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Meeting Report

  MAIN THEME:
 “Towards an Equitable Framework for Regional Trade and Enterprise: Counting the Social and Environmental Cost of Economic Growth”

  November 13th - 15th 2006: MEETING SUMMARY

1. Meeting Outline

Businesspersons from all ten ASEAN member countries and Japan as well as China and Korea met in Jakarta, Indonesia, from November 13th(Monday) through 15th (Wednesday), 2006 for the 32nd ASEAN-Japan Business Meeting (AJBM), focusing on the theme of Towards an Equitable Framework for Regional Trade and Enterprise : Counting the Social and Environmental Cost of Economic Growth.

The Meeting consisted of a Welcome Reception, an Opening Session, three Sessions of Panel Discussion, a Luncheon, a Closing Session and a Dinner.

All participants were invited by Vice President Jusuf Kalla to attend the Opening Session held in Vice President Palace on the morning of November 14, 2006.

2. Welcome Reception

At the Welcome Reception, Mr. Nicholas Tandi Dammen, Deputy Secretary General, ASEAN gave a speech about Economic Partnership between ASEAN and Japan. The ASEAN ? Brand to brand Complementation (BBC) and the ASEAN ? Industrial Joint Venture (AIJV) and the ASEAN Industrial Cooperation (AICO), those cooperation schemes are still being heavily utilized by Japanese Companies. The ASEAN-Japan Comprehensive Partnership (AJCEP) is unique in the sense that it is built on bilateral EPA's between Japan and ASEAN member countries. The AJCEP could mean more Japanese investments. In closing Mr. Dammen stated "Carry On". The governments need your valuable inputs to be heard.

3. Opening Session

CHAIRMAN AND CO-CHAIRMAN

CHAIRMAN:

Mr. H. Kusnaeni, Representative of The Indonesia National Committee for the AJBM (Executive Secretary, Indonesia-Japan Entrepreneurs Association)

CHAIRMAN of the Organizing Committee of the 32nd AJBM:

Mr. A.M. Kusumo, Chairman of Indonesia-Japan Economic Committee, Indonesia Chamber of Commerce and Industry (Chairman of PT. Catur Yasa)

CO-CHAIRMAN:

Mr Shoei Utsuda, Chairman of the Committee on Asia-Japan Relations of Keizai Doyukai (President and CEO, Mitsui & Co., Ltd)

SPEAKERS

(1)

Opening Remarks by Mr. A.M. Kusumo, Chairman of the Organizing Committee of the 32nd AJBM

(2)

Responding Remarks by Mr. Kakutaro Kitashiro, Chairman of Keizai Doyukai (Chairman, IBM Japan, Ltd.)

(3)

A Message of H.E. Mr. Shinzo Abe, Prime Minister of Japan, delivered by H.E. Mr. Shin Ebihara, Ambassador of Japan to Indonesia

(4)

A Keynote Speech by Vice President of the Republic of Indonesia, H.E. Mr. Jusuf Kalla

(1) Opening Remarks by Mr. A.M. Kusumo:

Theme and sub themes of The 32nd AJBM are very relevant. The road to an equitable framework for trade and enterprises needs to first eliminate disparity between the developed and the less developed. Not to be forgotten, while addressing the issue of environments to take into mind, the people who are displaced or marginalised in the prices of economic development and growth.
The SME's problem has been discussed over and again since they are important and substantial numbers of people involved. It is only proper that ways and means to empower the SME's.

Hopefully the 32nd AJBM will successfully produce a kind of scheme that can be accepted and implemented by all parties concerned in the nearest future.

(2) Responding Remarks by Mr. Kakutaro Kitashiro:

In order to overcome the challenges, the East Asian countries must promote domestic economic structural reforms and incubate new businesses as well as to further establishment of democratic political systems. They also need to promote FTA/EPA among them. While there is a danger of a rise in nationalism concerning resources around the world, collaboration among nations will ultimately serve the national interests of all nations. It is Japan's future responsibility to pass on to the other East Asian nations its post-war experiences of both success and failure in responding to such issues as economic disparity, environmental concerns and an aging population.

