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Enhancing trade flows for mutual gain

The formation of the Asean Economic Community is likely to give Japanese investments in Asean a boost, observers say.

Japan's contributions to building the logistics infrastructure in Asean range from providing loans to port projects from Cambodia to Vietnam and to Indonesia.

JAPAN'S cooperation with Asean on building up logistics infrastructure has had a long history and is intertwined with the development of Japanese investments in manufacturing in the region.

Some of the first waves of Japanese manufacturing investments in the region began in the 1960s and 70s. This was followed by a second wave of big investments in vehicle manufacturing in Thailand during the late 1990s and Japanese companies such as Honda, Toyota and Mitsubishi now make up some 80 per cent of the sector there.

Japanese companies have also been building similar vehicle industry clusters in other Asean countries. There are transport machinery clusters in Indonesia also, with manufacturers upbeat on the prospects in the rapidly developing economy. Domestic vehicle sales are already surpassing Thailand, making it the biggest market in Asean.

There are also clusters of chemical and pharmaceutical industries in Malaysia where relatively advanced infrastructure is available, and electric machinery clusters in the Philippines and Vietnam that have good access to southern China, which is a key part of the electronics parts and components supply chain.


These prospects are expected to brighten after the formation of the Asean Economic Community (AEC), experts believe. The AEC brings the emergence of a new market with cheaper supply and distribution networks to reach the large population, in particular to wealthier consumers in major cities in the region such as Bangkok, Jakarta and Kuala Lumpur.

The AEC will bring about an integrated market with a population of 600 million, making it the third largest market in Asia after China and India. Production bases in Asean could also be used to manufacture products for export to developing nations outside the Asean region.

However, to do this, Japanese companies are looking to make further investments to build new, or improve existing infrastructure and product supply chains in cooperation with local companies and governments.

This can be seen in Japanese companies bidding to build high-speed train lines in Indonesia, as well as further infrastructure upgrading that is needed in the region, along with Japanese technology.

Japanese companies are taking a multi-pronged approach to making all this happen. On the logistics side, real estate developers such as Mitsui Fudosan are looking to expand into logistics and warehouse development in Asean countries such as Thailand because of its strategic position within the region.

This is the next step after an initial foray into the property market through a condominium project. Executive managing director Akihiko Funaoka added that besides Thailand, the group would also tap opportunities in other rapidly growing Asean economies.

Mitsui Fudosan set up its office in Bangkok early last year, its second in Asean after initially coming to Singapore, which is its regional headquarters, several years ago.

On the infrastructure development side, there have also been numerous studies and cooperation agreements between Japan and Asean and individual Asean nations at the government level over the years.

Some key developments include the setting up of a joint task force on Asean connectivity after the adoption of the Master Plan on Asean Connectivity in 2010.

Further developments are the adopting of the updated Master Plan on Asean Connectivity 2025, which succeeds the Master Plan on Asean Connectivity 2010, and focuses on five strategic areas: sustainable infrastructure, digital innovation, seamless logistics, regulatory excellence and people mobility.

Japanese commitment to the goal of Asean connectivity was immediately put into effect with the launching of the Japan-Mekong Connectivity Initiative soon after a proposal made by Japanese Foreign Minister Fumio Kishida in May last year.

Japan has a vison of creating a vital artery for trade through the East-West and Southern Economic Corridors. This will be in the form of hard infrastructure developments in the Mekong region that will connect the South China Sea and the Indian Ocean.

A variety of Japan-Mekong Connectivity Initiative projects has provided assistance to develop the Southern Economic Corridor that connects Ho Chi Minh City, Phnom Penh, Bangkok and Dawei as well as the East-West Economic Corridor that goes from Da Nang to Mawlamyine. It is envisaged that the improvement of both corridors will enable overland access across the Indochina Peninsula, bringing benefits to transportation and the distribution of goods.


At the same time, Japan is also trying to consolidate connectivity through the Asean Maritime Economic Corridor, with the development of port and port-associated industries as well as energy and Infocomm technology (ICT) networks in the major cities of Malaysia, Singapore, Indonesia, Brunei and the Philippines.

And finally efforts are also being made through the development of soft infrastructure such as the Asean Smart Network, trade facilitation programmes and common standards for the automotive industry, the single aviation market and logistics enhancement and sea-land Intermodal transportation.

Japan's contributions to building the logistics infrastructure in Asean range from providing loans to port projects from Cambodia to Vietnam to Indonesia, while also putting in resources for soft infrastructure projects. These include a joint hydrographic survey of the Straits of Malacca and Singapore, the development of Vessel Traffic System (VTS) operators' capabilities through the establishment of the Asean Regional Training Centre and joint research on road technologies for Asean cross-border corridors which help provide technical references on road pavement and overloading control to improve the quality of transit highway networks for better connectivity.

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