Regional Cooperation in Asia: Will Japan stand up toa Leadership Role?
October 8 - October 9, 1998
Although the topic of the Japanese role within Asia has been on the agenda under different perspectives for a long time, it has again gained in importance since the unraveling of the Asian economic crisis in 1997. Especially in the fields of politics and economics, the question has been raised whether and to which extent Japan is willing and able to play a leadership role and to foster regional cooperation. The conference is to address this question and to put it into the broader discussion of the Japanese role within the political and economical integration process of Asia. By bringing together academic and non-academic experts on regional politics and economics from Europe, America, Asia and Japan, the conference will offer a wide range of insights from different perspectives. By this, it will allow to draw more general conclusions regarding the current and future role of Japan within Asia, both in political and economic terms.
Thursday, October 8
10.45 – 12.30: Panel 1 (Political Integration in Asia: Concepts and Ideas)
Friday, October 9
Abstracts in Order of Appearance
Between Bilateralism and Regionalism: The Domestic Debate in Japan about a Future Leadership Role in Asia and the EAEC
During the Cold War period, Japanese foreign relations were characterized by bilateralism and a strong focus on the U.S.-Japanese Alliance. Therefore, many authors have criticized Japanese foreign policy as reactive and mainly following the line of action given by the U.S. In the 1990s, however, economic tensions between the two countries are no longer buffered by Cold War security concerns, but can be considered a constant feature of Japan’s relations with its main ally. On the other hand, regionalism in Asia is extending. Continuing from the early 1980s to the late 1990s, the “economic miracle” in East Asia made many observers proclaim an upcoming “Asian century”. Against this background, Japanese politicians, top bureaucrats, business executives, journalists and intellectuals discussed what future role Japan should play in the region. The proposal by Malaysia’s Prime Minister Mahathir to create an East Asian Economic Caucus (EAEC) exposed the dilemma of Japanese foreign policy decision makers. Originally intended to become the basis for an economic bloc in Asia, the Caucus is now promoted as an Asia-only consultative grouping within the Asia Pacific Cooperation forum (APEC). As the most developed economy in East Asia, Japan was repeatedly asked to play a leading role in the EAEC. The proposal is attractive for Japanese business, which has made substantial commitments to the region, and also to many foreign policy decision makers who favour a closer cooperation between Japan and its Asian neighbour countries. But there are also considerable problems linked with the EAEC. The most important factor which prevented Japanese official support for the EAEC is that the U.S. vehemently oppose it. Active backing for the Caucus by the Japanese government would therefore exacerbate frictions between Japan and its closest ally. This presentation takes the public debate about the EAEC as an instant to examine the different positions of Japanese opinion leaders towards a future Japanese leadership role in Asia. The argument is based on the assumption that, because of the complexity of Japanese foreign relations in Asia and elsewhere, much of which is driven by its economic success and associated problems, Japanese foreign policy can not be adequately understood without including the perspectives of the private sector and public opinion in this analysis. It will be shown that since the end of the Cold War and especially in the 1990s, when domestic transformation and political realignment impeded an immediate reaction of politicians and bureaucrats to the regional challenges in Asia, the private sector is gaining more and more influence on Japanese foreign policy. It will be argued that while traditional foreign policy elites react rather cautiously to the perspective of a more active Japanese role in the region, representatives of Japanese big business favour a more proactive approach. With a growing influence of business interests on Japanese foreign policy decision making, for the future, a more positive attitude towards a Japanese leadership role in East Asia may be expected.
Asian Expectations Towards a Japanese Role in the Consensual Process of Regional Integration — with Special Reference to the EAEC
The East Asian Economic Caucus is conceived to be a regional economic cooperation forum to discuss and seek consensus about a wide range of problems of common concerns. The forum is to be exclusively composed of East Asian economies. While each of other regional cooperation arrangements existing in East Asia covers only a part of the region, the EAEC covers almost all parts of the region. The potential members of the EAEC are the nine member states of ASEAN plus China, Japan and South Korea. Although the EAEC is still on the way of its institutionalization and has yet to be fully perceived as a caucus within APEC by its member economies, it reached to a stage of holding an informal summit meeting of the potential members in December 1997. Thus it can be assumed that the story of the EAEC will clarify the nature and problems of economic as well as political integration in Asia.
