In the late eighteenth century, the Johor-Riau Empire started to decline as the European powers jockeyed to gain control of the region.

In 1819, Singapore was ceded to the British. In 1824, the Anglo-Dutch Treaty saw the separation of Riau from Johor and Singapore.

Singapore prospered as a free port, Johor was used for plantation agriculture - even today, Johor's economic structure is much more agro-based than that of other Malaysian states. Riau was relatively neglected as the Dutch turned their attention to Java and Sumatra.

In 1970, Batam was designated as a logistics and operational base for oil and gas industries. The following year, it was declared an industrial area, with emphasis on the entrepôt rôle.

In 1973 the Batam Industrial Development Authority was established as the central government-level agency overseeing its development. Five years later, the whole of Batam became a duty-free zone.

In the eighties, the cost of doing business in Singapore rose sharply, because of a combination of rapid economic growth, a strengthening Singapore dollar and the constraints of limited labour and land.

Profit margins were being squeezed. Improvements in labour productivity could not keep pace with real wage increases, especially in 1989/90, driving up real unit labour cost. In addition, foreign labour was increasingly expensive and scarce because of levies and quotas.

This meant that throughout the eighties, companies in Singapore dealing in products with short shelf-lives and low value-added (eg, textiles and electronics assembly) began to distribute their labour-intensive activities to Johor.

This strengthened the Singapore-Johor side of the Triangle (even though it was not yet officially in existence).

Economic motivations were thus one primary reason for the formation of the Triangle.

Part 1: The Rationale
Part 2: The Facts
Part 4: The Plans
Part 5: The Results

Reproduced with permission from the site formerly known as 'No Place Like Home', © Kenneth Y T Lim 1995-9