“East Asian Economic Partnership/Integration and ASEAN-Japan Relations in the Year 2020”
1. Outline of Meeting
Business persons from ASEAN countries and Japan met in Tokyo, Japan from October 6 (Wednesday) to October 8 (Friday), 2010 for the 36th ASEAN-Japan Business Meeting (AJBM) to discuss key issues under the theme "East Asian Economic Partnership/Integration and ASEAN-Japan Relations in the Year 2020".
The meeting consisted of an official opening ceremony, as well as the following three sessions: (1) "Vision for Economic Partnership/Integration in East Asia in the Year 2020", (2) "Strengthening the ASEAN-Japan Partnership and Deepening the ASEAN-Japan Comprehensive Economic Partnership Agreement", and (3) "Promoting Asian-based Innovation".
2. Opening Session
- Mr. Toshitaka Hagiwara, Chairman of the 36th AJBM
Recently, as Asia has shown growth ahead of other economies in the wake of the global recession, the focus has shifted to emerging economies, which in turn implies the growing importance of ASEAN. I look forward to the discussions at this yearfs AJBM on spurring innovation in Asia to enable sustainable economic development as well as expanding the trust and network that Japan and ASEAN countries have built and cultivated over the years.
- Mr. Masamitsu Sakurai, Chairman of Keizai Doyukai (Japan Association of Corporate Executives)
There has been much transformation since the last AJBM meeting was held in Japan three years ago, namely the subprime mortgage problem in late 2007 and a global recession since late 2008. Since the first quarter of 2009, however, economic recovery in Asia has outpaced that of the rest of the world, attributable to various measures to stimulate domestic demand and develop social capital. Asia has also witnessed the expansion of the middle class, which has caused demand in Asia overall and in ASEAN countries in particular to rise as demand in the West has waned. As a result, the relationship between Japan and ASEAN is progressing into a new phase of deepened trust and integration.
- Mr. Moe Kyaw, Co-Chairman of the 36th AJBM, Myanmar
This is the fourth AJBM meeting I have attended, with all of the previous meetings darkened by the gloom of the recession. This year, however, there is a recognized need to find new markets, and the markets of South East Asia hold great potential. Next year, Myanmar will host the 37th AJBM and with the many changes in Myanmar, including elections later this year as well as the transition to a rule-based economy, we look forward to contributing to and benefiting from the economic development of the region as the gateway between East Asia and the rest of the Asia.
- Ms. Makiko Kikuta, Parliamentary Vice Minister of Foreign Affairs, delivers a message from Mr. Naoto Kan, Prime Minister of Japan
I would first like to offer my congratulations for 36 years of success in holding the AJBM. Japan and ASEAN have a long history of working together, and Japan intends to continue to foster this relationship. ASEAN desires economic integration and support in the development of infrastructure and cultivation of skilled personnel, and Japan has a plan in place to assist by utilizing Japanese technology and know-how. Furthermore, economic unity by the year 2020 is a very important theme, and Japan will continue to promote these efforts going forward.
- Mr. Motohisa Ikeda, Senior Vice Minister for Economy, Trade and Industry
The global economy is gradually recovering but we must not be content with the progress to date. Amidst this recovery, ASEAN and Asia are attracting increasing attention, with East Asia expected to be the driver of global economic growth hereafter. Furthermore, Japan must grow in line with its ASEAN neighbors, based primarily on two pillars-the promotion of economic partnership and the development of infrastructure in Asia.
- H.E. Ambassador Hla Myint, Chairman of the ASEAN Committee in Tokyo, Ambassador of the Union of Myanmar in Japan
For the past 36 years, AJBM has promoted cooperation between the countries and companies of Japan and ASEAN, and this meeting underscores the importance of such cooperation. With ASEAN positioned as the hub of East Asia and the formation of the ASEAN Economic Community (AEC) slated for 2015, Japan and ASEAN must continue learning from each other, not only economically but culturally as well. Myanmar has worked in recent years to open its doors economically, and we very much look forward to hosting next year's AJBM.