This paper attempts to find out what kind of roles are expected of Japan by Asian countries in the regional political integration, through examining the institution building process of EAEC. First, the background of proliferation of regional cooperation arrangements in the first half of 1990s will be discussed. Secondly, the evolution and transformation of the EAEC concept will be traced. Thirdly, expected roles of Japan as an essential member of the EAEC will be discussed through examining statements of Malaysian as well as other ASEAN leaders. Finally, attempts will be made to answer the question why news of EAEC have not been heard since last autumn, while the meeting of heads of its potential member countries were held in December 1997.
Japan and the ASEAN Regional Forum: Bilateralism, Multilateralism or Supplementalism?
The constraints imposed by the legacy of Cold War bilateralism, centring on the US-Japan Security Treaty, and the opportunities to pursue post-Cold War multilateralism, centring on the ASEAN Regional Forum (ARF), are shaping profoundly Japan’s emerging security role in East Asia. This article argues that, as a result of the tension between bilateralism and multilateralism, the Japanese government’s ARF policy essentially centres on supplementalism.
We first examine the government’s resistance to multilateralism during the Cold War era. Although various reasons are advanced to explain the Japanese unwillingness to support multilateral initiatives, the article suggests this was the natural outcome of the power bilateralism exerted over policy-makers.
The article then examines the Japanese role in establishing the ARF within the context of the reshaping of the Alliance relationship in the post-Cold War era. Bilateralism is manifest in the 1990s in the redefinition of the US-Japan Security Treaty and the introduction of the new Guidelines for Defence Cooperation. Nevertheless, the Japanese policy towards the ARF cannot be understood simply from the perspective of an external explanation, such as the transformation of the Alliance relationship as a result of the ending of the Cold War, as internal explanations, such as the emerging sense of an Asian identity, also need to be taken into account. A central aim of the article is thus to provide a nuanced understanding of both the external and internal explanations for the pursuit of the ARF policy by the Japanese government.
Finally, we examine in detail the evolution and role of the ARF in the government’s policy. We conclude by summarising the findings of the article and reflecting on the meaning of the government’s ARF policy and the significance of multilateralism in East Asia.
Behind general discussions about Non-Governmental Organisations (NGOs), there seems to be an assumption that NGO activities, only when initiated and promoted by people living in civil society of the advanced countries, can support local initiatives for human emancipation in the developing countries. Probing into less development of NGOs in Japan, many have argued that less development of civil society is a cause of hindering their full development in Japan. This implies that civil society necessarily produces more people positively engaging in NGO activities. In the post-War Japan, we had a similar kind of argument over the cause of less democracy in its society. We do not deny that civil society has been a foundation for creating and supporting NGOs in the West. But it is also true that, although Asian people were unfamiliar with the idea of civil society, there were in fact social activities for assisting neighbours to help themselves before the birth of NGOs. Social atmosphere surrounding them in Japan is somehow different from that of the West. In this paper, firstly we locate NGOs in Japanese society and the outside world. Next, we make a short survey of peoples’ transnational activities before the age of NGOs (the 1980s). The third section is to outline characteristics of Japanese NGOs in the 1990s. Lastly, we end up with s brief summary of the discussions. In conclusion, civil society is not necessarily a prerequisite for developing NGOs, but a supplementary factor to exert influences on the way of how to found organisations, implement programmes, and promote activities. Without full-fledged civil society, it is still possible to have NGOs activated, but they cannot be firmly established.
Japan’s Multilateral Assistance Leadership: Momentum or Malaise ?
