The ASEAN-BIS Day 3 (18 November 2011) – More on ASEAN-Japan Relationships

ASEAN-Japan economic relationships are not all about government-to-government partnerships. The two regions have witnessed continuing progress in industry-to-industry partnerships too. The panellists in the ASEAN-Japan business and investment relationship session include Setsuo Iuchi (President of JETRO Thailand and Southeast Asia), Suparno Djasmin (Deputy Director PT Astra International Tbk), Karen Agustiawan (President Director of Pertamina), and Arifin Panigoro (Founder of Medco Group).

Setsuo Iuchi of JETRO (Japan External Trade Organization) presented the success story of the company he is leading. JETRO “is a government-related organization that works to promote mutual trade and investment between Japan and the rest of the world. Originally established in 1958 to promote Japanese exports abroad, JETRO’s core focus in the 21st century has shifted toward promoting foreign direct investment into Japan and helping small to medium size Japanese firms maximize their global export potential” (http://www.jetro.go.jp/en/jetro/).

Managed under the ministry of economy, trade and industry, JETRO contributes to Japan’s creation of regional production network by foreign trade agreements’ utilisation. Japan’s foreign direct investment (FDI) in ASEAN is substantial. It accounts for 15% of total FDI coming into the region, higher compared to share of total FDI into the US (9.5%) but still lower than its share of total FDI into the European Union (21%). In some ASEAN countries, Japanese FDI accounts for over one-third of total FDI in the respective country, namely into Thailand (36%), Brunei (34%) and  Philippines (30%). The contribution of Japanese FDI to total FDI in some other ASEAN countries is much lower, at 14% of total FDI in Malaysia, 12% in Viet Nam and 4.3% in Indonesia.

Suparno Djasmin of Astra International explained a long-term relationship that his company has built with major automobile and other companies in Japan. Those companies  include Toyota, Honda, Fuji Xerox, Nissan, Isuzu, Daihatsu and Denso. Astra International was established in 1957 and started being listed on the Indonesian stock exchange since 1990. As of 30 September 2011, the company is now worth US$ 17 billion in assets and US$ 8 billion in equity. It consists of 6 business groups, 145 affiliated companies and 145,154 employees. Based in Indonesia, Astra attracts Japan for a number of reasons. Mr Djasmin reported that Toyota is planned to invest US$ 337 million in Karawang and Cibitung and the initial operation will start in 2013; Daihatsu will also be investing US$40 million to expand its current capacity and build a new factory in East Karawang with the expected first production in 2012. The company’s business diversification, business profitability and good corporate governance have been the main drivers of such investments. At the moment, 28% of world vehicles are produced by Japan. With Indonesia’s auto market grows at 15% per annum, whilst Japanese domestic automobile market decreases by 3% per annum; it is expected that Japanese investment especially in automobile industries will continue in the long-run. Astra has also contributed to the creation of sustainable growth by producing an eco-friendly ‘low-cost green car’ which is scheduled to be launched in 2012.

Karen Agustiawan of Pertamina also presented her company’s contribution to sustainable growth. She viewed that building green energy architecture can be done by regional cooperation. It is predicted that by 2040, we will still depend on oil and gas. Pertamina has supported the finding of new energy resources including biofuels.

Arifin Panigoro of Medco reviewed his personal experience visiting and dealing with Japanese businesses. Japan has set a good example of how to deal with natural disasters. He recalled that only five months after the tsunami disaster, Japan has been able to operate the affected airport normally.

Overall, looking at the supply side of the economy the private sector seems to have considered what they can contribute to sustainable growth. The GoLive Indonesia Representative (GIR) in the discussion session raised her concern about the missing side of the story ie. the demand-side of the energy market. One of the most debated topics in Indonesia is fuel subsidies. The removal of fuel subsidies will potentially lower Indonesia’s products’ competitiveness in the global market and also lower consumption rates which will adversely affect the industry. However, this removal will address development challenges that UN Secretary General stated earlier. The funding currently used to subsidise fuel can be then allocated to poverty reduction programs to improve health and education facilities. The GIR asked to the panellists ‘what is your perspective about this issue?’.  Ms Agustiawan of Pertamina viewed that the question was more about a political decision. But she and other panellists viewed that the Indonesian government must give incentives for the private sector to contribute to the creation of a green economy.

This article is prepared by Risti Permani.

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Filed under ASEAN, ASEAN-BIS, Climate change and environment, Conference, East Asia, Economic development, Economic Integration, Education, Energy, Indonesia, Investment, Poverty, Trade

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