(3) A Message of Prime Minister of Japan, H.E. Mr. Shinzo Abe:

Japan has consistently maintained and strengthened its relationship with ASEAN. Under his administration starting in September he determined to continue this heritage by developing the relationship even further. Japan actively supports the acceleration of ASEAN integration and the efforts to realize an ASEAN community through such measures as narrowing the development gap within the region. The relationship between ASEAN and Japan is a crucial element in the network of cooperation that connects the countries of East Asia.

(4) A Keynote Speech by Vice President:

H.E. Mr. Jusuf Kalla expressed the concern of Indonesia of the high rate of unemployment and the problem of alleviating poverty. To address these problems, needless to say that Indonesia needs investment. The AJBM hopefully will induce investors and particularly participating businesspersons of the AJBM to come to invest in Indonesia. The government of Indonesia will do its utmost to create a conducive business climate.

The Vice President suggested that ASEAN cooperation be developed not only with Japan but also with China and Korea. The Vice President wished the participants to have a fruitful meeting and those from overseas a pleasant stay in Jakarta.

4. Session I ? Panel Discussion

TOPIC

Regional Cooperation to Reduce the Economic Disparity between the Developed and the Less Developed

CHAIRPERSON

Mr. Akihiko Kaji, Vice Chairman of the Committee on Asia-Japan Relations of Keizai Doyukai (President & CEO of JALPAK, Co., Ltd.)

PANELISTS

(1)

Mr. Anwar Pulukadang, President Director, PT. Tripindo Patria (Indonesia)

(2)

Mr. Shunsuke Takeda, Vice Chairman of the Committee on Asia-Japan Relations of Keizai Doyukai (Vice Chairman & CFO of ORIX Corporation)

(3)

Dato' Haji Mohamed Iqbal, Executive Director, Farlim Group Bhd (Malaysia)

COMMENTATOR

(1)

Mr. Soo-Chul Lee, Executive Vice President, Samsung Corporation

(2)

Ms. Wong Chian Voen, Regional Manager, Customs & Trade, Bryan Cave International Trade Pte. Ltd.(Singapore)

(3)

Dr. Narongchai Akrasanee, Chairman, Board of Executive Directors, Export-Import Bank of Thailand

PANELIST (1) Mr. Anwar's views were as follows:

Disparity means difference in income which is a product of competition in people's activities in acquiring profit. It is not significant when it served as a booster for development but when it passes the level of survival, it will become destructive. They have to be reduced by developed enterprises refraining from monopolistic attitude; government and NGO's should create training centres; the government and the developed ones provide access to market, provide access to financial and capital market. It is hoped that business people will participate in business cooperation.

PANELIST (2) Mr. Shunsuke Takeda's views were as follows:

Without redressing the economic and institutional disparity, an East Asian community will be for naught. In terms of the economic disparity, Keizai Doyukai proposed the concept of an East Asian Regional Development Fund. While Japan provides Official Development Assistance through multi and bilateral channels, this fund can also be considered a form of multilateral assistance. On the other hand, it is an urgent task in reducing institutional disparity to maintain the stability of currency within the region by increasing the swap limits of the current Chiang Mai Initiative as well as the development of the Asian bond market. Another institutional task is the creation of a new legislative system to assist a market economy.

PANELIST (3) Dato' Haji Mohamed Iqbal's views were as follows:

Regional cooperation should be to reduce disparity. Disparity is more than the difference in income structure. Globalization creates income disparity resulting in unemployment and lack of business opportunities. Apart from income disparity, there is also knowledge disparity; some have access to knowledge some do not. There is also space disparity due to geographical location for example in Malaysia. The west coast is better developed than the east coast. With the advancement of IT, people can see other places that have better amenities than what they have. This may induce dissatisfaction in their mind. Take note that Malaysia has the world standard infrastructures, but income disparity still exists. The 9th Malaysia Plan, implemented under the new Prime Minister is focusing this issue of income and other disparities.

COMMENTATOR (1) Mr. Lee's comments were as follows:

South Korean businesses are also interested in venture capital especially in IT areas. Internet is a very useful way to narrow disparity among the developed and the less developed regions. Institutional disparity in monetary area should be redressed to fend off re-occurrence of Asian financial crisis. Cultural exchange is also important.

COMMENTATOR (2) Ms. Wong's comments were as follows:

Comments on Dato' Iqbal's presentation and agrees that IT communication enable people to see what they lack. Mr. Anwar analyses concerns the micro level, while Mr. Takeda's concerns is on the macro level such as institutional disparity. Institutional disparity reflected in the disharmonization of regulation. Due to this, MNC (Multi-National Company) or SMEs both have difficulties in doing business. There's a need for a concrete program that can reduce disparity. A question arises about the proposed East Asia Development fund ? how will it be implemented.

