To what extent does governance change because of sub-regional cooperation? The analysis of Iskandar-Malaysia

To what extent does governance change because of sub-regional cooperation? The analysis of... The research puzzle of this article is to understand and explain the process of Iskandar-Malaysia region building. By doing that the article contributes to the debate around how regions emerge and to what extent states have to adapt to, cooperate with, and compete with them. Within the framework of regulatory regionalism and multi-level governance, the paper aims to address one main question: how and to what extent interactions between state and non-state actors that contribute to produce new (cross-border) regional forms may politically and economically reconfigure states' relations. This is the first study on Iskandar-Malaysia that focuses attention on the sub-national border governance that is shaped by the interaction between Singaporean, Malaysian and Johorian private and public actors and which can lead to an internal transformation of the states involved in the process. 1 Introduction This article aims to contribute to cross-border regionalism theories by clarifying and explaining the governance dynamics behind the process of cross-border region building in Iskandar-Malaysia (IM), in Southeast Asia. By scrutinizing the relations that develop among state and non-state actors at the sub-regional level (here Iskandar-Malaysia/IM), we will try to shed some light on the ways governmental and non-governmental actors have changed themselves due to this collaboration, power compromises, and bargaining in their institutional make-up and outlooks. Moreover, the emphasis on cross-border regions (CBRs) and cross-border cooperation (CBC) will also clarify our understanding of how States work and ‘how borders can be exploited to both mobilize and fix territory, security, identities, emotions and memories, and various forms of national socialization’ (Paasi 2012: 2307). Moreover, following Bridges’ approach to growth triangles (GTs), we aim to contribute to the ongoing literature by arguing that CBC in cross-border areas cannot be understood just as economic phenomena, but also as political and social ones (1997). By answering the question ‘how and to what extent interactions between state and non-state actors that contribute to produce new (cross-border) regional forms may politically and economically reconfigure States’ relations?’, we argue that the understanding of CBRs building and the investigation of how borders and bordering practices occur can shed light on political rationalities and State-based ideologies embedded in these practices. The main assumption of this work is that borders are not mere physical formal markers of territoriality, but also dynamic agents that undergo an everyday construction among communities and groups, through ideology, discourses, political institutions, attitudes, and agency (Scott, 2015). Moreover, borders are linked to security issues which cover not just the defence of territory but also the maintenance of core community values and related institutions (Bridges, 1995). As such, they can acquire a governance purpose that leads to the establishment and operation of social institutions. Moreover, studies have shown that a new kind of multi-level cross-border governance can emerge in CBRs (Nadalutti, 2015a) which is characterized by ‘a set of rules, decisions-making procedures, and programmatic activities that serve to define social practices and to guide the interactions of those participating in these practices’ (North, 1990, paraphrased in Young, 1997: 4). It is important to stress here that our conceptualization and analysis of CBRs does not suggest that States are disappearing and are losing their territoriality. We highlight instead that so far cross-border regionalism literature analysis has been premised on a methodological nationalism, and an analytical dualism between cross-border regional institutions and the nation state (Jayasuriya, 2009). Hence, we contribute to better understand cross-border regionalism that remains understudied in the politics and international relations disciplines, despite the fact that its importance has been recognized by political and economic geographers (Breslin, 2002; Tubilewicz and Jayasuriya, 2015). It is fruitful to clarify how the national and cross-border national levels intersect since they can generate new political and economic functions of integration and interaction across States borders. For instance, in our analysis it will be shown how and to what extent ‘national’ bodies (such as a national federal strategic investment fund as the Khazanah Nasional Berhad, the strategic investment fund of the Government of Malaysia) are enmeshed in a cross-border regional wide system of regulatory cooperation (i.e. economic and social development of Iskandar-Malaysia) and contribute to the process of CBR building. Put differently, practice of ‘national’ governance becomes incorporated into ‘cross-border’ policy making institutions. In order to conduct this analysis, we will rely on regionalism and regionalisation theories (Gamble, 1996). Hence, we will synergically combine multi-level governance (MLG) with and to regulatory regionalism, in order to better clarify both the governance process that emerges because of CBC activities in CBRs as well as the relationship that develops among the actors involved in the ‘region building-process’. Iskandar-Malaysia (IM), which has also been labelled as the ‘Shenzhen’ of Southeast Asia1, in the state of Johor, within the Federal State of Malaysia, on the geographical border with Singapore is the case study investigated in this article. This zone has been chosen for its cross-border position and its social, historical and political features. Although the state of Johor is geographically closed to Singapore, the relationship between the federal state of Malaysia, the state of Johor and the city state of Singapore has been at time very tensed (as will be better analysed in the next section) and characterized by rivalries, jealousy, and competition (Bridges, 1997). Only recently this relationship started to warm up again thanks to the development of the IM region (interview with an IRDA representative, Johor Bahru-JB, 22.04.2015). It is important to note that the IM project is highly political (as will be better clarified in the following section). Unanimously, all the interviewees selected for this investigation, agreed on the importance to cooperate in order to make IM successful. On one side ‘Singapore is really working in order to make IM a success. With a mix of people and services in IM, the animosity of having Singaporeans here is clearly outside the region. The animosity generally develops at the governmental level’ (interview with an IRDA representative, March 2015). On the other side, there is the awareness that the ‘IM can be a success only if develops together with Singapore’ (interview with a Johorian politician, Johor, March 2015). The time span of this research covers the period from 2006 when the IM region was incepted, to 2015 when the author spent four months by carrying out fieldwork research between Singapore, Malaysia, and Johor. A multidimensional qualitative approach is adopted for collecting, interpreting, and evaluating data such as official documents, state discourses, newspaper articles, blogs, and discussion forums. The present article is based on an extensive literature, consultation of primary sources, and 21 semi-structured interviews with Asian Development Bank (ADB) representatives, firm representatives, politicians, public servants, academics, and lawyers between 2012 and 2015 in Singapore, Malaysia, and Johor. Our analysis will proceed as follows. First, an historical overview that contextualizes the past and current policy settings between Singapore, Johor, and Malaysia will be provided in order to better understand how relations developed, have been built and evolved due to CBC in the border between Singapore, Johor, and Malaysia. Then, MLG and regulatory regionalism will be operationalized to the cross-border region building process. It will follow a section that focuses on the Iskandar-Malaysia building process where we will address the question of how and to what extent CBC re-configures state entities. 2 An historical brief overview Singapore shares a common historical past both with Malaysia and the state of Johor. Their relationship has been characterized by complementarity and competitiveness, and has not been always good in the past (Weatherbee, 1995; Nathan, 2002). After having become a self-governing state within the Commonwealth in 1959, the Singapore government through its People’s Action Party (PAP) proposed to merge with Malaysia, Sabah, and Sarawak to form the new Federation of Malaysia in 1963. This merging with Malaysia did not succeed, due to the inability to resolve ethnic suspicions: Singapore is a small country of 718.3 km2 and five million inhabitants whose ethnic composition is three-quarters Chinese, making it the only country in Southeast Asia with an ethnic Chinese majority. Conversely, the state of Malaysia is composed by a majority of Malays. The Federation of Malaya was also unstable from the very beginning, due to distrust and ideological differences between Singaporean and Malaysian’s leaders (Nathan, 2002). Among various disputed issues that led to separation, the most important one was related to Art. 153 of the Constitution of Malaysia that guaranteed special privilege to Malays vis-à-vis other ethnic groups. Moreover, Malays could also take advantage of financial and economic benefits that were guaranteed to them by Malaysia (Barter, 2006a). Additionally, the political party in power in the Federal Government, the United Malays National Organization (UMNO), was hostile to the Singapore-based PAP which was campaigning in Kuala Lumpur during the Malaysia’s general election in 1964. Riots led by Malays’ politicians followed Singapore’s legislative elections in 1963. It was very difficult to harmonize the contrasting approach to the politics of ethnicity between the ethnic Chinese majority in Singapore and ethnic Malay majority in Malaysia. Hence, this instability led Malaysian Prime Minister Tunku Abdul Rahman to expel Singapore from the Federation, leading to the independence of Singapore on 9 August 1965 (Case, 2002). It is therefore very important to stress the fact that Singapore and Malaysia were practically borderless until the 1960s. Singapore, due to its size, population pressure, and scarcity of resources2 had the immediate necessity to work in order to develop strong economic and political bilateral relations with its neighbour countries. Thus, the idea of ‘growth zones’ that developed from the UN developmental blueprint for ASEAN in 1972 that pointed out the advantages boosted from crossing national frontiers in ASEAN, was welcomed by Singapore as will be better explored in the next section (Weatherbee, 2015). 3 Subnational transborder regionalism in Southeast Asia Since the 1980s a new kind of ‘cross-border regionalism’ that has taken the form of ‘growth triangles’, characterized by a process of growing regional interconnectedness that occurs below the national level and cuts across national borders, has started developing in Southeast-Asia (Yang, 2006). These cross-border zones have been perceived by ASEAN and the Asian Development Bank (ADB) as a way to promote transnational integration of economic factors by providing infrastructure development, legal frameworks, and incentives to encourage the flow of private and quasi-private investment for zonal development (Bridges, 1995; Weatherbee, 2015). Growth triangles can be conceived as sub-national zones of economic or development cooperation between contiguous border areas under different sovereignties. They link together across their borders to maximize their varied factor endowments and exploit their comparative advantages (Bridges, 1997; Dent 2009). GTs aim to generate or capture cross-border flows of economic activity in order to benefit, for example, on factor price differentials (Tang and Thant, 1995). Since this article focuses on IM, which is the new regionalization attempt to build an economic, political and social partnership between Malaysia, Johor and Singapore a brief caveat on the Indonesia-Malaysia-Singapore growth triangle (IMS-GT), from which the IM project has been developed, is provided here. The IMS-GT came into being in 1989. It was promoted by Singapore Deputy Prime Minister Goh Chok Tong and it was a government-led initiative. The aim of the triangle was to benefit from economic complementarities that linked together the city state of Singapore, the state of Johor, and the Riau Islands (in Indonesia). However, since its inception, it was clear that economic integration was going to be directed into two channels, rather than three: Singapore with Johor, and Singapore with Riau (Tsao Yuan, 1995). Thus the foreseen triade cooperation did not occur. On one side, there are those who argued that the economic gap between the Riau Islands in Indonesia and the Johor state of Malaysia hindered the development of economic ties between the two states. Hence cooperation was not perceived as an activity that would promote further development in the two countries. Others argued that the leaders of the three states lacked real political will to develop and promote this kind of cooperation. However, this view is contradicted by some other studies led by Bridge and Weatherbee (Bridges, 1997; Weatherbee, 2015). Finally, there are those who suggest that the IMS-GT was principally promoted by Singapore political commitment for economic and security reasons (Dent 2009). Both Indonesia and Malaysia would provide Singapore with land and low-cost manual labour, resources that Singapore lacks (Development Bank of Singapore − DBS Asian Insights 2013). And this was the way through which the growth triangle was market by Singapore that suggested how Johor and Riau lacked technical and managerial capabilities and could only be a source of cheap labour and land (Bridges, 1997). Hence, Singapore aimed to play the main economic political and high-tech role within the IMS-GT. By analysing Singapore’s strategy of extraterritorialization, Phelps and Ho show that, despite relocating MNEs to overseas parks which were low-cost locations, and to low-cost investment enclaves, the Singapore government was very attentive to keep their headquarters in Singapore. By doing this, the industrial and technology parks have been a source of profits remitted to Singapore (Phelps 2007: 386). Thus, on one side Singapore provided the capital for developments in Indonesia and Malaysia, but on the other it was careful not to increase their strength, by retaining the headquarters of the MNEs, and to keep a hegemonic economic role in both bilateral relations (Nadalutti, 2015a). Nevertheless, as Barter (2006b) and Weatherbee point out, neither Indonesia nor Malaysia accepted a ‘boundaryless transnational melding with Singapore as the centerpiece’ (Weatherbee, 2015: 115). Thus, it can be said that the inability to create a ‘balance of power’ among these three actors, has led to the inability to develop the ‘triangle’ as such. Finally, while the previous Malaysian Prime Minister Mahathir and Singaporean Lee Kuan Yew were still burdened by personal and emotional feelings linked to Singapore separation from Malaysia in order to fully commit to and enhance cross-border cooperation, nowadays that the wounds of separation have partly healed, the new attempt to strengthen political, economic, and social linkages is linked to the IM project. The new leaders of the two countries seem to be more opened to a win-win cooperation formula, as will be better analysed in the next section. 