Session 1: “Vision for Economic Partnership/Integration in East Asia in the Year 2020”
- Mr. Shazali bin Sulaiman, Partner, KPMG, Brunei
- Mr. Anwar Pulukadang, President, PT. Tripind Patria, Indonesia
During the past decade, many unexpected events of great significance have changed the way we think and behave, including natural calamities, an increasing awareness of global warming, wars in Iraq and Afghanistan, numerous terrorist incidents, the global economic recession, and-on the positive side-scientific and technological advances in such fields as information and communication technology, medicine, and biotechnology. The most significant event in East Asia was the emergence of China as a major world economic power, with its GDP surpassing that of Japan this year, an unprecedented accumulation of foreign reserves, and a huge market that attracts investment and trade from nearly all countries worldwide. Other countries in the region, such as the ASEAN countries of Vietnam, Malaysia, the Philippines, and Indonesia, have also seen significant growth with four- or five-fold increases in GDP over the past ten years.
In the coming decade, I envision the following: (1) Naturefs threat of disaster will remain unpredictable; (2) Chinafs significance in the decade to come will only increase, and the country will serve as a model and engine for economic development in East Asia; (3) Free trade agreements (FTA) will confer a fairer share of the value created from trade on all signatories; (4) ASEAN countries with their vast land, marine, and human resources will function as a source of food supply to this region, with Japan providing necessary technical guidance through joint ventures with local enterprises; (5) Mineral and energy resources, which are developed through international business cooperation, will be processed and used locally; (6) Soil, air, and water conditions in ASEAN countries will have improved by 2020, enabling better living environments; (7) Corruption and terrorism will have diminished but not completely disappeared, and good governance will spread with varying success depending on the country; and (8) Each countryfs economy will be driven by a large number of entrepreneurs whose work will contribute to the creation of value that leads to real prosperity for all. In order to realize this vision, governments and businesses across East Asia must work together to create jobs, provide training and education to youth, form joint ventures, develop infrastructures, open environmentally friendly farm lands and marine culture, establish production facilities, and provide services associated with useful goods.
- Mr. Hideharu Kadowaki, Special Advisor & Senior Fellow, The Japan Research Institute, Ltd., Japan
The global economy is poised to undergo an historic shift from a model led by industrialized nations to a model led by emerging economies, and East Asia is at the forefront of this shift, transforming itself into a center of global economic growth that entails heightened responsibility for global economic stability. International trade is also increasing in East Asia, driven by a number of initiatives aimed at economic collaboration, such as the ASEAN+1 EPA/FTA, deepening ASEAN+6 tariff-free arrangements, and the negotiations for the establishment of the Trans-Pacific Partnership (TPP) agreement, which is expanding the regional integration framework through ASEAN+3, ASEAN+6, ASEAN+8, TPP, and APEC and diffusing the concept of East Asia more widely. Nevertheless, the East Asia region presents unique challenges along the road to economic integration, including vastly differing economic conditions, populations, and cultures; a widening of the economic gap in many countries resulting from recent economic growth; sovereign risk; security concerns in North East Asia; and declining birthrates and aging populations, resulting in an end to the population bonus and lagging per capita GDP compared with industrialized economies. East Asia requires strategic collaboration to tackle the priority issues inhibiting economic growth, which are (1) energy and resources, (2) the environment, (3) food and agriculture, and (4) social safety nets, as the region strives to fulfill its current role as a driver of global economic growth under the key phrase of "open stability."
- Ms. Rita King, CEO, Barterfli Holdings
As of January 2009, there were 37 free trade agreements (FTA) in effect in East Asia, with another 72 FTAs in the pipeline, providing support for trade and contributing to the expansion of foreign direct investment (FDI) activity, the deepening of production networks across the region, and greater economic integration and prosperity. The recent spread of FTAs is attributable to the slow progress achieved at the WTO Doha Round, as well as deepening market-driven economic integration, the relative success of NAFTA, and pressure created by the Asian financial crisis. With the increasing prevalence of various FTAs in the region come additional challenges in optimizing their application and increasing their utilization, including varying and confusing FTA modalities, the gspaghetti bowl syndromeh (whereby, for example, different tariff rates and rules of origin may apply to the same product, depending on the bilateral FTA), the costs of compliance and registration with the various FTAs, and the lack of information and understanding of FTAs beneficial impact on business. All of the above serve as disincentives for businesses, particularly SMEs, from taking advantage of the benefits FTAs afford, thereby limiting regional trade and economic development. More training, case studies, advisory, information, process automation, and other support through technology are needed, particularly for SMEs throughout the region, to promote greater understanding of the business opportunities afforded by FTAs, such as greater market access, lower production costs, new business opportunities, and more FDI.