COMMENTATOR (3) Dr. Narongchai's comments were as follows:

Every country has to address the disparity problems first. Mr. Anwar proposes moral proposition that is big company should not be monopolistic. Income disparity is product of bureaucracy, since bureaucracy is rent seeking rather than promote development. We should look into commercial proposition but very difficult to find and yet after the energy crisis there is a need for energy security and this need opens up opportunities for investment. For example, Thailand and China need energy supply and this open the opportunity to set up facilities for producing energy and its alternatives. Developing energy resources will open ways to increase income of the people in surrounding area. For example Laos that supply electricity to Thailand may one day become richer than Thailand. Take notes that millions of funds are invested in the west particularly USA. We hope that regional fund in the future will be invested in regional bond.

Discussion

During the discussion period views were exchanged on the issues of

5. Luncheon

At the Luncheon, H.E. Mr. Mahendra Siregar, Deputy Minister of Coordinator Minister for Economic Affairs, gave a speech about the gap between government perception on the importance of ASEAN -Japan economic relationship, and the corporation's view and decision on that matter. The obvious general question is of course, are we doing enough to address this gap? First questions are: How to effective has ASEAN improved its competitiveness as a group. How disciplines are we in ASEAN in implementing our own plan to achieve our own targets. The second key question is: How effective does ASEAN build partnership with major economic partners? The challenge on this matter is very clear: Progress in bilateral EPA should not detract us away from progress in completing Japan? ASEAN EPA. The third key question is: How we do improve the business climate in our respective countries? The challenge on this matter is obviously: How committed are we in carrying out this reform agenda to improve the overall business climate. Are those enough to address the gap between "The ASEAN and Japan leaders's vision and Japan business view on ASEAN as investment destination?"

6. Session II ? Panel Discussion

TOPIC

Closer Economic Partnership between ASEAN and Japan

CHAIRPERSON

Indonesia:

Mr. Suryo B. Sulisto, Commissioner, PT. Satmarindo Group

PANELISTS

(1)

Mr. Shiro Sugata, Vice Chairman of the Committee on Asia-Japan Relations of Keizai Doyukai (President & CEO, USHIO Inc.)

(2)

Mr. Maung Maung Oakka, Manager, Administration Department of Zaykabar Co. Ltd.(Myanmar)

(3)

Mr. Thomas Aquino, Undersecretary for Ministry of Trade and Industry (Philippines)

COMMENTATOR

(1)

Mr. Widihardja Tanudjaja, President Director, PT. Berlian Laju Tanker, Tbk (Indonesia)

(2)

Mr. Van Sou Ieng, Chairman, The Garment Manufactures Association of Cambodia

(3)

Dato' Haji Mohamed Iqbal, Executive Director, Farlim Group Bhd (Malaysia)

PANELIST (1) Mr. Sugata's views were as follows:

The Japanese corporate environmental leaders are also highly profitable because they induce innovation. It is important to implement environment management. Japan has a duty to accurately convey the environment management knowledge to ASEAN countries. Fortunately Japan and ASEAN have built strong ties over the years while numerous connections are being established through economic and business exchanges. Japanese companies can also individually contribute by sharing advanced expertise in the form of establishing ecological factories and the introduction of environmental technologies with ASEAN. The conclusion of an FTA/EPA between Japan and ASEAN will lend impetus to this trend.

PANELIST (2) Mr. Oakka‘s views were as follows:

He highlighted on economic partnership between ASEAN and Japan. Closer economic partnership between ASEAN and Japan should be an accelerator. Political trusts and confidence building among the stakeholders in the region is the first necessary precondition. Economies are interdependent. People concerned should be educated with respect to the need faced up with the challenges and opportunities rising out the present state and rapid rate of globalization. Japan supports the GMS (Greater Mekong Subregion) development program, which is a daring, dynamic and holistic approach to the GMS regional development.

