Operating in the fastest-growing region on Earth, Japanese businessmen are seizing opportunities in East Asia that many of their Western rivals are failing to grasp. The position of European and U.S. companies is strong in East Asia, but it is weakening daily--diluted by the flow of Japanese capital, technology, trade and government aid.
So far, the battles are largely being fought in the corporate arena. But with tensions between the West and communist countries easing, economic conflicts between the West and Japan are becoming increasingly political. East Asian countries, once mostly colonized by the Europeans and later strongly under the influence of the United States, may be increasingly forced to choose between these older links and their newer ones with Japan.
Japanese officials are beginning to acknowledge the true scale of the country's regional influence. In an unusually frank report last year, the government's Economic Planning Agency said: "The position of the U.S. has dropped in relative terms. . . . Japan's position has risen dramatically."
Others put it more bluntly. "Americans, British, French all make a lot of noise. But the Japanese are the real power in Asia," said K. C. Kwok, an economist at Hong Kong & Shanghai Bank in Hong Kong.
Some Asian countries feel threatened by Japan's resurgence, particularly those that harbor bitter memories of Japanese rule during World War II. But for the most part they are prepared to swallow their pride in the hope of sharing the rewards of Japan's vast wealth--a hope that in many countries is already being fulfilled. "Japan is the only country capable of supplying resources to the region," said Ali Wardhana, a former Indonesian Cabinet minister.
Japan's first postwar investments in the region were made to secure supplies of raw materials, principally from Indonesia. This was followed in the 1970s and early 1980s by waves of investment mainly in the newly industrialized economies (NIEs)--South Korea, Taiwan, Hong Kong and Singapore--designed to enter their markets through import-substitution and to establish export bases.
Since 1985, the rise of the yen has forced Japanese companies to redouble their efforts. With wages and currencies climbing in the NIEs, Japanese interest has focused on the members of the Assn. of South East Asian Nations. Of these, Thailand had been the main target for the past two years; now it is Indonesia and Malaysia.
Low labor costs are the main impetus. Early last year, a skilled worker's wages in Singapore were 20% of those in Tokyo, according to Mitsui Research Institute. For Bangkok, the figure was 10% and for Jakarta, 4%. Japanese industrialists expect these gaps to close, but not for a long time.
Japanese influence varies greatly between countries. But by most macroeconomic measures, the Japanese have overtaken the Europeans and are fast catching up with the Americans. According to the Nomura Research Institute, Japan takes 25%--the biggest share--of ASEAN's exports, principally oil and gas and raw materials. For the NIEs, the United States is the preeminent market, accounting for 31% of exports in 1988. But Japanese imports from Asia are growing fast: by 20% last year to $88 billion. Meanwhile, Japan has long been East Asia's biggest import source, supplying vital machinery and office equipment.
Japan overtook the United States in the mid-1980s as the largest provider of foreign capital to the region. In the year to March, 1989, Japan's flow of direct investment to Asia was $5.6 billion, compared to $1.4 billion in 1985. The nearest comparable figure for the United States (for the calendar year 1988) was $2.3 billion. Japanese investment in the United States and Europe is greater than in Asia. But relative to the size of the region's economies, the Asian investments are huge--four times more for Thailand than for the United States, for example.
As for government aid, Japan, the world's largest donor, provides 60% of Asia's official development assistance--a sum that accounts for about 60% of Japan's aid budget. The microeconomic details are just as compelling.
Japanese banks account for 56% of bank deposits in Hong Kong; Japanese department stores have 30% of the colony's retail sales. At night the names of Japanese companies in neon lights illuminate Hong Kong's harbor. In Malaysia, one Japanese company, Toray, accounts for a quarter of the nation's textile exports. In Thailand, most of the cars clogging Bangkok streets are made at local Japanese-run assembly plants.
Western companies are by no means out of the race. Many Western companies in East Asia are at least as strong as the Japanese. Exxon, Shell, British Petroleum and other Western oil groups dominate oil and gas exploration and production. IBM is the biggest supplier of large computers. The top companies in chemicals and pharmaceuticals include Du Pont of the United States, the British group ICI and BASF of West Germany.