Meeting Summary
THEME:
“ENHANCING THE ROLE OF ASEAN-JAPAN FOR
THE ECONOMIC PROSPERITY OF EAST ASIA”
1. Meeting Outline
Businesspersons from Japan and ASEAN met in Tokyo, Japan, from October 27th(Wednesday) through 29th (Friday), 2004 for the 30th ASEAN-Japan Business Meeting (AJBM), focusing on the theme of Enhancing the Role of ASEAN – Japan for the Economic Prosperity of East Asia.
The Meeting consisted of an Opening Session, two Consecutive Sessions, Luncheon, Dinner and a Closing Session. A joint statement was adopted at the Closing Session on an early conclusion of the ASEAN Japan Comprehensive Economic Partnership Agreement and the establishment of an East Asia Economic Community. Moreover, one copy of “Thirty Years of the ASEAN-Japan Business Meeting” edited by Keizai Doyukai was distributed to each participant in the meeting to commemorate the 30th anniversary of the AJBM.
The meeting was followed by a technical tour to a plant of Nichrei Foods Corporation on the afternoon of October 29, 2004, in which some ASEAN participants joined.
2. Opening Session
CHAIRMAN AND CO-CHAIRMAN
CHAIRMAN:
Mr. Shoei Utsuda, Chairman of the Committee on Asia-Japan Relations of Keizai Doyukai (President and CEO, Mitsui & Co., Ltd.)
CO-CHAIRMAN:
Mr. Staporn Kavitanon, Representative of The Thai National Committee for the AJBM (Vice Chairman, Bangkok Bank Public Co., Ltd.)
SPEAKERS
(1)
Welcome Remarks by Mr. Kakutaro Kitashiro, Chairman of Keizai Doyukai (Chiarman, IBM Japan, Ltd.)
(2)
Responding Remarks by Mr. Staporn Kavitanon, Co-Chairman of the 30th AJBM, Representative of The Thai National Committee for the AJBM (Vice Chairman, Bangkok Bank Public Co., Ltd.)
(3)
A Keynote Speech by H.E. Mr. Shoichi Nakagawa, Minister of Economy, Trade and Industry of Japan
(4)
A Message from Mr. Junichiro Koizumi, Prime Minister of Japan, read by Mr. Shinichi Nishimiya, Deputy Director-General Asian Oceanian Affairs Bureau, Ministry of Foreign Affairs of Japan
(5)
Guest Remarks by H.E. Mr. Chu Tuan Cap, Chairman of ASEAN Committee in Tokyo (Ambassador of Socialist Republic of Vietnam to Japan)
(1) Welcome Remarks by Mr. Kakutaro Kitashiro:
This 30th AJBM is going to put together a joint statement calling for the formation of an East Asia Economic Community, in light of the joint statement that was released last year seeking a Comprehensive Economic Partnership Agreement between Japan and ASEAN. The AJBM should tackle that task head-on and make a greater contribution than ever before to the development of regional economies. For this purpose, Keizai Doyukai will make various efforts. The key initiative for Japan in promoting FTAs among the nations of East Asia is to take the lead in opening up its markets to the other nations of East Asia. It is particularly critical whether or not Japan will be willing to proactively open up its markets in sensitive areas such as the movement of people and agricultural products.
(2) Responding Remarks by Mr.Staporn Kavitanon
We agreed at the last AJBM in Manila to pursue the ASEAN Japan Comprehensive Economic Partnership Agreement since we all understood the benefits of strengthening the free flow of goods and services. ASEAN would like to see sensitive parts of the Japanese economy, such as agriculture, included in the comprehensive agreement. One year on, however, not a lot of progress has been made. So, I ask you, as the world economy becomes increasingly globalized, can we really afford to wait for all conditions to be met? The answer to that questions is a resounding No. For if we wait, we run the risk of the world passing us by. So, rather than wait for the perfect timing, my message to all AJBM participants is “Do What We Can Do!”
(3) A Keynote Speech by H.E. Mr. Shoichi Nakagawa:
Although the Japanese economy is continuing to recover from a ten-year period of stagnation, we currently face two problems. One is the impact of the earthquakes that shook Niigata prefecture recently and the typhoons that swept through Japan in the summer and autumn of this year. The other is the rapid rise in the price of natural resources such as oil. Oil and other energy issues are extremely important not only for Japan but also for the ASEAN countries, and Japan would like to strengthen cooperation with ASEAN members in a number of fields, including securing safe passage through the Malacca Straits and export controls.
