06 October 2010Steve Finch
Southeast Asia GLOBE
In the Asean region, there could soon be a new economic kid on the bloc. When Hanoi hosts the fifth East Asia Summit at the end of this month, Southeast Asian leaders along with those from the Pacific region are expected to unveil a huge $290 billion infrastructure blueprint focused almost exclusively on the Asean region.
As expected, China has already manoeuvered to be intimately involved in what is known as the Comprehensive Asia Development Plan (CADP) over the next five years. Less expected, perhaps, are the increasing signs that the Chinese may be outmanoeuvered by their closest economic and geographical rival – Japan.
After overtaking Japan as the second-largest economy in the world during the second quarter, China’s rise in Southeast Asia has for some years now looked inevitable. In Cambodia, for instance, Chinese approved investment reached $5.6 billion between 1994 and the end of the first half of 2008, which nearly matched the total Cambodians invested in their own country.
Japan by comparison poured in a paltry $136.3 million over the same period, about 0.7% of the total, according to Council for the Development of Cambodia figures. In Laos, Vietnam and Myanmar the story was much the same. But with the likes of India, China, South Korea and Japan looking to home in on the Asean region – and especially mainland Southeast Asia – as part of a new ambitious infrastructure plan designed to distribute wealth and speed up economic growth, Japan has stated its intentions and has done a great deal already to take centre stage.
“There is a need to consider how to pursue public-private collaboration and organise an all-Japan setup for the development of infrastructure,” the all-powerful Japanese Business Federation announced in a March policy paper.
Known in Japan as Nippon Keidanren, the organisation’s strategy is both explicit and simple: make greater business and diplomatic contact across the Asean region, mobilise as many Japanese funding schemes as possible and offer technical assistance across the region.
“The Japanese government has positioned Asian development as a core element of its new growth strategy,” noted the federation in the same document.
But after years of watching China commit to a similar strategy of soft loans and even softer diplomacy, has Japan left it a bit too late?
When Japanese Foreign Minister Katsuya Okada visited Bangkok at the end of August, he admitted to his Thai counterpart Kasit Piromya, “he should have come earlier”. Tokyo had not dispatched a foreign minister to Thailand for five years despite a heavy Japanese presence in the country. In 2007, for example, more Japanese arrived in Bangkok by air than those from China, Hong Kong and Taiwan combined and indeed more than any nationality other than Thais themselves, according to the Tourism Authority of Thailand.
One of Okada’s main talking points in Bangkok with Piromya and Thai Prime Minister Abhisit Vejjajiva was development of the Mekong, according to a statement by the ministry of foreign affairs in Tokyo. Then three weeks later on September 9, another high-profile Japanese official – Osamu Fujimura, state secretary of the ministry of foreign affairs – touched down in Bangkok for the Mekong-Japan International Conference on the East-West Economic Corridor and the Southern Economic Corridor, trade links that cross each other with Thailand at the centre extending to Myanmar in the west, Vietnam in the east, China’s Yunnan province in the north and Malaysia in the south. Japan wants to be central in these plans, he announced.
“A lot of Japanese companies are heading towards this region,” Fujimura told delegates, according to a transcript of his speech. “The potentials for growth by . . . "connections" are immeasurable. That is vital for the Japanese companies pursing optimum distribution of production bases in the region as well as for the local businesses here, and is also indispensable for the potential growth of the region to fully bloom.”
It’s not just Thailand that Japan has sought to court over the past few months, as the Asian Development Bank (ADB) and the Economic Research Institute for Asean and East Asia (ERIA) finalise the CADP with the help of the Asean Secretariat. At the end of July, Okada also made official state visits to Laos and Vietnam and again, the message was loud and clear.
“Japan is ready to cooperate with Asean countries to increase the connectivity in the region,” Ministry of Foreign Affairs Deputy Press Secretary Hidenobu Sobashima said following Okada’s trips to Vientiane and Hanoi.
By comparison, high-ranking Chinese officials have been much less busy in the Mekong region over the past few months, especially in relation to the CADP. Chinese Vice President Xi Jinping did visit Cambodia at the end of last December, a trip that involved discussions on investment and trade, but recent high-level interaction between the Burmese junta and officials in Beijing as recently as early September appeared to be more closely related to Burma’s expected political evolution following elections on November 7. Junta leader Senior General Than Shwe did visit the southern economic Chinese hub Shenzhen, but other key meetings involved high-ranking military officials from both sides.
Diplomats from Tokyo have therefore clearly been busier than their Chinese counterparts around the Mekong region in recent weeks, even if the world's most populous nation enjoys a more close-knit role with Southeast Asia by default due to its geography. Yunnan Province in the southwest of China is part of the Greater Mekong Subregion that also includes Vietnam, Cambodia, Laos, Thailand and Myanmar.