PANELIST (3) Mr. Aquino's views were as follows:

He highlighted the EPA between Philippines and Japan. He elaborated on the ASEAN competitive reality. Southeast Asian countries are pursuing bilateral agreements with Japan, under the Framework for Comprehensive Economic Partnership (CEP) between the ASEAN and Japan. From the ASEAN perspective, in 2005 Indonesia accounted for 28.7% of total ASEAN exports to Japan; Thailand accounted for 21.4%; Malaysia, 20.2%; and the Philippines 10.6%. Under the umbrella of an ASEAN- Japan framework for CEP, RP and Japan economic interests can be further advanced under a focused bilateral agreement.

COMMENTATOR (1) Mr. Tanudjaja's comments were as follows:

Japan's experience in a catastrophe like "Minamata" made it aware of the importance of the environment. We might have to learn from Japan how to handle environmental problems, such as Industrial Pollution, and in city environmental problems such as garbage disposal and exhaust gas, that become serious problems to overcome. Looking into the GMS (Greater Mekong Subregion), it is a great market that has big buying power to attract investors. This in turn creates demand for manpower, capital and a long term program.

COMMENTATOR (2) Mr. Ieng's comments were as follows:

Dr. Aquino's presentation aroused admiration for the private sector that it can assert its influence to make the government officials act. Mr. Ieng looked into the problems in closing agreement with Japan such as:
a. The Level of development may not meet Japan's expectation
b. FTA's and EPA's are a bit slow, compared with China
c. Japan should use the approach of bilateral agreements.
Regarding environmental problems, Mr. Ieng proposed in order to create awareness of environmental problems, environmental matters should be put into schools' curriculum.

COMMENTATOR (3) Dato' Haji Mohamed Iqbal's comments were as follows:

Environment awareness is important. However EPA and FTA forge direct trade and investment links, for which business environment is more the focus. Stabilization should be maintained by each country and take measure to strengthen the business relationships. Issues in sensitive areas may be avoided for early harvest. Failure of WTO and FTA should not deter Japan from strengthening relationship with ASEAN.

Discussion:

During the discussion period views were exchanged on the idea of misuse of funds in investment. It is up to the citizens of each country to look into the matter. Ms. Wong agrees that certain rules and regulations hinder industries and trade. What matters is the objective behind those rules. Free Trade should abolish these hindrances. Problems of pollution arises, such as in Cambodia, which originated from the electric plant and rice mills. In generating power, they use rice husks. NEDO (New Energy Development Organization) of Japan is looking to improve technology in using husks for generating power.
A recent trend to preserve energy is to look for cheaper energy sources and its alternatives.
In Cambodia, pollution came from a traditional way of the people to use garment waste for home cooking. This practice is hazardous to health. The GMS Region is importing second hand equipment that might in the long run cause the GMS region to become the dumping ground of other countries' waste. Ways to stop this must be found.

7. Session-3 - Panel Discussion

TOPIC

Developing Small Medium Enterprise in FTA Era

CHAIRPERSON

Philippines:

Mr. Gerard B. Sanvictores, Partner, SGV & Co.

PANELISTS

(1)

Mr. Umar Juoro, Commissioner of Bank International Indonesia

(2)

Mr. Akira Kiyota, Deputy Chairman of the Board, Executive Officer, Daiwa Securities Group Inc. (Japan)

(3)

Bunluasak Pussarungsri Ph.D., Vice President, Bangkok Bank, PCL (Thailand)

COMMENTATOR

(1)

Mr. Hj. Shazali bin Dato Sulaiman, Partner KPMG (Brunei)

(2)

Mr. Prachit Sayavong, Managing Director, Societe Mixte De Transport Co. Ltd. (Laos)

(3)

Mr. Luong Trung Hieu, Director Marketing & Hotel Management Department of Saigon Tourist Holding Company (Vietnam)

PANELIST (1) Mr. Juoro's views were as follows:

As a consequence of globalization and regionalization of the economy, developing SMEs can no longer be implemented in a closed economy, but it should be in an open economic environment. This means that competition and integration of the larger companies, domestic as well as international companies, would be higher. SMEs will remain the main contributor for the economy in terms of GDP contribution as well as employment. There is a need to analyze efforts, to develop the linkage between SME's and large corporations. The finance sector, especially banking, should open access to SMEs.

