Place-Based Public Policy in Southeast Asia:
Developing, Managing, and Innovating for Sustainability

In 1999 and beyond, policymakers will continue to face myriad choices as they write policies that will encourage responsible industrial development within their own economies. These choices include (a) the correct mix of industrial sectors, each with their own process technologies, (b) the optimal sites for locating those industries, and (c) a balance of industrial, commercial, utility, infrastructure, residential, and recreational facilities at each site. Each choice will have a direct impact on the local environment and on long-term sustainability issues.

Industrial estates mirror these choices, because policymakers�both public and private�must blend the results of all three of these decisions into specific parcels of land. Much of the land in Southeast Asia is undergoing a transformation from agriculture-based production through labor-intensive and heavy industries to service-oriented activity. Each of these economic activities leaves a different kind of environmental footprint and results in markedly different commercial and residential scenarios. This is because different choices in site selection and land use�including resource use, energy use, waste output, and heavy concentration of industrial facilities�can have significantly varied impacts on surrounding watersheds and neighborhoods. For this reason, analysts have long said that industrial estates are likely incubators for policy development, because they have the potential to provide a model of the balance between economic and environmental development. At these sites, esoteric public policies become more tangible, as industrial estates provide a place to test ideas on the ground. These estates can also become a showcase for "best practices," such as voluntary corporate disclosure under the guidance of the Laguna Lake Development Authority in the Philippines, industrial environmental management in Singapore, and radically improved environmental performance of the oil palm industry in Malaysia.

The term "industrial estate" is often used interchangeably with industrial district, industrial park, or industrial zone, business park, ecopark, or ecozone.¹⁴ The United Nations Environment Programme defines an industrial estate as any

. . . defined geographical area that contains businesses of an industrial nature . . . the essential element is that the estates are administered or managed by a single authority that has defined jurisdiction with respect to tenant companies. The authority makes provision for continuing management, enforcing restrictions on tenants, and [planning] with respect to lot sizes, access, and utilities.¹⁵

An industrial estate may or may not have prebuilt standard factory buildings and community facilities available for use by industry. Depending on the country, such a geographical area may fulfill a variety of needs and may contain general industrial zones, export-processing zones, free trade zones, tourist centers, and residential areas.

So, how can industrial estates be well situated to provide leadership in the area of industrial environmental performance and sustainable development? The answer is threefold. First, they are "representative." In other words, they are designed as blueprints (by government officials who are planning the future of their national economies) and accurately represent a microcosm of the community of stakeholders who have an interest in local economic development, environmental stewardship, and sustainable development. Second, they occupy a place in the global supply chain that positions them well to provide leadership in these same three areas. Third, industrial estates can be quite progressive in their structure and administration, setting the stage for innovative products, technologies, and management practices. Each of these aspects of leadership merit further examination.

Officials from around the Asia-Pacific region agree that industrial estates accurately provide the "big picture" on the status of industry within each country, because the majority of large corporations locate there. Industrial estates also represent the mix of decisionmakers and participants affecting and affected by industrial development, including national government agencies, manufacturing companies and their investors, and a community of local government units, NGOs, labor unions, and citizens. Each of these groups�discussed below�already uses industrial estates as development tools to achieve their own goals and bear some responsibility for activities that take place there.

National governments, for their part, are committed to attracting foreign investment and business, but must simultaneously monitor and enforce environmental and labor laws. With dozens or even hundreds of facilities on site, however, industrial estates are especially well positioned to provide the government with an opportunity to transform operations as a bundle, instead of on a facility-by-facility basis. Inside industrial estates, the government can also provide bundled services and environmental guidance to small- and medium-sized enterprises that many times do not have the individual resources and do not face public pressure to improve their performance. Because these improvements must be largely driven by private sector initiative, the government�s role as a moderator and provider of information to the public and corporations is important. But, the government also has the ability to foster creative improvements through innovative market-based policies. In an industrial estate scenario, such programs, if structured properly, could flourish.

Governments use industrial estates as national industrialization vehicles and spatial planning templates. In economies that plan the development of industrial estates at the national level, such as Thailand and Malaysia, officials are spreading estates farther apart, mitigating the effects of dense population and industrial emissions. Officials also group industrial sectors together in estates to take advantage of common treatment facilities tailored to meet the specialized needs of different sectors.

