East Asia Beyond the Global Economic Crisis (Opening Addresses / Keynote speech)

Opening Addresses / Keynote speech　｜　Panel Discussion (1)　｜　Panel Discussion (2)　｜　Summary / Closing Remarks　

Within two years since its establishment, ERIA has achieved big development with strong and thoughtful support by Dr. Surin Pitsuwan, Secretary-General of ASEAN. I feel very flattered that we hold this symposium in Japan today as an achievement of ERIA activities. I would like to express my deep gratitude to Dr. Surin Pitsuwan for his devotion to ERIA.

Dr. Surin, explaining the significance of holding this particular symposium in Japan, stated, “Japan lags behind the ASEAN member countries in its understanding of ERIA’s activities.” I sincerely hope that this gathering will be a good opportunity to create greater understanding about the role of ERIA among the Japanese people and for its greater publicity throughout the country.

The world is now in time of great economic difficulties. Asian economies are strongly expected to contribute to overcoming this global economic crisis by harnessing its economic potential. I hope this symposium will be an opportunity to realize an East Asian community so that we can really contribute to the global prosperity.

I would like to extend my gratitude to ASEAN Secretary-General Dr. Surin Pitsuwan, the experts from overseas and all the participants representing industrial communities.

I spent three years as an expatriate in Indonesia and as such have special feelings for Asia. Soon after I took office as Senior Vice Minister of Economy, Trade and Industry, a strong quake hit Sumatra. I immediately flew to Indonesia carrying a personal letter from the Prime Minister and conveyed our condolence and encouragement to those affected on behalf of our nation. At that time, I had the opportunity to meet Dr. Surin, Secretary-General of ASEAN, to whom I offered assurance of our cooperation for the future of East Asia.

In the aftermath of the world economic crisis last year, the Asian economy is becoming increasingly important. Some 10,000 Japanese firms are operating in Asian economies, and approximately 40% of the profit of Japanese enterprises comes from Asia. Growing along with Asia is indeed a pillar of Japan’s growth strategy and Prime Minister Hatoyama, upholding the major goal of building the East Asian community, places a great emphasis on Asia, making it a pillar of Japan’s diplomacy. The growth of Asia and the prosperity of Asian people are more important to our country than ever before. On the other hand, however, Asia as a growth center faces many challenges. There are still major disparities in development levels; infrastructure needs to be strengthened; and energy and environmental problems need to be addressed. These shared regional problems should be tackled not unilaterally by the respective countries but jointly by mobilizing the wisdom of the entire region and by strengthening policy coordination. After World War II, the Organization for Economic Co-operation and Development (OECD) played a major role in the post-war reconstruction of Europe. Today, Asia also requires a core institution to serve the purpose of facilitating policy coordination. ERIA, based on a Japanese proposal, was established in Jakarta, Indonesia in June of last year with the consensus of the 16 countries of East Asia. While it was originally proposed by Japan, it is now a common asset of the entire region. I truly hope that ERIA will develop into a core institution for regional integration under the strong leadership of Dr. Surin and through the cooperation of Asian countries.

I wish you all lively and fruitful discussions over the future of Asia.

A year ago, IDE-JETRO organized an international symposium at a time when the world economy was collapsing in the aftermath of the Lehman Shock. The symposium pointed out that, “If the economic recovery of the U.S. takes time, Asian market will be the key to the economic rebound of the world.” Concerns were also expressed in the symposium toward emerging protectionism and nasty politics, creating fear that the momentum toward regional cooperation in East Asia might be lost. A year has passed, and the current political and economic situation indicates that the panic has cooled. The economic performances of China, India and the ASEAN countries are not at all bad. Further, the middle class in East Asia is projected to grow at an accelerated rate. As such, Asia is attracting high expectations as a long-term growth center.

However, analysis of the most recent data leads us to suspect that Asia’s domestic-demand-led growth strategy is not going as well as had been expected. For example, as a result of China’s full-set industrialization, the increased domestic demand of the country is being filled by its domestic supply and the export of final consumer goods to China has failed to increase. From a mid- to long-term perspective, this will have a negative impact on East Asian growth. Even during the economic crisis, the size of the consumer goods market in ASEAN and in Japan has somehow been maintained but it is nowhere close to sufficient to offset the collapse of demand in the U.S. market. I wonder about the direction of East Asian integration, which has been promoted based on the export-led economic development model, relying on the U.S. as its final market, in the face of the rectification of the global imbalances.

Japan has traditionally advocated East Asian community building as a pillar of its foreign policy. However, the Hatoyama administration is very different from previous administrations in that it has called for a transition from the export-led economic growth model to a domestic-demand-led one. Today’s international symposium will be an ideal opportunity for us to discuss the policies that we should adopt based on a recognition of the reality that domestic-demand-led economic development is not well on track in East Asia.

Allow me to present a progress report on ERIA’s project to formulate a Comprehensive Asian Development Plan. At the East Asia Summit held on June 3, 2009, an agreement was reached to promote the formulation of a master plan for East Asian economic growth through cooperation among ERIA, the Asian Development Bank, and the ASEAN Secretariat. The source of East Asia’s competitive strength lies in the formation of sophisticated international production networks, which accelerates the growth of the East Asian economy. As a means to this end, it is helpful to learn about production network building mechanisms. (Here, he introduced fragmentation and agglomeration theories.)

These theories suggest three tiers of development strategies in developing East Asia. The first tier consists of countries/regions that have already participated in production networks and have started forming industrial clusters. There, it is important to upgrade the industrial clusters (e.g. integrate local enterprises into the clusters). The second group consists of countries/regions that are not yet fully integrated into production networks. There, it is important to take advantages of dispersion forces from agglomerations and attract economic activities. The third group consists of countries/regions that may not participate in quick-type production networks in the short run. These areas require novel framework of industrial development with using the development of logistics infrastructure as a trigger.

(An analysis of the outcome of a simulation on the impact of infrastructure improvements (e.g. North-South, East-West Corridors) on the GRDP of each province within the East Asian region (by ERIA/IDE-JETRO GSM Team) was presented to further deepen these studies in this fiscal year.)

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Opening Addresses / Keynote speech　｜　Panel Discussion (1)　｜　Panel Discussion (2)　｜　Summary / Closing Remarks