One of Japan’s most notable contributions to the international community from the 1980s was the rapid expansion of Official Development Assistance to developing nations. By the mid-1990s, Japan had attained top donor status, with ODA policy entering an even greater period of activism in the areas of development, “global issues”, and in the area of post-Cold War diplomatic issues. While the spotlight had been focused on bilateral ODA, Japanese activism was paralleled in the multilateral arena, especially within multilateral banks. Throughout the 1980s and into the mid-1990s, Japan concentrated its MDB activism on the areas of institutional influence (including increased vote shares and management and staff presence), diplomatic objectives (including bilateral and multilateral issues), and especially in the new area of development philosophy and strategy (i.e., promotion of a “Japanese” or “Asian” development model).
By the late 1990s, the question may well be, What happened to the multilateral component of aid activism? In the wake of the Asian financial crisis, Japan’s activist thrust seems to have been blunted, mired in a lethal combination of domestic political confusion and economic and financial stagnation. Japan is being judged by the way it handles these crises, and at present, Japan seems to be failing the test, casting serious doubts about Japan’s willingness and ability to exert “leadership”. What accounts for the slow-down of multilateral activism? Among reasons that can be cited are the resurgence of bilateralism as the utility of ODA as a diplomatic tool increases; changes in the international multilateral environment; the ascendancy of the IMF because of the Russian and Asian crises; the lack of follow through by Japan on the development philosophy debate; the onset of domestic political and bugetary problems; and the difficulties with the U.S.
On the other hand, multilateral activism is not dead. The prospects for a revival are promising: The transformation of ODA as a diplomatic tool ensures its utility and necessity; the domestic policymaking process is still in tact and domestic support for ODA is actually increasing, especially because of new constituents for development; MDBs themselves are courting Japan, providing opportunities to exert greater influence; the U.S. and Japan cooperate more than compete within MDBs; and MDB policy provides a necessary conduit for Japan in pursuing its diplomacy in Asia. We can expect continued, if not revived, multilateral activism in the long run.
The Political Utilities of Developmental Assistance: the Philippines and Indonesia in Comparative Perspective
How, and to what extent, does external financial resource support political stability or change in a developing nation? What are the political consequences of development assistance? This paper is an interim report to answer these questions, by focusing on the planning, implementation, and political effects of official capital transfer, taking two pairs of comparative analysis: U.S. and Japan as donor states, and Indonesia and the Philippines as recipients. The tentative conclusions will show how U.S. and U.S.-related development projects tended to enhance political change and erode the status quo in the recipient governments, while Japanese and Japan-related projects worked in the reverse direction.
Japanese Economic Policy Toward Asia – Past, Present and in the Future
Japan’s economic policy toward Asia as part of its overall foreign policy since 1945 could be defined as oriented toward: 1) building up closer trade and economic relations for its own benefits, 2) assisting the countries of the region to promote their economic and social development through expanded intra-regional trade and economic relations, and 3) installing and reinforcing the regime of mutual benefits among the countries of the region for regional and worldwide security. While all these objectives have been simultaneously pursued, there has been a steady shift in foreign policy priority from the first through the first and the second combined between 1950s-60s and 1970s to all the three combined during the 1980s-90s. The shift has been symbolically represented by Japan’s Income Doubling Program during the 1960s, Japan’s initiative for establishing the Asian Development Bank and giving a top priority to the Association of South East Asian Nations (ASEAN) beginning in the late 1960s and Japan’s initiative for starting the Asia-Pacific Economic Cooperation (APEC) and the Asian Regional Forum process in the late 1980s. With the Plaza Accord of 1985 sharply appreciating the Japanese yen an with the acceleration of economic globalization through liberalized trade and investment regimes, Japanese economic policy toward Asia has become much more global in its outlook, going beyond the traditional confine of trade and investment and promoting good governance and people participation, and much more collaborative, going beyond its bilateral relations and global peace, stability and prosperity. It has been a long, cautious but steady process of positive engagements toward the goals shared by all countries of the region. While the western community may have taken Japan’s slow foreign policy thrust as too timid and at times “too selfish,” Japan’s economic policy toward Asia can be assessed as being built on its painful experiences of the 1970s. Japan should continue that stance in the 21st century, though swifter and a little bolder action will be required in the age of advancing globalization.
