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Evolving Asean-Japan Economic Relations

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Although Japan’s share in the ASEAN trade and investment markets has declined over the past decades, Japan’s importance still remains high, according to the ASEAN-Japan Centre recently.

The ASEAN Promotion Centre on Trade, Investment and Tourism (ASEAN-Japan Centre: AJC) is an intergovernmental organisation established by the Member States of the Association of South-East Asia Nations (ASEAN) and Japan in 1981.

Over the years, it has been promoting exports from ASEAN Member States to Japan while revitalising investment and tourism, as well as people-to-people exchanges, between the ASEAN Member States and Japan.

Mr. Masataka Fujita, Secretary General of the AJC, told Vientiane Times during his recent visit to Vientiane that the GDP of the ten ASEAN Member States combined, which was one tenth of that of Japan in the 1980s, expanded to US$ 2.4 trillion in 2015, nearly half of that of Japan.

He said that the dynamic growth in the ASEAN Member States is clearly reflected in the ASEAN-Japan economic relations.

SG Fujita explained that the Japan accounted for around 11 percent of ASEAN’s total value of imports in 2015. Compared to two decades ago in 1995, at which the Japanese share was around 25 percent, the share has been declining.

It is because other countries, such as China and Korea, have become major trade partners for the ASEAN Member States, he added.

On the other hand, SG Fujita said that the share of ASEAN in Japan’s total imports was 15 percent in 2015. Compared to two decades ago in 1995, when the share was 14 percent, the share in the Japanese market has been rising.

With regard to foreign direct investment inflows, SG Fujita mentioned that Japan has always been a major investor for the ASEAN Member States, accounting for 17 percent during 1995-1997 and 15 percent during 2013-2015. Meanwhile, Japan’s investment inflows from the ASEAN Member States have remarkably increased, taking up a share of 21 percent of total Japanese inflows in 2013-2015, a jump from 7 percent in 1995-1997.

Movement of people between the ASEAN region and Japan has been even more dramatic. In 2014, nearly 4.6 million Japanese people visited the ASEAN Member States and the share of Japanese tourists was 4.4 percent of the total, which is a 2.7 percentage point decline from 2005. The number of ASEAN tourists to Japan tripled to more than 2.1 million in 2015 from 2005, which is an around 11 percent share of all the foreign visitors to Japan.

The statistics show the relative decline of Japan’s shares in the ASEAN Member States in areas of trade, investment flows and tourism, while the ASEAN Member States’ presence is increasing in the Japanese market. However, SG Fujita reiterated that it does not necessarily mean that Japan is losing its importance in the ASEAN market; Japan’s importance has still remained high.

Taking up an example, SG Fujita explained that although Japan’s exports to the ASEAN Member States have not grown much over the years in absolute terms, they have been replaced with direct production in the ASEAN market. Namely, when Japanese companies deliver their products to ASEAN, it has not necessarily been through trade but more importantly nowadays through international production. The mode of delivery of products to ASEAN has changed, he said.

Also, with regard to the Official Development Assistance (ODA), the ASEAN Member States’ share in Japan’s ODA has declined over the years. However, SG Fujita explained that it does not necessarily mean that Japan’s role has lessened in supporting the development of the ASEAN region; the development in the region recently has been more and more private-sector led. In fact, the volume of Japan’s exports and FDI flows to the region have been much bigger than the volume of ODA.

Finally, touching upon the implication of the ASEAN Economic Community (AEC), which was established last year, SG Fujita said that it is drawing wide attention from Japanese people, as well as the rest of the world. A huge economy with over 600 million people created by the AEC is an attractive consumer market for the Japanese companies.

The AEC has a common goal, i.e. free flows of (i) goods, (ii) services, (iii) investment, (iv) capital and (v) natural persons. In all these areas, the AEC is aiming at liberalisation and deregulation of transactions. The companies that are engaged in producing goods or services in ASEAN should benefit from such liberalisation. Therefore, I think this will create greater opportunities for companies, including those from Japan to operate on a regional basis in ASEAN, SG Fujita said.

Japanese companies already have well-established production networks in the ASEAN region. With the AEC, this kind of establishment of value chains becomes easier and more effective, simply because there is harmonisation of policies among ten countries in trade and investment in a freer community, among others. Therefore, the AEC contributes to easiness of doing business in the ASEAN region.

Opportunities for further growth abound in both ASEAN and Japan, he concluded.

 

Source: Vientiane Times