Southeast Asia has emerged from the 2008-2009 global financial crisis with a robust economic expansion that, along with China and India, makes up a new growth center of the world economy. Still, major countries in the region foresee a mixed picture in the years ahead.
Singapore anticipates slower growth as the government plans to curb the use of foreign labor, while Thailand hopes to return to higher growth following the devastation from the massive flooding last year, according to veteran journalists from the region who spoke at a recent symposium in Tokyo.
Each country, meanwhile, has its own agenda in its relations with Japan. Indonesia’s energy trade with Japan has entered a new phase as the country reviews its energy policies in light of growing domestic consumption, while Vietnam remains committed to seeking Japanese support in starting nuclear power generation, even after last year’s crisis at Tokyo Electric Power Co.’s Fukushima No. 1 nuclear plant, the journalists said.
Journalists from six major economies of the Association of Southeast Asian Nations were taking part in the March 16 symposium organized by the Keizai Koho Center to discuss Asia’s economic growth and cooperation between Japan and ASEAN countries. Shujiro Urata, a professor at Waseda University’s Graduate School of Asia-Pacific Studies, served as moderator of the discussions.
Singapore’s economy grew 4.8 percent in 2011, following a whopping 14.5 percent growth in 2010. However, the government forecasts that growth this year will be limited to the 1-3 percent range. This is due to continuing concerns over the global economy, including the European debt crisis, but Singapore will have to live with slower growth in the years ahead also because of its own policies, said Leonard Lim, a news desk reporter from The Straits Times.
Prime Minister Lee Hsien Loong has stated that, given Singapore’s rapid development over the years, it cannot expect to continue to grow at the same rapid pace, Lim noted. The forecast is that the 5.5 percent average annual growth over the past decade will slow down to 3-5 percent in the coming 10 years, he said.
One of the reasons behind the anticipated slowdown is the government’s policy to tighten the flow of foreign workers, Lim said. Foreign labor from countries such as China, the Philippines and Indonesia have so far played a key role in the island city-state’s manufacturing and shipping sectors.
Foreign workers accounted for 36 percent of Singapore’s 5.18 million population, up from about 20 percent a decade ago, and the rise of the immigrant population has led to increased complaints about housing prices, the public transportation squeeze, the widening income gap and depressed wages of low-income workers, Lim said.
Complaints about foreign labor are seen as one of the reasons behind the 2011 general election setback for the ruling People’s Action Party, which scored the lowest share of votes won since the country’s independence in 1965, Lim said. Following the election, Deputy Prime Minister Tharman Shanmugaratnam declared that the government would seek to reduce the country’s dependence on foreign labor, Lim noted.
The reliance on foreign labor has in fact kept Singapore’s productivity lower than in many developed economies as companies choose to recruit low-cost workers from abroad rather than invest in the training of their workers or automation of the manufacturing processes, Lim said.
Lim said it is not clear whether the government will introduce further curbs on foreign labor beyond the measures already taken, including a levy on companies using foreign labor. This will no doubt increase prices and the cost of doing business in Singapore, he said.
Thailand, meanwhile, was severely hit by the massive flooding of last fall, which is estimated to have slashed the country’s economic activity by 3.7 percent. The government hopes to return to a growth of 5-6 percent this year, but risks remain, including domestic political instability, questions over the implementation of flood-prevention measures promised in the wake of last year’s disasters and global economic uncertainties, said Somporn Thapanachai, deputy business editor of the Bangkok Post.
Last year, Thailand’s gross domestic product growth was a minimal 0.1 percent, and the October-December period alone saw a GDP contraction of 10.7 percent from the previous quarter — the biggest decline since the Asian currency crisis of 1997, Somporn said.
In the massive floods, seven industrial estates were inundated by water up to 3.5 meters high for at least a month, and facilities of nearly 2,000 companies were damaged, with about 1,300 of them having since reopened for business, she said.
Automakers and high-tech firms from Japan, the largest foreign investor in Thailand, were the hardest hit. The impact of the Thai floods was a key factor behind a 3.1 percent decrease in Japan’s exports in the October-December period. Still, Japanese companies’ confidence in Thailand as a base of their Southeast Asian operations does not appear to have wavered, she said. A survey by the Japanese Chamber of Commerce in Bangkok has shown that only 8 percent of 1,345 Japanese firms operating in Thailand plan to relocate production facilities to another country, and 72 percent of the Japanese firms have already resumed operations there, Somporn noted.
In the wake of last year’s disasters, the Thai government forecasts a 5.5-6.5 percent growth in 2012, with the implementation of anti-flood measures and policies such as raising minimum wages, Somporn said.
The Thai Cabinet has set up a single-command authority chaired by the prime minister to manage water-related issues, and has come up with a three-year $11.7 billion master plan to prevent flood damage, including construction of five more dams and improved drainage systems, she said.
Meanwhile, Indonesia, another ASEAN member that has enjoyed rapid growth in recent years, is reviewing its energy policy as increased domestic consumption forces the government to limit energy exports, said Andi Haswidi, deputy editor for the business desk at The Jakarta Post.