4 The building of Iskandar-Malaysia Iskandar-Malaysia, which is organized around five flagships zones3, is one of the five economic corridors planned by the federal government of Malaysia under the Ninth Malaysia Plan and which was structured through the Comprehensive Development Plan (CDP). It is considered as one of the catalysts for Gross Domestic Product (GDP) growth through high-impact development within both the Government Transformation Programme and Economic Transformation Programme (ETP). Besides the IM, the other four Malaysian corridors are: the East Economic Region, the Northern Corridor Economic Region, Sabah Development Corridor and Sarawak Corridor of Renewable Energy. The idea behind developing economic corridors was to raise the standard of living and to attain balanced socio-economic development across regions and states. Accordingly, these corridors are promoted by the Malaysian government as growth zones that transcend state boundaries and should benefit people (Government of Malaysia, 2008: 67). As an interviewee stated to me ‘…we used to focus too much on the Kuala Lumpur and Klang Valley areas. That was in accordance with Dr Mahathir’s (Malaysia Prime Minister from 1981 to 2003) dream to compete with Singapore. He always had the dream to defeat the Chinese and the West so he wanted to build his own kingdom’ (interview with a politician, Johor-Bahru, March 2015). In other words, these mega-projects aimed to boost the nation-building and economic development process that was undergoing during PM Mahathir. Conversely, the goal pursued by developing these corridors was officially to reduce regional imbalances and to bring about equitable growth, investment, and employment opportunities to all Malaysian regions. It is interesting to note here, that the development of the state of Johor within the IMS-GT project was perceived not very well from other states within Malaysia. Indeed, these states become jealous of Johor’s economic development and interprovincial and interstate rivalries intensified during the development of this triangle (Bridge, 1997: 66). The corridors, instead, have been planned as instruments to create more cohesion as well as to facilitate public-private partnerships. They offer multi-year corporate tax exemptions, investment tax allowances, import duty and sales tax exemption for equipment used in company activities, more flexibility to recruit foreign workers, and lighter foreign exchange regulations (Leng and Mavroeidi, 2014). This article does not aim to analyse the economic, social, and environmental effects that the development of these growth zones have produced4. Instead, it focuses on what kind of governance emerges in this area due to CBC on-going activities and it scrutinizes the governmental (the federal state of Malaysia, the state of Johor, and the city-state of Singapore) and no-governmental ties that develop in building IM. Before proceeding to analyse the empirical case study, we will devote the next section to theoretically scrutinize regulatory regionalism and MLG in relation to CBC. 5 Regulatory regionalism and multi-level governance Regionalism and regionalization are generally used in order to explain political and social processes that occur at the national and supranational level. However, it is argued here that in order to fully understand these processes, how they interrelate and influence one another, how states are economically, politically and socially reconfigured by the interactions between different actors at different scales of governance we must consider also a third level, which is the sub-national one (here cross-border regions). Starting from Gamble (1996) analysis of regionalism, we understand regionalism as the conscious, deliberate, and purposive attempts made by national states to create formal mechanisms for dealing with common transnational issues. Regionalization instead refers to a more informal process that sees the active engagement of non-state actors that by interacting among them as well as with state actors shape a new form of governance. The main contribution that regionalist theories provide is that they aim to clarify the ways through which geographical areas (that are not exclusively nation-states) ‘are transformed from passive objects to active subjects capable of articulating the transnational interests of the emerging region’ (Hettne and Söderbaum, 2000: 461). And this is the starting point of our analysis as well. Indeed, by focusing on the IM region, we will try to better understand the formal and informal ways through which state, market and civil society actors relate together as ‘a set of interlocking but separate bodies’ (Hettne and Söderbaum, 2000) along several dimensions, economic as well as political and cultural. It has been broadly investigated to what extent nation-states have been transformed by supra-national activities (and vice-versa) and how the territorial space of states can be restructured (Chen, 2005; Jayasuriya, 2008). Evidence has been provided that the ways through which non-state economic and social actors mobilize, link to one another and to the state level, and participate in policy-making can contribute to redefining governance and territory (Scholte, 2005). However, whilst this analysis has mainly focused on the national and supranational level, we ask here: what is the role played by sub-national actors in the regionalization process? What kind of interlocking political, economic, and social relationships develop between different scales of governance and what are the implications for power and political outcomes? In order to address these questions, we argue that Jayasuriya’s and Hameiri’s regulatory regionalism contextualized within a multi-level governance (MLG) framework can be elucidatory. On the one hand MLG, conceived as ‘an arrangement for making binding decisions that engages a multiplicity of politically independent but otherwise interdependent actors – private and public – at different levels of territorial aggregation in more-or-less continuous negotiation/deliberation/implementation, and that does not assign exclusive policy competence or assert a stable hierarchy of political authority to any of these levels’ (Schmitter, 2004: 49) helps to better understand the linkages that tie/untie, develop and or/are hindered between state and non-state actors in CBRs. On the other hand regulatory regionalism is conceived as ‘the development of regulatory frameworks within the political and policy making institutions of “national governments”’(Jayasuriya, 2010: 103). Its politics corresponds to a system of territorial politics fought out and accommodated across the institutional space of the state (Hameiri and Jayasuriya, 2011) through which an individual or group aim ‘to affect, influence, or control people, phenomena, and relationships, by delimiting and asserting control over a geographic area’ (Sack, 1986: 19). As such, regulatory regionalism sheds light on the rescaling of governance and policy making. Moreover, it better explains the process that leads to cross-border region building. Jayasuriya and Hameiri, by focusing on the clashes that occur over the control of the state’s spatial organization between regional and state-centric governance regimes, try to understand how and to what extent these conflicts cause the rise of new forms of political (and economic) rule within the state. In other words, their core of analysis is the rescaling of governance and policy making that occurs within the state and/or alongside the established institutions of domestic rule (Hameiri and Jayasuriya, 2011). These authors are interested in understanding the transformation that states undergo due to the emergence and social, economic, and political involvement of non-state actors in areas that were original states’ prerogatives. We contribute to their analysis by focusing on the cross-border level that has been understudied. We think that regulatory regionalism can be fully understood and operationalized within the framework of MLG that examines the interactions of political and economic actors across multiple levels of government and unravel the ways through which in any scale system of territorial governance political, economic, and social institutions are entangled across space. Thus ‘strategies of political control are never limited to any single arena’ (Gibson, 2005: 106). Bache and Flinders show that while the multi-level character of governance captures the fact that governments which operate at different territorial levels become increasingly interdependent, governance stresses the increasing interconnectedness between governments and non-governmental actors at various territorial levels (2004: 3). Moreover, as Rosenau argues MLG ‘suggests the absence of clear-cut distinctions between domestic and foreign affairs’, private and public and ‘that local problems can become transnational in scope even as global challenges can have repercussions for neighbourhoods’ (Rosenau, 1997: 38). Hooghe and Marks, who first elaborated the multilevel approach to governance, further developed it in a two-fold typology, better known as ‘type 1’ and ‘type 2’ governance (Hooghe and Marks, 2003). While ‘type 1’ is characterized by a limited dispersion of authority at just a few levels, and jurisdiction is placed at a limited number of territorial levels, each of which has responsibility for a ‘bundle’ of functions, ‘type 2’ can be seen as a mix of polycentric authorities and is a ‘complex, fluid patchwork of innumerable, overlapping jurisdictions’ which work at numerous territorial levels (Hooghe and Marks, 2003: 236). In other words, power is shared and dispersed in a network of horizontal and vertical ties, linking the public, private and voluntary sectors. ‘Type 2’ straddles the private and public sectors and territorial boundaries: ‘such standard-setting jurisdictions are task-specific, arm’s length from traditional government, largely autonomous, and territorially overlapping’ (Hooghe and Marks, 2001: 10). In his instructive work, Phelps has already pointed out that regionalization strategies in sub-national regions have been highly influenced by processes of ‘extra-territorialization’ strategies through which states exert their powers extra-territorially and try to gain a grip on processes of international economic integration (Phelps, 2007: 372). However, Phelps mainly focuses on economic issues, and neglects to analyse the important political and social implications that this process can cause. Also, he does not explain the kind of governance that interlinks the actors engaged in the region building process. Finally, he does not address the question on how and to what extent extra-territorialization through sub-national region building can change states political and economic relations. These issues will be investigated in the following section. 6 The formal intergovernmental building of Iskandar Malaysia (IM) and its multi-level character In 2005, the federal government of Malaysia along with the state government of Johor, identified the need for a focused and developmental approach to the economic and geographic region of South Johor, the southern part of the federal state of Malaysia. Accordingly, IM, three times Singapore size of land, was promoted as a ‘future metropolitan region’ that would attract investors, and people to ‘live, work and play’ (DBS Asian Insights 2013; Fig.1). Figure 1 View largeDownload slide Figure 1 View largeDownload slide Since its launch, it was officially clear that Singapore would play a very important role in developing IM (as emerges from the reading of the CDP, 2006–2014 and as unanimously agreed by the interviewees contacted for this research). This could sound as a paradox, if we consider that IM responded to the previous Malaysian Prime Minister (2003–2009) Badawi’s dream to modernize Malaysia in order to compete with the rival Singapore (Rizzo and Glasson, 2012). Moreover, Singapore was initially very sceptical on investing in IM as emerges from former Singaporean Prime Minister Lee Kuan Yew who cautiously warned Singaporeans in helping to develop IM (Business News, 2013). This was also evident from my conversations with politicians, and civil servants contacted for this research who plainly stated that Singapore had initially a very negative perception of IM (interview in Johor Bahru, April 2015). Some of them were so biased to point out to me that there were rumours of money laundry going on in IM. Having said that, IM is perceived as a hinterland for Singapore, ‘given Singapore’s scarce land supply, rising land prices, increased property, and foreign labour restrictions’ (DBS Asian Insights 2013: 10), and population ageing increment. As stressed by the Development Bank of Singapore (DBS), Singapore’s participation through its MNEs in IM would not only encourage Singaporean companies’ involvement in this area, but also attract greater attention from global investors. It needs to be said here that the partnership that links Singapore to and with Malaysia was triggered by an historic swap land parcels between the Republic of Singapore and the federation of Malaysia over the Keretapi Tanah Melayu (KTM) railway land, as part of a broad agreement that saw Malaysia to give up its control of railway land that runs through Singapore (AsiaOne News, September 2010). In exchange, Singapore provided a Malaysia-Singapore joint venture six land parcels near the city-state’s central business district in the Marina Bay and Ophir-Rochor areas. We clearly witness here the transition from a ‘zero sum game’ formula, where one actor’s gain corresponds to another actor’s loss, to a ‘positive game’ within which states learn to compromise and thus to cooperate in trans-border zones (Nadalutti, 2015a). The discussion to foster cooperation between Singapore and Johor started at the governmental level between the Singaporean Prime Minister Lee Hsien Loong (from 2004) and Malaysian Prime Minister Abdullah Badawi (Prime Minister from 2003 to 2008) who agreed at a meeting in Langkawi in 2007 to ‘set up a Joint Ministerial Committee [JMC] as a platform for Singapore and Malaysia to explore ideas of collaboration in the Iskandar Development Region [IDR] project’ (Ministry of Foreign Affairs, Singapore, 11 September 2006). This was done in order to find ‘ways in which Singapore can help the region to succeed’ (Ministry of Foreign Affairs, 22 May 2007). As has clearly been shown by Leong, the establishment of the JMC has raised some concerns at the ministerial level in Malaysia since it was considered to be a threat to Malaysia’s sovereignty (Leong, 2007). Accordingly, the Malaysian Prime Minister promptly clarified that Singapore was not interested in meddling with Malaysia’s internal affairs since the setting-up of the JMC was not a ‘concession’ to Singapore. Clearly, both politics and economics intersect here and are going to affect and pace IM development and its internationalization. Put differently, the internationalization of IM is facilitated by the export of state capital and supported by state alliances (Tubilewicz and Jayasuriya, 2015: 200). Also the national Singaporean Temasek Holdings (Private) Limited and Malaysian Khazanah Nasional Berhad strategic investment fund started to officially collaborate through joint development projects on the basis of a 50:50 joint venture. In other words, Khazanah and Temasek would establish joint venture companies, to respectively develop land parcels in Singapore and undertake projects in IM. They also collaborated together for the wellness centre in Medini (DBS Asian Insights, 2013) which aim to address some of the issues related to Singapore’s ageing population. It is a fact that IM has become an option for retirement planning for Singapore’s elderly. Accordingly, healthcare is one promising area for IM to target as the Singapore consumer gets older. It is evident as ‘in any large-scale system of territorial governance political