Region: Japan, ASEAN And The Rise of China

2004

Lee Poh Ping

The ASEAN-Japan Commemorative Summit in Tokyo in December 2003 to mark thirty years of ties between the two parties was touted as a meeting that would deepen Japan-ASEAN cooperation, for example in the forging of bilateral economic agreements between Japan and some of the ASEAN countries. Yet for all the hype, that meeting lacked the sense of direction and forward movement of the previous two summit meetings in Kuala Lumpur in 1977 and in Manila in 1987. The 1977 meeting had Japan systematically laying out the Fukuda Doctrine concerning a new post-World War Two role that went beyond economic considerations, and to which the ASEAN countries responded positively. At the 1987 meeting the then Japanese Prime Minister, Noburu Takeshita, offered a two billion US dollar aid package for an ASEAN-Japan development fund. That offer signified a further broadening of the Japanese role as it presented a Japan that had become a global economic power which was willing to dispense ever larger amounts of largesse to ASEAN development. Since these two meetings, the momentum in ASEAN-Japan relations has slowed. The Tokyo meeting had the tone instead of a Japan trying to recover lost ground.

Three reasons can be adduced for this slowed momentum. One is the bursting of the Japanese bubble economy from the early 1990s. This brought about more than a decade of economic stagnation from which Japan may be only just recovering. This stagnation has affected the bilateral relationship in that it greatly reduced the Japanese capacity to act as an economic locomotive that could pull the ASEAN economies along, a capacity that had for a long time provided much of the impetus to the relationship. Second, the unwieldiness that arose from the expansion of ASEAN from the original five to ten countries together with the economic and political distress suffered by some of the ASEAN countries as a result of the Asian financial crisis have greatly reduced the ability of the ASEAN countries to act effectively in the international arena. This has reduced the attractiveness of ASEAN as a partner to Japan.

But more significant has been the rise of China. The Chinese rise has on one hand drawn the Japanese closer to China, creating the possibility that Japanese investment which may have been destined for the ASEAN countries could be diverted to China because of the low wages and the huge market China offers to Japan. While the statistics for the past few years have yet to conclusively prove such diversion, there nevertheless are plenty of statements from Japanese corporations about their intentions to invest in China at the expense of some ASEAN countries to worry ASEAN about the Japanese commitment to help ASEAN economically. On the other hand, China, by offering to establish a free trade area with ASEAN, could lessen ASEAN interest in the economic leadership of Japan.

Would the rise of China inevitably weaken the Japan-ASEAN relationship? That would depend on what both parties can see fit to do. First, the Japanese need to reinvigorate their economy and appreciate the fact that for all the attractiveness of China, ASEAN had been a reliable economic and diplomatic partner of Japan for many years. Many of the ASEAN countries still possess a lot of the 'software' advantages, not too evident in China, such as the rule of law, the English language and so on, that are helpful to Japanese investors.

ASEAN on its part can help by ensuring that its ASEAN Free Trade Agreement is a meaningful enterprise as there will be a market of more than 500 million people that could be an immense attraction to foreign, not least Japanese investment. ASEAN should also realize that despite the inexorable rise of China, Japan is not without certain strengths when compared to China. One is the ability of Japan, its present financial woes notwithstanding, to export capital, be it in the form of aid or investment. The Miyazawa plan of US$30 billion to aid countries stricken by the Asian financial crisis is an example. It is unlikely China can mobilise such an amount for aid as it needs what financial reserves it possesses to develop itself. And finally, Japan has the technology and the corporate structure to aid in the industrialization of ASEAN that China still lacks.

WATCHPOINT: With commitments firming to the ASEAN-plus three process and to various free trade agreements already in place, how will North East Asian countries, in particular, tackle the more difficult issues relating to their respective security concerns?

 

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AFG Venture Group is an Asia and Australia based corporate advisory and consulting firm with over 20 years experience in creating alliances, relationships and transactions in Australia, South East Asia and India; including a 15 year history of corporate and equities advisory in Australia, undertaking merger, acquisition, divestment, fund raising and consulting for private and public companies.

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