Despite recent efforts, Tokyo’s policy of high-level diplomacy in mainland Southeast Asia to win support for large infrastructure contracts for Japanese firms appeared to have come too late in the case of the high-profile, high-speed train link planned to run the length of Vietnam. In June, Vietnam’s National Assembly voted down the huge $56-billion project – an event analysts viewed as the organ’s biggest show of independence ever – thereby effectively ending the possibility of a huge tender by one of two Japanese consortiums. The Vietnamese cabinet had previously approved a plan that would have resulted in a collaboration by two or more of Kawasaki Heavy Industries Ltd, Mitsubishi Heavy Industries Ltd, Mitsubishi Corp and Sumitomo Corp. The project now looks to be doomed at worst or at best delayed and severely curtailed in scope after Vietnamese lawmakers expressed doubts over the cost and scale of the ambitious project.
Still, Japan has major designs on other key infrastructure aimed at bringing the region economically closer together. Fujimura told delegates in Bangkok in September that Japan had already constructed 300 bridges in the Greater Mekong Subregion and it plans to develop more by supplying soft loans and grants and then contracting Japanese firms to build these projects.
In Neak Loueng, a key Cambodian town on the East-West corridor route on the way to the Vietnamese border where locals still cross the Mekong by ferry, Japan plans to build a $165m bridge spanning the wide part of the river. Also in Cambodia, the Japan Bank for International Cooperation (JBIC) has agreed to finance the improvement of port facilities along the Mekong and on the Tonle Sap Lake at Siem Reap, although the exact cost of these projects is yet to be determined, according to ADB. JBIC is also partially funding a new 220 kilovolt transmission line between Kampot and Sihanoukville in southern Cambodia and an upgrade on port facilities at Phone Falls on the Mekong in Laos.
All of these projects relate only to the Southern Corridor, just a small part of the overall CADP. With billions of dollars in funding still required on key infrastructure projects on this route, Japan-based financiers could end up committing further loans and grants. It is also noticeable that China has yet to commit a single dollar to any of these projects, according to an ADB update on their status published last month.
As representatives of ERIA, the main research body on the CADP, have travelled around the region to promote awareness of the project and to liaise with key partners in government and the private sector, both Chinese and Japanese interests have staked their claims for involvement, even if organisations in Japan were slow off the mark in realising ERIA’s influence in the region.
As noted by Japanese President Yukio Hatoyama in a speech to an ERIA symposium in Japan in December: “It seems that Japan is lagging behind compared to other countries in understanding ERIA’s activities.”
Since then ERIA has met with the Japan Business Federation in January and a number of times in May. At the end of the same month, some 70 Japanese private sector representatives in Indonesia held another meeting with the ERIA, and then in July Japanese economic research institutes held discussions with the organisation in Nara, Japan. During this period only one ERIA meeting was held in China – in Beijing in July.
Notably, Japan’s ERIA governing border representative, Hiroshi Okuda, is a senior advisor and member of the board of directors at Toyota and an honourary board member of the Japan Business Federation. By contrast his Chinese counterpart, Zhang Yunling, has little direct involvement in the private sector as a professor of economics and a social scientist.
Ultimately, ERIA is a Japanese baby anyway. Japan is the main benefactor with contributions also supplied by India, Australia and New Zealand (and not China), plus the organisation’s executive director and chief economist are both Japanese – Hidetoshi Nishimura and Fukunari Kimura. Within the research department there are a further three senior Japanese personnel as opposed to just one Chinese.
Japan’s motivation to influence economic policy in the wider Asian region and in Southeast Asia in particular is obvious. Between 1987 and 2007, China’s exports grew on average by 20% per year as developing economies exploded in the region. “The PRC [China] became the largest trader in Asia, far surpassing Japan,” notes last year’s ADB report, Infrastructure for a seamless Asia.
As Japan’s share of world trade has slid from the heydays of the 1970s and 80s, Asia’s share of world trade rose from 22.7% in 1990 to 29.2% in 2007, it adds. Despite Japanese efforts to gain influence in Southeast Asia as ADB and ERIA prepare to publish a huge blueprint for the region, China looks set to win the ultimate spoils. Japan could gain as much as $200 billion from infrastructure improvements in developing Asia, according to ADB, compared to $960 billion for the rest of the world. But then this is dwarfed in comparison to China, which again would benefit from its geographical proximity to the region – ADB estimates the world’s second-largest economy could gain a staggering $3,550 billion from new infrastructure up to and beyond the year 2020, the most of any country in the world. That would be once the infrastructure is completed though. Japan has made it clear it also plans to generate significant opportunities for its construction and engineering firms to actually build this infrastructure in a bid to boost an economy still suffering from the global economic crisis.
Few countries seem to take on China and win these days. Yet when it comes to gaining contracts to build in Southeast Asia, can Japan win the business battle, if not the economic war?