Cities in Thailand have become untenably overcrowded, which has persuaded the Thai government to develop plans to woo industry and labor out of cities in a coordinated and responsible manner, avoiding sprawl and the destruction of green space as much as possible. One of the environmental goals of the Industrial Estate Authority of Thailand (IEAT) during this process is to group factories systematically by industry sector to treat and dispose of waste more efficiently. In one scenario published in 1998, IEAT shows a distribution of electronics, ceramics, gems, agro-industry, and metal works industries to the north; textiles, paper products, automobiles, and electronics parks through the midlands; and steel, petrochemical, palm oil/rubber, food canning, and electronics estates in the south. IEAT also tries to keep certain industrial sectors away from urban centers and water sources. One example that officials cite is the restriction on industries with particularly high water use and pollution, such as textile dying and electroplating, from locating near Bangkok�s historic Chao Phraya River. One of the policy techniques IEAT uses to induce developers away from cities such as Bangkok is a tiered-tax system. The farther one locates from Bangkok, the better one�s tax holiday. Locators in Zone 1 industrial estates (Bangkok area) earn three years of corporate income tax holidays, those in Zone 2 earn seven, and those in Zone 3 earn eight, plus an additional 50 percent reduction for another five years.

Malaysia also tries to group its state-owned industrial estates by industry for more efficient waste management. Development of industrial estates has proliferated along Malaysia�s North-South highway, which has greater access to ports, airfields, and other infrastructure. Through an investment package that includes tax holidays and other tax incentives, the government is encouraging industrial sectors to group together to maximize efficiency in specialized waste treatment. Financing for this program tends to come from a mixture of joint ventures and multinational corporate investment. The government, however, has also pledged loans amounting to 486 million Malaysian ringgit ($128 million)¹⁶ for development of Malaysia�s industrial estates in less-developed states: Damak Laut Industrial Park in Sarawak, the Kota Kinabalu Industrial Park in Sabah, the Gebeng Phase II Industrial Park in Pahang, and the Telok Kalong Phase II Industrial Park in Terengganu.

Malaysia�s semiconductor industries flock to the north, information technologies reside in the central corridor, and heavy industries locate in the east. Other examples of industries grouping together geographically include the Subang Industrial Aerospace Park in Selangor; the Composite Technology City in Batu Berendam, Melaka; the Natural Resources Park in Kuching, Sarawak; and the Automotive Town in Tanjong Malim, Perak. In addition, Malaysia has planned a new multimedia "super corridor" that runs from the twin towers in the capital of Kuala Lumpur through several high-tech neighborhoods to the new international airport. Even the government�s administrative offices are grouping together and paying increasing attention to efficiency. "Putrajaya," the new seat of national government, sits along the super corridor and within the next several years is supposed to house Malaysia�s national government offices in a paperless setting. Next door, the new "Cyberjaya"¹⁷ area will presumably provide all the information technology required to advance Malaysia�s population in the competitive global market. Cyberjaya is designed to develop Malaysia�s information technology industries by complementing and cooperating with high-tech industrial estates already located in Penang, Malaysia. These host the world�s pre-eminent semiconductor manufacturers, earning Penang the nickname, "the world�s next Silicon Valley."

In economies with privately owned and developed estates, such as the Philippines and Indonesia, the estates have tended to cluster around the capital cities to make use of existing and publicly provided infrastructure. In the Philippines� CALABAR-ZON region�the provinces of Cavite, Laguna, Batangas, Rizal, and Quezon�industrial tracts have all but reached their carrying capacity. Since 1997, however, the Philippine Department of Trade and Industry has conducted its own program of industrial clustering¹⁸ for long-term efficiencies that produce economies of scale when it comes to waste treatment, common infrastructure, research and development, and supplier partnerships within related industries. The Department of Trade and Industry (DTI) allows the duty-free import of capital equipment and raw materials as an incentive to encourage companies to locate or relocate under such programs. Industrial clustering sites in the Philippines include an integrated food industry site in Mariveles, Bataan; a jewelry industry in Bulacan; footwear production in Marikina; and fish-processing centers in General Santos City.

