When Donald Trump on January 2017, announced that he was withdrawing from the global mega-deal known as the Trans-Pacific Partnership (TPP), it gave room for others to fill where the US had left.
His pulling out of the Paris climate subsequently also meant that it is time for somebody else to take a lead role in economic and global leadership.
The void left by the US provides a timely opportunity for a country like Japan to play that important role in thrusting its economic and global leadership, particularly in the Asean region.
Japan is already one of Asean’s oldest and most important dialogue partner with the organisation being Tokyo’s second largest trading partner.
The total bilateral trade between Asean and Japan amounted to US$$220 billion in 2014 according to Japanese Finance ministry data. (Latest data not available at the time of writing).
Japan is also Asean’s largest source of foreign direct investment, with an FDI stock of US$180 billion. Japan’s is the Asean’s second largest trading partner after China.
Asean countries collectively constitute the most important FDI destination in Asia, ahead of China.
Considering Asean is the key production base for Japanese MNCs that have developed extensive production networks and supply chains throughout Asean, it is already an important and attractive market for Japanese firms providing goods and services.
For example, Japanese automakers have established production bases for parts and components and final assembly in several Asean countries, including Indonesia, Malaysia, and Thailand.
In doing so, they have taken into account the specific conditions of individual countries, such as the availability of trained workers, technological capabilities, the agglomeration of suppliers, infrastructure availability, market characteristics, and policy and tax incentives.
By investing in Asean and creating supply chains that connect Japan and several member countries, these and other Japanese MNCs, including several small and medium-sized enterprises, have greatly contributed to the region’s economic development, technology transfer and the de-facto integration of Asean economies.
Although Asean’s trade relationship with China has expanded rapidly in recent years, China’s presence as a source of FDI in Asean is still limited.
Unlike China, Japan and the Asean member countries have nurtured friendly relationships and have no major historical issues or territorial disputes.
Holistic packages similar to HSR bid
Considering Asean’s prosperity and stability are essential to the Japanese economy, Japan can play a significant role in Asean’s economic development and regional integration.
In order to further enhance the relationship, Japan can infuse holistic packages in all its assistance to Asean member countries in the likes what they offered to Malaysia in its bid for the high-speed railway (HSR).
In its HSR bid, Japan offered technology which was first invented through the world-renowned high-speed railway system, the Shinkansen, plus total transfer of technology and local vendor development.
It is also offering full-fledged training for the officials, operators, and engineers of both countries so that they can start the operations by themselves from Day One.
Japan is also offering a comprehensive financial package that will help the two nations reduce their financial burden in introducing the system.
Many Asean countries have been trying very hard to move up the value-chain and move out of the middle-income trap but their falling behind thus far is on account of their inability to grapple with new technologies.
Japan could play a vital role in spurring the economies of the asean countries by offering technology and training and ensuring that these economies are able to move the value chain in the likes what they have offered to Malaysia in its HSR bid.
A prosperous Asean would definitely mean a huge market for Japanese goods in the future and this is important for Japan as the number of young people in Japan gets less and it has to depend on overseas markets for its goods.
By Sathish P.G.. Sathish was previously the Senior Analyst at the Institute of strategic and International Studies and most recently as the Assistant Business Editor in a local newspaper.