institutions are entangled across space. Strategies of political control are thus never limited to any single arena’ (Gibson, 2005: 106). And indeed, ‘state capital’ is per se political, in terms of control and ownership (Tubilewicz and Jayasuriya, 2015: 188). In terms of regionalization, this strategy would show that both Malaysia and Singapore pursue a kind of regional governance that aim to exercise some control in specific areas in each other country. Moreover, this is a very important political, economic, and diplomatic manoeuvre by Singapore that shows to what extent the city-state aims to develop its external economy to augment its limited domestic economy. Not least, it is a clear political and economic message from the Singaporean government to Singaporean companies to commit to the development of the Malaysian region. The Temasek Holdings Limited move into the region officially indicates that the Singaporean government had given its ‘blessing’ to invest in the zone. On the ground, this is evident if we consider the Singaporean Economic Development Board (EDB) activities. The EDB is discussing with MNEs to facilitate ‘the twinning of manufacturing activities between Singapore and Iskandar-Malaysia’ (The Straits Times, April 2014). Hence, on the one hand, Malaysia could benefit from Singapore’s comprehensive network of bilateral free trade agreements (FTAs). On the other hand, while MNCs will be able to locate their low-end production to IM, they have their critical processes of headquarters functions based in Singapore so as to benefit from the FTAs. Singaporean Prime Minister Lee Hsien Loong, in an official speech at the Malay-Muslim Business Conference, stated that: there are opportunities in IM for companies to go. It is not so far, it is not so unfamiliar. You can take advantage of lower costs there and of more space there, more land there and at the same time stay close to Singapore. I encourage companies to look at these opportunities seriously … We will also help SMEs [small and medium-sized enterprises] to go overseas, and to fly Singapore’s flag and do well (7 May 2014; emphasis has been added).Already several Singaporean companies such as private education providers (i.e. the Management Development Institute of Singapore, property developer CapitaLand and electronics manufacturer Nestronics) have started establishing their presence in IM (the IRDA 2013). According to the IRDA, Singapore is the first among the ten top investors in IM, followed by Spain, Japan and the USA (MIDA Statistics as at June 2013, the IRDA). Moreover, from 2006 when IM was established, Singaporean investment has doubled. Singapore’s main investment is in technology parks (i.e. Nusajaya, Medini), property development, education, energy, and transportation projects (the IRDA, 2013). In brief, this analysis has shown that cross-border investments from Singaporean and Malaysian economic actors are occurring in IM. These investments overcome national political and economic boundaries in order to link to transnational agencies and authorities. This clearly emerges if we focus on the educational sector and the investments (and political compromises) that are financing the development of EduCity, which is the education hub in the Iskandar Puteri IM zone flag B (previously known as Nusajaya). 7 Educity: what kind of MLG does emerge? The education sector is highly instructive in order to show what kind of regulatory regionalism emerges on the ground, how and what different governmental levels interact, and to what extent governance levels are regulated. Besides, it also shows that rivalries and tensions still characterize at times Malaysia and Singapore relations. Educity is a political idea (interview with TD, March 2015, Johor-Bahru) which is financed by the Iskandar Investment Berhad (IIB) that was incorporated on 3 November 2006. Its shareholders are Khazanah Nasional Berhad, the Employees Provident Fund (a national social security organization which operates through a provident fund scheme in Malaysia) and Kumpulan Prasarana Rakyat Johor Sdn Bhd (a Johor state investment arm). Overseeing the entire IM project is the Iskandar Regional Development Authority (IRDA), co-chaired by the Prime Minister of Malaysia and the Chief Minister of Johor. Clearly the federal Malaysia level aims to go ‘global’ by developing Educity in IM . A kind of MLG 2 can be singled out here. As was clearly explained to me by a high representative of the Management Team of the IIB: ‘we have relations with the federal level, as well as with representatives of the state of Johor. Approvals do not come from the state level, but from the federal one. The state has authority in matters that concern the public sector, not the private one that is instead prerogative of the federal level. Nevertheless, in our meetings we have both levels, as well as representatives of the immigration department, and people from the Education Malaysia Global services … in other words we have what I can call a landscape of authorities that have specific responsibilities’ (interview in Johor-Bahru, April 2015). Additionally, the IIB directly deals with foreign universities, such as the University of Reading Malaysia, Newcastle University, University of Southampton, Raffles University Iskandar Malaysia ect. Therefore, it clearly emerges that Educity is built by the synergic interaction between both private and public actors that interrelate at different governmental level. Within this framework, although Singapore initially had a very negative perception of IM, it then invested in Educity and opened two schools, Raffles University and the Singapore Management Development Institute. However, it is not easy and politically neutral to introduce foreign institutions in Malaysia. All my interviewees agreed by saying that there are still strong mental barriers in introducing education systems that may differ from the Malaysian one. Moreover, there is the need to make a clear distinction between private and public education institutions. Indeed, by talking to a representative of a foreign university in IM, I was told that ‘while ethnic Malays access more easily public universities than ethnic Chinese or Indian groups, these last ones usually opt for private universities. And our fees are not higher than those institutions that are already in place. Therefore, when families decide to send their children to our institutions, they know the amount of money they are going to pay. And anyway, it is surely cheaper than sending their children oversea. We do expect to have a bigger proportion of Chinese and Indian ethnic students rather ethnic Malay ones because that is the way public education is set up here’ (interview in Johor-Bahru, March 2015). Here the interviewee refers to the fact that generally the federal state provides specific scholarships to ethnic Malays in order to access public universities. It is interesting to point out that these foreign universities, which are aware of the fact that they are going to recruit more ethnic Chinese or other ethnic groups but Malay students, might exacerbate ethnic differences and therefore have an impact on the socio-cultural asset of the area. Another interviewee suggested that the rivalries that can emerge from this scenario can be instead beneficial for further developing Malaysia. Indeed, it is argued that the federal government, by seeing that those students who graduate from foreigner institutions can be more competitive within the job market, can decide to change and thus improve their curricula. And hence to become more competitive (interview in Johor-Bahru, April 2015). It is not the aim of this article, to assess whether this vision is correct. It is however, interesting to point out, that cross-border areas are surely laboratories where economic, political and cultural issues intersect with one another at several governance levels. As put by one of my interviewees: ‘for some time now, the (Malaysian) Prime Minister has been talking about Malaysia being a kind of landing place for a lot of western countries who want to invest … and IM is an interesting place where to invest. Moreover, there are many Singaporeans who moved to Nusajaya. They live closed to English colleges and schools just because they want to send their children in those schools. Thus these Singaporeans work in Singapore but have a house in Malaysia, and they commute daily’ (interview in Johor-Bahru, March 2015). In line with Tubilewicz and Jayasuriya (2015) it would appear that the internationalization of IM through the investment flow from outside, would lead to an internationalization of Malaysia itself. The education system seems to be a tool used by the government in order to internationalize. Nevertheless, this analysis has shown that there are still social and political contradictions that need to be addressed. 8 The multi-governmental scalar nature of Iskandar-Malaysia A step forward in formalizing Singapore and Iskandar-Malaysia relationship is represented by the setting up of the Iskandar Regional Development Authority (IRDA). The IRDA is a federal statutory body established through the Iskandar Regional Development Authority Act 2007, which came into force on 17 February 2007 (IRDA, 2007). The IRDA was conceived to be the sole decision-making body on all issues pertaining to both domestic and foreign investments flowing into the region. In other words, ‘be they local or foreign direct investments from all sources including Singapore, it is the IRDA which will have jurisdiction over issues pertaining to investments’ (Datuk Abdul Ghani Othman, 17 May 2007). Although official documentation is ambiguous on clearly delineating the role of the IRDA in the IM development, the interviews carried out for this research point out how the IRDA is a mere ‘advisory’ body. This means that the IRDA does not have any binding authority. It is interesting here to focus on its internal organization in order to better grasp its governance (for IRDA organization see: http://www.IRDA.com.my/organizational-structure.htm). The Johor Chief Minister, is the IRDA co-Chairman together with Malaysia Prime Minister. Moreover within the Advisory Council (AC), there is the Mayor of Johor-Bahru. According to official documentation, this set-up has been put in place in order to facilitate closer cooperation between the federal, the state and the local government level. Our analysis contradicts this official image. Indeed, evidence shows that competition between actors and interference among different governmental levels characterize IM building. In explaining the IRDA’s role within IM, an IRDA’s representative of the Economic and Investment sector stated: In the economic planning unit, we have people from the state, who second us (the federal government employees) and their salary are under our pay role. Their role is to facilitate the state engagement in the development of Iskandar-Malaysia. So we have a state commissioner together with a federal commissioner, and special officers. Most of the people are based in Johor-Bahru… We do not have the power to decide. We facilitate. The federal government looks at us to take a leading role in many areas. For instance, there was the project called BLUE, and it was meant to be a catalytic dataset hub. So the federal government said that it would channel money through the IRDA and not through the state. This was not liked by the state level and sometimes things can become sensitive. Yes, at the beginning there were challenges between the IRDA and the state level. Now, the state decides.This interviewee further clarified to me: We adopt a persuasive strategy because the final decision goes to the local council and the Johor state. Sometimes they have their own plans, and sometimes they have their hands tight because there is someone bigger behind them, so it is not a forward straight engagement5… (interview in Johor-Bahru, April 2015).This interview provides interesting insights that are supported also by the other interviewees contacted for this research. First, it is explicitly stated that the federal governmental level (the one he/she represents) has to accept the final decision that comes from either the state and/or even local level in land development issues. For clarity, it is worth to mention here that while state governments had a key official recognized role in previous Malaysia Plans, the Tenth Malaysia Plan (that focuses on the development of regional economic corridors) does not mention them at all. It has been suggested that this responds to the federal state of Malaysia tactic to further centralized authority (Loh, 2010). Having said that, state government agencies have authority on land use, building construction, and safety, according to Malaysian federal state law. Therefore, it comes without saying that the development of this zone through planning, facilitation and promotion encroaches on tasks that have been traditionally undertaken by state governments. Moreover, although the federal government level attempted to take some prerogatives and competencies that belonged to the state level, it had to re-recognize these prerogatives as ‘state prerogatives’. As a Malaysian interviewee who works for the Malaysian Investment Development Authority (MIDA) based in Singapore has put it: We have the federal and the state level in Malaysia. All states in Malaysia have some power, and when we talk about land, well that belongs to the state. So if the state does not approve a specific activity within its territory, no one can do anything. Even though IM is a governmental project, you need approvals from the state of Johor. When it comes to projects to be developed in IM, the division in Johor-Bahru will give the approval. We have our representative in Johor that closely work with the state government. We coordinate meetings between investors and the state department. So when we say that we want to facilitate investors who want to invest in IM we work very closely with the state, we discuss with state agents, we bring investors to them (interview in Singapore, May 2015).It is clear that the IM regional project is located within the institutional spaces of the federal state of Malaysia. Thus, it is an unproductive debate the one that focuses on the relative importance of regional institutions vis-à-vis national institutions. The regional governance that emerges is layered on previous national territorial fixes that lies on the tensions between the national and regional territorial fixes. Additionally, it can be suggested that the implementation of these corridors can have a counter-effect in terms of governance that was not foreseen by the federal government of Malaysia. It consists of an additional ‘empowerment’ of the sub-regional national level that become more aware of its role and play an important role in ‘coordinating’ cooperation between the federal level and the state of Singapore (which is presently dealing mainly with the federal level rather than the state level for matters concerning the development of Iskandar-Malaysia). Thus, a kind of multi-scalar apparatus emerges from the analysis, where both the state and local levels engage directly with realms beyond their federal level. Finally, the above interviewee points out also the important network of relationships that has developed between private and public agents in relation to the development of IM, and between private actors and MNEs. Thus: MIDA has this collaborative effort with the EDB. We are the Malaysian government federal investment agency, and the EDB is the investment government arm of Singapore. Some companies go to the EDB that can propose to them to look and to invest in IM. The EDB sends companies to us […] hence we can advise them what kind of industry Malaysia wants to promote (interview in Johor-Bahru, May 2015).A triangular relationship that interlinks different actors which belong to different administrative and governmental levels emerges here. It clearly corresponds to MLG 2. Private-public partnership and networks become very important and play a vital role in developing cross-border relationships. Therefore, although it can be said that there is still a kind of top-down coordination, horizontal networks also develop. States do not play the role of prime movers. They become rather partners, facilitators in public-private consortia and growth coalitions (Jessop, 2002). 