The paper analyzes Japanese economic policies and their impact on the Asian economies. These policies include macroeconomic, trade and industrial, foreign investment, and ODA policies. These policies have certainly influenced the rest of the world particularly Asia as it is a major trading partner of Japan and a major destination of Japanís financial savings in the form of portfolio and direct investments, loans, trade credits, foreign currency and deposits. Japan has relied on the use of traditional demand-management policies through fiscal, monetary and exchange rate policies, to stabilize economic disturbances. Japan has also adopted trade liberalization measures including tariff reductions and lessening non-tariff barriers. It has also implemented successful global trade, industrial and foreign investment strategies involving mass-production of products with high quality and low prices ñ a strategy which in turn have led to the accumulation of Japanís trade surpluses with the world, particularly with Asia. Consequently, it has allowed the yen/dollar rate to appreciate resulting in massive expansion of Japanese foreign investments worldwide. Asia has become a major production and distribution base for Japanese export-oriented industries given Asiaís locational advantages on the one hand and Japanís ownership advantage on the other hand. Japan has also provided economic assistance to Asia by way of ODA and more importantly, through financial help to address the current Asian crisis. The issue now is whether Japan will continue to hold on to its economic supremacy given that its own economy and those of the Asian region have been experiencing worsening economic crises. This calls for more government measures to stimulate domestic demand and for more international financial assistance to Asia from Japan, the US, EU and other developed countries. It is important that Japan, Asia and the rest of the world recover in the midst of an increasingly interdependent world.
Financial Cooperation and Integration in Pacific Asia: The Role of International Organizations like IMF, World Bank and Asian Development Bank
Whereas in recent years most studies on regional cooperation in Pacific Asia were devoted to matters of the so-called “real economy”, since the East Asian financial crisis of 1997/98 set in, interest in monetary and financial matters has immensely increased. This paper is about the question whether cooperation on financial matters is primarily a multilateral issue, or whether there is some scope for regional action. In answering this question, it is important to discuss under which institutional frameworks such cooperation could – and does – take place.
The paper is organised as follows: In the first section, we will discuss experiences made during the Asian financial crisis on whether apart from multilateral international organisations (MIOs) like IMF and World Bank, regional international organisations (RIOs) played a role. We will do this by analysing three principal aspects: · Pre-crisis schemes aimed at the financial sector · Crisis management and immediate reaction (in particular, agreements with the IMF) · Follow-up, mitigation of effects This will lead us in section 2 to discuss the principal areas for IO activity in financial cooperation. Reacting to the events of 1997/1998, our observations are very much tainted by their relationship to the concept of “crisis”, although basically it would also be possible to treat – at least most of – them without reference to sudden turmoil in financial markets: · Regional surveillance of financial system reform · (Additional) financial assistance scheme · Technical Assistance for banking reform and supervision, management of currency policy · Analytical capability · Currency cooperation. Discussing these areas of possible policy activity, we will have the following considerations in mind: · The economic case for (or against) IO involvement, · the case for regional (as opposed to multilateral) schemes, · the political economy of existing or potential IO schemes in this context, · Paying particular attention to the role of Japan or rather of Japanese actors (bureaucracy, politicians, etc.) Put in a different way, section 1 intends to do a positive analysis of which IOs – either on a multilateral or on a global level – did what, whereas in section 2 we intend a normative analysis, taking economic rationality as a point of departure, while at the same time of course discussing conditions.
