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Meeting Summary

  MAIN THEME:
  “Strengthening the Effectiveness of ASEAN and JAPAN Cooperation - Toward a New Economic Growth Strategy”

1. Outline of Meeting

Business persons from ASEAN and Japan met in Ho Chi Minh, Vietnam, from September 30 (Wednesday) to October 2 (Friday), 2009 for the 35th ASEAN-Japan Business Meeting (AJBM) and discussed key issues about ASEAN and Japan under the theme “STRENGTHENING THE EFFECTIVENESS OF ASEAN AND JAPAN COOPERATION - TOWARD A NEW ECONOMIC GROWTH STRATEGY”.

The meeting consisted of an official opening ceremony and three sessions: ‘Global Economy Crisis: Challenges and Solutions for the Business Sector’, ‘A New Economic Model for ASEAN and Japan’, and ‘Toward A Meaningful Operation of Bilateral and Multilateral EPAs between ASEAN and Japan’.

2. Opening Session

We hope 35th AJBM will be a crucial step forward in consolidating diversified cooperation between ASEAN and Japan particularly in trade and investment. In order to further develop economic relation between ASEAN and Japan, ASEAN need to work on not only asking governmental support but also enhancing its service quality.

An era of asking a government to resolve everything is over. This is the reason that we business leaders of ASEAN and Japan convene even at the time of economic hardship. We business persons have to build cooperative relations with various stakeholders, tackle those global issues as our own problems, and become the driving force to solve them. And these are the objective that we try to achieve. Responsible private sector cooperation with government and proactive private sector participation are essential.

Since the relationship between ASEAN and Japan has established in 1973, this relationship has been further consolidated and developed in every field, particularly in the fields of economic, trading, and investment cooperation. AJBM serves as the motive to promote the development of potential trade and economic relations between ASEAN and Japan.

Japan and ASEAN share a close relationship based on a long history of friendship. It is expected that ASEAN will contribute to the global economy by strengthening cooperation as it liberalizes trade and investment, and improves economic efficiency. Economic Partnership Agreement between Japan and ASEAN, one of this meeting’s themes, is a part of such international efforts. From the viewpoint of deepening the Japan-ASEAN partnership, I believe this meeting provides a very valuable opportunity for business leaders from each country to discuss how to promote Japan- ASEAN relations.

Session 1: “Global Economy Crisis: Challenges and Solutions for the Business Sector”

Chairperson:

Panelists:

World economic growth slowed to 3.2% in 2008 from 5.2% in 2007. In 2009 Q1, the emerging and developing economies rebounded better than the advanced economies and the world economy. In case of Malaysia, its 2009 Q1 GDP shrank 6.2% and its 2009 GDP focast is expected to be between -5% to -4%.
The Malaysian government challenge currently is aimed at maintaining strong business and consumer confidence through various measures. These include its economic stimulus packages, pump-priming domestic consumption and promoting various private financial initiatives, including the liberalization of its financial service sector.
The AJCEP framework is now in place and the private sector of ASEAN and Japan are encouraged to strike win-win solutions and seize the emerging opportunities under this framework. Toward this end, ASEAN should quickly innovate and upgrade its manufacturing production capabilities with efficiency and quality in mind. To do this,, it must address issues concerning energy saving/efficiency environment friendly practices and IPR issues as well as upgrading human skills.
ASEAN would like to urge Japan, with its strong financial and technological resources to engage constructively with its ASEAN partners to make ASEAN the next engine of world growth.

Whether before, during, or after the global economic crisis, Japan was and will still remain an important market and economic partner for the Philippines. Whether or not the worst of the economic crisis is already over, it is therefore wise to continue to foster initiatives, exploit opportunities, and cultivate partnerships between Japan and the Philippines, with the goal of spurring mutual economic growth and development.
There are five (5) areas that the Philippines and Japan can focus on, not only to improve business and trade relations, but also to develop their economies. These are:

  1. Exploring and exploiting opportunities under the Japan Philippines Economic Partnership Agreement (JPEPA);
  2. Increasing the deployment of Philippine seafarers to Japanese shipping vessels;
  3. Developing and enhancing the healthcare services of Philippine nurses and caregivers for Japanese patients and elderly citizens;
  4. Promoting tourism in the Philippines; and
  5. Enacting laws in both Japan and Philippines to support business and trade between the two (2) countries.

