EXPERIENCES OF DEVELOPMENT TRIANGLE CONSTRUCTION

Despite the differences in the specific structures of development triangles, we can describe the most general characteristics of them. A Development Triangle usually involves three or more states, although only sub-national units of these states are involved directly in the scheme. Development triangles are not trade blocs.

Development triangles are typically initiated by governments and require a certain level of government involvement to expand commercial and investment activities within the sub-region. The role of the central government in a development triangle is to provide a policy environment conducive for the development of that development triangle, such as the legal and regulatory frameworks. More specifically, the central government determines the investment incentives for its portion of the development triangle, controls the tariff and customs schedule for imports and exports and regulates the flow of people entering and exiting the country. The central government is also expected to provide the initial infrastructure for a development triangle to emerge, including electricity, water supply and transportation networks, etc.

Another core function of the central government is to develop the linkages with its counterparts and reach an agreement on the basic form of the development triangle and the most general policy requirements.

The contributions of the business sector to a development triangle include the provision of investment funds and employment opportunities while also performing production and export activities. Activities of the business sector are the driving force for growth and once the central government has created a positive business climate, the success of the sub-region will hinge on the performance of the business sector.

Experiences of the regional states show that it must be clearly recognised that a crucial factor in the establishment of development triangle and its potential for success is the public-private partnership.

1. The need for bilateral and informal networks and communication channels in a development triangle

Bilateral cooperation serves as the initial step in the development of a multilateral cooperation in a development triangle. Bilateral networks and communication channels occur at different levels: between governments; and between business sectors. At the government level, cooperative bilateral ties are necessary to establish the development triangle and also to facilitate cross-border development. Thus it is important for the central and local governments to maintain cooperative relations if the development triangle is to succeed. Equally important are the informal networks between the business sectors.

Government and the business sector must reach common points of view through exchanging information and ideas about their needs and concerns.

2. Equal development cooperation and mutual assistance for the sake of development are important to the success of a development triangle

The literature and evidence from the case studies concur that equal cooperation is vital to the development of cross-border economic activities. However, the literature on development triangle considers only one aspect of complementarities and that is in regard to factor endowment. The other form of complementarities involves interests and challenges.

The capability to cooperate with and complement one another among the members of a development triangle is established when these members who share common interest realise that they cannot achieve their goals independently. Similarly, cooperation also ensues when individual actors face similar challenges that are more easily solved by working together.

3. The role of a "centre" or a "growth pole"

Successful development triangles often include a modern, wealthy, and capital surplus “centre”. Development triangles lacking a centre that can inject the above-mentioned elements into the others have not considerably prospered. Clearly, not every sub-region contains a centre or a growth pole like Hong Kong or Singapore, and thus alternative strategies must be developed in order to operationalise the development triangle. Due to limited capacity of governments in the Development Triangle and the absence of a leading economic centre, the only alternative is to improve the business sector’s capabilities by creating an ideal business environment for cross-border economic activities.

4. Geographic proximity: important but declining

Geographic proximity and contiguity will probably continue to be important for sub-regions lacking modern infrastructure and advanced technology, as they are less equipped to take advantage of comparative advantages around the globe. The lack of geographic proximity or contiguity, however, should not discourage sub-regional actions to resolve their difficulties.

5. Critical contribution of the business sector

Governments are those who establish development triangles but the leading role in implementing them falls into the hands of the business sector. The successful development triangles in Asia are all characterised by limited involvement of the Government in production activities as a result of a thriving business sector.

In a Development Triangle, the business sector has emerged only recently and has not been strong enough to play a leading role. While multinational companies and governments can play a role, the domestic business sector must be strengthened so as to become capable of leading economic growth and development. The government can assist in the development of the business sector by improving and expanding the education system at primary, secondary and higher education levels; devote greater resources to research and development and push up the activities of vocational training centres.

6. The role of the government in facilitating a development triangle

a) Minimising regulatory obstacles and providing the requisite legal framework: A conducive business environment is characterized by simplified administrative procedures for investment and trade (including one-stop services for licences, permits, investment approval…), minimising or eliminating unnecessary transaction costs, promulgating laws related to business, and establishing mechanisms for dispute settlement.

b) Avoiding picking winners: The government should concentrate on the above-mentioned business environment and simply let the market determine which sectors will utilise the development triangle.

c) Continued liberalisation as a key factor: Continued liberalisation of the national economy will produce even greater benefits not only for the sub-national units involved in the development triangle but also for the entire country.

d) Need for demonstrating a clear political commitment: Government commitment to the development triangle is vital for its success.

e) Promoting the micro-economic factors of competitiveness: The government needs to give sufficient attention to promoting the micro-economic factors of competitiveness instead of focusing all of its attention on the macro environment.

7. Potential for special economic zones

Increasing the flow of goods, people and capital into a sub-region may require special economic incentives by the government. This occurs for two reasons.

First, by offering special economic policies to the sub-national units within the development triangle, the government clearly expresses its commitment to the development triangle.

Second, the favourable economic conditions in the special economic zones give incentives never available before for investors to establish cross-border production and new activities.

Source:clv-triangle.vn

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