9 The role of ‘silent’ actors in the building of the Iskandar-Malaysia region The analysis of the development of IM would be incomplete without mentioning the role played by the Sultan of Johor. It is important to know that Malaysia has nine Malay rulers (for simplicity we will generally refer to them here as ‘sultans’ although there are differences among them) who are the constitutional heads of their respective states and who are responsible on issues linked to religion and Malay custom, land management, natural resources, and local government (Fong, 2008). Among them, the Sultan of Johor, Ibrahim Ismail, plays certainly a unique role since he also influences public life and policy matters (from religion to inter-ethnic relations and from land management to education). Additionally, Johor is the only state with a local army, the Royal Johor Military Force. Not least, the Sultan of Johor has often referred to the uniqueness of the ‘Bangsa Johor’ that characterises the Johor state and which refers to the concept of identity based on territory and local culture rather than on ethnicity as is in the national Bumiputra policy which privileges indigenous Malay rights. According to the sultan, ‘Bangsa Johor means everybody is responsible for developing Johor while respecting everyone else’s culture and religion because we want everybody to live in peace and prosperity. Concord is a blessing’ (Malaymail Online, 30 August, Kuala Lumpur). Finally, although it is generally pointed out by experts in history and constitutional law as improbable, sultan Ibrahim Ismail has also provocatively flirted with secession from Malaysia (Strait Times, 16 October 2015). From the above, it clearly emerges that although the Malaysian law states that he should be above politics and play just a representative and ‘symbolic’ role in IM, he is far more powerful. Besides, he also actively deals with business as well as state affairs (Kinibiz, 10 June 2014). All the interviewees who took part in this research were very reticent to talk about his role in the IM building process. It is very relevant to highlight here that the name of the Sultan of Johor is not made even once within the Comprehensive Development Plan Iskandar-Malaysia 2006–2014. Is it because this scale has not been initially considered in the building process of this area? This would be most surprising. Indeed, the Sultan not only owns vast portion of land in the state of Johor6, but also wield real power as the official guardian of Islam and can withhold consent for the dissolution of state assemblies and appointments of chief ministers. It is hypothesized here that the fact that he is not mentioned in the CDP is due to the fact that the IRDA (i.e. the government level) did not want to officially recognize his ‘power’ and ‘authority’ in a ‘federal’ project. It is also worth to mention that the name ‘Iskandar’ ‘was given to IM in order to show appropriate respect to the Sultan’ (interview in Johor-Bahru, March 2015). While initially Iskandar-Malaysia was named South Johor Economic Region (SJER), it was then renamed ‘as a sign of tribute to the previous sultan. The royal family, the royal mechanism is very strong in Johor, and its involvement in the state as well’ (interview in Johor-Bahru, April 2015). Indeed, as Leng and Mavroeidi highlight in their analysis: the Sultan is a notable private investor who owns land in Johor and Singapore, has oversight over JCorp (a key state-controlled investment company), and runs a vast personal business spanning property, shipping, oil and gas and power. The real estate boom in the state has certainly benefited him. In fact, the land purchased by Guangzhou R&F (major Chinese developers) had belonged to the Sultan, and there has been much surprise over the sale of what was previously state-owned land. The Sultan thus has a dual role as state leader and prominent investor (Leng and Mavroeidi 2014: 6). In 2014, there was an attempt by the sultan to acquire prerogatives through the state chief minister in the Johor legislature. He aimed at modify the bill in order to assume control over vast amounts of lucrative state land through the Johor Property and Housing Commission. The measure would have given the sultan the power to appoint board members and investigate the commission’s books, among other functions. Finally, the bill was modified to remove the sultan’s power to make appointments and vest it in the chief minister due to the former Malaysian Prime Minister Mahathir’s intervention (anonymous, The Asia Sentinel, 14 June 2014). Indeed, it has been repeatedly questioned whether a ‘sitting ruler’ should be so conspicuously involved not only in the business world, but also in political and governance issues (A. Raghu and S. Grudgings, Reuters, 6 October 2014). It has even been suggested that he owned more clout than the Menteri Besar, who is the head of the state government. Both in newspaper articles, blogs and interviews here emerged several times the allusion that the sultan is so powerful that ‘the state government, even the chief minister does not dare to say anything’ (interview with a politician in Kuala Lumpur, March 2015). It is apparent that the sultan’s interests and decisions influence the kind of governance that emerges and leads the building of this zone. In terms of the sultan’s network with businesses, he has strong relationships with key figures in the economic business sectors such as Ekovest and Iskandar Waterfront Holdings (IWH) who made business with Country Garden (which is a project of China developers) for the development of Danga Bay that is part of the IM development plan. The present development of Danga Bay by Chinese investors was not conceived in the CDP. As an interviewee argued: We (the federal government level) did not expect the Chinese investors to come here so strongly. The sultan took them in, and the sultan was not initially considered in the development of Iskandar-Malaysia. And when we initially planned we engaged with the state and the municipal level. But then things changed along the road and we had to adjust. Investors are coming and pumping good money (interview in Johor-Bahru, April 2015).Here it is empirically voiced out the very essence of the politics of regulatory regionalism that pertains to the accommodation, tensions, and contradictions between different governmental and non-governmental scales. However, we also suggest that a very important element that should be considered within regulatory regionalism is the personal and individualistic interest that makes various actors to engage in and shape regional governance. Finally, it is evident that the important role the sultan plays is also due to the deal and accord ‘silently’ achieved between different governmental levels that compromise and bargain for a final common profit. 10 Conclusion This article aimed to contribute to the literature on regionalism and regionalization both theoretically and empirically and to better understand the governance that emerges from the region-building process at the micro-level. In order to do that it analysed the building of IM. This is the first study on IM that scrutinizes the governance that emerges on the ground. So far, academic literature has mainly analysed IM from a physical planning perspective (Rizzo and Glasson, 2012), transportation links (Barter, 2006a-b), and waste management (T. S. Ting et al, 2014). Thus we provided a fresh overview of this geographical area and went beyond a theoretical/conceptual discussion of regionalism in Asian contexts in order to look at a specific case study at the sub-regional border level. The analysis has shown that the economic, political, and social boundaries of IM shift and do not necessarily overlap. Hence this region is not unitary and/or homogeneous. It is instead constructed, deconstructed and reconstructed from within and outside. Thus new forms of interactions between contending actors and regimes over the relationship between territory and governance develop and have the potentials to transform states’ governance. Together they shape and modify the regional scale of governance and transcend states territorial boundaries (Hameiri and Jayasuriya, 2011). Therefore, it can be argued that in line with MLG2, the development of Iskandar Malaysia results from both planned government policies as well as entrepreneurial companies to which governments are linked and respond to. Indeed, it has been shown that in order to start up a regionalization process, Singapore and Malaysia are called upon to compromise politically and economically first at the governmental level. However, as shown by Tubilewicz and Jayasuriya (2015) in their analysis of the Greater Mekong Subregion (GMS), the subnational state internationalizes thanks to the alliance that develop between the provincial state and capital. Put differently, the process of capital and state internationalization is itself rescaled at both the national and subnational levels. For instance, we can see these socio-political forces at play by focusing on the subnational transborder relational character that starts linking Malaysia, Singapore, and Johor, and which leads to internationalize IM. Besides, the importance attributed to MNEs and investment processes within regionalization shows how and to what extent private and public sectors are intrinsically intertwined, and influence one another in the sub-national region building process. Additionally, regionalization is perceived as a way to ‘go global’ through regionalism based on the development of synergies between Malaysia and Singapore. It is apparent the linkages and synergies developed between state and non-state actors are crucial in the region-building process. The analysis of this relation and the political struggle between various social forces in the region-building process define what the sub-national region is going to be, how it should be politically organized and how is going to fit in the global order. Finally, it is interesting to mention the ‘informal’ way through which IM is built. Indeed, what is emerging from the analysis is that rules, in order to have a regulatory effect, do not necessarily need to be written or formally spelled out in treaties, constitutions, laws, and agreements. Instead, ‘informal’-‘invisible’ rules that are rooted in customs, traditions, and conventions can be more powerful and influential than official codes. And IM is a clear example of that. Particularly interesting is the role played by the Sultan of Johor, who ‘although does not have a direct role per se, is the ruler of the state’. His overwhelming powerful role clearly emerges from this interviewee that stresses ‘He, being the ruler says what he wants, and we, being the subjects, listen to him. So there is not much engagement you can have with him. He is the royalty. He has full control over the land of the state’ (interview in Johor-Bahru, March 2015). Interviews A.G. ADB, Senior advisory, October 2012. B.F., Delegation of the European Union in Singapore, Singapore, May 2015. C.A. GVC, Gallant Venture, Corporate Secretary, May 2013. C.M.A. SPM, Corporate Relations Sembcorp Parks Management, Senior Manager, 2013. G.A. ADB, coordinator of the ‘Regional Cooperation and Operations Coordination Division’, Southeast Asia Department, Asian Development Bank, Manila, February 2013. G.K. RDIPS, Assistant Head, Resource Development International Policy Singapore Economic Development Board, June 2013. G.M.L, the IRDA, JB, April 2015. I.W.A., the IRDA, JB, March 2015. J.C. and J.C. BCA (Building and Construction Authority) representative, Singapore, May 2015. J.J.O., Educity, JB, April 2015. K.C. EWECS, President of East West Engineering Consultants, Singapore, January 2014. K.C. STB, Senior Officer, Cultural Precincts and Tourism Concept Development Singapore Tourism Board, June 2013. K.K., Kinibiz, Kuala Lumpur, March 2015. N.B.R., University of Malaya, Kuala Lumpur, March 2015. R.J. ANU, Australian National University, 2012. R.Q., European External Action Service, Singapore, May 2015. S.E. ILAL, International Lawyers Appleton Luff, Singapore, January 2014. S.Q.W., Senai State Assemblyperson, Kuala Lumpur, March 2015. S.S.I., Malaysian Investment Development Authority, Singapore, May 2015. S.S.T. IDSS, Deputy Director of the Institute of Defense and Strategic Studies at Nanyang Technological University in Singapore, September 2012. T.D., University of Reading Malaysia Campus at EduCity Iskandar, JB, March 2015. 1 Shenzhen is a special economic zone in Southern China. Shenzhen has been taken as a model for the development of Iskandar Malaysia since from being a small, peripheral town of 30 000 inhabitants in 1978 (55) it has today become the major city in the south of Southern China’s Guangdong Province, with a population of 10 547 400 inhabitants (55). 2 Singapore depends for water supply from Johor in Malaysia. This is an issue that creates high tensions between the two countries, since it is often used whenever strains develop in bilateral relations (55). 3 (a) Johor Bahru (JB) City Centre, the core of the SJER conurbation, to develop as the financial centre for the region; (b) Nusajaya, a green zone to the west of JB, to be converted to residential, light-industry, and tertiary uses; (c) Western Gate and Development, to strengthen the rapidly growing area around the Port of Tanjung Pelepas (PTP); (d) Eastern Gate Development, to strengthen and redevelop the brownfield area around Pasir Gudang Port and its heavy industries; and (e) Senai–Skudai, two cities located to the north of JB, to sustain the need of the region for quaternary infrastructure (universities, airports etc.). 4 However, several studies pointed out that the development which is occurring in these zones is negatively affecting the environment as well as people’s lifes (Sovacool and Bulan, 2012). My interviewees as well generally agreed that IM, which is labelled as a low carbon city, in reality is far from being one. Emblematically, I was told: ‘The developers of IM themselves are hiring those consultants who will write reports on the development of the area. In other countries it is different. The consultancy is external. So what would you expect? The consultants must write favourable reports, regardless the results/effects on the ground’ (interview with a politician, Johor, March 2015). 5 Here the interviewee refers to the inference of the Sultan of Johor, who plays an important role in the building of IM. 6 Since State’s and Sultan’s land reclamation and land ownership are very sensitive topic at the moment both in Malaysia and Singapore it is not possible to find official data that provide information about it. When questioned on these issues, all my interviews preferred not to respond, were very vague or explicitly told me that ‘this is a question not to be asked’. 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Google Scholar CrossRef Search ADS   Yang C. ( 2006) The geopolitics of cross-boundary governance in the greater pearl river delta, China: a case study of the proposed Hong Kong-Zhuhai-Macao bridge, Political Geography , 25, 817– 835. Google Scholar CrossRef Search ADS   Young O. R. ( 1997) Global governance: towards a theory of decentralized world order, in Young O. D. (ed.), Global Governance. Drawing Insights From the Environmental Experience , Cambridge, MA and London: MIT Press. Weatherbee D. E. ( 1995) The foreign policy dimensions of subregional economic zones, Contemporary Southeast Asia, XVI  ( 4), 421– 432. Weatherbee D. E. ( 2015) ( third edition) International Relations in Southeast Asia. The struggle for autonomy , London: UK: Rowman and Littlefield. © The author 2017. Published by Oxford University Press in association with the Japan Association of International Relations; all rights reserved. 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To what extent does governance change because of sub-regional cooperation? The analysis of Iskandar-Malaysia