Through economic partnership agreements, Japan is currently working hard to enhance economic cooperation with Thailand, Malaysia, and the Philippines, as well as with ASEAN as a whole. While there are some difficult aspects to the negotiations, it is important that all parties work together to achieve a win-win result, and to share any pain that must be borne. Economic partnership involves not only trade in goods, but also trade in services and movement of people, capital, intellectual property and more. If we can achieve our aims, the positive effects on the business activities of 600 million people will be great, so we hope to reach agreements at the earliest possible stage.
(4) A Message from Mr. Junichiro Koizumi:
The Japan-ASEAN relationship should be at the core of the trend toward the creation of an East Asian community. At the Japan-ASEAN Commemorative Summit held in Tokyo in December last year, Japan –ASEAN issued the “Tokyo Declaration”, which set the future direction of Japan–ASEAN relations, and the “Japan-ASEAN Plan of Action” in which Japan announced its financial support for Mekong region development and for human resources development. Following the Japan-Singapore Economic Partnership Agreement, Japan started negotiations for bilateral economic partnership agreements with the Philippines, Malaysia and Thailand this year and is expected to start negotiations for a comprehensive economic partnership agreement with ASEAN as a whole from April next year.
(5) Guest Remarks by H.E. Mr. Chu Tuan Cap:
ASEAN countries expect that the Japanese Government will continue to have appropriate policies and measures to support and encourage Japanese businesses to increase their investment in and trade with ASEAN countries, including negotiating and signing FTAs with ASEAN countries. We believe that bilateral FTAs between Japan and ASEAN countries will further facilitate business on both sides. Besides, as Japan has agreed to start negotiations with ASEAN for the ASEAN-Japan Comprehensive Economic Partnership agreement (AJCEP) in April 2005 and with both sides aiming to conclude the negotiations within 2 years, we do hope that AJBM, especially Keizai Doyukai, will play a significant and constructive role in the process.
3. Session I
TOPIC
Impact of China on the Economies of ASEAN and Japan
JOINT CHAIRPERSONS
ASEAN:
YBhg Tan Sri Dato’ Azman Hashim, Chairman of AmBank Group
Japan:
Mr. Akihiko Kaji, Vice Chairman of the Committee on Asia-Japan Relations of Keizai Doyukai (President of Jalpak, Co., Ltd.)
SPECIAL ADDRESS
Mr. Shen Caibin, Director of China Center for Economy, Mitsui Global Strategic Studies Institute
PRESENTERS
(1)
Dr. Narongchai Akrasanee, Chairman of MFG Asset Management PLC (Former Minister of Commerce of Thailand)
(2)
Mr. Tomas I. Alcantara, Chairman & President of Alsons Consolidated Resources. Inc. (Philippines)
(3)
Mr. Kimikazu Nakamura, Vice Chairman of Committee on China – Japan Relations of Keizai Doyukai (President & CEO of Sankyu Inc.)
(1) The highlights of Mr. Shen’s presentation were as follows:
The rise of China, today, can be viewed as the fifth wave of global economic growth, following the Industrial Revolution in the U. K. in the mid-18th century, the dynamic ascent of the U.S. in the late 19th century, the rapid growth of Japan and Western Europe in the mid-20th century, and the IT Revolution in the U.S. in the 1990’s. As China is making a rapid transformation from “China the World’s Factory” to ”China the Massive Market”, this is having a major impact on Japan and ASEAN economies. For now, the United States stands as the largest market for exports from Japan and ASEAN, but China will replace the U.S. in this role in 10 years. However, Chinese developments bring risks as well as opportunities. In the medium and long term, China appears likely to encounter four problems, namely, worsening of nonperforming loans, tensions in China – Taiwan relations, political democratization, and oil and energy supply problems. Despite these possible risks, it will be essential for Japan and ASEAN to tap into China’s vitality in order to develop their economies in the years ahead. From this point of view, too, it will be very important to make an East Asian Economic Community a reality. For this purpose, Japan and China need to take the leadership, and “passion and calmness” is required.
(2) The highlights of Dr. Akrasanee’s presentation were as follows:
A new paradigm is now replacing the old paradigm. Instead of 3 major economies – the U.S., E.U. and Japan, the East Asia-9, led by China, could grow by themselves and contribute to the growth of others. The East Asia-9 consists of China, Hong Kong, Taiwan, South Korea, and the ASEAN-5 (Indonesia, Malaysia, Philippines, Singapore, Thailand). Economic growth and intra-industry trade among EA-9 and Japan provide economic imperatives for East Asia economic cooperation (EAEC)
This would enhance the competitiveness of the group. Economic cooperation in East Asia is not exclusive of the rest of the world. The ASEAN and Japan business communities should strongly support the setting up of EAEC.