- Mr. Nguyen Viet Cuong, General Representative, Saigon Invest Group, Vietnam
As Asia has led the way out of the global recession, for the first time in recent history the world looks to Asia as an engine for growth and prosperity. With the accelerating pace of globalization and the increased competition it entails, as well as the disappointing lack of progress in the latest Doha Round, the need for an economically integrated East Asia through a single region-wide FTA becomes even more pressing. We have seen a proliferation of bilateral FTAs in East Asia; however, their varying rules of origin and content requirements complicate cross-border trade in the region. A region-wide FTA would enhance the competitiveness of companies and countries in the region by cutting through the complexities of different national rules, taxation, and non-tariff barriers, while also facilitating the framing of regional policies on food and energy security as well as sustainable growth. While ideally this integration would allow for the free flow of goods, services, capital, and labor, I am confident that by the year 2020 we can secure at least the free movement of goods and services, with free flows of capital and labor set as a goal thereafter.
- It isn't enough to implement FTAs. Of additional importance is the rate at which FTAs are utilized by the businesses to which they apply.
- Concerning the spaghetti syndrome mentioned in two of the presentations, it appears that ASEAN is confronted with the need to integrate its various bilateral FTAs in order to simplify their application.
- Mr. Monte Cassim, Vice Chancellor, Ritsumeikan Trust, Former President, Ritsumeikan Asia Pacific University
While Asia has a tremendous body of indigenous scientific knowledge and the foundations have been laid for a robust scientific community and the free flow of ideas in the region, there is still work to be done. Economic growth gives rise to new problems that require solutions, and Asian science must meet the challenge of transforming ideas into commercial solutions for such problems. Science in Japan has traditionally been strong in the development of devices and the accumulation of knowledge; however, it has been lacking in the transformation of these devices into marketable systems and the transformation of this knowledge into wisdom. Japanese science has generated a number of inspiring discoveries that hold great potential to resolve pressing societal problems, such as a water desalination device and advances in stem cell therapy. However, the Japanese government has recently scaled down scientific funding. Imperatives for the progress of Asian science include the dissemination of research results through respected journals and the harnessing of information communication technology, the enhancement of the mobility of professionals through mutual recognition of professional qualifications and the easing of visa requirements and other impediments to travel, and the creation of exemplars to harness local initiatives for the resolution of global issues.
Session 1: “Strengthening the ASEAN-Japan Partnership and Deepening the ASEAN-Japan Comprehensive Economic Partnership Agreement”
- Mr. Phu Sae Tong, President/CEO, Anco Brothers Co., Ltd., Cambodia
- Mr. Chiaki Yamaguchi, Corporate Auditor, Toyota Motor Corporation, Japan
ASEAN countries are not only attracting attention as locations for global production bases but also as markets for exports. However, in order to withstand severe global competition over the next ten years, ASEAN countries and Japan must forge an equal partnership based upon win-win relationships. In the wake of the financial crisis, ASEAN countries showed a temporary slowdown, but they recovered quickly and are exhibiting sustained growth. Projections for a sharp recovery in unit sales of the entire Toyota group in ASEAN markets are evidence of this, and Toyota is committed to positioning the region as a global production base going forward. As a hub of the global economy, it is imperative that South East Asia continue to liberalize customs procedures, improve its business environment, and further stabilize its governments.