As expected, China has already manoeuvered to be intimately involved in what is known as the Comprehensive Asia Development Plan (CADP) over the next five years. Less expected, perhaps, are the increasing signs that the Chinese may be outmanoeuvered by their closest economic and geographical rival – Japan.
After overtaking Japan as the second-largest economy in the world during the second quarter, China’s rise in Southeast Asia has for some years now looked inevitable. In Cambodia, for instance, Chinese approved investment reached $5.6 billion between 1994 and the end of the first half of 2008, which nearly matched the total Cambodians invested in their own country.
Japan by comparison poured in a paltry $136.3 million over the same period, about 0.7% of the total, according to Council for the Development of Cambodia figures. In Laos, Vietnam and Myanmar the story was much the same. But with the likes of India, China, South Korea and Japan looking to home in on the Asean region – and especially mainland Southeast Asia – as part of a new ambitious infrastructure plan designed to distribute wealth and speed up economic growth, Japan has stated its intentions and has done a great deal already to take centre stage.
“There is a need to consider how to pursue public-private collaboration and organise an all-Japan setup for the development of infrastructure,” the all-powerful Japanese Business Federation announced in a March policy paper.
Known in Japan as Nippon Keidanren, the organisation’s strategy is both explicit and simple: make greater business and diplomatic contact across the Asean region, mobilise as many Japanese funding schemes as possible and offer technical assistance across the region.
“The Japanese government has positioned Asian development as a core element of its new growth strategy,” noted the federation in the same document.
But after years of watching China commit to a similar strategy of soft loans and even softer diplomacy, has Japan left it a bit too late?
When Japanese Foreign Minister Katsuya Okada visited Bangkok at the end of August, he admitted to his Thai counterpart Kasit Piromya, “he should have come earlier”. Tokyo had not dispatched a foreign minister to Thailand for five years despite a heavy Japanese presence in the country. In 2007, for example, more Japanese arrived in Bangkok by air than those from China, Hong Kong and Taiwan combined and indeed more than any nationality other than Thais themselves, according to the Tourism Authority of Thailand.
One of Okada’s main talking points in Bangkok with Piromya and Thai Prime Minister Abhisit Vejjajiva was development of the Mekong, according to a statement by the ministry of foreign affairs in Tokyo. Then three weeks later on September 9, another high-profile Japanese official – Osamu Fujimura, state secretary of the ministry of foreign affairs – touched down in Bangkok for the Mekong-Japan International Conference on the East-West Economic Corridor and the Southern Economic Corridor, trade links that cross each other with Thailand at the centre extending to Myanmar in the west, Vietnam in the east, China’s Yunnan province in the north and Malaysia in the south. Japan wants to be central in these plans, he announced.
“A lot of Japanese companies are heading towards this region,” Fujimura told delegates, according to a transcript of his speech. “The potentials for growth by . . . "connections" are immeasurable. That is vital for the Japanese companies pursing optimum distribution of production bases in the region as well as for the local businesses here, and is also indispensable for the potential growth of the region to fully bloom.”
It’s not just Thailand that Japan has sought to court over the past few months, as the Asian Development Bank (ADB) and the Economic Research Institute for Asean and East Asia (ERIA) finalise the CADP with the help of the Asean Secretariat. At the end of July, Okada also made official state visits to Laos and Vietnam and again, the message was loud and clear.
“Japan is ready to cooperate with Asean countries to increase the connectivity in the region,” Ministry of Foreign Affairs Deputy Press Secretary Hidenobu Sobashima said following Okada’s trips to Vientiane and Hanoi.
By comparison, high-ranking Chinese officials have been much less busy in the Mekong region over the past few months, especially in relation to the CADP. Chinese Vice President Xi Jinping did visit Cambodia at the end of last December, a trip that involved discussions on investment and trade, but recent high-level interaction between the Burmese junta and officials in Beijing as recently as early September appeared to be more closely related to Burma’s expected political evolution following elections on November 7. Junta leader Senior General Than Shwe did visit the southern economic Chinese hub Shenzhen, but other key meetings involved high-ranking military officials from both sides.
Diplomats from Tokyo have therefore clearly been busier than their Chinese counterparts around the Mekong region in recent weeks, even if the world's most populous nation enjoys a more close-knit role with Southeast Asia by default due to its geography. Yunnan Province in the southwest of China is part of the Greater Mekong Subregion that also includes Vietnam, Cambodia, Laos, Thailand and Myanmar.