There are different views on the impact of the global financial crisis on the Philippines. Some economists and businessmen believe that the global financial crisis had minimal impact on the Philippines as compared to other neighboring countries, while others believe that there is a delayed impact on the Philippines economy given its structure, but a significant impact nonetheless.
Instead of focusing on the effect of the global financial crisis on the Philippines and whether the Philippines has recovered from such crisis, we may consider taking the position stated by Professor Ram Charan, Ph.D. in his article “My Recovery Playbook” published in the August 2009 edition of Fortune Magazine. According to Professor Charan, instead of waiting for the normal economic situation to return, we must accept the present economic situation as the “new normal”.
To quote Professor Charan, “No matter what business you are in, no matter what you've done till now, there is still time to change your attitude from that of fighting for survival to seeking opportunities for growth. Face the tough decisions, but don't let cutbacks stop you from seeing the windows of opportunity that are suddenly open. Think creatively. Act aggressively. We can't predict with certainty when the broader economy will recover. But your company's recovery can begin whenever you're ready.”
Japanese and Philippine businessmen should, therefore, act now and aggressively exploit the opportunities that are available today with the goal of improving business and trade relations between Japan and the Philippines.

The impact of global economic crisis has not led to major one in Myanmar. The reason for this is because it is illegal for Myanmar people to hold US dollar and the banking services are very poor. It is a place where cash is king.
The challenges facing businesses in Asia is new markets and more importantly access to new markets. It is surprising to learn that the emphasis on trading amongst ASEAN and Asian countries is very small and the investment within each other is even smaller. Could this be because of the unfound confidence and high regards for US dollar, it is obvious that this confidence will not go away easily, there has to be a starting point. The presentation shows an interesting starting point for the reliance on the US dollar to start ending and highlights the fact that “The US major export is its debt.”

Magnitude of the global economic crisis for ASEAN countries was relatively small. After the experience of the Asian currency crisis, ASEAN countries could protect themselves against speculative investment with strict foreign exchange control and inward capital investment control. Correlation between Asian export and the US economy is declining. The weight of ASEAN countries’ domestic demand is becoming increasingly higher while the weight of export is falling. Expansion of export has led to higher income and subsequently expanded consumption. Presumably Asian consumption will drive the future global economic growth.
Currently most of ASEAN countries are experiencing over-saving situation since social safety net in Asia is immature. Therefore Asian countries’ foreign currency reserves are indirectly reinvested into Asian countries through the United States. Enhancement of social safety net is important to grow out from over-saving culture. Over-saved reserves should be mobilized within ASEAN i.e. over-saved reserves in Asia should be directly invested within ASEAN.
Regarding to the relationship between ASEAN and Japan, it is needed to begin a new phase of cooperation such as sharing know-how in bullet train projects, green technology, waterworks, and sewerage systems as well as receiving care workers and nurses in line with EPA.

Comments

Session 2: “A New Economic Model for ASEAN and Japan”

Chairperson:

Focusing on a handful sectors does not really accelerate the economic process in Cambodia. As a result, the Royal government of Cambodia has pushed and facilitated some other major areas like construction industry, banking investment, agriculture, energy and so on. Furthermore, all of these investment projects and Special Economic Zones do not exist only in the city, but also in some bordering areas which benefit the local residents. Out of these above areas, agriculture is seen as a major one due to the availability of farmland and Cambodian manpower who are currently working on farming. At the same time, energy industry is also a key factor to supply the increase in demand, especially in urban areas. With financial assistance of which Japan is a major donor, transportation system has been well improved through the country to promote the import and export.
Development and economic Cooperation with other countries including private sectors in terms of bilateral or multilateral agreement are constantly on the government’s agenda such as taking part in this 35th ASEAN-Japan Business Meeting. By the mutual dialogue today, we hope that all ASEAN members and Japan will continue (1) to facilitate trade in goods and services among the Parties; (2) to improve investment opportunities and ensure protection for investments and investment activities; and (3) to establish a framework for the enhancement of economic cooperation among the Parties with a view to supporting ASEAN economic integration as stated in the Agreement on Comprehensive Economic Partnership among Japan and Member States of ASEAN (AJCEP) in 2008. Moreover, we wish to see Japan and other developed ASEAN members will provide both financial and technical assistance as well as direct investment into Cambodia, Laos and Myanmar whose economic wealth remains weak.

