Southeast Asia Loses Faith in Japan 'Supermen'
International Herald Tribune
April 7, 1994
Michael Richardson  

Southeast Asian countries, concerned that prolonged economic and political problems may permanently weaken Japan, are beginning to doubt its reliability as a major player in the region.

This view, by officials, businessmen and analysts, is in sharp contrast to the notion of Japan as an invincible economic juggernaut that has prevailed in Southeast Asia for more than two decades of its economic ascendancy.

The idea that Japan may not bounce back with renewed vigor after three years of recession deeply troubles the nations of Southeast Asia. Throughout the 1970s and 1980s, Japan was the region's largest source of manufacturing investment, imports and aid.

Southeast Asian countries are worried that rising protectionist sentiment will limit their exports to the United States and the European Union. They also fear that China's superheated economy will boil over and falter, closing off another avenue for export expansion.

As a result, they are looking to Japan to revive its role as a locomotive for regional economic growth by increasing its transfer of technology and opening its markets more widely to imports of manufactured and processed goods.

Instead, they find that Japan is becoming increasingly preoccupied with its own economic difficulties and that Japanese companies are diverting investment away from Southeast Asia to China.

"We don't see the Japanese being as reliable as before," said Naquiyuddin Ja'afar, chairman of Antah Holdings, a Malaysian conglomerate with interests in financial services, the oil and gas industry and manufacturing.

"They are still here in strength but it does seem as though they have discovered another favorite son," he added, in reference to China.

In the six months to September, Japanese investment in China jumped 58 percent to $695 million, while in Hong Kong, which serves as a gateway to China for many Japanese firms, it rose by 35 percent to $618 million.

In the same period, Japanese investment in Indonesia, Malaysia, the Philippines and Thailand dropped by 33 percent to $984 million. In Singapore, it increased by just under 3 percent to $331 million.

C.H. Kwan, senior economist and head of Asian research at Nomura Research Institute Ltd. in Tokyo, said that more and more Japanese firms favored China over Southeast Asia "because China, with its large population and high growth rate, promises to become an important market over the medium term."

He added that this consideration had become "all the more important as rising protectionism and the prolonged recession in the industrialized countries has prompted Japanese companies to develop new markets."

Mainly because Japan sells far more than it buys from the region, Asia replaced the European Union as the area with the biggest current-account deficit with Japan in the six months to September.

According to Japanese figures, Japan's surplus with non-Communist Asian nations in the period was $28 billion, up from $19.5 billion a year earlier.

Many Southeast Asian businessmen and officials are concerned that weak coalition government in Japan, as well as nagging trade conflict between Tokyo and Washington, are undermining chances of a Japanese economic recovery.

Reflecting that view, Mr, Naquiyuddin noted that "all the economically successful regimes in Asia today have strong, stable governments."

Mohammed Sadli, a former Indonesian cabinet minister, said that he was surprised to find on a visit to Japan that Japanese businessmen were no longer confident, as they had been in previous recessions, that the economy would bounce back.

"This crisis of confidence may delay and weaken any economic upturn" in Japan, Mr. Sadli added.

In a recent report to the Pacific Economic Cooperation Council, a panel of 18 economists from Pacific rim nations warned that forecasts of 1.1 percent growth in Japan this year, and 2.7 percent in 1995, might be too optimistic and that all economies in the region would feel the impact if Japan failed to recover.

With Japan in trouble, Southeast Asian countries are questioning whether they should continue to rely too heavily on Japan as an economic partner.

Mahathir bin Mohamad, the Malaysian prime minister, complained the other day that Mitsubishi Motors Corp. was too slow in transferring key technology for Malaysia's national car and said that he could turn to European, American or other Japanese companies if Mitsubishi continued to drag its feet.

The venture is part of an ambitious plan to industrialize Malaysia.

"Our imitation of the Japanese model of economic development was always based on the belief that Japan was a success story," said Lee Poh Ping, a Malaysian political scientist who specializes in relations between Southeast Asia and Japan.

"We no longer believe they are supermen," he said. "It is clear they are prone to error."

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