Geographic fragmentation as a driver of institutional adaptation: the cases of Indonesia and the Philippines

Abstract

Relevance. In the context of increasing global fragmentation – reshoring, regionalization of economic blocks and strengthening of transactional barriers – there is an acute problem of adaptation of national states to manage deeply fragmented and heterogeneous spaces. The traditional paradigms of centralized management and uniform spatial development have failed to meet this challenge, requiring the search for new models.
Research objective. The study aims to develop a holistic theoretical model, based on the cases of Indonesia and the Philippines, explaining the genesis and persistence of specific socio-economic systems (“island capitalism”) and associated hybrid political regimes (“liquid state”) that arise under conditions of extreme geographical fragmentation. It further argues that these phenomena should not be understood as a set of pathologies, but rather as forms of systemic adaptation with broader relevance in a world of increasing global fragmentation.
Data and Methods. The study is based on a comparative analysis of cases from Indonesia and the Philippines as marginal examples of development in large archipelagic states. Qualitative methodology is used, including institutional and spatial analysis, synthesis of data from international organizations (World Bank, ADB) and empirical studies, as well as author conceptualization of key phenomena.
Results. It was found that the critically high logistics costs (up to 24 % of GDP by World Bank, 2013) make the classic industrialization of the periphery unfeasible, generating a sustainable system of “island capitalism” with economy hyperconcentration in the core and raw-material peripherization. In response, the central state evolves into a “liquid state” – a hybrid, networked form of sovereignty using asymmetric autonomy, fiscal patronage and maintaining territorial integrity through the creation of common infrastructure.
Conclusions. The experiences of Indonesia and the Philippines show that extreme fragmentation does not form a pathology, but an alternative model of economic-institutional adaptation. Practices of the “liquid state” and strategies of survival in the conditions of “island capitalism” acquire universal importance in a world where fragmentation becomes a new norm, offering tools to manage complexity and maintain unity in the face of internal diversity and high transaction costs.