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Policy Proposals  Asia and Oceania Promoting Cooperation between Japan and the Mekong Region

November 12, 2012

Creating a virtuous cycle of growth between Japan and other Asian countries, whereby Japan contributes to foster sound business environment and enhance people's quality of life in Asia, is a crucial element of the regional growth strategy. In this connection, the Mekong region has become more important as a source of high-caliber labor and a consumer market with great potential, with the welcome return of Myanmar to the international community. Using industrial accumulation in Thailand and Vietnam as a base, both public and private sectors should strengthen logistical connectivity within the Mekong region by enhancing transport infrastructure to encourage further development and supply chain participation by Cambodia, Laos, and Myanmar, thereby achieving balanced growth for the region and Asia as a whole. Japan needs to attune its cooperative measures to the particular features and development level of each country in the Mekong region.

With a view to the East Asia Summit to be held in Phnom Penh, Cambodia, on November 18-20, Keidanren makes the following proposals to the governments of Japan and the other participating nations.

1. Development of Hard Infrastructure

(1) Strengthening connectivity through transport infrastructure

Japan should further contribute to infrastructure development in the East-West Economic Corridor and the Southern Economic Corridor. In particular, the public and private sectors should hold concrete discussions aiming to bridge missing links in the Southern Economic Corridor, and should collaborate on active involvement in the Dawei Project. Bilateral efforts should place priority on enhancing port facilities in and improving access to the Thilawa Special Economic Zone in Myanmar, Cai Mep-Thi Vai, Lach Huyen, and Vung Ang in Vietnam, and Phnom Penh in Cambodia.

(2) Improving electricity supply and other basic infrastructure

Japan should prioritize cooperation in increase and improvement of hydroelectric and other power stations, as well as power grid development aimed at achieving stable electricity supply in the Mekong region. Highly responsive grant aid needs to be utilized for pilot projects of Japanese technologies and systems in fields such as electricity, telecommunications, and water treatment. In parallel with fundamental infrastructure improvement plans, proactive efforts are also required to restore existing infrastructure for short-term benefits.

(3) Enhancing support through ODA and institutional finance

Official development assistance and institutional finance provided via the Japan International Cooperation Agency (JICA), Nippon Export and Investment Insurance (NEXI), and the Japan Bank for International Cooperation (JBIC) should be mobilized in support of public-private infrastructure development projects. There is a need to swiftly begin implementing the 57 flagship infrastructure projects proposed by the Japanese government at the Mekong-Japan Summit held in April 2012, starting with high-priority projects.

2. Enhancement of Soft Infrastructure

(1) Facilitating trade

To rapidly realize the Asia Cargo Highway Initiative proposed by Japan, the relevant countries should take a unified approach to making customs procedures across the region simpler, faster, and clearer. In tandem with development of transport infrastructure, the Cross-Border Transport Agreement (CBTA) needs to be expanded in scope and steadily implemented.

(2) Developing legal systems and standards

Utilizing legal system development assistance offered by JICA, the Japanese private and public sectors should collaborate in supporting the establishment of business laws in the Mekong region to create a stable and predictable business environment. At the same time, the relevant countries need to establish and steadily make use of public-private partnership (PPP) laws so that the private sector can contribute to booming demand for infrastructure. Such legislation needs to include bidding systems based on comprehensive assessment of proposals and schemes for project proposers to gain preferential business rights.

(3) Promoting economic partnership

In order to enhance connectivity within the Mekong region and with adjacent countries, at the coming East Asia Summit, the relevant countries need to agree on launching negotiations for the Regional Comprehensive Economic Partnership (RCEP) by the end of this year. In addition to covering such topics as trade in goods and services, investment, movement of natural persons, and intellectual property, these talks should aim to harmonize rules of origin and facilitate procedures.

3. Collaboration in Industrial Policy

Comprehensive growth strategies and enhancement of the business environment are useful in promoting industrialization and foreign direct investment in Cambodia, Laos, and Myanmar. With reference to the successful example of the Japan-Vietnam Joint Initiative implemented through public and private sector collaboration, the three countries need to rapidly establish similar schemes.

4. Cooperation in Environment, Disaster Management, Agriculture, and Other Fields

In order to make effective use of Japanese companies' experience and technologies in the environmental and energy fields, the governments of Japan and other relevant countries should establish mechanisms for the appropriate transfer of technology, bearing in mind the protection of intellectual property rights. There is also a pressing need to create bilateral offset mechanisms, which are currently the subject of governmental discussion between Japan and Mekong region countries.

Japan should utilize its own experience to play an active role in supporting the development of disaster-resilient infrastructure and the establishment of disaster management systems. Through collaboration between the public and private sectors, it should also contribute to resource development projects and provide technical assistance in such fields as the cultivation of commercial crops and the raising of the competitiveness of the processed food industry with a view to increasing food sector productivity and encouraging value-added agriculture.

5. Strengthening Ties among Relevant Organizations

In addition to enhancing policy discussion with Mekong region government leaders, policymakers, and business groups, the Japanese business community will actively increase its efforts to cooperate with countries in the region in the formulation of a growth strategy and the creation of a favorable business environment through public and private sector ties.

Regional Affairs