(3) The highlights of Mr. Alcantara’s presentation were as follows:
China serves as a significant export market for the ASEAN countries, but also poses a great competitive challenge to them. Hence it is important to improve competitiveness and address the need to restructure its industrial policies in order to focus on production of goods that have comparative advantage over China. ASEAN countries, which offer similar products, can adopt specialization and innovative differentiation to compete with one another in China’s market. It is important to work at identifying specific opportunities by linking up with Chinese business. China seeks an FTA with ASEAN. For ASEAN, multilateral economic cooperation can be a key to gaining a stronger foothold in China’s market and in being ensured of priority for China’s future investments abroad.
(4) The highlights of Mr. Nakamura’s presentation were as follows:
China is an opportunity for Japan and ASEAN and we should try to integrate China into East Asian economic unity. One challenge to integrating East Asian economies is that a stable, prosperous and open China is an indispensable element for the development of East Asia. Japan and ASEAN should make concerted efforts to establish a unified, transparent and fair EPA (economic partnership agreement). Japan and ASEAN should keep working hard on technical innovation, rationalization in industries, formulation of international specialization systems and risk diversification. Measures and reforms involving pain are necessary to proceed with economic integration. It is important to promote dialog within the countries in economic as well as political and diplomatic fields.
(5) Discussion
During the discussion period views were exchanged on the issues of population policies, the role of overseas Chinese and protecting intellectual property rights in China, as well as education. The key points of the discussion are set out below.
- Although China has a one-child policy, the population is predicted to reach 1.6 billion around 2030. Since population growth will bring both benefits and burdens for the economy, population policies are extremely important.
- Overseas Chinese account for 50 percent of inward investment in China and have played a large role in the reforms and opening-up that have taken place in China.
- Although protection of intellectual property rights in China is insufficient, the situation has improved since China joined the WTO. Different methods have been introduced in respect of measures to combat fake goods, such as lawsuits, linking efforts to stamp out imitations with cooperative initiatives, and raising product quality.
- The Japanese public and private sectors need to continue working cooperatively to raise standards of education in Asia.
4. Luncheon
At the Luncheon, Mr. Tadao Chino, President of the Asian Development Bank gave a speech about ASEAN and Japan – Economic Prospects and Challenges as follows:
GDP growth for developing Asia as a whole is projected at 7% in 2004 and 6.2% in 2005. Nevertheless, we should not lose sight of the huge problems and challenges. The first and foremost of these is undoubtedly poverty. Asia remains home to more than 60% of the world’s poor. In order to cope with poverty, ADB will continue to make efforts to improve infrastructure in the region.
Regional cooperation in monetary and financial areas offers a major route to reducing vulnerabilities to external shocks like the Asian financial crisis. Cooperation has expanded to cover information exchange and economic surveillance, currency swap arrangements like The Chiang Mai Initiative (CMI) and regional bond market initiatives. However, CMI swaps are currently bilateral in nature, so the region could consider establishing a centralized reserve pool. The U.S. and the IMF expressed negative views on the Asian Monetary Fund (AMF) idea proposed at the time of the Asian financial crisis, but since that time further progress has been made toward Asian economic integration and it may now be easier to gain the understanding of the U.S. and the IMF
In terms of bond markets, ADB launched the Asian Bond Online web site in May 2004. An Asian single currency offers a number of potential benefits for participating economies. Since cross-border movement of the elements of production, including people, is a prerequisite to a single currency, discussion of this matter should be conducted in conjunction with progress in FTA talks within the region. In addition, Asian countries currently have various exchange mechanisms, but it will be important to seek convergence among exchange mechanisms in order to work toward the goal of a single currency.
