SINGAPORE – Visiting other Asian countries makes me more and more convinced that Japan has a major role to play in the region. It’s no use to say “Japan is great!” by comparing it with the rest of Asia. Seeking to answer the meaningless question of which to choose between Japan and other Asian nations is also futile.
The problems that both Japan and its neighbors face are complementary. Each needs the other to solve them. The chances are high that helping each other solve their own problems will improve the situation for all. This sums up all the things Japan and its neighbors must do. It is the role of both business and political leaders to take action with this in mind.
Various opportunities abound, but I would highlight the importance of the manufacturing industry. It is Japan that created and implemented Asia’s model for success. South Korea, Taiwan and China — and Singapore to a certain degree — followed the model and succeeded in getting out of the middle-advanced country status. The key to their success was industrialization.
They built up their own manufacturing industry — to promote exports. They cultivated homegrown manufacturing industries so they could compete with their rivals in the world market — and eventually established their own global brands. Just like Japan had Toyota, Honda, Sony, Matsushita (Panasonic), Toshiba and so on, South Korea, Taiwan and China developed their own manufacturing brands that became known worldwide.
India has finally started using the slogan “Manufacturing India,” as Prime Minister Narendra Modi came to realize that there will be no future for India as a major economic powerhouse unless it develops its own manufacturing industry. It dawned on him that the nation could not outgrow its emerging economy status at the macro level even if kept on producing large numbers of information technology experts.
In Southeast Asia, the Philippines — the country that was deemed to have the greatest potential in the region after World War II and hosted the Asian Development Bank headquarters — has hit a wall in its strategy to earn money by exporting migrant labor and fulfilling the outsourcing needs of other countries’ firms.
Developing a manufacturing industry is indispensable for any country’s economic development because it creates a large quantity of jobs, gives rise to technological innovation, enlarges the network of small and medium-size businesses, improves the quality of the labor force and produces a substantial middle class.
The manufacturing industry is the sector that most effectively produces such effects. The IT sector does not create as many jobs as one might expect given its sheer scale. Nor does the sector contribute to the development of broadly useful manpower. Probably only the manufacturing industry can employ anywhere from tens of millions to hundreds of millions of youths.
The service industry alone cannot give birth to and raise a middle class, and the service industry cannot grow without a substantial domestic middle class. It is the manufacturing industry that can hire a large number of young people, train them and make them financially comfortable.
Japan, South Korea, Taiwan and China nurtured their manufacturing industries and raised their abilities by getting them to compete internationally. This, in turn, led to the growth and education of the middle class, and fostered related businesses. Such businesses served as the base from which various industries sprouted.
Giant conglomerates in Southeast Asia accumulated massive wealth by investing mainly in real estate and natural resources. But they should start investing in the manufacturing sector. The governments should also seek to help create global manufacturing brands by promoting global competition.
Today, however, traditional manufacturing is facing a setback due to the wave of automation. With the greater use of artificial intelligence and robots in manufacturing, the days when the sector hired large numbers of workers are coming to an end. The model that Japan and other countries established with their manufacturers may quickly become obsolete.
Here Japan has a role to play in the rest of Asia. Japan still has large numbers of small firms with excellent technology and patents, but they face murky prospects at home due to the shrinking domestic market and a lack of successors to carry on their businesses. It is time for these firms to help other Asian countries cultivate and strengthen their homegrown manufacturing industries.
Kotaro Tamura, a former Upper House member and parliamentary secretary in charge of economic and fiscal policy, is an Asia fellow at the Milken Institute and serves as an adjunct professor at National University of Singapore.