By and large, the economies of Asia, including Japan, now appear to be bouncing back from the financial crisis that struck the region in 1997. For the present turnaround to develop into genuine, sustainable growth, Asian nations must move ahead with structural economic reform. They also should cooperate more closely in the areas of trade and investment liberalization, financial and exchange rate stabilization, and the strengthening of industrial competitiveness. It is with such a perspective that we present the following as a proposal by Japan's business community.
Given the weight of its role in Asia's economic development, Japan must lead the region in structural reform, whether it is in the area of adjusting national legal and taxation systems to globally practiced standards, developing a strategic industrial-technology policy for the future or overhauling the social security system. All this is to build the necessary underpinnings of renewed economic vibrancy. Simultaneously, we in Japan must strive to increase imports by expanding domestic demand with the government steadily applying measures to keep up the level of economic activity.
For their part, Japanese businesses must strive not only to improve their financial and other key strengths but also to increase transparency, bolster their corporate governance systems, and accept the obligation to account for consequences of decisions. While respecting different cultures and business climates, Japanese businesspeople can share their experiences in corporate reform with their counterparts in other Asian countries.
The current upturn in Asian economies presents a good opportunity to push forward trade and investment liberalization in a manner that suits the region's realities. Even those industries that have been slow to liberalize or those fearing the negative impact of liberalization now have to make themselves more competitive on their own. While there may be times ahead when the so-called safeguards or some other measures have to be applied, the Asian businesses must maintain the basic commitment to liberalization.
The failure to launch a new round of multilateral trade negotiations at the third WTO ministerial conference in Seattle was a regrettable turn of events, indeed. Japan must help set up a dialogue among Asian nations aimed at starting a new round of the comprehensive round of negotiations at an early date. Also, the Asean countries should be encouraged to work toward bringing the AFTA plan to fruition. In the meantime, Japan can go ahead in exploring possible free trade agreements with countries like the Republic of Korea and Singapore.
The financial authorities of Asian countries need to establish an open but sound system of finance, learning from the lessons of the last regional crisis. To this end, they will have to reform their domestic financial systems by improving information disclosure, putting updated laws and regulations in place, and strengthening the supervision of financial institutions. Japan can offer more assistance by both the public and private sectors to other Asian countries in the areas of personnel training and know-how. Where it comes to the matter of regional cooperation for financial and currency stability, the Manila Framework (*1) is in need of strengthening so Asian countries can better cope with market trends that stray too far from their economic fundamentals.
There is no better time than the present to call for a wider international use of the yen. The Japanese government has been attempting to make it easier to raise yen funds and manage them in Japan's financial and capital markets. Japan should respond more actively to the strong demand for capital in Asia by helping finance real economic transactions such as investments and loans. For this purpose, the Second Stage of the New Miyazawa Initiative (*2) can be utilized. It is also important that, under a government-private sector consensus, the wider use of the yen be more vigorously encouraged for varied purposes such as trade settlements, investments and loans, and implementation of Japan's assistance programs for Asian nations. In response to the Japanese initiative, it is hoped, the governments and businesses of other Asian countries take a positive approach in matters of increased use of the yen.
Japanese business can help enhance Asian nations' industrial competitiveness by expanding their activities in different areas of Asia. In this connection, they strongly hope that each country make efforts in good faith to resolve their private debt problems. Ultimately, the challenge for Asian businesses is to cut their excessive reliance on borrowings and step up, instead, their own capital accumulation.
Japan's continued assistance in the area of infrastructure development in Asia is important from the standpoint of enhancing the region's industrial competitiveness as well. While giving priority to countries that have been affected more seriously, and taking into account each partner's economic circumstances, Japan is advised to put the emphasis on assistance to the next generation of infrastructure including, for example, projects in the information, communications, environmental and energy conservation sectors. Efficient implementation of assistance to private sector projects that generate more ripple effects on the economy is especially important. This requires intensified dialogues with partner countries as well as increased transfer of the experience, knowledge and human resources of Japan's private sector throughout the ODA process, from the planning and drafting of project proposals to project implementation and assessment.
Human resources development commands increased importance in strengthening industrial competitiveness. Japanese businesses have much to offer in terms of knowledge and experience not just in manufacturing technologies but also in many other areas such as business administration, finance and distribution. Nonetheless, effective private sector participation requires that the parties concerned have a clear picture of the proliferating training and educational programs pursued at present by JICA and other governmental and private institutions for evaluation. Then, the parties concerned will be asked to review the existing programs, simplify administrative procedures and consolidate some programs and expand others to accommodate a greater number of trainees over a longer period.
The objectives of the exercise are to better adapt programs to the actual manpower needs of partner countries as well as to facilitate the greater involvement of Japanese businesses people. One of the present schemes in need of expansion is the Program for Dispatching Private Sector Advisors (*3), which makes use of private sector initiatives to respond flexibly to newly felt needs in partner countries. Meanwhile, Japanese businesses operating in other Asian countries should make efforts to provide more opportunities for training and promotion of locally employed management personnel.
- Note 1: Manila Framework
This new framework to enhance Asian regional cooperation and promote financial stability was agreed upon at the meeting of the deputy finance ministers and central bankers of 14 economies held in Manila in November 1997. It includes four major initiatives: 1) establishment of a mechanism for regional surveillance to complement global surveillance by the IMF; 2) enhanced economic and technical cooperation, particularly in strengthening domestic financial systems and regulatory capacities; 3) measures to strengthen the IMF's capacity to respond to financial crises; and 4) a cooperative financing arrangement that would supplement IMF resources. Regional surveillance was performed four times between March 1998 and August 1999.
- Note 2: Second Stage of the New Miyazawa Initiative
To assist Asian countries in overcoming their economic difficulties and to contribute to the stability of international financial markets, the Japanese government announced in October 1998 a "New Initiative to Overcome the Asian Currency Crisis (New Miyazawa Initiative)" that would provide a package of support measures to Asian nations totaling 30 billion yen. In May 1999, it announced the "Resource Mobilization Plan for Asia (Second Stage of the New Miyazawa Initiative)" totaling 2 trillion yen. Aimed at achieving a full-scale economic recovery in Asia, the purpose of the initiative is to mobilize domestic and foreign private-sector funds and to reinvest the wealth of private funds in Japan in the construction of more stable and robust financial systems that are less susceptible to currency crises.
- Note 3: Dispatching Private Sector Advisors
A technological cooperation scheme that falls under Japanese ODA, the Program for Dispatching Private Sector Human Resources was initiated with the cooperation of the Ministry of Foreign Affairs and JICA in fiscal 1997. Personnel from private Japanese businesses are dispatched to developing countries to help mobilize the private sector in those countries through the transfer of experience and knowledge. A Keidanren policy announcement in October 1996, "A Call for Promotion of Government-Private Coordination in Intellectual Support for Developing Countries: Toward Vitalization of Private Sector Economic Activities in Developing Countries," occasioned the initiation of this program. Dispatch destinations and selection of the human resources are conducted under private-sector initiative. Over the past three years, more than 50 specialists (long- and short-term) have been dispatched to ASEAN nations, Central Asia, and Central and South America, where they have made progress in fields where private know-how is essential, such as provision of advice on the creation of an electric power master plan, airport management, development of a wholesale market, tourism promotion, trade and investment promotion, distribution centers, promotion of mining industry compound concepts, and other projects.