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Abstract

The research puzzle of this article is to understand and explain the process of Iskandar-Malaysia region building. By doing that the article contributes to the debate around how regions emerge and to what extent states have to adapt to, cooperate with, and compete with them. Within the framework of regulatory regionalism and multi-level governance, the paper aims to address one main question: how and to what extent interactions between state and non-state actors that contribute to produce new (cross-border) regional forms may politically and economically reconfigure states' relations. This is the first study on Iskandar-Malaysia that focuses attention on the sub-national border governance that is shaped by the interaction between Singaporean, Malaysian and Johorian private and public actors and which can lead to an internal transformation of the states involved in the process. 1 Introduction This article aims to contribute to cross-border regionalism theories by clarifying and explaining the governance dynamics behind the process of cross-border region building in Iskandar-Malaysia (IM), in Southeast Asia. By scrutinizing the relations that develop among state and non-state actors at the sub-regional level (here Iskandar-Malaysia/IM), we will try to shed some light on the ways governmental and non-governmental actors have changed themselves due to this collaboration, power compromises, and bargaining in their institutional make-up and outlooks. Moreover, the emphasis on cross-border regions (CBRs) and cross-border cooperation (CBC) will also clarify our understanding of how States work and ‘how borders can be exploited to both mobilize and fix territory, security, identities, emotions and memories, and various forms of national socialization’ (Paasi 2012: 2307). Moreover, following Bridges’ approach to growth triangles (GTs), we aim to contribute to the ongoing literature by arguing that CBC in cross-border areas cannot be understood just as economic phenomena, but also as political and social ones (1997). By answering the question ‘how and to what extent interactions between state and non-state actors that contribute to produce new (cross-border) regional forms may politically and economically reconfigure States’ relations?’, we argue that the understanding of CBRs building and the investigation of how borders and bordering practices occur can shed light on political rationalities and State-based ideologies embedded in these practices. The main assumption of this work is that borders are not mere physical formal markers of territoriality, but also dynamic agents that undergo an everyday construction among communities and groups, through ideology, discourses, political institutions, attitudes, and agency (Scott, 2015). Moreover, borders are linked to security issues which cover not just the defence of territory but also the maintenance of core community values and related institutions (Bridges, 1995). As such, they can acquire a governance purpose that leads to the establishment and operation of social institutions. Moreover, studies have shown that a new kind of multi-level cross-border governance can emerge in CBRs (Nadalutti, 2015a) which is characterized by ‘a set of rules, decisions-making procedures, and programmatic activities that serve to define social practices and to guide the interactions of those participating in these practices’ (North, 1990, paraphrased in Young, 1997: 4). It is important to stress here that our conceptualization and analysis of CBRs does not suggest that States are disappearing and are losing their territoriality. We highlight instead that so far cross-border regionalism literature analysis has been premised on a methodological nationalism, and an analytical dualism between cross-border regional institutions and the nation state (Jayasuriya, 2009). Hence, we contribute to better understand cross-border regionalism that remains understudied in the politics and international relations disciplines, despite the fact that its importance has been recognized by political and economic geographers (Breslin, 2002; Tubilewicz and Jayasuriya, 2015). It is fruitful to clarify how the national and cross-border national levels intersect since they can generate new political and economic functions of integration and interaction across States borders. For instance, in our analysis it will be shown how and to what extent ‘national’ bodies (such as a national federal strategic investment fund as the Khazanah Nasional Berhad, the strategic investment fund of the Government of Malaysia) are enmeshed in a cross-border regional wide system of regulatory cooperation (i.e. economic and social development of Iskandar-Malaysia) and contribute to the process of CBR building. Put differently, practice of ‘national’ governance becomes incorporated into ‘cross-border’ policy making institutions. In order to conduct this analysis, we will rely on regionalism and regionalisation theories (Gamble, 1996). Hence, we will synergically combine multi-level governance (MLG) with and to regulatory regionalism, in order to better clarify both the governance process that emerges because of CBC activities in CBRs as well as the relationship that develops among the actors involved in the ‘region building-process’. Iskandar-Malaysia (IM), which has also been labelled as the ‘Shenzhen’ of Southeast Asia1, in the state of Johor, within the Federal State of Malaysia, on the geographical border with Singapore is the case study investigated in this article. This zone has been chosen for its cross-border position and its social, historical and political features. Although the state of Johor is geographically closed to Singapore, the relationship between the federal state of Malaysia, the state of Johor and the city state of Singapore has been at time very tensed (as will be better analysed in the next section) and characterized by rivalries, jealousy, and competition (Bridges, 1997). Only recently this relationship started to warm up again thanks to the development of the IM region (interview with an IRDA representative, Johor Bahru-JB, 22.04.2015). It is important to note that the IM project is highly political (as will be better clarified in the following section). Unanimously, all the interviewees selected for this investigation, agreed on the importance to cooperate in order to make IM successful. On one side ‘Singapore is really working in order to make IM a success. With a mix of people and services in IM, the animosity of having Singaporeans here is clearly outside the region. The animosity generally develops at the governmental level’ (interview with an IRDA representative, March 2015). On the other side, there is the awareness that the ‘IM can be a success only if develops together with Singapore’ (interview with a Johorian politician, Johor, March 2015). The time span of this research covers the period from 2006 when the IM region was incepted, to 2015 when the author spent four months by carrying out fieldwork research between Singapore, Malaysia, and Johor. A multidimensional qualitative approach is adopted for collecting, interpreting, and evaluating data such as official documents, state discourses, newspaper articles, blogs, and discussion forums. The present article is based on an extensive literature, consultation of primary sources, and 21 semi-structured interviews with Asian Development Bank (ADB) representatives, firm representatives, politicians, public servants, academics, and lawyers between 2012 and 2015 in Singapore, Malaysia, and Johor. Our analysis will proceed as follows. First, an historical overview that contextualizes the past and current policy settings between Singapore, Johor, and Malaysia will be provided in order to better understand how relations developed, have been built and evolved due to CBC in the border between Singapore, Johor, and Malaysia. Then, MLG and regulatory regionalism will be operationalized to the cross-border region building process. It will follow a section that focuses on the Iskandar-Malaysia building process where we will address the question of how and to what extent CBC re-configures state entities. 2 An historical brief overview Singapore shares a common historical past both with Malaysia and the state of Johor. Their relationship has been characterized by complementarity and competitiveness, and has not been always good in the past (Weatherbee, 1995; Nathan, 2002). After having become a self-governing state within the Commonwealth in 1959, the Singapore government through its People’s Action Party (PAP) proposed to merge with Malaysia, Sabah, and Sarawak to form the new Federation of Malaysia in 1963. This merging with Malaysia did not succeed, due to the inability to resolve ethnic suspicions: Singapore is a small country of 718.3 km2 and five million inhabitants whose ethnic composition is three-quarters Chinese, making it the only country in Southeast Asia with an ethnic Chinese majority. Conversely, the state of Malaysia is composed by a majority of Malays. The Federation of Malaya was also unstable from the very beginning, due to distrust and ideological differences between Singaporean and Malaysian’s leaders (Nathan, 2002). Among various disputed issues that led to separation, the most important one was related to Art. 153 of the Constitution of Malaysia that guaranteed special privilege to Malays vis-à-vis other ethnic groups. Moreover, Malays could also take advantage of financial and economic benefits that were guaranteed to them by Malaysia (Barter, 2006a). Additionally, the political party in power in the Federal Government, the United Malays National Organization (UMNO), was hostile to the Singapore-based PAP which was campaigning in Kuala Lumpur during the Malaysia’s general election in 1964. Riots led by Malays’ politicians followed Singapore’s legislative elections in 1963. It was very difficult to harmonize the contrasting approach to the politics of ethnicity between the ethnic Chinese majority in Singapore and ethnic Malay majority in Malaysia. Hence, this instability led Malaysian Prime Minister Tunku Abdul Rahman to expel Singapore from the Federation, leading to the independence of Singapore on 9 August 1965 (Case, 2002). It is therefore very important to stress the fact that Singapore and Malaysia were practically borderless until the 1960s. Singapore, due to its size, population pressure, and scarcity of resources2 had the immediate necessity to work in order to develop strong economic and political bilateral relations with its neighbour countries. Thus, the idea of ‘growth zones’ that developed from the UN developmental blueprint for ASEAN in 1972 that pointed out the advantages boosted from crossing national frontiers in ASEAN, was welcomed by Singapore as will be better explored in the next section (Weatherbee, 2015). 3 Subnational transborder regionalism in Southeast Asia Since the 1980s a new kind of ‘cross-border regionalism’ that has taken the form of ‘growth triangles’, characterized by a process of growing regional interconnectedness that occurs below the national level and cuts across national borders, has started developing in Southeast-Asia (Yang, 2006). These cross-border zones have been perceived by ASEAN and the Asian Development Bank (ADB) as a way to promote transnational integration of economic factors by providing infrastructure development, legal frameworks, and incentives to encourage the flow of private and quasi-private investment for zonal development (Bridges, 1995; Weatherbee, 2015). Growth triangles can be conceived as sub-national zones of economic or development cooperation between contiguous border areas under different sovereignties. They link together across their borders to maximize their varied factor endowments and exploit their comparative advantages (Bridges, 1997; Dent 2009). GTs aim to generate or capture cross-border flows of economic activity in order to benefit, for example, on factor price differentials (Tang and Thant, 1995). Since this article focuses on IM, which is the new regionalization attempt to build an economic, political and social partnership between Malaysia, Johor and Singapore a brief caveat on the Indonesia-Malaysia-Singapore growth triangle (IMS-GT), from which the IM project has been developed, is provided here. The IMS-GT came into being in 1989. It was promoted by Singapore Deputy Prime Minister Goh Chok Tong and it was a government-led initiative. The aim of the triangle was to benefit from economic complementarities that linked together the city state of Singapore, the state of Johor, and the Riau Islands (in Indonesia). However, since its inception, it was clear that economic integration was going to be directed into two channels, rather than three: Singapore with Johor, and Singapore with Riau (Tsao Yuan, 1995). Thus the foreseen triade cooperation did not occur. On one side, there are those who argued that the economic gap between the Riau Islands in Indonesia and the Johor state of Malaysia hindered the development of economic ties between the two states. Hence cooperation was not perceived as an activity that would promote further development in the two countries. Others argued that the leaders of the three states lacked real political will to develop and promote this kind of cooperation. However, this view is contradicted by some other studies led by Bridge and Weatherbee (Bridges, 1997; Weatherbee, 2015). Finally, there are those who suggest that the IMS-GT was principally promoted by Singapore political commitment for economic and security reasons (Dent 2009). Both Indonesia and Malaysia would provide Singapore with land and low-cost manual labour, resources that Singapore lacks (Development Bank of Singapore − DBS Asian Insights 2013). And this was the way through which the growth triangle was market by Singapore that suggested how Johor and Riau lacked technical and managerial capabilities and could only be a source of cheap labour and land (Bridges, 1997). Hence, Singapore aimed to play the main economic political and high-tech role within the IMS-GT. By analysing Singapore’s strategy of extraterritorialization, Phelps and Ho show that, despite relocating MNEs to overseas parks which were low-cost locations, and to low-cost investment enclaves, the Singapore government was very attentive to keep their headquarters in Singapore. By doing this, the industrial and technology parks have been a source of profits remitted to Singapore (Phelps 2007: 386). Thus, on one side Singapore provided the capital for developments in Indonesia and Malaysia, but on the other it was careful not to increase their strength, by retaining the headquarters of the MNEs, and to keep a hegemonic economic role in both bilateral relations (Nadalutti, 2015a). Nevertheless, as Barter (2006b) and Weatherbee point out, neither Indonesia nor Malaysia accepted a ‘boundaryless transnational melding with Singapore as the centerpiece’ (Weatherbee, 2015: 115). Thus, it can be said that the inability to create a ‘balance of power’ among these three actors, has led to the inability to develop the ‘triangle’ as such. Finally, while the previous Malaysian Prime Minister Mahathir and Singaporean Lee Kuan Yew were still burdened by personal and emotional feelings linked to Singapore separation from Malaysia in order to fully commit to and enhance cross-border cooperation, nowadays that the wounds of separation have partly healed, the new attempt to strengthen political, economic, and social linkages is linked to the IM project. The new leaders of the two countries seem to be more opened to a win-win cooperation formula, as will be better analysed in the next section. 