Author: Karen Peachy, Martin Perry & Carl Grundy-Warr
In the early 1990s, Indonesia's Riau islands to the south of Singapore experienced an investment boom. Singaporean investment in infrastructure and management combined with low operating costs in Indonesia produced dramatic growth. Between 1988 and 1993, Batam, the closest Riau island to Singapore, experienced population growth of over 50%, an eight-fold increase in the value of its exports and a fifteen-fold increase in annual private investment. Similar rates of growth have also taken place on the neighbouring islands of Bintan and Karimun.
The transformation of the Indonesia-Singapore border region is of more than local interest for several reasons. First, the investment strategy employed by Singapore in Batam has become the model for a much larger regional programme. Second, the Indonesia-Singapore cooperation in the Riau has become part of a tripartite initiative in subregional cooperation with the inclusion of the Malaysian state of Johor. Thirdly, the experience of Batam and neighbouring islands is a test of the Indonesian development model. Fourthly, the Riaus also provide a case study of the constraints on seeking to 'fast track' development in a low-income country with high levels of population migration.
This Briefing provides a detailed analysis of the Riau Islands project and its consequences. It begins by discussing the context for Indonesian-Singaporean cooperation in the area and outlines the development strategy being followed. It then examines the flagship projects and their impact on the Riau islands. Finally, it considers the influence of the project on the Indonesia-Malaysia-Singapore Growth Triangle and the region in general.
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