Policy Proposals Asia and Oceania
Keidanren Mission to ASEAN
Observations of Keidanren Chairman Hiromasa Yonekura
February 18, 2011
Issued in: Singapore
During the period from February 13 to 18, the mission visited Indonesia, current chair of ASEAN, Thailand, an important strategic business base for Japanese corporations, and Singapore, a major supporter of a Free Trade Area of the Asia-Pacific (FTAAP) and the Trans-Pacific Partnership (TPP). Exchanging views with public- and private-sector leaders in these countries enabled us to demonstrate to Japan and other nations that Keidanren attaches great importance to Asia.
Keidanren's Asian growth strategy calls for regional economic integration and infrastructure development to assist further Asian development by utilizing Japan's outstanding technologies and expertise so that Japan can grow in tandem with the rest of Asia. This strategy is now approaching the implementation stage. The mission was highly productive in providing an opportunity to exchange opinions with government and business leaders in the countries visited with a view to devising specific cooperative measures and moving forward to implement them.
In working toward regional economic integration, Keidanren agreed with leaders in all countries visited that there is a need to facilitate the free movement of people, goods, and services between Japan and ASEAN nations with a view to establishing structures such as FTAAP by 2020.
We also reaffirmed that in order to make FTAAP a reality Japan needs to display leadership and work with ASEAN countries to accelerate setting up its proposed Comprehensive Economic Partnership in East Asia (CEPEA) framework, and join TPP as quickly as possible. We confirmed that to advance these two frameworks in parallel, Japan has a duty to play an active bridging role between the Asian region and Pacific nations including the US, and that this is crucial to sustainable growth not only for Japan, but for all of Asia and the world as a whole.
Given the enormous demand for infrastructure development throughout ASEAN, we agreed with the leaders visited and with ASEAN Secretary-General Surin Pitsuwan on the need to swiftly introduce concrete measures in all countries to address this issue. They include promoting public-private policy dialog, improving public-private partnerships (PPP) schemes, developing Asian bond markets to raise funds for infrastructure development, and introducing bilateral offset mechanisms.
In addition to development of "hard" infrastructure, all three countries visited by the mission noted great demand for cooperation in human resource development, based on recognition that training the next generation of players will create a platform for perpetuating current economic prosperity. A Singaporean leader suggested that Japan actively create opportunities for Japanese students and young businesspeople, those who seem to lack international exposure, to study in the melting-pot nation of Singapore. The mission was made keenly aware that Japan needs to rebuild its own human resource development policies.
Against a background of sound economic management in all three countries visited, we were deeply impressed to see people's lives steadily improving. Based on their confidence in handling of the economy, leaders in all countries again expressed their appreciation for Japan's economic cooperation and assistance over the years.
To provide a forum for further discussion of the important topics mentioned above, we invited leaders of business groups in the three countries (KADIN in Indonesia, JSCCIB in Thailand, and the Singapore Business Federation) to the second Asian Business Summit to be held in Tokyo on April 5. Business leaders from all the countries visited readily consented to attend, reinforcing our sense that an international business community network is being steadily established.
After returning to Japan, we will immediately report the outcomes of the visits to relevant government agencies, including Prime Minister Naoto Kan and members of the ministerial meetings on deployment of integrated infrastructure overseas. We will also report to international business leaders at the above-mentioned Asian Business Summit on April 5 to generate more in-depth discussion and spur concrete action to achieve further growth for Asia.
In Indonesia we exchanged views with government and business leaders including President Susilo Bambang Yudhoyono, Vice President Boediono, Coordinating Minister for the Economy Hatta Rajasa, Minister of Industry Mohamad Suleman Hidayat, and KADIN Chairman Suryo Bambang Sulisto, covering a range of topics centered on infrastructure development to strengthen intra-regional connectivity, resource and energy development, environmental issues, and regional economic integration. Eight cabinet ministers with key economic responsibilities attended our meeting with the president, providing us with a renewed sense of the major expectations Indonesia has for Japan.
The Indonesian side showed strong expectation that Japan will actively cooperate in infrastructure development for the six economic corridors and the Metropolitan Priority Area (MPA). Specifically, it requested cooperation in fields where advanced Japanese technologies can be utilized—particularly thermal power generation, geothermal power generation, water supply and sewerage systems, railways, and urban transport—and in revitalizing regional economies and assuring food and energy security.