4 The building of Iskandar-Malaysia Iskandar-Malaysia, which is organized around five flagships zones3, is one of the five economic corridors planned by the federal government of Malaysia under the Ninth Malaysia Plan and which was structured through the Comprehensive Development Plan (CDP). It is considered as one of the catalysts for Gross Domestic Product (GDP) growth through high-impact development within both the Government Transformation Programme and Economic Transformation Programme (ETP). Besides the IM, the other four Malaysian corridors are: the East Economic Region, the Northern Corridor Economic Region, Sabah Development Corridor and Sarawak Corridor of Renewable Energy. The idea behind developing economic corridors was to raise the standard of living and to attain balanced socio-economic development across regions and states. Accordingly, these corridors are promoted by the Malaysian government as growth zones that transcend state boundaries and should benefit people (Government of Malaysia, 2008: 67). As an interviewee stated to me ‘…we used to focus too much on the Kuala Lumpur and Klang Valley areas. That was in accordance with Dr Mahathir’s (Malaysia Prime Minister from 1981 to 2003) dream to compete with Singapore. He always had the dream to defeat the Chinese and the West so he wanted to build his own kingdom’ (interview with a politician, Johor-Bahru, March 2015). In other words, these mega-projects aimed to boost the nation-building and economic development process that was undergoing during PM Mahathir. Conversely, the goal pursued by developing these corridors was officially to reduce regional imbalances and to bring about equitable growth, investment, and employment opportunities to all Malaysian regions. It is interesting to note here, that the development of the state of Johor within the IMS-GT project was perceived not very well from other states within Malaysia. Indeed, these states become jealous of Johor’s economic development and interprovincial and interstate rivalries intensified during the development of this triangle (Bridge, 1997: 66). The corridors, instead, have been planned as instruments to create more cohesion as well as to facilitate public-private partnerships. They offer multi-year corporate tax exemptions, investment tax allowances, import duty and sales tax exemption for equipment used in company activities, more flexibility to recruit foreign workers, and lighter foreign exchange regulations (Leng and Mavroeidi, 2014). This article does not aim to analyse the economic, social, and environmental effects that the development of these growth zones have produced4. Instead, it focuses on what kind of governance emerges in this area due to CBC on-going activities and it scrutinizes the governmental (the federal state of Malaysia, the state of Johor, and the city-state of Singapore) and no-governmental ties that develop in building IM. Before proceeding to analyse the empirical case study, we will devote the next section to theoretically scrutinize regulatory regionalism and MLG in relation to CBC. 5 Regulatory regionalism and multi-level governance Regionalism and regionalization are generally used in order to explain political and social processes that occur at the national and supranational level. However, it is argued here that in order to fully understand these processes, how they interrelate and influence one another, how states are economically, politically and socially reconfigured by the interactions between different actors at different scales of governance we must consider also a third level, which is the sub-national one (here cross-border regions). Starting from Gamble (1996) analysis of regionalism, we understand regionalism as the conscious, deliberate, and purposive attempts made by national states to create formal mechanisms for dealing with common transnational issues. Regionalization instead refers to a more informal process that sees the active engagement of non-state actors that by interacting among them as well as with state actors shape a new form of governance. The main contribution that regionalist theories provide is that they aim to clarify the ways through which geographical areas (that are not exclusively nation-states) ‘are transformed from passive objects to active subjects capable of articulating the transnational interests of the emerging region’ (Hettne and Söderbaum, 2000: 461). And this is the starting point of our analysis as well. Indeed, by focusing on the IM region, we will try to better understand the formal and informal ways through which state, market and civil society actors relate together as ‘a set of interlocking but separate bodies’ (Hettne and Söderbaum, 2000) along several dimensions, economic as well as political and cultural. It has been broadly investigated to what extent nation-states have been transformed by supra-national activities (and vice-versa) and how the territorial space of states can be restructured (Chen, 2005; Jayasuriya, 2008). Evidence has been provided that the ways through which non-state economic and social actors mobilize, link to one another and to the state level, and participate in policy-making can contribute to redefining governance and territory (Scholte, 2005). However, whilst this analysis has mainly focused on the national and supranational level, we ask here: what is the role played by sub-national actors in the regionalization process? What kind of interlocking political, economic, and social relationships develop between different scales of governance and what are the implications for power and political outcomes? In order to address these questions, we argue that Jayasuriya’s and Hameiri’s regulatory regionalism contextualized within a multi-level governance (MLG) framework can be elucidatory. On the one hand MLG, conceived as ‘an arrangement for making binding decisions that engages a multiplicity of politically independent but otherwise interdependent actors – private and public – at different levels of territorial aggregation in more-or-less continuous negotiation/deliberation/implementation, and that does not assign exclusive policy competence or assert a stable hierarchy of political authority to any of these levels’ (Schmitter, 2004: 49) helps to better understand the linkages that tie/untie, develop and or/are hindered between state and non-state actors in CBRs. On the other hand regulatory regionalism is conceived as ‘the development of regulatory frameworks within the political and policy making institutions of “national governments”’(Jayasuriya, 2010: 103). Its politics corresponds to a system of territorial politics fought out and accommodated across the institutional space of the state (Hameiri and Jayasuriya, 2011) through which an individual or group aim ‘to affect, influence, or control people, phenomena, and relationships, by delimiting and asserting control over a geographic area’ (Sack, 1986: 19). As such, regulatory regionalism sheds light on the rescaling of governance and policy making. Moreover, it better explains the process that leads to cross-border region building. Jayasuriya and Hameiri, by focusing on the clashes that occur over the control of the state’s spatial organization between regional and state-centric governance regimes, try to understand how and to what extent these conflicts cause the rise of new forms of political (and economic) rule within the state. In other words, their core of analysis is the rescaling of governance and policy making that occurs within the state and/or alongside the established institutions of domestic rule (Hameiri and Jayasuriya, 2011). These authors are interested in understanding the transformation that states undergo due to the emergence and social, economic, and political involvement of non-state actors in areas that were original states’ prerogatives. We contribute to their analysis by focusing on the cross-border level that has been understudied. We think that regulatory regionalism can be fully understood and operationalized within the framework of MLG that examines the interactions of political and economic actors across multiple levels of government and unravel the ways through which in any scale system of territorial governance political, economic, and social institutions are entangled across space. Thus ‘strategies of political control are never limited to any single arena’ (Gibson, 2005: 106). Bache and Flinders show that while the multi-level character of governance captures the fact that governments which operate at different territorial levels become increasingly interdependent, governance stresses the increasing interconnectedness between governments and non-governmental actors at various territorial levels (2004: 3). Moreover, as Rosenau argues MLG ‘suggests the absence of clear-cut distinctions between domestic and foreign affairs’, private and public and ‘that local problems can become transnational in scope even as global challenges can have repercussions for neighbourhoods’ (Rosenau, 1997: 38). Hooghe and Marks, who first elaborated the multilevel approach to governance, further developed it in a two-fold typology, better known as ‘type 1’ and ‘type 2’ governance (Hooghe and Marks, 2003). While ‘type 1’ is characterized by a limited dispersion of authority at just a few levels, and jurisdiction is placed at a limited number of territorial levels, each of which has responsibility for a ‘bundle’ of functions, ‘type 2’ can be seen as a mix of polycentric authorities and is a ‘complex, fluid patchwork of innumerable, overlapping jurisdictions’ which work at numerous territorial levels (Hooghe and Marks, 2003: 236). In other words, power is shared and dispersed in a network of horizontal and vertical ties, linking the public, private and voluntary sectors. ‘Type 2’ straddles the private and public sectors and territorial boundaries: ‘such standard-setting jurisdictions are task-specific, arm’s length from traditional government, largely autonomous, and territorially overlapping’ (Hooghe and Marks, 2001: 10). In his instructive work, Phelps has already pointed out that regionalization strategies in sub-national regions have been highly influenced by processes of ‘extra-territorialization’ strategies through which states exert their powers extra-territorially and try to gain a grip on processes of international economic integration (Phelps, 2007: 372). However, Phelps mainly focuses on economic issues, and neglects to analyse the important political and social implications that this process can cause. Also, he does not explain the kind of governance that interlinks the actors engaged in the region building process. Finally, he does not address the question on how and to what extent extra-territorialization through sub-national region building can change states political and economic relations. These issues will be investigated in the following section. 6 The formal intergovernmental building of Iskandar Malaysia (IM) and its multi-level character In 2005, the federal government of Malaysia along with the state government of Johor, identified the need for a focused and developmental approach to the economic and geographic region of South Johor, the southern part of the federal state of Malaysia. Accordingly, IM, three times Singapore size of land, was promoted as a ‘future metropolitan region’ that would attract investors, and people to ‘live, work and play’ (DBS Asian Insights 2013; Fig.1). Figure 1 View largeDownload slide Figure 1 View largeDownload slide Since its launch, it was officially clear that Singapore would play a very important role in developing IM (as emerges from the reading of the CDP, 2006–2014 and as unanimously agreed by the interviewees contacted for this research). This could sound as a paradox, if we consider that IM responded to the previous Malaysian Prime Minister (2003–2009) Badawi’s dream to modernize Malaysia in order to compete with the rival Singapore (Rizzo and Glasson, 2012). Moreover, Singapore was initially very sceptical on investing in IM as emerges from former Singaporean Prime Minister Lee Kuan Yew who cautiously warned Singaporeans in helping to develop IM (Business News, 2013). This was also evident from my conversations with politicians, and civil servants contacted for this research who plainly stated that Singapore had initially a very negative perception of IM (interview in Johor Bahru, April 2015). Some of them were so biased to point out to me that there were rumours of money laundry going on in IM. Having said that, IM is perceived as a hinterland for Singapore, ‘given Singapore’s scarce land supply, rising land prices, increased property, and foreign labour restrictions’ (DBS Asian Insights 2013: 10), and population ageing increment. As stressed by the Development Bank of Singapore (DBS), Singapore’s participation through its MNEs in IM would not only encourage Singaporean companies’ involvement in this area, but also attract greater attention from global investors. It needs to be said here that the partnership that links Singapore to and with Malaysia was triggered by an historic swap land parcels between the Republic of Singapore and the federation of Malaysia over the Keretapi Tanah Melayu (KTM) railway land, as part of a broad agreement that saw Malaysia to give up its control of railway land that runs through Singapore (AsiaOne News, September 2010). In exchange, Singapore provided a Malaysia-Singapore joint venture six land parcels near the city-state’s central business district in the Marina Bay and Ophir-Rochor areas. We clearly witness here the transition from a ‘zero sum game’ formula, where one actor’s gain corresponds to another actor’s loss, to a ‘positive game’ within which states learn to compromise and thus to cooperate in trans-border zones (Nadalutti, 2015a). The discussion to foster cooperation between Singapore and Johor started at the governmental level between the Singaporean Prime Minister Lee Hsien Loong (from 2004) and Malaysian Prime Minister Abdullah Badawi (Prime Minister from 2003 to 2008) who agreed at a meeting in Langkawi in 2007 to ‘set up a Joint Ministerial Committee [JMC] as a platform for Singapore and Malaysia to explore ideas of collaboration in the Iskandar Development Region [IDR] project’ (Ministry of Foreign Affairs, Singapore, 11 September 2006). This was done in order to find ‘ways in which Singapore can help the region to succeed’ (Ministry of Foreign Affairs, 22 May 2007). As has clearly been shown by Leong, the establishment of the JMC has raised some concerns at the ministerial level in Malaysia since it was considered to be a threat to Malaysia’s sovereignty (Leong, 2007). Accordingly, the Malaysian Prime Minister promptly clarified that Singapore was not interested in meddling with Malaysia’s internal affairs since the setting-up of the JMC was not a ‘concession’ to Singapore. Clearly, both politics and economics intersect here and are going to affect and pace IM development and its internationalization. Put differently, the internationalization of IM is facilitated by the export of state capital and supported by state alliances (Tubilewicz and Jayasuriya, 2015: 200). Also the national Singaporean Temasek Holdings (Private) Limited and Malaysian Khazanah Nasional Berhad strategic investment fund started to officially collaborate through joint development projects on the basis of a 50:50 joint venture. In other words, Khazanah and Temasek would establish joint venture companies, to respectively develop land parcels in Singapore and undertake projects in IM. They also collaborated together for the wellness centre