The period of the 1980s and the early 1990s was characterized by the global bank crisis. Not only many industrialized countries such as the United States and Japan, but also most developing countries and the economies transiting from the central planning to the market-oriented system experienced more or less bank crisis. Lindgren et al. (1996) describe “[a] review of the experience since 1980 of the 181 current Fund member countries reveals that 133 have experienced significant banking sector problems at some stage during the past fifteen years.” After aggressively expanding their credit to risky projects like real estate developments, many banks were found trapped in the difficulty of a large amount of non-performing loans in those countries. The government had to step to bail out heavily damaged banks by pouring public money in some cases. It may be a comfort for Japanese people to hear that the bank crisis is not peculiar to Japan. However, the Japanese bank crisis seems to be unique to its long duration and seriousness of its bad influence on the macro-economy. Japan has taken half a decade to deal with the bad loan problem in the banking sector without remarkable success. As many people worried about, the bad loan problem has grown so serious as to endanger viability of the current financial system in the late 1997. This seriousness of bank crisis seems to be unique to Japan. Thus, we should be interested in why the banking crisis is so serious rather than why Japan has experienced the banking sector problem. After Japan, both South Korea and Thailand has fallen into difficulty of serious bank crisis as well. We think there are common factors which can explain the banking sector problem in those countries including Japan. This paper attempts an answer to the question why Japan has suffered from so serious bank crisis from the perspective of corporate governance. Needless to say, the bank is a corporation managers of which must be monitored and disciplined by some means in order to keep their managerial efficiency. However, this paper stresses the bank management has not effectively been controlled. The deficiency of governance in bank management led to the current bank crisis. This is the conclusion of this paper.
The Effects of the Asian Crisis on Japan’s Manufacturing FDI
In the 1980s and 1990s, there existed the complementary relationship between Japan’s FDI and Asian host countries, which were beneficial for both parties. However, the good relationship between Japanese investors and Asian countries has been gradually transformed into a new one. The Asian crisis since 1997 has accelerated this transformation through deteriorating the sales and profits performances of Japanese affiliates in Asia and shrinking FDI of Japanese firms over the short-term period. To know exact effects of Asian crisis, I did a questionnaire survey toward major Japanese manufacturing firms, which have substantial experiences in Asian countries, on this May and June. The survey is to investigate the effects of Asian crisis on, first, our respondents’ affiliates’ sales and profits performances, second, the respondents’ FDI strategies in future, third, export ratio, local procurement ratio and local finance ratio of the affiliates and, fourth, future FDI environments of Asian countries. The result of the survey shows that, generally speaking, the profits of the affiliates are more severely damaged than their sales performances in comparison with those performances before the Asian crisis. The future FDI plan over the short-term period is also damaged and the future FDI will decrease below the FDI level in 1997. However, the degree of damage on FDI is less than on sales and profits performance. The effects of the Asian crisis are diversified by host country and by industry, to which Japanese firms belong. By country, Thailand, Indonesia and Korea are most severely damaged in terms of Japanese affiliates’ sales and profits performances and future FDI plan in those countries. On the contrary, China and Taiwan are scarcely damaged. By industry, automobile parts industry is most severely damaged and electric/electronic parts industry is scarcely damaged. Sales and profits performances of Japanese affiliates are strongly related to export ratio of the affiliates. Over the long-term period, automobile industries as well as electric/electronic industries will recover their affiliates’ performances through huge effects of expanding exports. Therefore, Japan’s FDI will be gradually recovered over the medium- and long-term period. However, it is certain that the Asian crisis will prompt the transformation of the complementary relationship between Japanese investors and Asian host countries through deteriorated sales and profits performances and declining FDI over the short-term period. Asian countries have to seek newly higher value-added industries, which are enough to support higher per capita income of those countries, instead of labor-intensive industries. Japanese firms have to reconstruct their competitive production networks spread over Asian regions with the higher value-added industries, which are to be newly developed in host Asian countries. One necessary condition for the success of new complementary relationship is the construction of region-wide large-scale markets.