PANELIST (2) Mr. Kiyota's views were as follows:

He spoke about Japan's SME management strategies amid the proliferation of FTAs, which will promote positive effects in a number of areas. Japan's SMEs must revolve around two key concepts ? Japan's low birth rate and aging population and globalization. The Japan's current demographic trend progresses, companies will face pressure to consider overseas options in terms of securing both adequate supply and demand. While Japan's population is shrinking, the world's is not. This leaves Japanese firms with every incentive to push the globalization process forward. Japan's SMEs are enhancing their capacity for international development, positioning them to fully capitalize on Asian growth.

PANELIST (3) DR. Bunluasak's views were as follows:

He talked about the SME's Promotion Strategy in Thailand. As follows:

COMMENTATOR (1) Mr. Hj. Shazali's comments were as follows:

Brunei has only 6000 SMEs. Brunei relies on oil and gas sector to develop SMEs and government also gets them involve in infrastructure and government projects. Japan has been able to develop their SMEs through MNCs and Brunei should try to emulate Japan's success. Government and banks often criticized for not helping with financing SMEs but entrepreneurs have to understand their business to have access to banking facilities. Brunei must do their part and have no domestic demand and so an FTA is welcome since Brunei has to look outside the country for its market. Brunei tries to attract investors, by providing facilities such as low taxes, cheap land and thereby, hope investors will create business for exports. Governments should provide adequate training of human resources and open financial access to SMEs.

COMMENTATOR (2) Mr. Sayavong's comments were as follows:

Presentation of Mr. Umar Juoro reveals that SMEs are facing many problems. This might be because they are farmers who became and many of them do not know how to run business. They have limited knowledge, lack of finance, lack of support and mostly marketing based on commissions. Most governments try to promote SMEs. Hopefully cooperation between Japan and ASEAN will open possibilities for the development of SMEs. Partnership with big companies will improve productivity.

COMMENTATOR (3) Mr. Hieu's comments were as follows:

We can easily recognize that SMEs are a critically important sector in all ASEAN economies in terms of employment, income, trade, global and regional production networks and in reducing poverty. For this reason, capacity building for SMEs must remain a priority, and removing regulatory obstacles to SME growth, improving access to financing, technology and information are important to the development of SMEs particularly in some emerging economies.

Vietnam's SME have important contribution to the creation of the employment opportunities and an accumulation of domestic capital. The government supports the SMEs by providing a suitable legal framework, conducive business climate, and credit assistant. Vietnam has set up planning from 2001 up to 2010 to promote the development of SME. In 2003, the government established the SME's Promotion Board.

Discussion:

During the discussion period, Japan highlighted the history of SME in Japan. 99% of establishment are SMEs and 80% of workers are employed in the SMEs. Japanese big corporations work together with the SMEs. The biggest worry in Japan now is the population decline. Japan praised the promotional efforts in Thailand. Mr. Iqbal from Malaysia informed the meeting about the SME's global exhibition in Malaysia organized by Malaysian Japan Economic Association. The problem faced by the SMEs is that they might know the technology, but they do not know how to find partners from overseas. So the meeting hope that Keizai Doyukai will use its good office for Japan to extend cooperation and support in this matter to ASEAN.

8. Closing Session

At the closing session, Mr Shoei Utsuda, Chairman of the 32nd AJBM indicated as follows:
Regarding the disparity issue, it should first clarify its definition and also it is important to take regulatory and institutional disparity into consideration. As for ASEAN-Japan economic partnership, it was found out through discussion that environment conservation constitutes a very important element of the partnership. Japan's SMEs will face a lot of difficulties with their businesses, while ASEAN countries want to promote SMEs. One idea for solving these problems would be the ASEAN companies's M & A of Japan's SMEs.

Mr. Utsuda introduced his successor Mr. Toshitaka Hagiwara, Chairman of Komatsu Ltd, who will be the Chairman of the 33rd AJBM.

Mr. H. Kusnaeni, Chairman of the 32nd AJBM, closed the meeting by saying that he worked together with his colleagues to establish the Indonesia National Development Associates modelling after Japan's Keizai Doyukai in June this year to host and organize the 32nd AJBM.

Also, an agreement was reached to hold the 33rd ASEAN-Japan Business Meeting (AJBM) in Japan from Wednesday November 7th through Friday 9th, November 2007. Furthermore, it was agreed that the Steering Committee Meeting is scheduled to be held to discuss the preparations for the 33rd AJBM in July 2007, in Myanmar, and the 34th AJBM will be held in Brunei Darussalam.