in Medini (DBS Asian Insights, 2013) which aim to address some of the issues related to Singapore’s ageing population. It is a fact that IM has become an option for retirement planning for Singapore’s elderly. Accordingly, healthcare is one promising area for IM to target as the Singapore consumer gets older. It is evident as ‘in any large-scale system of territorial governance political institutions are entangled across space. Strategies of political control are thus never limited to any single arena’ (Gibson, 2005: 106). And indeed, ‘state capital’ is per se political, in terms of control and ownership (Tubilewicz and Jayasuriya, 2015: 188). In terms of regionalization, this strategy would show that both Malaysia and Singapore pursue a kind of regional governance that aim to exercise some control in specific areas in each other country. Moreover, this is a very important political, economic, and diplomatic manoeuvre by Singapore that shows to what extent the city-state aims to develop its external economy to augment its limited domestic economy. Not least, it is a clear political and economic message from the Singaporean government to Singaporean companies to commit to the development of the Malaysian region. The Temasek Holdings Limited move into the region officially indicates that the Singaporean government had given its ‘blessing’ to invest in the zone. On the ground, this is evident if we consider the Singaporean Economic Development Board (EDB) activities. The EDB is discussing with MNEs to facilitate ‘the twinning of manufacturing activities between Singapore and Iskandar-Malaysia’ (The Straits Times, April 2014). Hence, on the one hand, Malaysia could benefit from Singapore’s comprehensive network of bilateral free trade agreements (FTAs). On the other hand, while MNCs will be able to locate their low-end production to IM, they have their critical processes of headquarters functions based in Singapore so as to benefit from the FTAs. Singaporean Prime Minister Lee Hsien Loong, in an official speech at the Malay-Muslim Business Conference, stated that: there are opportunities in IM for companies to go. It is not so far, it is not so unfamiliar. You can take advantage of lower costs there and of more space there, more land there and at the same time stay close to Singapore. I encourage companies to look at these opportunities seriously … We will also help SMEs [small and medium-sized enterprises] to go overseas, and to fly Singapore’s flag and do well (7 May 2014; emphasis has been added).Already several Singaporean companies such as private education providers (i.e. the Management Development Institute of Singapore, property developer CapitaLand and electronics manufacturer Nestronics) have started establishing their presence in IM (the IRDA 2013). According to the IRDA, Singapore is the first among the ten top investors in IM, followed by Spain, Japan and the USA (MIDA Statistics as at June 2013, the IRDA). Moreover, from 2006 when IM was established, Singaporean investment has doubled. Singapore’s main investment is in technology parks (i.e. Nusajaya, Medini), property development, education, energy, and transportation projects (the IRDA, 2013). In brief, this analysis has shown that cross-border investments from Singaporean and Malaysian economic actors are occurring in IM. These investments overcome national political and economic boundaries in order to link to transnational agencies and authorities. This clearly emerges if we focus on the educational sector and the investments (and political compromises) that are financing the development of EduCity, which is the education hub in the Iskandar Puteri IM zone flag B (previously known as Nusajaya). 7 Educity: what kind of MLG does emerge? The education sector is highly instructive in order to show what kind of regulatory regionalism emerges on the ground, how and what different governmental levels interact, and to what extent governance levels are regulated. Besides, it also shows that rivalries and tensions still characterize at times Malaysia and Singapore relations. Educity is a political idea (interview with TD, March 2015, Johor-Bahru) which is financed by the Iskandar Investment Berhad (IIB) that was incorporated on 3 November 2006. Its shareholders are Khazanah Nasional Berhad, the Employees Provident Fund (a national social security organization which operates through a provident fund scheme in Malaysia) and Kumpulan Prasarana Rakyat Johor Sdn Bhd (a Johor state investment arm). Overseeing the entire IM project is the Iskandar Regional Development Authority (IRDA), co-chaired by the Prime Minister of Malaysia and the Chief Minister of Johor. Clearly the federal Malaysia level aims to go ‘global’ by developing Educity in IM . A kind of MLG 2 can be singled out here. As was clearly explained to me by a high representative of the Management Team of the IIB: ‘we have relations with the federal level, as well as with representatives of the state of Johor. Approvals do not come from the state level, but from the federal one. The state has authority in matters that concern the public sector, not the private one that is instead prerogative of the federal level. Nevertheless, in our meetings we have both levels, as well as representatives of the immigration department, and people from the Education Malaysia Global services … in other words we have what I can call a landscape of authorities that have specific responsibilities’ (interview in Johor-Bahru, April 2015). Additionally, the IIB directly deals with foreign universities, such as the University of Reading Malaysia, Newcastle University, University of Southampton, Raffles University Iskandar Malaysia ect. Therefore, it clearly emerges that Educity is built by the synergic interaction between both private and public actors that interrelate at different governmental level. Within this framework, although Singapore initially had a very negative perception of IM, it then invested in Educity and opened two schools, Raffles University and the Singapore Management Development Institute. However, it is not easy and politically neutral to introduce foreign institutions in Malaysia. All my interviewees agreed by saying that there are still strong mental barriers in introducing education systems that may differ from the Malaysian one. Moreover, there is the need to make a clear distinction between private and public education institutions. Indeed, by talking to a representative of a foreign university in IM, I was told that ‘while ethnic Malays access more easily public universities than ethnic Chinese or Indian groups, these last ones usually opt for private universities. And our fees are not higher than those institutions that are already in place. Therefore, when families decide to send their children to our institutions, they know the amount of money they are going to pay. And anyway, it is surely cheaper than sending their children oversea. We do expect to have a bigger proportion of Chinese and Indian ethnic students rather ethnic Malay ones because that is the way public education is set up here’ (interview in Johor-Bahru, March 2015). Here the interviewee refers to the fact that generally the federal state provides specific scholarships to ethnic Malays in order to access public universities. It is interesting to point out that these foreign universities, which are aware of the fact that they are going to recruit more ethnic Chinese or other ethnic groups but Malay students, might exacerbate ethnic differences and therefore have an impact on the socio-cultural asset of the area. Another interviewee suggested that the rivalries that can emerge from this scenario can be instead beneficial for further developing Malaysia. Indeed, it is argued that the federal government, by seeing that those students who graduate from foreigner institutions can be more competitive within the job market, can decide to change and thus improve their curricula. And hence to become more competitive (interview in Johor-Bahru, April 2015). It is not the aim of this article, to assess whether this vision is correct. It is however, interesting to point out, that cross-border areas are surely laboratories where economic, political and cultural issues intersect with one another at several governance levels. As put by one of my interviewees: ‘for some time now, the (Malaysian) Prime Minister has been talking about Malaysia being a kind of landing place for a lot of western countries who want to invest … and IM is an interesting place where to invest. Moreover, there are many Singaporeans who moved to Nusajaya. They live closed to English colleges and schools just because they want to send their children in those schools. Thus these Singaporeans work in Singapore but have a house in Malaysia, and they commute daily’ (interview in Johor-Bahru, March 2015). In line with Tubilewicz and Jayasuriya (2015) it would appear that the internationalization of IM through the investment flow from outside, would lead to an internationalization of Malaysia itself. The education system seems to be a tool used by the government in order to internationalize. Nevertheless, this analysis has shown that there are still social and political contradictions that need to be addressed. 8 The multi-governmental scalar nature of Iskandar-Malaysia A step forward in formalizing Singapore and Iskandar-Malaysia relationship is represented by the setting up of the Iskandar Regional Development Authority (IRDA). The IRDA is a federal statutory body established through the Iskandar Regional Development Authority Act 2007, which came into force on 17 February 2007 (IRDA, 2007). The IRDA was conceived to be the sole decision-making body on all issues pertaining to both domestic and foreign investments flowing into the region. In other words, ‘be they local or foreign direct investments from all sources including Singapore, it is the IRDA which will have jurisdiction over issues pertaining to investments’ (Datuk Abdul Ghani Othman, 17 May 2007). Although official documentation is ambiguous on clearly delineating the role of the IRDA in the IM development, the interviews carried out for this research point out how the IRDA is a mere ‘advisory’ body. This means that the IRDA does not have any binding authority. It is interesting here to focus on its internal organization in order to better grasp its governance (for IRDA organization see: http://www.IRDA.com.my/organizational-structure.htm). The Johor Chief Minister, is the IRDA co-Chairman together with Malaysia Prime Minister. Moreover within the Advisory Council (AC), there is the Mayor of Johor-Bahru. According to official documentation, this set-up has been put in place in order to facilitate closer cooperation between the federal, the state and the local government level. Our analysis contradicts this official image. Indeed, evidence shows that competition between actors and interference among different governmental levels characterize IM building. In explaining the IRDA’s role within IM, an IRDA’s representative of the Economic and Investment sector stated: In the economic planning unit, we have people from the state, who second us (the federal government employees) and their salary are under our pay role. Their role is to facilitate the state engagement in the development of Iskandar-Malaysia. So we have a state commissioner together with a federal commissioner, and special officers. Most of the people are based in Johor-Bahru… We do not have the power to decide. We facilitate. The federal government looks at us to take a leading role in many areas. For instance, there was the project called BLUE, and it was meant to be a catalytic dataset hub. So the federal government said that it would channel money through the IRDA and not through the state. This was not liked by the state level and sometimes things can become sensitive. Yes, at the beginning there were challenges between the IRDA and the state level. Now, the state decides.This interviewee further clarified to me: We adopt a persuasive strategy because the final decision goes to the local council and the Johor state. Sometimes they have their own plans, and sometimes they have their hands tight because there is someone bigger behind them, so it is not a forward straight engagement5… (interview in Johor-Bahru, April 2015).This interview provides interesting insights that are supported also by the other interviewees contacted for this research. First, it is explicitly stated that the federal governmental level (the one he/she represents) has to accept the final decision that comes from either the state and/or even local level in land development issues. For clarity, it is worth to mention here that while state governments had a key official recognized role in previous Malaysia Plans, the Tenth Malaysia Plan (that focuses on the development of regional economic corridors) does not mention them at all. It has been suggested that this responds to the federal state of Malaysia tactic to further centralized authority (Loh, 2010). Having said that, state government agencies have authority on land use, building construction, and safety, according to Malaysian federal state law. Therefore, it comes without saying that the development of this zone through planning, facilitation and promotion encroaches on tasks that have been traditionally undertaken by state governments. Moreover, although the federal government level attempted to take some prerogatives and competencies that belonged to the state level, it had to re-recognize these prerogatives as ‘state prerogatives’. As a Malaysian interviewee who works for the Malaysian Investment Development Authority (MIDA) based in Singapore has put it: We have the federal and the state level in Malaysia. All states in Malaysia have some power, and when we talk about land, well that belongs to the state. So if the state does not approve a specific activity within its territory, no one can do anything. Even though IM is a governmental project, you need approvals from the state of Johor. When it comes to projects to be developed in IM, the division in Johor-Bahru will give the approval. We have our representative in Johor that closely work with the state government. We coordinate meetings between investors and the state department. So when we say that we want to facilitate investors who want to invest in IM we work very closely with the state, we discuss with state agents, we bring investors to them (interview in Singapore, May 2015).It is clear that the IM regional project is located within the institutional spaces of the federal state of Malaysia. Thus, it is an unproductive debate the one that focuses on the relative importance of regional institutions vis-à-vis national institutions. The regional governance that emerges is layered on previous national territorial fixes that lies on the tensions between the national and regional territorial fixes. Additionally, it can be suggested that the implementation of these corridors can have a counter-effect in terms of governance that was not foreseen by the federal government of Malaysia. It consists of an additional ‘empowerment’ of the sub-regional national level that become more aware of its role and play an important role in ‘coordinating’ cooperation between the federal level and the state of Singapore (which is presently dealing mainly with the federal level rather than the state level for matters concerning the development of Iskandar-Malaysia). Thus, a kind of multi-scalar apparatus emerges from the analysis, where both the state and local levels engage directly with realms beyond their federal level. Finally, the above interviewee points out also the important network of relationships that has developed between private and public agents in relation to the development of IM, and between private actors and MNEs. Thus: MIDA has this collaborative effort with the EDB. We are the Malaysian government federal investment agency, and the EDB is the investment government arm of Singapore. Some companies go to the EDB that can propose to them to look and to invest in IM. The EDB sends companies to us […] hence we can advise them what kind of industry Malaysia wants to promote (interview in Johor-Bahru, May 2015).A triangular relationship that interlinks different actors which belong to different administrative and governmental levels emerges here. It clearly corresponds to MLG 2. Private-public partnership and networks become very important and play a vital role in developing cross-border relationships. Therefore, although it can be said that there is still a kind of top-down coordination, horizontal networks also develop. States do not play the role of prime movers. They become rather partners, facilitators in public-private consortia and growth coalitions (Jessop, 2002). 