“Indonesia is a major player in the world energy economy. It is the world’s leading steam coal exporter, a substantial exporter of liquefied natural gas and, until 2004, an oil exporter,” Haswidi said. Indonesia became a net oil importer due to rising domestic consumption and declining production at home.
Indonesia posted an economic growth of at least 6 percent annually since the mid-2000s. The government has had to fill the widening gap between energy production and consumption with large state subsidies to keep energy prices low, he said. Since the amount of subsidies continued to pile up in recent years to hit more than 10 percent of the state budget, the government is now trying to cut the subsidies to retain fiscal health, he noted.
How is this going to affect Japan? The government plans to raise domestic fuel prices and ban private cars in Java and Bali from using subsidized premium gasoline, which would affect the sales of cars in Indonesia, where 90 percent of the vehicle market is dominated by Japanese brands led by Toyota, Haswidi said.
Japan has long been a major importer of energy sources from Indonesia, including crude oil, LNG and coal. Since the 1970s, a major portion of the country’s LNG exports went to Japan because the first LNG plant in the country was built through Japanese investments, Haswidi said.
However, Indonesia has been struggling to meet the export commitments to Japan since 2002, when local industries began shifting toward the use of gas to meet rising demand, he said. Meanwhile, Japan’s demand for LNG is expected to rise especially after most of the nuclear power plants in Japan have been put offline following last year’s Fukushima crisis, he said.
Currently, Indonesia has four LNG production plants, three of which have been largely financed by Japan. One of the plants, built in the 1970s, has almost depleted its supply and production is expected to end in the next two to three years, he said.
Meanwhile, the Indonesian government has decided to slash overall LNG exports to Japan from the roughly 13 million tons a year to 3 million tons following the expiration of the earlier contracts in 2010 and 2011, Haswidi said.
“Japan will have a greater chance of buying more Indonesian LNG only if it invests in LNG plants or explorations in the country,” he said. “That is what the Indonesian government wants. It seems that Japan does not have much choice for viable alternatives.”
Vietnam, on the other hand, is committed to its plan to seek Japanese technology to develop its nuclear power generation capabilities — despite Japan’s nuclear power crisis, said Nguyen Hai Van, deputy editor in chief of the Vietnam News daily.
Despite the questions that spread worldwide about nuclear energy following the meltdowns at the Fukushima plant in Japan, Vietnam is “determined to go ahead with its first nuclear power project” as its trust in Japanese nuclear technology remains intact, Nguyen said.
Rising power demand in the rapidly expanding economy has required Vietnam to plan for substantially increasing energy production and diversifying energy sources, she said. The nation has so far relied mainly on thermal and hydropower generation, but exploitation of all existing sources does not meet the increasing demand, she added.
Vietnam has sought the help of Russia and Japan for building the first generation of its nuclear plants. Even as Japan’s nuclear power policy remains under review, Japan agreed with Vietnam last November to move ahead with the plans to build the Ninh Thuan 2 nuclear power plant in southeast Vietnam using Japanese technology. And in December, Japan’s Diet approved a bilateral agreement for cooperation in the development and use of nuclear energy.
Malaysia looks to achieve economic growth of 6 percent this year after recording around 5-7 percent growth annually over the past five years, except for 2009, said Hamisah Hamid, assistant news editor for Malaysia’s Business Times.
The government launched a program in 2010 to turn Malaysia into a high-income economy by 2020, with a target of boosting the per capita income from $6,700 in 2009 to $15,000 — a World Bank threshold for such a status — by focusing on key growth sectors, Hamid said.
Since the early 1980s, Malaysia has had its “Look East” policy of learning from Japan’s postwar growth in its economic development, and bilateral relations — in terms of trade and investment, technical cooperation as well as cultural exchanges — have increased, she said.
Even as Japan was hit by the Great East Japan Earthquake, it remains the second-largest investor in Malaysia after South Korea, and Japanese investments in Malaysia today are “mainly driven by pure commercial and business reasons” — unlike in the past when they were supported by deliberate moves by the Malaysian government to lure Japanese investors, she noted.
Wilfredo Reyes, managing editor of the Manila-based Business World economic daily, said the Philippines has also been riding on Southeast Asia’s generally strong growth, with its GDP rising 3.7 percent in 2011 after increasing 7.6 percent in 2010.
The government and the private sector have long been concerned, however, about the nation’s poor showings in global competitiveness rankings, which point to its weaknesses in terms of regulatory processes, infrastructure development and labor productivity, he said.
Many of these concerns have been shared by Japanese investors, who also cited problems in security and traffic, lack of coordination and consistency in state policies, as well as conflicts between national and local laws, he noted.
In 2010, the Joint Foreign Chambers in the Philippines issued a report prescribing more than 400 areas of reforms in high-growth sectors that can generate more investments and jobs, such as agribusiness, business process outsourcing, creative industries, infrastructure, manufacturing, logistics, mining and tourism.
However, a subsequent progress assessment showed that just seven of the prescriptions in the report had been completed, while only 34 others showed “substantial progress,” prompting the foreign chamber leaders to agree that the government needs to move faster, Reyes said.