The Asia-Pacific economic crisis, which began in 1997, continues to take a heavy toll on the region. In 1998 most economies in Southeast Asia experienced negative real growth in GDP, with the exception of Singapore and the Philippines at 1.3 percent and 0.3 percent respectively.¹ Predictions for 1999 are not much better. Indonesia�s economic growth is estimated at around - 3.4 percent and Thailand�s at - 0.5 percent, and that of Malaysia, Philippines, and Singapore will hover around an estimated 2.0 percent each.

East Asian economies are still documenting the full effects of the economic crisis. The Philippine Board of Investment reports that its target investment goals for newly approved projects in 1998 began at $600 billion,² were adjusted to $400 billion around mid-year, and then settled at $270 billion. Malaysia reports that its Ministry of Special Functions is chairing a special government committee to monitor the crisis; thus far, it has documented skyrocketing government deficits as funds go to stabilize the private sector. Likewise, in Thailand, the government is considering 100 million baht ($2.7 million)³ in bailout assistance for small- and medium-sized enterprises that are less linked to�and have less of a safety net in�the global economy and consequently are going bankrupt to an alarming extent. Indonesia, which was hardest hit by the economic crisis, has extended its social safety net to include small- and medium-sized enterprises as well as individual citizens, as the manufacturing sector struggles both to retain its labor force and to continue exporting goods that will earn foreign currency.

Yet, economic activity manages to continue in the form of industrial and urban infrastructure. The Philippines and Thailand continue to move forward with mega-infrastructure projects that include new airports, highways, and light rail systems. As this economic activity continues, so does its attendant environmental burden, resulting in an ongoing concern for environmental protection and sustainable development.

One indication of this ongoing concern is the plethora of environmental and energy efficiency events held in the region in 1999. This includes an Asia-Pacific mayors� summit on the environment, cleaner production and clean technology conferences, sustainable development workshops, and myriad ISO (International Standards Organization) 14000 seminars. Hosts for these events range from national governments to international bodies, such as the United Nations and Asia-Pacific Economic Cooperation (APEC) forum; donor and development agencies, such as the World Bank and the U.S. Agency for International Development; the private sector; academia; and other nongovernmental organizations.

(average annual percentage rates of change)

a. Organization for Economic Cooperation and Development/European Union.
b. Eastern Europe and the Former Soviet Union.

Cleaner production and pollution prevention programs are important local and facility-level programs. It is clear, however, that, at the provincial, state, and national levels, policymakers must be more involved in creating development, management, and innovation policies that will take account of and encourage these programs across the entire economy in order to fundamentally erase pollution, not just treat it at the end of the pipe. In the race to eliminate pollution and improve the overall performance of industrial operations, policymakers increasingly find themselves grappling with the term "sustainable development," which creates quite a range of policy alternatives to pursue. The most widely accepted definition says that sustainable development "meets the needs of the present generation without compromising the ability of future generations to meet their own needs."⁵ On closer inspection, this definition reflects a broader concern not only for the environment, but also for labor and other standard of living issues as well. So where should one start? In an era of limited resources and fiscal belt tightening, regional policymakers are pondering the most efficient ways to set priorities to begin to meet these goals.

The ability to bundle industrial environmental and development issues together through "cluster regulation" or "coordinated rule making" is one method of focusing limited resources efficiently. In a regulatory context, one can focus efforts on different types of industrial groupings that require the most attention and can be bundled together, for example:

• "Most polluting facilities" (typically large companies, not small- and medium-sized enterprises)

• Specific "industrial sectors" (such as textiles, metal finishing, or electronics industries)

• "Place-based" industrial groupings (where economic activity is clustered within a geographic area, be it a small tract of land, a city, a national boundary, or a region).

An approach that focuses on "places" is particularly intriguing because it can include the concept of island economies and industrial estates�"cordoned-off" areas where regulatory and policy practices are able to incubate, mature, and provide data to other places and their policymakers as well. In such cases, the significance of "the fence" becomes more apparent; those physical boundaries make it easier for developers, manufacturers, and local government officials to ensure compliance with safety, environment, and security regulations. A fence line also makes it easier to direct and implement programs more efficiently and keeps out unplanned residential and commercial growth, sprawl, and squatter communities. Other place-based discussions, however, will also include the concept of "virtual" industrial estates or communities�those that are "mentally close," that is, their geography, culture, and resources are more like each other than other places on the globe, but not confined within a single fence line.

As the region transitions from reliance on an agricultural economy, the role of industry is ever increasing. Entire communities develop in conjunction with any industrial center; issues affecting housing, schools, recreational areas, hospitals and clinics, transportation, water consumption, and power supplies have cropped up as the result of market demand by investors, workers, and their families. With such issues comes a host of environmental and sustainability concerns. This discussion, however, will focus quite narrowly on industrial economic activity in Southeast Asia and the role of the public sector in developing policies that will help the region manage economic and industrial growth through innovative methods. The following chapters document four "place-based" industrial trends that have broader policy implications:

• An innovative market-based incentive (chapter 2). Using one type of market-based incentive, policymakers in the Philippines� Laguna Lake Development Authority have implemented a successful environmental user fee system for the economic and domestic activities around Laguna de Bay.

• Industrial estates in a leadership role (chapter 3). This is the most universal of the four topics, with the most available documentation and debate throughout the region.

• The potential for sustainable development through growth triangles (chapter 4). This is an idea in development. Growth triangles first began in Southeast Asia in the early 1990s and provide unique opportunities to local economies, as well as historic ties to the past.