DE-FACTO ECONOMIC
INTEGRATION IN EAST ASIA AND JAPANESE COMPANIES
By Kiyoshi
Abe, Chiba University, Japan (E-mail: abe@le.chiba-u.ac.jp)
East Asian (ASEAN-type) integration is different in many aspects from the EU-type integration. The differences can be summarized as follows:
Europe (EU) |
Comparison |
East Asia
(ASEAN) |
De-jure
integration |
Basic
feature |
De-facto
integration |
Tight |
Organization |
Loose |
Politics |
Driving
force |
Market |
Leader |
Role of
government |
Facilitator |
Inherent,
strong |
Community
concept |
Alien, weak |
Developed
countries |
Members |
Developing
countries |
Governments |
Promoters of
integration |
MNCs (esp.
Jap. firms) |
Increasing |
Intra-regional
trade |
Increasing |
Relatively
Closed |
Regionalism |
Relatively
Open |
Yes |
US presence |
Yes |
Despite the differences or difficulties,
there has recently been a rise of intra-regional trade in East Asia. What
accounts for it? Various new original data from Indonesia, Malaysia, Thailand,
Germany, the USA etc.support a view that Japanese multinational companies play
significant roles as promoters of the de-facto East Asia, especially Southeast
Asia, integration. Behind it are massive inflows of FDIs from Japan, increasing
local productions by Japanese transplants, involvement of Japanese small and
medium enterprises (SMEs), the formation of supplier network of foreign origin,
the shift in Japan’s comparative advantages, Asian local incentives, Asian own
efforts etc. Relevant is also the cooperation with Korean firms. Samsung's
Asian networks, for instance, are deeply enmeshed with Japanese multinational
companies.
When Japanese
MNCs relocate, so does their vertical and horizontal relationship. In
management localization, Japan lags behind other advanced countries, as shown by
my questionnaires. Japanese small and medium enterprises (SMEs) are also
promoters of the de-facto integration.
Southeast
Asian countries have encouraged Japanese and other MNCs to locate operations
within their borders, and by doing so, have PLUGGED IN the regionally-based
production system of MNCs. The cross-national networks become increasingly
complex, interwoven and overlapping, making the Asian de-facto integration
deeper. Market dynamics functions
well. All that a developing
country in Southeast Asia needs to do is to plug in. The network then starts
working under the control of the MNC, just as a formation of airplanes takes
off under the control of an aerobatics commander. The developing country is “elevated” by an “elevator”,
attaining high economic growth and export expansion inside the MNC-led
production network. An “elevator”
model functions well.
My
own questionnaire surveys of the managers of Japanese-based companies conclude
that good foreign-affiliated supporting industries are located nearby in
Southeast Asia. Domestic procurement is made possible by the support of
foreign-based subsidiaries, which make domestic linkages (clusters) possible. Many Japanese companies have many times tried to find capable
domestic suppliers they can trust, but in vain. They have so far ended up with
affiliation with Japanese subsidiaries, related Korean companies, Overseas
Chinese companies, and the like. Some local economists blame their failure to
use domestic suppliers, but what matters in the borderless mega competition is
very high quality of products, which can only be secured by experienced,
QC-trained and knowledge-intensive companies with global standard. It takes
much consistent time and effort to develop technological levels of indigenous
workers.
Southeast Asia
acts as typical high exchange economy. The key imports from Japan and elsewhere
are processed (exchanged) into export-products by localized foreign-affiliated
companies. The high exchange economy corresponds to the plug-in model in the
MNC production network. Mutual
supply of parts among East Asian countries is promoted mainly by
Japanese-affiliated MNCs.
In conclusion,
various new data including my own original questionnaire survey data support
that the de-facto economic integration of East Asia, especially Southeast Asia,
is being promoted significantly by the Japanese-affiliated companies.