduce growth, poverty environmentally and improve sustainable the quality growth, of life and of their regional people. integration. Despite the region’s many successes, REGIONAL DEVELOPMENT: it remains home to approximately two-thirds of the world’s poor: 1.6 billion people who live on less than $2Based a day, in withManila, 733 ADB million is owned struggling by 67 on members, less than $1.25including a day. 48 ADB from is thecommitted region. Its to mainreducing instruments poverty throughfor from Power PlAnts In inclusivehelping its economic developing growth, member environmentally countries are sustainablepolicy dialogue, growth, loans, and equity regional investments, integration. guarantees, grants, THE MALAYSIAN EXPERIENCE and technical assistance. Based in Manila, ADB is owned by 67 members, including 48 from the region. Its main instruments for AsIA: A PrActIcAl GuIDe helping its developing member countries are policy dialogue, loans, equity investments, guarantees, grants, Prema-chandra Athukorala and Suresh Narayanan and technical assistance. Herath Gunatilake, Karthik Ganesan, and Eleanor Bacani NO.no .520 30 adbADB SOUTH ECONOMICS aSia DOctoberecember 2014 2017 WORKINGwOrking paper PAPER Serie SERIESS AsiAn Development BAnk 6 ADB Avenue, Mandaluyong City 1550 Metro Manila, Philippines ASIAN DEVELOPMENT BANK www.adb.org ADB Economics Working Paper Series Economic Corridors and Regional Development: The Malaysian Experience Prema-chandra Athukorala Prema-chandra Athukorala ([email protected]) is a professor at and Suresh Narayanan the Arndt-Corden Department of Economics, No. 520 | December 2017 Australian National University. Suresh Narayanan ([email protected]) is a professor at the School of Social Sciences, Universiti Sains Malaysia The authors would like to thank Edmund Terence Gomez, Hal Hill, Jayant Menon, Rana Hasan, and Yasuyuki Sawada for insightful comments on the draft paper. ASIAN DEVELOPMENT BANK Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) © 2018 Asian Development Bank 6 ADB Avenue, Mandaluyong City, 1550 Metro Manila, Philippines Tel +63 2 632 4444; Fax +63 2 636 2444 www.adb.org Some rights reserved. Published in 2018. ISSN 2313-6537 (print), 2313-6545 (electronic) Publication Stock No. WPS189287-2 DOI: http://dx.doi.org/10.22617/WPS189287-2 The views expressed in this publication are those of the authors and do not necessarily reflect the views and policies of the Asian Development Bank (ADB) or its Board of Governors or the governments they represent. ADB does not guarantee the accuracy of the data included in this publication and accepts no responsibility for any consequence of their use. The mention of specific companies or products of manufacturers does not imply that they are endorsed or recommended by ADB in preference to others of a similar nature that are not mentioned. By making any designation of or reference to a particular territory or geographic area, or by using the term “country” in this document, ADB does not intend to make any judgments as to the legal or other status of any territory or area. This work is available under the Creative Commons Attribution 3.0 IGO license (CC BY 3.0 IGO) https://creativecommons.org/licenses/by/3.0/igo/. By using the content of this publication, you agree to be bound by the terms of this license. For attribution, translations, adaptations, and permissions, please read the provisions and terms of use at https://www.adb.org/terms-use#openaccess. This CC license does not apply to non-ADB copyright materials in this publication. If the material is attributed to another source, please contact the copyright owner or publisher of that source for permission to reproduce it. ADB cannot be held liable for any claims that arise as a result of your use of the material. Please contact [email protected] if you have questions or comments with respect to content, or if you wish to obtain copyright permission for your intended use that does not fall within these terms, or for permission to use the ADB logo. Notes: In this publication, “$” refers to United States dollars. ADB recognizes “China” as the People’s Republic of China. Corrigenda to ADB publications may be found at http://www.adb.org/publications/corrigenda. CONTENTS TABLES iv ABSTRACT v I. INTRODUCTION 1 II. ANALYTICAL FRAMEWORK 2 A. Policy Context 2 B. Concept and Profile 3 III. ECONOMIC CORRIDORS IN MALAYSIA 4 A. The Case for Economic Corridors 4 B. Five Economic Corridors 5 C. Why the Northern Corridor Economic Region for this Study? 5 D. Data Sources 6 IV. OVERVIEW OF THE NORTHERN CORRIDOR ECONOMIC REGION 6 A. Economic Profile 6 B. Potential for Subregional Development 9 V. THE NORTHERN CORRIDOR ECONOMIC REGION MODEL 14 VI. IMPLEMENTATION OF THE NORTHERN CORRIDOR IMPLEMENTING AUTHORITY PROGRAM 15 A. Phase I 15 B. Phase II 16 VII. ASSESSMENT 17 A. Achievements 17 B. Limitations of the Northern Corridor Economic Region Programs 18 C. Challenges Facing Northern Corridor Implementing Authority 20 VIII. SUMMARY AND POLICY INFERENCE 22 APPENDIX 25 REFERENCES 27 TABLES 1 Northern Corridor Economic Region States in the Malaysian Economy, 2010–2015 7 2 Northern Corridor Economic Region States in the Malaysian Economy: Population, Urbanization, and Poverty 7 3 Sectoral Composition of Gross Domestic Product, 2010–2015 8 4 The Structure of Manufacturing in Northern Corridor Economic Region Sates: Output and Employment Composition, 2010 10 5 Manufacturing in Northern Corridor Economic Region Sates: Share in Output and Employment by State and Industry, 2010 11 6 Northern Corridor Economic Region Sates and Malaysia: Manufacturing Employment, Labor Productivity, and Wages 12 7 Investment and Employment in Malaysian Economic Corridors, 2011–2014 17 ABSTRACT This paper examines prerequisites for a successful interstate economic corridor development program in a country with a federal system of government through an in-depth study of the design, implementation, and the developmental impact of the Northern Corridor Economic Region (NCER) in Malaysia that encompasses the states of Penang, Kedah, Perak, and Perlis. The analysis suggests that the NCER has the potential to leverage on the core strengths of the state of Penang—global connectivity, mature business ecosystem with a strong presence of multinational enterprises, and sizable talent pool—in order to redress the widening interregional and urban–rural development divide. While it is too early to assess the full outcome of NCER initiative, a potential problem looms in the future. The Northern Corridor Implementing Authority (NCIA), charged with implementing projects in the NCER, is structured with no formal positions allotted to planning officials from the member states. This will not pose problems in implementing projects that are in broad alignment with the interest of the states. Conflicts will arise, however, when state and NCIA views on projects differ. This potential problem can be overcome by restructuring the NCIA to allow for the formal inclusion of planning representatives from member states. Keywords: economic corridor, Malaysia, regional development JEL codes: O18, O21, O53 I. INTRODUCTION Economic corridors have gained popularity over the past 2 decades as a vehicle for subregional economic development. This is on account of their potential for promoting equitable growth among regions across countries that share common borders, as well
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