Indonesian officials likewise believe that by "grouping industries into industrial estates, various promotional measures (technological, managerial, financial, and marketing) can be applied effectively at reasonable costs. This would not be possible for industries spread over whole cities or districts."¹⁹

Indonesia cites several reasons for encouraging the growth of industrial estates: accelerating industrial development in specific sectors, creating employment opportunities, offsetting periodic irregularities in agricultural employment, relocating industry out of urban areas, and increasing economic activity in rural areas.²⁰

The government of Vietnam reported recently that it is revisiting its locational decisions about industrial estates�largely due to pollution emissions.²¹ The Hanoi Municipal People�s Committee has announced that fourteen inner-city industrial facilities will be relocated in the next two years with an additional fifteen by 2010 to reduce pollution levels. Hanoi authorities plan to construct four small industrial zones covering 15 hectares (37 acres) near outer roads that ring the city to accommodate the industries flagged for compulsory relocation. Companies affected by the compulsory order include refrigerant and tobacco enterprises, tanneries, chemical firms, and textile firms.

National governments are not the only ones who use industrial estates to further their goals. Private developers in high growth areas are acquiring and developing estates to earn a profit in lieu of traditional real estate investments. Corporations are using industrial estate resources to meet market demand more readily. Entire industrial sectors use industrial estates as complexes where they can encourage downstream development (i.e., processing, refining, packaging, and distribution) and share infrastructure and facilities with business partners. Many of the sites highlighted in this and later chapters actually rely on an "anchor" corporation for their success. The anchor or corporate "champion" is the company whose products and methods set the example for neighboring companies within an industrial estate, park, or region. The anchor corporation can even be a utility; in fact, some remote communities are using the advent of industrial estates as their principal sources of neighborhood power supply.

Among government, corporations, and the community, industrial estates create a geographic relationship, which can then be extended to one of information, innovation, and partnering. Increased interaction and transparency among groups are crucial in light of the fact that industrial estates have earned a reputation in communities and in the media for behaving like closed-wall fortresses. NGOs, labor unions, and communities are demanding increased access to government and corporate officials when it comes to industry�s effect on environment, health, and safety and are finding increasing support for their efforts. But, theoretically, through the industrial estate environmental impact assessment and environmental clearance certificate processes, communities have the opportunity to become involved, voice their opinions or request information. Many industrial estates have created community relations units who report that community leaders usually list crime, pollution (air, water, and noise), employment, and squatters among their concerns.

Despite the current slowdown, industrial estates still occupy a place in the global supply chain and have the opportunity to exhibit leadership on environmental management, waste treatment, transportation, zoning, and other issues. Often companies in industrial estates have a direct link to local suppliers, whose materials move through the estates and on to other facilities for assembly, sale, or export. With such a position in the supply chain, industrial estates have the leverage to improve the environmental impact of both their own operations as well as those of their suppliers. Many of the multinational corporations currently operating in industrial estates already have experience in this area, because they are required to measure and disclose their performance in countries of the Organization for Economic Cooperation and Development. Industrial estates can benefit from the "best practices" already under way in the global economy.

Singapore is one economy with unique industrial and environmental successes. It stands out prominently as an Asian country that has implemented clean technology and strict environmental controls since the late 1960s when it sought to protect Singapore�s water catchment, creating an area outside the catchment that was zoned and managed for industrial development. Strong regulations and enforcement under both the Ministry of Environment and Ministry of Trade have supported Singapore�s disciplined land-use policies. The latter includes both the Economic Development Board and Jurong Town Corporation, which manages Singapore�s industrial estates. Jurong Town Corporation officials describe Singapore�s relatively small parcel of land as "less land, which requires better performance."²²

Although Singapore may provide one model of environmental success, its experience may not soon, if ever, be replicated by national governments throughout the region, due to tight governmental controls that other countries might regard as an unnecessary burden. It is the industrial estates across the region with their built-in relationship to government agencies that may come closest to duplicating the conditions that made Singapore a success in the environmental arena. JTC�s international arm, JTC International (JTCI), has as a matter of policy exported its high environmental performance around the region to other industrial estates in which it has investments.²⁵ Officials in the host countries describe JTCI as "influential" in implementing local environmental management programs and note that the company has retained Dames & Moore, an American engineering and consulting company, to provide environmental consulting services to JTCI on a regional basis.