Top executives need to effectively manage supply chain challenges as we move towards a borderless global economy, and at the same time, drive sustainability efforts in the face of growing global environmental awareness. Environmental issues can no longer be ignored in the face of mounting pressure from key stakeholders and stricter restrictions from regulatory bodies. Sustainability is a core part of our business strategy and our daily business. Responding to climate change is a key objective. We publish our annual carbon footprint and targets. Our 2008 footprint was published in our Sustainability report in May 2009. We have committed to improving our CO2 efficiency by 30% by the year 2020. DHL has set itself an aggressive, aspirational “Sustainability” goal - reducing both direct and indirect emissions over 3 phases; 1) reduce, 2) eliminate and 3) leverage our scale to reduce. To further sharpen our “Sustainability” agenda, The Neutral Group was established to focus on reducing our environmental impact, enabling us to take a 3-pronged approach towards reducing our carbon footprint across our operations, globally.

ASEAN economies have been strongly bouncing from the damage caused by global financial crisis. The development level of each country is different, but all the member countries have been cooperating toward mutual development. Japan’s contribution to ASEAN economies has been enormous and therefore Vietnam thinks highly of the development process of Japan and believes that there are a lot to learn from it. Japan’s development is characteristic in that its government and private sector pursued economic success side by side.
There is a lack of electricity in Vietnam, and Vietnamese government is not competent in meeting the demand. Vietnam needs cooperation from private sector and more detail, financial supply from other countries. Japan is one of them.
What we have learnt from Japan’s development process is that we cannot sacrifice environment for our economic growth. Vietnam is determined to concentrate on developing high-quality and safe technology.

After the U.S. and EU economies worsened by the global economic crisis and exports from East Asia have been deeply affected as its consequence, East Asia needs the expansion of our own internal market in considering our new economic model. This conversion may not be easy because currently 70% of consumer goods produced in Asia are exported to the U.S. and Europe, while in EU they consume 84% of their consumer goods within their own market.
However, at the same time, East Asia possesses a good foundation for consumption-led development; high population growth rate, rapid progress of urbanization, the improvement of literacy rate, rapid growth of China, and a number of potential investment opportunities in ASEAN.
To take the advantage of all those factors and develop domestic consumer markets, East Asian countries need to facilitate economic infrastructures such as the expansion from ASEAN+1 FTA net to mutual FTA with each +1 country, development of intra-regional logistics, strong currency and financial systems, provision of corporate accounting and corporate legal systems, development of consumer financial markets, modernization of distributions, and the structuring of social security system.

Comments

Session 3: “Toward A Meaningful Operation of Bilateral and Multilateral EPAs between ASEAN and Japan”

Chairperson:

Panelists:

Mr. Cecil Leong of Bryan Cave International Trade provided the AJBM participants with an overview of the state of ASEAN-Japan trade relations, a status report on the bilateral and multilateral EPAs/FTAs that are concluded and/or about to be implemented. In six short year, seven bilateral EPAs and the ASEAN-Japan Comprehensive Economic Partnership Agreement (AJCEP) have been concluded, with the Vietnam-Japan EPA entering into force October 1, 2009.
The AJBM was informed that whilst most EPAs will include trade in goods, trade in services, investment and a dispute settlement mechanism, issues like movement of natural persons, intellectual property, government procurement, SPS/TBT, etc. could be excluded. Even the AJCEP’s talks on trade in services and investment liberalization have not been materialized although provided for under the AJCEP.
Many obstacles are still present preventing a higher utilization of EPA/FTA benefits. Lack of awareness and inflexibility in rules in the FTAs (e.g. back-to-back COs, third-party invoicing) are common problems encountered. Also, with so many agreements and different rules, it can be very complicated for businesses to truly appreciate the value of such agreements. Mr. Leong encouraged the business community, especially MNCs with a broad manufacturing platform and complex supply chain, to review the EPAs/FTAs available as a cost-saving opportunity.