- Dr. Thomas Aquino, Senior Fellow, Center for Research and Communication, Philippines
With the exception of 2009, trade has increased between Japan and ASEAN countries over the past five years, due in no small part to negotiations on and the establishment of the ASEAN-Japan Comprehensive Economic Partnership (AJCEP) Agreement, which sets regulations on goods and services trade, rules of origin, sanitary and phytosanitary measures, standards, technical regulations and conformity assessment procedures, investment, economic cooperation, and dispute settlement mechanisms. Since the signing of the AJCEP in April 2008, ten ASEAN nations have joined the agreement, which represents only the second attempt by ASEAN for such an agreement and also involves the use of bilateral CEPs and FTAs to supplement the regional CEP. The AJCEP calls for the liberalization of regional economies and trade through the reduction or elimination of customs duties and establishment of rules of origin that confer preferential treatment, the facilitation of trade through easier standards recognition and defined dispute settlement mechanisms, and economic cooperation through the establishment of an implementation body and work programs for development. Work remains to be done, however, particularly in the areas of negotiations on services trade and investment, further calibration with other trade agreements negotiated between Japan and ASEAN countries, policy coordination with regard to energy security and environmental protection, cooperation in industry sectors with high potential such as information and communications technology, automotive, biotechnology, tourism, and infrastructure, as well as work programs covering intellectual property, agriculture, fisheries, and forestry, improved understanding of rules of origin and operational certification procedures among implementing agencies and businesses, and updates to goods tariff schedules and classifications. Going forward, governments must promote increased trade and investment, particularly in the services sector, as well as measures to promote and facilitate the movement of business people and skilled professionals.
- Mr. Ignatius Hwang, Managing Partner, Bryan Cave LLC, Singapore
Public private partnerships (PPP) represent a paradigm shift in large, public infrastructure projects as they involve more private sector financing and less public sector financing, increased use of off-balance sheet financing by governments, and transfer of ownership from the public to the private sector. This shift is expected to lead to increase adoption of PPPs for similar projects in ASEAN countries. The new breed of PPPs taps into private sector innovation, expertise, and efficiencies while freeing up public sector funds. Other benefits include optimal whole lifecycle costing, which considers not only construction but also operation costs, optimal risk allocation between the public and private sectors, the creation of more business opportunities in the private sector, and the cultivation of local legal, financial, and technical expertise. The liberalization of ASEAN economies and the various FTAs and CEPs already established in the region somewhat mitigate key PPP investment risks such as nationalization, exchange rates and the repatriation of profits, dispute resolution, and legal and regulatory changes. The success of a PPP typically relies on strong political will, a supportive investment regime, fair and transparent procurement processes, and the health and liquidity of local debt markets.
- Dr. Bunluasak Pussarungsri, Executive Vice President, CIMB Thai Bank Public Company Limited, Thailand
The global environment has undergone significant changes in recent years that will shape the future of Japan and ASEAN countries. We have seen a massive global monetary rebalancing reflected by a reduction of the U.S. current account deficit through depreciation of the U.S. dollar and increased saving in the U.S., which should diminish the U.S.fs role as an importer of goods and shift the centers of demand East. The forces of globalization have also accelerated in recent years, giving rise to a gOne World One Marketh system made possible through eased constraints on the movement of goods, services, capital, and labor across borders and the proliferation of bilateral and regional FTAs. The implications of all these changes for ASEAN countries and Japan are a slowdown in demand from the U.S. and other Western countries, greater economic and cultural ties among East Asian countries, and the possible relocation of production bases from China to ASEAN countries due to rising production costs in China. As such, next steps in the continuing economic integration of the region should involve the acceleration of the formation of ASEAN+6, or ideally ASEAN+3, which I think is more feasible, to incorporate key regional trading partners in a more comprehensive agreement by leveraging and extending existing agreements, as well as further strengthening the cross-border supply chain across all ASEAN countries.
- The presentation on PPP mentioned that only Singapore has an established PPP sector. However, Singapore enjoys high ratings from rating agencies, whereas other ASEAN countries do not. Thus, PPP investment in these other ASEAN countries entails a high level of risk-a level which Japanese banks are unlikely to bear.