Carmelray Industrial Park II in the Philippines, with investment from a Singapore consortium led by JTCI, is in the development and construction phase and intends to host power, logistics, and electronics companies. Administrators of the 145-hectare (358-acre) park are considering an environmental management system that includes the concept of "zero emissions," a policy approach also popular in Japan. Carmelray Industrial Park I, which is 230 hectares (568 acres) in area, already has fifty locators and comprises largely Japanese semiconductor manufacturers. Its Environmental Management Unit has created environmental management systems under ISO 14001 through the leadership of its Japanese locators and Singapore developers. Carmelray says that, to its knowledge, it has the only industrial estate administration in the Philippines with such an environmental management system. Carmelray advertises its environmental management system to other potential multinational locators that require these systems as part of their corporate policies. Until now, industrial estate developers in the Philippines say they were only interested in real estate marketing and were not concerned with environmental issues beyond fundamental compliance, but the idea seems to be catching hold as other industrial estate managers note Carmelray�s activities.

As industrial estates such as Carmelray begin planning for "sustainable development," long-term access to resources such as water will vary depending on several factors. Time, changes in the number or intensity of users, and changes in the mix or production processes of goods and services will all significantly affect the sustainability of resources. Sustainability is not so much an end state gained by having clean water for the next 20 years, as it is the act of using water ever more efficiently and producing ever smaller impacts on the underlying resource base.

Part of the value of using an environmental management system as described here, is the emphasis on process, systems thinking, and continuous improvement of performance. This has the benefit of not locking in technologies or levels of waste, but rather using incentives to continue reducing impacts. The longer these techniques are used, the more abundant and cleaner resources, the fewer local pollution problems, and the more returns will increase at any point in the future.

Along with environmental management systems, it could be helpful to use third-party certification as a mechanism for accountability and verification. These approaches also have public relations benefits for industrial estates and the surrounding community in that the approaches can be coupled with public reporting of environmental data or used in future industrial modeling and planning.

As already seen in the Laguna de Bay case study, industrial estates have the potential to provide leadership in other areas too, such as insisting that the government provide clear and enforceable policy guidelines on waste disposal. In the Philippines, some policymakers and developers believe industrial estate managers might even be best positioned to insist that the government provide common treatment facilities (for waste water, solid waste, and hazardous waste) that could be used by several estates at once, because adequate waste treatment is sorely lacking. Malaysia seems to have had success with its waste collection system, which is privately owned and operated by U.S.-based WMX Technologies. Nineteen percent of that waste comes from industrial estate customers. Malaysia notes, however, that collection operations and fee structures would have had no chance of success without strong, vigorously enforced government regulations. In Thailand, public-private joint venture companies provide waste treatment services in the industrial estates.

The proximity (among facilities) lent by industrial parks can also be an asset in reducing transit impacts, and mitigating traffic congestion within the supply chain. Industrial estates also have the opportunity to lead the way in terms of modeling zoning regulations that separate industry from residential areas, toxic facilities from schools, heavy polluters from food processors, and so on. Industrial estates by nature represent planned zoning. This is crucial in countries such as the Philippines, which has a national land zoning code that is obsolete and no longer used, and Indonesia, whose zoning ordinances are not well enforced.

Many industrial estates are already more progressive than other production facilities in terms of high product quality, the use of cutting edge manufacturing technology, and a synergistic mix of large national and multinational corporations with small- and medium-sized enterprises. The oversight required in terms of quality control, tax structure, environmental impact assessments, permitting, and other regulations has two implications. First, administrators of these estates have fairly strict control over the conduct of companies located in them. Second, corporations operating within the confines of industrial estates are already accustomed to working closely with government officials.

