Japan and China square off in Southeast Asia

Sathish Govind

Anybody arriving at a capital city airport in Southeast Asia, say, Jakarta, Singapore, Bangkok or Phnom Penh, would notice that the main roads and alleyways are clogged with Japanese automobiles and motorcycles.

Anybody arriving at a capital city airport in Southeast Asia, say, Jakarta, Singapore, Bangkok or Phnom Penh, would notice that the main roads and alleyways are clogged with Japanese automobiles and motorcycles.

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As you then settle into a hotel or apartment, you would realise that aside from cars, multiple electrical gadgets comprising household appliances such as refrigerators, dishwashers and hairdryers are Japanese.

Japanese brands are so entrenched in the region because most of them are actually locally manufactured by Japanese factories scattered across Southeast Asia.

Of course, the huge influx of Japanese products into Southeast Asian countries did not happen recently. Rather, it is the result of a well-crafted Japanese investment policy in the region over the past 50 years which not only goes beyond physical products and industrial plants but also implants soft values such as “Kaizen” and “just-in-time” manufacturing philosophy that has become an integral part of the Southeast Asian way of life.

Japan’s economic dominance started in 1977 through the Fukuda Doctrine which was asserted by the late Prime Minister Takeo Fukuda. He pledged that Japan, a country committed to peace, would build up mutual confidence with Southeast Asia in wide-ranging fields. After more than 40 years of the Fukuda Doctrine, Japan is still busy reinventing itself in the region.

Japan is the main investor in Southeast Asia and remains the biggest cumulative provider of foreign direct investment. About 20 percent of capital invested in the region in so-called greenfield projects — those that are being built from the ground up — in the past seven years originated from Japan. It is up six percentage points from 14 percent in the seven years to 2010.

However, in the last five years, its economic dominance in the region has been challenged by a new superpower, China.

China is making its foray into the region through its “belt and road initiative” which is the land and sea link that it hopes would make “all roads lead to Beijing”.

Apart from making its economic foray into the region, it is also challenging the US in the East and South China seas through its claims particularly in the contested Senkaku Island which Beijing refers to as Diaoyu, an area of major shipping and energy reserves.

Chinese investment in the region is lumpy such as the $15 billion East Cost Rail Link project in Peninsular Malaysia which the Malaysian government is renegotiating via private talks with the Chinese government. In addition, Chinese carmaker Geely and owner of Volvo, has also bought into the Malaysian car manufacturer Proton.

However, political observers and economists alike say China’s hard elbow-approach in trying to dislodge Japan’s long held economic perch in Southeast Asia cannot solely depend on its vast financial resources as it must consider the fact that Japan has cultivated the trust of its Southeastern neighbours for over half a century.

Japan’s commitment not to use military power had allowed it to engage in soft power which it uses extensively in the region.

While the Japanese presence in Southeast Asia is apparent in hardware, like streets being clogged with Japanese cars and motorcycles, the man on the street might not be aware that the Japanese also exported its industrial and managerial philosophy over the years, codified in the principles of Kaizen.

The Kaizen concept means continuous improvement, a long-term approach that systematically seeks to achieve small incremental changes in order to improve efficiency.

There are many examples of world-class organisations that use Kaizen. One such example is Toyota, the giant Japanese automotive manufacturer that focusses on incremental improvements by using these principles in different levels of organisation.

Other multinational companies such as Nestle has also adopted the concept seriously to make great improvements in waste reduction by lowering the time and materials used in their processes. It is also finding methods to use in the working space.

Kaizen is so pervasive it is also implemented in the medical practice such as Mayo Clinic in the US to improve waiting time and the handling of patients’ records.

While Chinese investments in Southeast Asia have been driven by large infrastructure projects, the Japanese have taken a long-term approach to win the hearts and minds of countries in the region.

The race between China and Japan in Southeast Asia is intensifying. At the moment, Japan is leading the race. As of 2018, Japanese investments in Southeast Asia are estimated at US$230 billion, dating back to the early 2000s.

Sathish Gowind
Contributing Writer, Capital Cambodia

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