5. Session II - 1
TOPIC
Global Competitiveness of ASEAN and Japanese Enterprises
— Important Factors for Corporate Competitiveness
JOINT CHAIRPERSONS
ASEAN:
Mr. Hj Shazali Bin Dato Sulaiman, Partner of KPMG
Japan:
Mr. Terukazu Inoue, Vice Chairman of the Committee on Asia-Japan Relations of Keizai Doyukai (Advisor of Toyota Motor Corporation)
PRESENTERS
(1)
Dato’ Che Mohd Annuar Che Mohd Senawi, Chairman of Idaman Unggul Berhad (Malaysia)
(2)
Mr. Tan Eng Soon, Deputy Chairman of Tan Chong International Ltd. (Singapore)
(3)
Mr. Takemoto Ohto, Vice Chairman of the Committee on Asia-Japan Relations of Keizai Doyukai (Chairman of Nichirei Corporation)(Japan)
(1) The highlights of Dato’ Annuar Senawi,’s presentation were as follows :
Corporations wishing to be competitive must practice corporate governance and adopt its values as part of their corporate cultures. It is no longer sufficient for corporations to offer the lowest price, be the first to introduce new products, be able to maintain quality standards, etc. To be truly competitive these quality factors must be reinforced by a continuous drive to reinvent the future. Corporations have to invest in research and development of products, as well as meeting customer needs and taste. Corporations in ASEAN countries may need to seriously consider forming alliances with corporations from other ASEAN countries, Japan, or other developed economies. And instead of competing head-on they should compete at a different level as a long-term strategy to remain competitive.
(2) The highlights of Mr. Tan’s presentation on managing risks to
reinforce corporate competitiveness in a global marketplace were as follows:
Risk management is important for improving corporate competitiveness in a global market. Although risk cannot be eliminated completely, it can be managed to reduce the negative effects on the company and sometimes even used to its advantage. In the market there are many instruments to hedge risks, at a price of course. They are available from investment banks, insurance companies and hedge funds. For political risk, geographical diversification is the most appropriate method. While it is tempting to focus on reward and in forgetting to manage risks, the company could suffer a major setback and might take months and immense resources to recover. After that, its customers and staff might migrate to its competitors. Sometimes the setback may be so great that the company goes bankrupt.
(3) The highlights of Mr. Ohto’s presentation on quality control for food business were as follows:
Quality control is important for competitiveness. Since raw materials are affected by weather, environment and other factors, an interactive supply chain management throughout the entire process is called for that involves raw material producers, preliminary processors, processed food manufactures and distributors. With the advancement of technology, the key is how nations and enterprises set the quality control rules and standards, and how they observe and follow them. Since the private and public sectors of Japan have accumulated knowledge and know–how in regard to technology as well as rules and standards, they could probably support their ASEAN friends in this field. Japan and ASEAN countries should further cooperate in quality control to develop mutually.
(4) Discussion:
During the discussion period views were exchanged on the issues of customer needs, conformity with Japanese quality standards, risk management and corporate governance, human resources development, and dealing with low-cost goods made in China. The key points of the discussion are set out below.
- In order to strengthen competitiveness, it is important to make constant efforts to respond to customer needs.
- Since Japanese quality standards are high, an ability to achieve those standards will bring the ability to meet quality standards anywhere in the world.
- There are two key aspects to risk management and corporate governance: systems and the people who support them.
- There is a need to train and develop the people who will actually be responsible for risk management.
- Given the large amounts of low-cost goods coming out of China, Japan and the ASEAN countries will not be able to compete unless each country carefully considers its own comparative advantage. Problems such as protection of intellectual property rights, subsidies, etc. should be resolved on the basis of fair rules.
6. Session II - 2
TOPICS
Global Competitiveness of ASEAN and Japanese Enterprises
— Further improvement of Competitive Business Circumstances
JOINT CHAIRPERSONS
ASEAN:
Mr. Praphad Phodhivorakhun, Chairman of Kang Yong Group Chairman of the Federation of Thai Industries
Japan:
Mr. Shunsuke Takeda, Vice Chairman of the Committee on Asia-Japan Relations of Keizai Doyukai (Deputy President & CFO of ORIX Corporation)
PRESENTERS
(1)
Mr. Kenichiro Yonezawa, Vice Chairman of the Committee on Asia-Japan Relations of Keizai Doyukai (Senior Executive Vice President of Sony Corporation)
(2)
Ms. Ha Thi Thu Thanh, General Director, Vietnam Auditing Company, Ltd. (Member of Deloitte Touche Tohmatsu)
(3)
Mr. H. Kusnaeni, Executive Secretary of Indonesia – Japan Entrepreneurs Association
(4)
Mr. Anwar Pulukadang’s, President of PT Tripindo Patria
(5)
Mr. Kusumo A. Martoredjo, Chairman of Indonesia-Japan Economic Committee, KADIN
(1) The highlights of Mr. Yonezawa’s presentation on development of
management talent in the East Asia Region were as follows:
Japanese companies need to build management teams to cope with intensified global competition and the power shift to Asia. Specifically, it is essential for Japanese firms to develop Japanese managerial human resources who have a deeper understanding of Asia as well as Asian management. Since not enough Japanese companies place East Asian people in top and middle management positions, they should improve their human resources systems and the attitudes within their organizations so that mechanisms can be put in place to facilitate the recruitment of East Asian managers. These improvements must extend throughout the system, including recruiting practices, training, evaluation, and wages. The Japanese government is requested to eliminate the regulations that impede the hiring and exchange of management-level personnel as well as to promote these exchanges.