Industrial estates throughout the region are of different sizes and serve different purposes. Accordingly, the number of estates differs greatly from country to country:

The Philippines. This nation has more than 120 industrial estates and ecozones in various stages of development and representing 30 percent of the country�s industrial facilities. Six of the estates, including the former Clark Air Force Base and Subic Bay Naval Station, are government owned. Most heavy industry is located outside the industrial estates because the estate managers are selective and favor less-polluting industries. In fact, some parks advertise that they "cater to light to medium nonpolluting multinational companies."²⁶ Planners are, however, considering a new industrial estate for heavy industry. Although the Philippine Economic Zone Authority officially took over responsibility for licensing private ecozones in 1995 (under Republic Act No. 7916), the Philippine Board of Investment is the lead agency in investment promotion and industrial development and still facilitates business ventures such as industrial estates. It has stated that "as a general rule, development of industrial estates must be outside Metro Manila."²⁷

Indonesia. This nation has forty-six industrial estates in operation. As in the Philippines, only half a dozen are wholly government owned. Although Indonesia began developing its industrial estates under the Ministry of Industry and Trade in the early 1970s, the private sector was not allowed to develop and manage any until 1989. The government sites tend to be in more remote areas, whereas private estates are located primarily in urban centers. In fact, four-fifths of all of Indonesia�s registered industrial enterprises are located near the urban areas on Java, particularly West Java and the capital of Jakarta. About 15 percent of all Indonesia�s industrial activity takes place on industrial estates, which contain a mix of industrial sectors.

Thailand. The Industrial Estate Authority of Thailand (IEAT) directly administers thirteen public estates in that country and jointly manages fourteen private ones.²⁸ These twenty-seven estates represent 1,700 factories, an investment of about 769 billion baht ($20.95 billion),²⁹ and approximately 400,000 employees. IEAT, as the permitting agency for facilities inside the borders of industrial estates, is responsible for all aspects of estate management, including the granting of land-use and operation permits, operating utility and waste treatment systems, monitoring environmental quality, safety, and labor, and regulating industrial operations, taxes, and administration.³⁰ Since 1972 IEAT has functioned as a state enterprise under the jurisdiction of the Ministry of Industry³¹ and is tasked with implementing the country�s industrial policy, which includes economic development through the "orderly and planned industrialization of Thailand."³²

Malaysia. Malaysia has 222 industrial estates, special economic zones, and free trade zones developed by the state economic development corporations, port authorities, and municipal governments. Private developers own and operate another sixty-three, and dozens more are in the planning stages. In the publication of its seventh five-year plan,³³ the Government of Malaysia mentions that it will continue to encourage private developers to own and operate industrial estates alone, as well as on a joint-venture basis with government agencies. If the idea takes hold, direct participation of government agencies in industrial estate development will eventually be reduced, but, for now, the development of Malaysia�s industrial estates is undertaken principally by the national government. Malaysian officials report that most of the large companies are located in the industrial estates to take advantage of tax benefits offered by the government.

Singapore. This nation has thirty state-owned industrial parks, of which Jurong Town is the largest estate. Jurong Town Corporation (JTC), a government agency, has a tight regulatory grip on the companies operating under its auspices, allocating land to companies that may themselves build or that may occupy buildings established by JTC under a thirty-year lease. JTC has built all the required infrastructure�sewers, roads, substations, electrical and communication lines�in the industrial estates. The ongoing management of the telecommunications, electrical wiring, and other infrastructure support contracts is farmed out to other government agencies for a fee, which JTC recovers through land leases. At present, JTC is conducting major reclamation work to build up and connect Singapore�s offshore islands, which house the country�s petrochemical and refinery plants.

Many industrial estates have their own marketing units that promote the parks and engage in fairly rigorous recruiting efforts. In fact, some industrial estate associations are bemoaning the fact that the economic crisis has meant so much extra time advertising and recruiting participants, instead of developing still more sites. Industrial estate billboards and flyers are everywhere, from the baggage claim areas in international airports to local magazines. Estate developers are receiving assistance from national development agencies and are participating in trade missions worldwide.

Industrial parks offer a mixture of services and incentives to entice manufacturers. Services for export-oriented companies include "one-stop shops" that facilitate export licenses, permits, and customs procedures. Other services include assistance with administrative activities, such as feasibility studies, land development and acquisition, or logistical activities, such as security, water supply and treatment, energy generation, transportation, and telecommunications. These last four logistical concerns consistently rank at the top of the manufacturer�s list of needs. Interestingly, labor needs seem to be of less concern, because the labor force is more mobile (i.e., workers will relocate to areas near the park to have better jobs). Still, some estates offer technical assistance and worker education programs. A few advertise their location as part of Southeast Asia�s growth triangles with access to consumer markets and human resources (see chapter 4).