Driving Industrial Integration: Japanese Firms and the Automobile Industry in Southeast Asia
This paper presents an analysis of the development of the automobile industry in ASEAN countries with an emphasis on regional integration efforts within this industry. The focus is on the role of Japanese companies which are identified as the most important players within this integration process. It is argued that Japanese companies do not only dominate the region automobile production but also have been the driving and shaping force behind industrial cooperation schemes as well as the whole integration process of this industry in Southeast Asia. This review of the development of the ASEAN automobile industry shows three distinctive stages with the last one still going on. During the first stage until the mid- to late 1980s, the ASEAN countries succeeded in localizing simple assembly activities of foreign automakers, most of which were Japanese by pursuing import substitution policies. But they failed totally in accomplishing any efficient production by integration steps on a regional scale which was due to their priority placed on domestic concerns. In the following phase up to the record production of 1.4 million vehicles in 1996, some success attributable to a rationalization process was accomplished by multinationals from Japan. These companies have started to profit from economies of scale by regional production specialization and subsequent intra-regional trade facilitated by the Brand-to-Brand Complementation (BBC) scheme and a general trend toward more liberalization. Simultaneously, a stronger supplying industry started to develop, especially in Thailand, highly supported by investments from Japan. Despite further integration efforts based on the ASEAN Industrial Cooperation (AICO) scheme that succeeded the BBC scheme in 1996, the current economic crisis threatens to destroy any achievements and poses the risk of a regional standstill for the further development of the automobile industry in Southeast Asia. In the short run, the strong commitment of Japanese companies in this region and the resulting supporting activities appear to soften the negative effects of the current crisis on the ASEAN automobile industry. In the long run, however, it is argued that the prospects for this industry will be positive only if the auto policies of the ASEAN countries allow an accommodation of the interests of Japanese and other multinational automakers and thus permit a deeper regional and – equally important – global integration of automobile production activities in Southeast Asia.
The currency crisis oppresses East Asian economies. Since the currency turmoil happened in July 1997, each country in East Asia has been facing serious economic depression. Domestic demand shrunk and production levels sharply dropped in this year. Many of the factories had to lay-off their workers. It makes the unemployment problem serious in this region. This paper discusses the role of FDI (foreign direct investment) for solving the unemployment problem and focuses on the importance of employees training at FDI factories or offices for upgrading their technical and managerial capabilities. Firstly, East Asian economies at this moment cannot expect an autonomous recovery in domestic economy. Export-oriented recovery policy is recommendable, since the devalued currencies imply stronger international competitiveness. FDI will help not only the export promotion at present, but also the export oriented industrialization in the long run. Secondly, when we observe the impacts of the monetary crisis in each Asian country, the difference in the damage of the crisis seems to depend on the degree of personnel training. In the last decades, East Asian economies have enjoyed rapid economic growth. But their strategy is, in short, to promote an export oriented industrialization policy which solely relies on FDI and cheap labor. This strategy cannot stand when new comers like China get into the market. This is one of the structural reasons Indonesia and others have not yet escaped the trap. East Asian countries should be aware of the importance of upgrading national capabilities by self-reliance. Japan has traditionally had an in-house training system based on OJT (on the job training) and good experience in training personnel at Japanese affiliates in East Asia for long. Japan can work together with these countries for up-grading their national capabilities through technology transfer by Japanese FDI and official technical cooperation.
Day 1 October 8th (Thursday)
Political Focus: Panel 1 (Political Integration in Asia: Concepts and Ideas)
Kimura Michio, Institute of Developing Economies
Panel 2 (Institutions and Actors)
Glenn D. Hook, University of Sheffield
Hatsue Ryūhei, Kōbe University
Panel 3 (Japanese Leadership at Work: The Case of Japanese ODA)
Dennis Yasutomo, Smith College
Fuijwara Kiichi, Tokyo University
Day 2 October 9th (Friday)
Economical Focus: Panel 1 (Japanese Economic Policy toward Asia)
Hirono Ryōkichi, Seikei University
Teofilo Daquila, National University of Singapore
Panel 2 (Financial Cooperation and Integration)
Werner Pascha, University Duisburg
Horiuchi Akiyoshi, Tokyo University
Panel 3: (Overseas investment and industrial relations)
Tejima Shigeki, Export-Bank of Japan
Yamashita Shōichi, Hiroshima University
Final Panel Discussion
Onda Takashi, ASEAN Centre; Matsukawa Yoshihiro, Matsushita Panasonic; Peter Landers, Far Eastern Economic Review; Louis Ross, Merrill Lynch Japan; Kurt-Werner Radtke, Waseda University; Moderation Verena Blechinger und Jochen Legewie, DIJ