(2) The highlights of Ms. Ha’s presentation on how to develop SMEs and
improve training in Vietnam were as follows :
The demand to develop SMEs and to improve training for SMEs is increasing for two reasons: The starting-up of more enterprises and the increasing awareness by enterprises of the trend of integration. The contribution of 100, 000 Vietnamese SMEs to GDP is roughly calculated at 26%, and 71% of non-farm employment is provided by the private sector, overwhelming by some SMEs. Solutions to the issue of developing SMEs include improving the legal system, developing stock, land and labour markets, and clearly defining the role and the intervention level of government in providing training services for enterprises. Solutions to the issue of improving training for SMEs include developing new highly practical training products, strengthening capacity for training service providers, and improving access to advanced training by using the advantages of new technologies.
(3) The highlights of Mr. Kusnaeni’s presentation on the new perspective of business activities in Indonesia
under the new national leadership were as follows:
In September 2004, the Indonesian people made a historical political decision toward democracy by voting directly to elect their national leaders: President Susilo Bambang Yudhoyono with Vice President Jusuf Kalla. For business people, this is a real blessing because the new team is determined to and appears capable of systematically wiping out all obstructions to the practices of fair business and investment, such as bad security, weak law enforcement, corruption, illegal levies, irrational labour regulations, irregular taxation and red tape. This momentum should be utilized in a timely manner. We hope that this AJBM will become one vehicle for forming new ventures, as well as exploring and following up new business deals.
(4) The highlights of Mr. Pulukadang’s presentation were as follows:
Over the last seven years Indonesia has faced great difficulties and has lost confidence. However, Indonesia has potential in terms of factors such as human and natural resources. Now it is the right time for us to do business together utilizing natural resources and simultaneously provide training for human resource development.
(5) The highlights of Mr. Martoredjo’s presentation were as follows:
Indonesia is said to have widespread corruption and low efficiency. Although Indonesia is the only country still not totally recovered from the 1997 financial crisis, the economic situation there is continuing to improve. Indonesian business supports the new administration and has high expectations of it. With the cooperation of Japan and ASEAN, Indonesia is aiming for sustainable economic growth. With the addition of India, the ASEAN +4 grouping is a driving force for the world economy.
(6) Discussion :
During the discussion period, views were exchanged on problems with Japanese-style management and redistribution of production bases within ASEAN. The key points of the discussion are set out below.
- It is important to adapt Japanese-style management to local management methods. There is a need to aim for a universal market-driven management style.
- Regarding corporate management, the notion of “think global, act local” is not easy to put into practice. In particular, Japanese managers tend to be vague in their communication and this must be rectified.
- Japanese companies apparently are struggling with job-hopping by their local management staff, but they need to take action to offer improved career paths, etc.
- Redistribution of production bases is proceeding within ASEAN through AFTA (the ASEAN free trade agreement), but if protective measures are taken companies in ASEAN will not become globally competitive.
7. Dinner
At the dinner, H.E. Mr. Nobutaka Machimura, Minister for Foreign Affairs of Japan, expressed the following views.
People from the private sector such as yourselves have made an even greater contribution than governments to the development of Japan and ASEAN. Japan and ASEAN are partners under the motto of “walk together and develop together.” The bilateral EPAs we are working to conclude with various ASEAN countries, as well as the EPA with ASEAN as a whole, are evidence of that. I hope that the ASEAN-Japan Business Meeting, which is now convening for the 30th time, will play an even greater role in these developments.
8. Closing Session
Adopted at the Closing Session was a joint statement for the ASEAN plus 3 Summit to be held in Vientiane in late November 2004 to urge an early conclusion of the ASEAN Japan Comprehensive Economic Partnership Agreement and the establishment of an East Asia Economic Community. Also, an agreement was reached to hold the 31st ASEAN-Japan Business Meeting (AJBM) in Bangkok, Thailand from Wednesday 23rd through Friday 25th November 2005 and to invite to the 31st meeting as observers some businesspersons from China and South Korea. It was also agreed to hold a Steering Committee Meeting to discuss the preparations for the 31st AJBM in Malaysia some time between April and August 2005. Furthermore, it was agreed that the 32nd AJBM would be held in Indonesia in 2006.