Indonesia Japan Economic Partnership Agreement (IJEPA) is quite expansive and comprehensive and in short there are three pillars namely Facilitation, Liberalization and Cooperation. To define what and how the IJEPA can operate and be implemented for mutual benefits, several measures have been taken. To tackle the problems concerning investment, a committee has been set namely The Strategic Investment Actions Plan. It is noted that around 118 action plan have been laid out that have to be resolved by 4 Working- Group that covers Tax and Custom, Labor, Infrastructures and Competitiveness that includes SMEs’
Aside of that there is also a Joint Forum for Investment, a bilateral forum between Japan and Indonesia with a task to create a conducive climate for investment in Indonesia that being set out by the SIAP. The main objective is to induce greater flow of investment from Japan to Indonesia in the framework of creating employment as to eradicate poverty. Specifically for infrastructures a scheme is created and named Public Private Partnership to accelerate investment in infrastructures. There are many fields for cooperation for capacity building. It is well known that the small and medium business entities have a very strong resilience during the 1997 economic crises. Nonetheless for really empowering them, they do need not only support of capital investment, but also guidance in management and how to achieve optimum efficiency.
The undeniable fact is substantial support is required to strengthen the supply-side capacity of the poorer members of ASEAN - including for example, the building of trade-supporting infrastructure in transport, energy and telecommunications, so that they can take advantage of integral markets while narrowing the income and other development gaps within ASEAN and within ASEAN and Japan. By designing proper action, dynamic gains can be achieved by generating greater trade and investment among countries concerned- through liberalization, as well as facilitation of trade in goods and services, cooperation in capacity building and through domestic structural reforms.

ASEAN need to catch up with the world’s changes and keep pace with new technologies that pursue friendlier environment. Transfer of high-quality environmental technology from Japan and governmental initiative are key elements to improve the environment. The future meetings need to be more focused on environmental issues and sustainable economic development, both regional and global.

Global economic crisis that hit Toyota badly has forced us to review the long-established approaches in the South East Asia and to develop more deeply integrated business operations in the era of FTA / EPA.
For the economic prosperity in the region, it is of great importance to remove the bottleneck that the exporters and their trade partners face when they apply for the preferential tariff under FTA / EPA.
By hearing the voice from FTA users, the related governments are recommended to improve the administrative procedure that prevents the trade under FTA from penetration, while the private sector need to make an all-out effort to fully utilize the privileges of FTA / EPA.
The private sector must acknowledge the fact that the preferential tariff under FTA will enlarge customers’ interest and therefore, the company management must seek the possibility to make full use of FTA / EPA between ASEAN and Japan as well as other countries together with their trade partners. Expecting the automotive markets in ASEAN countries to recover firmly, Toyota is engaged to go back to the basis; that is to offer customers attractive models with affordable price in the region.
Both governments and private sector work together and that enables to deepen the economic relationship between ASEAN and Japan.

Commentator:

Protection of intellectual property right has a critical importance for every country and especially for ASEAN. It will lead to trade increase and investment attraction because it gives a sense of security for potential traders and investors. Also following the rules of IPR has been an international norm in such places as WTO.
To promote the protection of IPR further in the region, I propose four points; 1) educational activities to enhance public awareness of the importance of intellectual creation, 2) establishment of IPR operation system and nurturing of IPR experts, 3) promotion of cooperative efforts by ASEAN and Japan to initiate a movement of Institute of Invention & Innovation in each country, 4) establishment of the patent attorney system, for which professionals with expertise in science, technology and law are essential. ASEAN has a great potential with a pool of emerging young talents.

Comments

Closing Ceremony

AJBM has long served as a regional platform for business leaders of ASEAN and Japan. Its contribution to the making of mutual understanding and cooperative relation is something we should all recognize. However, with shifts in global circumstance such as the growth of emerging economies and the appearance of global challenges, what is required to AJBM also seems to be changing gradually but steadily. In 36th AJBM, which will be taken place in Tokyo next year, we wish to make a new start where AJBM pursues deeper involvement and more fruitful outcomes.

It was a great honor to be able to host 35th AJBM in Vietnam. ASEAN and Japan should work together for the future economic development.

Steering Committee Meeting Items