Keidanren suggested that moving forward with such large-scale infrastructure projects would require (1) the introduction of flexible bilateral offset mechanisms enabling CO2 emission reductions to be exchanged for carbon credits, and (2) the formulation and utilization of PPP schemes where fundamental elements of the project are financed by ODA and commercially viable elements are funded by private investments. Both sides agreed on the need for these two types of mechanisms.
The president, the vice president, and many ministers expressed particularly keen interest in bilateral offset mechanisms, and the coordinating minister for the economy proposed that the MPA management committee would examine specific measures. In the context of infrastructure development, the minister of industry requested concrete proposals for reducing logistics costs, and both sides agreed that the Japan-Indonesia Economic Committee would examine this issue.
Having recently experienced a sharp rise in population (of around 3 million people annually) and a rapid increase in national income (300% over the last five years), Indonesia has achieved high economic growth driven by internal demand, and neighboring nations are taking growing interest in the purchasing power of the country's domestic market. In this context, the president noted that Japan has made a major contribution to the growth in Indonesia, offering support even in the difficult times from the 1970s onward, and he expressed his particular hope that Indonesia and Japan would continue to cooperate closely. To meet these expectations, we would like to continue working with the Japan's ministerial meetings on deployment of integrated infrastructure overseas and other forums.
Discussion with Prime Minister Abhisit Vejjajiva, Deputy Prime Minister Trairong Suwannakhiri, Minister of Finance Korn Chatikavanij, Minister of Commerce Pornthiva Nakasai, and other leaders covered topics including promotion of regional economic integration, upgrading of the Japan-Thailand Economic Partnership Agreement (JTEPA) and improvement of business environment, and cooperation in Mekong development as part of ASEAN-wide infrastructure projects.
The prime minister expressed his support for Keidanren's Asian growth strategy and stressed the need for infrastructure development that enhances geographical connectivity in order to advance economic integration. He proposed to collaborate with Japan, in Thailand and other Mekong countries, especially on transport infrastructure development projects and training of related personnel, making the most of Japan's particularly advanced technologies and expertise in this field, with the aim of avoiding duplication of investment. Another related outcome was Thailand's firm resolution he showed to focus on creating PPP schemes.
Thai business leaders also requested Japan's collaboration in infrastructure development and related human resource development. In this context, we reconfirmed the importance of promoting industrial cooperation in the area of human resource development between Japan and the Mekong countries. In order to further this discussion, it was agreed to hold the 22nd Japan-Thailand Joint Trade and Economic Committee Meeting in Tokyo, hopefully before the end of the year.
Commenting on regional economic integration, both the prime minister and the minister of commerce, who is responsible for this matter, expressed interest in TPP, but indicated that their initial priority is to accelerate the existing process of CEPEA. However, they reconfirmed their agreement with Keidanren's views on continuing to work toward economic integration in the Asia-Pacific region.
They also spoke about the review of JTEPA beginning next year and reiterated their willingness to improve the business environment. Since they value candid opinions from Japan, they asked Keidanren to provide its views to the Board of Investment. They once again expressed their trust in the Japanese business community, which has consistently supported Thailand's economy even in difficult times, and indicated their intention to quickly resolve obstacles and issues including environmental problems in Map Ta Phut.
In the context of securing infrastructure funds, it was noted that the World Bank has expressed concerns over the impact that tighter regulations under the Basel III accord may have on commercial bank lending. It was agreed to cooperate in future initiatives in this area and in the development of Asian bond markets.
Prime Minister Lee Hsien Loong and Minister for Trade and Industry Lim Hng Kiang conveyed their strong expectations that Japan would display leadership in developing CEPEA and TPP, which are two wheels of one cart toward realization of FTAAP. The mission renewed its awareness that, as the proposer of CEPEA, Japan has a particular responsibility to speed up progress.
The minister for trade and industry provided valuable insight for Japan's participation in TPP when he noted that opening up this comprehensive and exception-free 21st century FTA to a wide number of participants and ensuring its success would require incremental steps to give potential participants leading time for preparations.
Prime Minister Lee Hsien Loong and Senior Minister Goh Chok Tong supported the policy of developing Asian bond markets to meet the vast demand for infrastructure funding in the region. The next issue to address will be currency, namely, whether to specify one particular currency in the Asian market or to adopt a basket of currencies. We would like to continue cooperating with Singapore, a major Asian financial center, to examine this issue.