Sijori-GT Economic Cooperation for Three Decades: Examining Malaysia’s and Singapore’s FDI Commitments to Riau Islands

Abstract

The Singapore-Johor-Riau Growth Triangle (Sijori-GT) was initiated by the government of Singapore, Malaysia, and Indonesia in 1989. It took the advantages of complementarities among the involved regions. The peripheral regions were expected to reap benefits and gain spillovers from the extended metropolitan region of Singapore.  In the age of 30 years of the growth triangle, many scholars found great progress and challenges of the subregional economic cooperation such as unbalanced development and allegedly weak commitment of the participating countries in Riau Islands. This research has the aim to investigate the tenable commitments of Singapore’s and Malaysia’s Foreign Direct Investment (FDI) in Riau Islands. Using statistical data from Indonesia’s Ministry of Investment from 1990 to 2020, this study compared FDI in Riau Islands by origin, and Singapore's and Malaysia's FDI by sector and subsector. The data was analyzed using the independent sample t-test for two-variable comparison and analysis of variance (post-hoc test) for multiple-variable comparison. Finally, this study found that: firstly, investment of Singapore was larger than that of Malaysia in Riau Islands; secondly, Singapore specialized its investment in manufacturing sector having better comparative advantage while Malaysia specialized its investment in non-manufacturing sector with potential assumed capabilities in halal-related sectors. The implication of this research is the importance of provision of competitive policies on industrial land estate prices to attract more investment in Riau Islands and to improve halal-related services to take advantage of domestic halal market and cross-border halal trade.