9 The role of ‘silent’ actors in the building of the Iskandar-Malaysia region The analysis of the development of IM would be incomplete without mentioning the role played by the Sultan of Johor. It is important to know that Malaysia has nine Malay rulers (for simplicity we will generally refer to them here as ‘sultans’ although there are differences among them) who are the constitutional heads of their respective states and who are responsible on issues linked to religion and Malay custom, land management, natural resources, and local government (Fong, 2008). Among them, the Sultan of Johor, Ibrahim Ismail, plays certainly a unique role since he also influences public life and policy matters (from religion to inter-ethnic relations and from land management to education). Additionally, Johor is the only state with a local army, the Royal Johor Military Force. Not least, the Sultan of Johor has often referred to the uniqueness of the ‘Bangsa Johor’ that characterises the Johor state and which refers to the concept of identity based on territory and local culture rather than on ethnicity as is in the national Bumiputra policy which privileges indigenous Malay rights. According to the sultan, ‘Bangsa Johor means everybody is responsible for developing Johor while respecting everyone else’s culture and religion because we want everybody to live in peace and prosperity. Concord is a blessing’ (Malaymail Online, 30 August, Kuala Lumpur). Finally, although it is generally pointed out by experts in history and constitutional law as improbable, sultan Ibrahim Ismail has also provocatively flirted with secession from Malaysia (Strait Times, 16 October 2015). From the above, it clearly emerges that although the Malaysian law states that he should be above politics and play just a representative and ‘symbolic’ role in IM, he is far more powerful. Besides, he also actively deals with business as well as state affairs (Kinibiz, 10 June 2014). All the interviewees who took part in this research were very reticent to talk about his role in the IM building process. It is very relevant to highlight here that the name of the Sultan of Johor is not made even once within the Comprehensive Development Plan Iskandar-Malaysia 2006–2014. Is it because this scale has not been initially considered in the building process of this area? This would be most surprising. Indeed, the Sultan not only owns vast portion of land in the state of Johor6, but also wield real power as the official guardian of Islam and can withhold consent for the dissolution of state assemblies and appointments of chief ministers. It is hypothesized here that the fact that he is not mentioned in the CDP is due to the fact that the IRDA (i.e. the government level) did not want to officially recognize his ‘power’ and ‘authority’ in a ‘federal’ project. It is also worth to mention that the name ‘Iskandar’ ‘was given to IM in order to show appropriate respect to the Sultan’ (interview in Johor-Bahru, March 2015). While initially Iskandar-Malaysia was named South Johor Economic Region (SJER), it was then renamed ‘as a sign of tribute to the previous sultan. The royal family, the royal mechanism is very strong in Johor, and its involvement in the state as well’ (interview in Johor-Bahru, April 2015). Indeed, as Leng and Mavroeidi highlight in their analysis: the Sultan is a notable private investor who owns land in Johor and Singapore, has oversight over JCorp (a key state-controlled investment company), and runs a vast personal business spanning property, shipping, oil and gas and power. The real estate boom in the state has certainly benefited him. In fact, the land purchased by Guangzhou R&F (major Chinese developers) had belonged to the Sultan, and there has been much surprise over the sale of what was previously state-owned land. The Sultan thus has a dual role as state leader and prominent investor (Leng and Mavroeidi 2014: 6). In 2014, there was an attempt by the sultan to acquire prerogatives through the state chief minister in the Johor legislature. He aimed at modify the bill in order to assume control over vast amounts of lucrative state land through the Johor Property and Housing Commission. The measure would have given the sultan the power to appoint board members and investigate the commission’s books, among other functions. Finally, the bill was modified to remove the sultan’s power to make appointments and vest it in the chief minister due to the former Malaysian Prime Minister Mahathir’s intervention (anonymous, The Asia Sentinel, 14 June 2014). Indeed, it has been repeatedly questioned whether a ‘sitting ruler’ should be so conspicuously involved not only in the business world, but also in political and governance issues (A. Raghu and S. Grudgings, Reuters, 6 October 2014). It has even been suggested that he owned more clout than the Menteri Besar, who is the head of the state government. Both in newspaper articles, blogs and interviews here emerged several times the allusion that the sultan is so powerful that ‘the state government, even the chief minister does not dare to say anything’ (interview with a politician in Kuala Lumpur, March 2015). It is apparent that the sultan’s interests and decisions influence the kind of governance that emerges and leads the building of this zone. In terms of the sultan’s network with businesses, he has strong relationships with key figures in the economic business sectors such as Ekovest and Iskandar Waterfront Holdings (IWH) who made business with Country Garden (which is a project of China developers) for the development of Danga Bay that is part of the IM development plan. The present development of Danga Bay by Chinese investors was not conceived in the CDP. As an interviewee argued: We (the federal government level) did not expect the Chinese investors to come here so strongly. The sultan took them in, and the sultan was not initially considered in the development of Iskandar-Malaysia. And when we initially planned we engaged with the state and the municipal level. But then things changed along the road and we had to adjust. Investors are coming and pumping good money (interview in Johor-Bahru, April 2015).Here it is empirically voiced out the very essence of the politics of regulatory regionalism that pertains to the accommodation, tensions, and contradictions between different governmental and non-governmental scales. However, we also suggest that a very important element that should be considered within regulatory regionalism is the personal and individualistic interest that makes various actors to engage in and shape regional governance. Finally, it is evident that the important role the sultan plays is also due to the deal and accord ‘silently’ achieved between different governmental levels that compromise and bargain for a final common profit. 10 Conclusion This article aimed to contribute to the literature on regionalism and regionalization both theoretically and empirically and to better understand the governance that emerges from the region-building process at the micro-level. In order to do that it analysed the building of IM. This is the first study on IM that scrutinizes the governance that emerges on the ground. So far, academic literature has mainly analysed IM from a physical planning perspective (Rizzo and Glasson, 2012), transportation links (Barter, 2006a-b), and waste management (T. S. Ting et al, 2014). Thus we provided a fresh overview of this geographical area and went beyond a theoretical/conceptual discussion of regionalism in Asian contexts in order to look at a specific case study at the sub-regional border level. The analysis has shown that the economic, political, and social boundaries of IM shift and do not necessarily overlap. Hence this region is not unitary and/or homogeneous. It is instead constructed, deconstructed and reconstructed from within and outside. Thus new forms of interactions between contending actors and regimes over the relationship between territory and governance develop and have the potentials to transform states’ governance. Together they shape and modify the regional scale of governance and transcend states territorial boundaries (Hameiri and Jayasuriya, 2011). Therefore, it can be argued that in line with MLG2, the development of Iskandar Malaysia results from both planned government policies as well as entrepreneurial companies to which governments are linked and respond to. Indeed, it has been shown that in order to start up a regionalization process, Singapore and Malaysia are called upon to compromise politically and economically first at the governmental level. However, as shown by Tubilewicz and Jayasuriya (2015) in their analysis of the Greater Mekong Subregion (GMS), the subnational state internationalizes thanks to the alliance that develop between the provincial state and capital. Put differently, the process of capital and state internationalization is itself rescaled at both the national and subnational levels. For instance, we can see these socio-political forces at play by focusing on the subnational transborder relational character that starts linking Malaysia, Singapore, and Johor, and which leads to internationalize IM. Besides, the importance attributed to MNEs and investment processes within regionalization shows how and to what extent private and public sectors are intrinsically intertwined, and influence one another in the sub-national region building process. Additionally, regionalization is perceived as a way to ‘go global’ through regionalism based on the development of synergies between Malaysia and Singapore. It is apparent the linkages and synergies developed between state and non-state actors are crucial in the region-building process. The analysis of this relation and the political struggle between various social forces in the region-building process define what the sub-national region is going to be, how it should be politically organized and how is going to fit in the global order. Finally, it is interesting to mention the ‘informal’ way through which IM is built. Indeed, what is emerging from the analysis is that rules, in order to have a regulatory effect, do not necessarily need to be written or formally spelled out in treaties, constitutions, laws, and agreements. Instead, ‘informal’-‘invisible’ rules that are rooted in customs, traditions, and conventions can be more powerful and influential than official codes. And IM is a clear example of that. Particularly interesting is the role played by the Sultan of Johor, who ‘although does not have a direct role per se, is the ruler of the state’. His overwhelming powerful role clearly emerges from this interviewee that stresses ‘He, being the ruler says what he wants, and we, being the subjects, listen to him. So there is not much engagement you can have with him. He is the royalty. He has full control over the land of the state’ (interview in Johor-Bahru, March 2015). Interviews A.G. ADB, Senior advisory, October 2012. B.F., Delegation of the European Union in Singapore, Singapore, May 2015. C.A. GVC, Gallant Venture, Corporate Secretary, May 2013. C.M.A. SPM, Corporate Relations Sembcorp Parks Management, Senior Manager, 2013. G.A. ADB, coordinator of the ‘Regional Cooperation and Operations Coordination Division’, Southeast Asia Department, Asian Development Bank, Manila, February 2013. G.K. RDIPS, Assistant Head, Resource Development International Policy Singapore Economic Development Board, June 2013. G.M.L, the IRDA, JB, April 2015. I.W.A., the IRDA, JB, March 2015. J.C. and J.C. BCA (Building and Construction Authority) representative, Singapore, May 2015. J.J.O., Educity, JB, April 2015. K.C. EWECS, President of East West Engineering Consultants, Singapore, January 2014. K.C. STB, Senior Officer, Cultural Precincts and Tourism Concept Development Singapore Tourism Board, June 2013. K.K., Kinibiz, Kuala Lumpur, March 2015. N.B.R., University of Malaya, Kuala Lumpur, March 2015. R.J. ANU, Australian National University, 2012. R.Q., European External Action Service, Singapore, May 2015. S.E. ILAL, International Lawyers Appleton Luff, Singapore, January 2014. S.Q.W., Senai State Assemblyperson, Kuala Lumpur, March 2015. S.S.I., Malaysian Investment Development Authority, Singapore, May 2015. S.S.T. IDSS, Deputy Director of the Institute of Defense and Strategic Studies at Nanyang Technological University in Singapore, September 2012. T.D., University of Reading Malaysia Campus at EduCity Iskandar, JB, March 2015. 1 Shenzhen is a special economic zone in Southern China. Shenzhen has been taken as a model for the development of Iskandar Malaysia since from being a small, peripheral town of 30 000 inhabitants in 1978 (55) it has today become the major city in the south of Southern China’s Guangdong Province, with a population of 10 547 400 inhabitants (55). 2 Singapore depends for water supply from Johor in Malaysia. This is an issue that creates high tensions between the two countries, since it is often used whenever strains develop in bilateral relations (55). 3 (a) Johor Bahru (JB) City Centre, the core of the SJER conurbation, to develop as the financial centre for the region; (b) Nusajaya, a green zone to the west of JB, to be converted to residential, light-industry, and tertiary uses; (c) Western Gate and Development, to strengthen the rapidly growing area around the Port of Tanjung Pelepas (PTP); (d) Eastern Gate Development, to strengthen and redevelop the brownfield area around Pasir Gudang Port and its heavy industries; and (e) Senai–Skudai, two cities located to the north of JB, to sustain the need of the region for quaternary infrastructure (universities, airports etc.). 4 However, several studies pointed out that the development which is occurring in these zones is negatively affecting the environment as well as people’s lifes (Sovacool and Bulan, 2012). My interviewees as well generally agreed that IM, which is labelled as a low carbon city, in reality is far from being one. Emblematically, I was told: ‘The developers of IM themselves are hiring those consultants who will write reports on the development of the area. In other countries it is different. The consultancy is external. So what would you expect? The consultants must write favourable reports, regardless the results/effects on the ground’ (interview with a politician, Johor, March 2015). 5 Here the interviewee refers to the inference of the Sultan of Johor, who plays an important role in the building of IM. 6 Since State’s and Sultan’s land reclamation and land ownership are very sensitive topic at the moment both in Malaysia and Singapore it is not possible to find official data that provide information about it. When questioned on these issues, all my interviews preferred not to respond, were very vague or explicitly told me that ‘this is a question not to be asked’. 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International Relations of the Asia-PacificOxford University Press

Published: Feb 2, 2017

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