Despite recent efforts, Tokyo’s policy of high-level diplomacy in mainland Southeast Asia to win support for large infrastructure contracts for Japanese firms appeared to have come too late in the case of the high-profile, high-speed train link planned to run the length of Vietnam. In June, Vietnam’s National Assembly voted down the huge $56-billion project – an event analysts viewed as the organ’s biggest show of independence ever – thereby effectively ending the possibility of a huge tender by one of two Japanese consortiums. The Vietnamese cabinet had previously approved a plan that would have resulted in a collaboration by two or more of Kawasaki Heavy Industries Ltd, Mitsubishi Heavy Industries Ltd, Mitsubishi Corp and Sumitomo Corp. The project now looks to be doomed at worst or at best delayed and severely curtailed in scope after Vietnamese lawmakers expressed doubts over the cost and scale of the ambitious project.
Still, Japan has major designs on other key infrastructure aimed at bringing the region economically closer together. Fujimura told delegates in Bangkok in September that Japan had already constructed 300 bridges in the Greater Mekong Subregion and it plans to develop more by supplying soft loans and grants and then contracting Japanese firms to build these projects.
In Neak Loueng, a key Cambodian town on the East-West corridor route on the way to the Vietnamese border where locals still cross the Mekong by ferry, Japan plans to build a $165m bridge spanning the wide part of the river. Also in Cambodia, the Japan Bank for International Cooperation (JBIC) has agreed to finance the improvement of port facilities along the Mekong and on the Tonle Sap Lake at Siem Reap, although the exact cost of these projects is yet to be determined, according to ADB. JBIC is also partially funding a new 220 kilovolt transmission line between Kampot and Sihanoukville in southern Cambodia and an upgrade on port facilities at Phone Falls on the Mekong in Laos.
All of these projects relate only to the Southern Corridor, just a small part of the overall CADP. With billions of dollars in funding still required on key infrastructure projects on this route, Japan-based financiers could end up committing further loans and grants. It is also noticeable that China has yet to commit a single dollar to any of these projects, according to an ADB update on their status published last month.
As representatives of ERIA, the main research body on the CADP, have travelled around the region to promote awareness of the project and to liaise with key partners in government and the private sector, both Chinese and Japanese interests have staked their claims for involvement, even if organisations in Japan were slow off the mark in realising ERIA’s influence in the region.
As noted by Japanese President Yukio Hatoyama in a speech to an ERIA symposium in Japan in December: “It seems that Japan is lagging behind compared to other countries in understanding ERIA’s activities.”
Since then ERIA has met with the Japan Business Federation in January and a number of times in May. At the end of the same month, some 70 Japanese private sector representatives in Indonesia held another meeting with the ERIA, and then in July Japanese economic research institutes held discussions with the organisation in Nara, Japan. During this period only one ERIA meeting was held in China – in Beijing in July.
Notably, Japan’s ERIA governing border representative, Hiroshi Okuda, is a senior advisor and member of the board of directors at Toyota and an honourary board member of the Japan Business Federation. By contrast his Chinese counterpart, Zhang Yunling, has little direct involvement in the private sector as a professor of economics and a social scientist.
Ultimately, ERIA is a Japanese baby anyway. Japan is the main benefactor with contributions also supplied by India, Australia and New Zealand (and not China), plus the organisation’s executive director and chief economist are both Japanese – Hidetoshi Nishimura and Fukunari Kimura. Within the research department there are a further three senior Japanese personnel as opposed to just one Chinese.
Japan’s motivation to influence economic policy in the wider Asian region and in Southeast Asia in particular is obvious. Between 1987 and 2007, China’s exports grew on average by 20% per year as developing economies exploded in the region. “The PRC [China] became the largest trader in Asia, far surpassing Japan,” notes last year’s ADB report, Infrastructure for a seamless Asia.
As Japan’s share of world trade has slid from the heydays of the 1970s and 80s, Asia’s share of world trade rose from 22.7% in 1990 to 29.2% in 2007, it adds. Despite Japanese efforts to gain influence in Southeast Asia as ADB and ERIA prepare to publish a huge blueprint for the region, China looks set to win the ultimate spoils. Japan could gain as much as $200 billion from infrastructure improvements in developing Asia, according to ADB, compared to $960 billion for the rest of the world. But then this is dwarfed in comparison to China, which again would benefit from its geographical proximity to the region – ADB estimates the world’s second-largest economy could gain a staggering $3,550 billion from new infrastructure up to and beyond the year 2020, the most of any country in the world. That would be once the infrastructure is completed though. Japan has made it clear it also plans to generate significant opportunities for its construction and engineering firms to actually build this infrastructure in a bid to boost an economy still suffering from the global economic crisis.
Few countries seem to take on China and win these days. Yet when it comes to gaining contracts to build in Southeast Asia, can Japan win the business battle, if not the economic war?
2 comments:
Police and Authority must keep an eyes on overload trucking! they will destroy roads, bridges, any overload, oversize trucking must stop and punish...with big big fine$$!
glad to see cambodia is now building a lot of good roads all over the country! it's a sign of economic integration in the region as well as the world.
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