- Japanese banks play a crucial role in expanding the Japan-ASEAN partnership, and as such decisions to make investments in PPP projects in ASEAN countries must come from the top of these organizations, namely those executives with the authority to make such decisions.
- While it is true that Japanese financial institutions are traditionally risk averse, it is also true that their attitudes are gradually beginning to change.
- Governments have a crucial role in strengthening intellectual property rights, which is a key issue in furthering cross-border economic partnerships.
Session 3: “Promoting Asian-based Innovation”
- Mr. Moe Kyaw, Managing Director, Myanmar Marketing Research & Development Co., Ltd., Myanmar
- Mr. Kusumo Martoredjo, Chairman, PT. Catur Yasa, Indonesia
Asia, home to 55 percent of the worldfs population, should no longer merely be regarded as a lucrative market for innovative goods and services, but also as a powerful region for the creation, growth, and development of innovation. Innovation in Asia, particularly Asiafs developing countries, remains hampered by at least three factors: (1) levels of educational attainment, (2) the business environment, and (3) the information infrastructure. In promoting innovation, the role of public policy is critical in improving the business environment, establishing a well-balanced intellectual property rights system, enhancing the R&D infrastructure, and setting up a framework of integrated policies that collectively support the capability of a country to innovate by learning, adapting, and creating new ideas, knowledge, and technology for economic and societal use. The highly diversified conditions in Asia, in terms of levels of development, culture, and other factors, necessitate a specific strategy in each country for the creation of public policy and regulations in order to promote innovation, while a common public policy template may be applicable for those countries with less significant gaps in development and culture. Given the vibrant growth of Asiafs economies to date, and provided that all the required conditions be fulfilled and a conducive environment be accommodated, Asia could become the center for innovation in the 21st century in the not too distant future.
- Mr. Shiro Sugata, President and CEO, Ushio, Inc., Japan
Until now, the model for economic growth has traditionally involved Western- and Japan-based innovation giving rise to products that are then produced in Asian countries; however, the time has come for Asia-based innovation for the development of low-cost products of sufficient quality and functionality that are more aligned with the needs of the middle class in Asia and the so-called gAsian volume zone.h No longer merely the gworldfs factory,h Asia is also increasingly being considered the gworldfs market.h However, Asiafs ratio of production facilities to R&D facilities is only one-third that of Western countries, exemplified by the fact that, while Japanese companies have recently been moving production bases to other countries in Asia, they continue to locate R&D facilities in Japan and the West. Going forward, we must establish marketing and product development capabilities and R&D functions in bases throughout Asia to directly connect product development with this burgeoning consumer market.
- Mr. Oudet Souvannavong, Vice President, Lao National Chamber of Commerce and Industry, Laos
Increased competition in the global market has forced the business communities in Asian countries to innovate by adapting business models to new market demands and value chains and by applying the latest technologies in production, management, and marketing. In the increasingly competitive global marketplace, innovation and branding go hand in hand, as branded products are subject to constant innovation and the companies that develop these brands invest large sums in R&D and human resource development. ASEAN countries can be characterized by the lack of interest shown by local companies in innovating, likely due to the fact that innovation is costly and change is difficult. In addition, many ASEAN countries have poorly developed educational systems and infrastructures as well as limited R&D networks. Going forward, knowledge-based economies must expand from Japan and South Korea to ASEAN countries through FDI for the development of human resources and infrastructures, and the competitive advantages of each ASEAN country must be cultivated based on this knowledge-based concept.
- Innovation must be understood from the three aspects of functions, skills, and technology.
- While many participants chose Google and Apple as examples of innovative companies, these companies succeeded because they were able to create gsystemsh through which customers could derive value.
- Asia-based innovation, however, will likely take a different form, and we need to focus in the future on the questions of what kinds of innovations Asia can create and what kinds of value these innovations can generate.
Steering Committee Meeting Items
- 37th AJBM preparatory meeting to be held in Indonesia around June/July, 2011.
- 37th AJBM to be held in Myanmar in autumn, 2011.
- (Joint statement was adopted.)