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NO. 19 -- May 16, 1997

 

Feature Article

STRENGTH WITHOUT DOMINANCE: JAPANESE INVESTMENT IN SOUTHEAST ASIA by Christopher B. Johnstone and Atsushi Yamakoshi

Even as Japan's economy suffers through a lengthy period of slow growth, that country's multinationals continue their march into overseas markets. While the United States easily continues to be Japan's single largest trading partner as well as the biggest host to its foreign direct investments, Japanese companies increasingly are directing their attention to markets in Asia. In recent years the People's Republic of China has emerged as a particular focus of activity, but the economies of Southeast Asia occupy a central role in corporate strategy.

As Southeast Asia has climbed the development ladder, the nature of corporate Japan's presence in the region has changed. No longer are these countries simply a source of inexpensive labor for products shipped to Japan or to third markets; they have blossomed into viable markets in and of themselves. Japanese investment across a number of manufacturing industries increasingly is geared toward serving local customers and building sophisticated local production and supplier networks.

As corporate Japan's advance into Southeast Asia has proceeded, a number of analysts have argued that key players are replicating in Asian markets the keiretsu production and supply networks found at home -- a trend that, if accurate, could pose serious market access problems for outsiders. This formulation is far too simple and static, however. Japanese firms clearly do possess strong competitive advantages in Southeast Asia, but those strengths come more from the benefits of early entry than from the peculiar characteristics of corporate Japan's investment patterns.

Further, a changing business environment in Southeast Asia is doing much to challenge the Japanese position. European and American investors increasingly are moving into local markets, as are companies headquartered elsewhere in Asia, in part because of market liberalization initiatives but mainly because these competitors hope to capitalize on the opportunities created by the region's rapidly growing economies.

Finally, much Japanese investment in Southeast Asia is so new that definitive evaluations of its competitiveness, efficiency and profitability remain impossible.

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Weekly Review

APEC Ministers Outline Steps For Further Liberalization by Christopher B. Johnstone

The Asia Pacific Economic Cooperation forum is making painfully slow progress toward its goal of achieving a regional free trade and investment zone by the early 21st century. Despite a wealth of reasons for skepticism, APEC economics continue to push forward with an agenda that merits attention.

 

Possibility of New Multilateral Trade Round Surfaces At Quad Talks by Douglas Ostrom

More than tree years after the end of the multilateral trade negotiations known as the Uruguay Round, the principal participants remain divided not only on the agenda for a new series of international trade liberalization talks but even on the desirability of such a move. Those differences were on clear display during April 30-May 2 meetings in Toronto involving the trade ministers of the so-called quadrilateral countries -- the United States, Japan, the European Union and Canada.

 

Retiring Bureaucrats Find Narrower Stairway for "Descent From Heaven" by Jon Choy

A string of scandals involving venal actions by bureaucrats has shattered civil servants' image as paragons of virtue and selflessness. As a consequence of their diminished social standing, retired bureaucrats have found that the well-trod path from a senior government position to an executive desk job -- the practice of amakudari or descent from heaven -- has become narrower and more difficult to negotiate.

 

Reform Panel Proposes New Approach To Crisis Management by Barbara Wanner

The Japanese government's ill-prepared, sluggish and poorly coordinated response to a string of natural and man-made disasters drew into sharp focus weaknesses in Tokyo's approach to crisis management. In a bid to improve the government's handling of such disasters, an advisory panel has proposed a plan that would give the premier more power to make quick decisions during emergencies.

 

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