ASEAN – Encouraging business partnerships, trade and investment for fifty years
This year sees the Association of Southeast Nations (ASEAN) celebrate its fiftieth anniversary. The Association’s founding members (Singapore, Malaysia, Philippines, Thailand and Indonesia) believed that creating unity across the Asian region would lead to strengthened cross-cultural ties and economic growth. Singapore emerged from this initiative as the wealthiest country in the region per capita and continues to see its role within the region flourish but other countries are on their respective paths towards development.
Brunei became the sixth ASEAN member country in 1984 and the Association has grown over the years with Cambodia, Laos, Vietnam and Myanmar joining ASEAN to create a ten-nation-strong regional economic community with a combined population of 625 million. The regional pact’s combined economy is currently growing at seven per cent per annum and is ranked closely behind the USA, China, Japan, India and Germany by nominal GDP. By 2023, the combined ASEAN economy is predicted to be larger than that of Japan.
“In 2015, the ASEAN Economic Community (AEC) was established to further strengthen the ASEAN-vision of a fully integrated region”, says Masataka Fujita, Secretary General, of the ASEAN Promotion Centre on Trade, Investment and Tourism (ASEAN-Japan Centre). “This sent a strong message to the world that the regional integration we had already seen will continue to provide economic transparency, instill investor confidence and encourage ‘intra-nation’ trade”.
Masataka Fujita, Secretary General, ASEAN-Japan Centre
“In 1977, the ‘Fukuda Doctrine’ which was enacted by former Japanese Prime Minister Takeo Fukuda, underlined the relationship between ASEAN and Japan should be equal and ‘heart to heart,’” explains Fujita. “This was the basis of our relationship which prompted the establishment of the ASEAN-Japan Centre”.
Japanese investment in the region commenced in the sixties as manufacturing companies moved production to Southeast Asian countries. Today, Japanese foreign direct investment (FDI) remains one of the largest in the region. From 2013 to 2015, Japanese FDI to ASEAN member countries stood at $19.2 billion and represented 15.4 per cent of total inbound investment into ASEAN markets. FDI from Japan to ASEAN Member countries represents 16.7 percent of Japan’s total overseas investment.
ASEAN foreign direct investment into Japan continues to be driven by Singapore. While from 1995-1997, ASEAN member countries’ investments into Japan represented only seven per cent of Japan’s total inward FDI, over the last three years, this has increased to 21.4 per cent with renewed interest in the country’s logistics, real estate and service industries.
In the last two decades, growth in trade has expanded rapidly. In 1995 ASEAN member countries’ imports from Japan was valued at $319 billion. In 2015 the figure was $1 trillion and Japan imported $648 billion worth of goods from ASEAN member countries.
“Bilateral trade and investment between Southeast Asia and Japan is on the rise”, says Fujita. “The ASEAN region has one of the fastest economic growth rates in the world and with geopolitical and economic challenges facing northern Asia, Southeast Asia is becoming even more attractive to Japanese investors”.
Japanese companies active in the region continue to be significant investors in production value-chain projects and the electronic, automotive and chemical industries. Countries such as Indonesia and the Philippines also offer tremendous opportunities due to their young, educated populations and consumer market potential.
“Over the last two decades, just as Japan has increased its trade ties with ASEAN member countries, investment into Japan from Southeast Asian based companies has increased. Opportunities in the Japanese market across a range of industries continue to attract investment from our neighbors”, says Fujita. “Business between Japan and ASEAN member countries is today, truly bilateral. We intend to work even closer with our friends across the region to encourage business partnerships, trade and investment”.