Terrie's Take 443 -- ASEAN Opportunities, ebiz news from Japan
terrie at mailman.japaninc.com
terrie at mailman.japaninc.com
Mon Oct 29 08:52:18 JST 2007
* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
General Edition Sunday, October 28, 2007 Issue No. 443
- What's new
- Candidate roundup/Vacancies
- Upcoming events
- News credits
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+++ WHAT'S NEW
Japan and Japanese companies have always had a "thing"
about South East Asia, represented by the 10-country bloc
known as the Association of Southeast Asian Nations
(ASEAN). Although some might argue that the involvement by
Japan in SE Asia goes back to the nation's imperial
ambitions before WWII, we think it is more an issue of the
region simply being in Japan's back yard, both in terms of
time zone and distance, and also in terms of societal
values and business methods. As a case in point, look at
how well received Japanese-style capitalism has become,
rolling together as it does, national politics, an elite
bureaucracy, and big business. For the Japanese, this makes
ASEAN nations easier to understand and deal with.
Within the current generation of Japanese business leaders,
ASEAN fervor really started with the Plaza Accord and
resulting "en-daka" (High Yen) crisis of mid-1985 through
1986. This event was a huge shock for Japanese
manufacturers, who'd just started figuring out how to adapt
to higher energy prices and to turn out better quality
So severe was the shock in fact, that literally within 18
months, most major Japanese manufacturers, particularly
those in the electronics and auto sectors had started
setting up factories in lower cost destinations and
shutting down in Japan -- forming the vanguard of the
hollowing out of Japan.
Where did they go? Mainly ASEAN countries such as Thailand
and Malaysia. Remember, they couldn't go to China, because
back then she still didn't have the infrastructure nor the
political graces to entice foreign firms. Along with these
manufacturers went their multitude of parts suppliers, IT
firms, banks, management advisors, etc., and thus began
the makings of a Japanese migration into the ASEAN region.
Over the following 20 years, Japanese Foreign Direct
Investment (FDI) into the area has been running at around
US$2bn a year, and overall there are more than 5,000
Japanese companies operating within ASEAN borders. The
Japanese government has been doing its bit as well, and
through Overseas Development Assistance (ODA) aid and
government loans, in 2005 alone dispensed over US$1.96bn
in financial assistance.
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So far, it is Thailand and Malaysia that have attracted the
most attention from Japan and as a result, both countries
have the bulk of Japanese companies (2,500+ in Thailand,
1,450 in Malaysia) and over time more retirees as well.
Whether companies or individuals, everyone wants the same
things: lower cost platforms and lifestyles, a reasonable
chance of finding Japanese-speaking helpers, and relative
public safety. Thailand now has about 30,000 expat Japanese
residents, and Malaysia has issued more than 10,000 10-year
multiple-entry visas to Japanese retirees wanting a second
Overshadowing Japan's ASEAN relationship is China. In the
mid- to late-1990's it became clear that China was going to
commit to orderly socialist-capitalism, and Japanese
companies under pressure from the economic decline of their
home markets in the 1990's started investing in and around
Shanghai, trying to squeeze out whatever profit they could
from their foreign manufacturing operations to support the
head office. This significantly slowed down Japan's
interest in its ASEAN relationships and in fact, from 1995
to 2005, the percentage of overseas loans to ASEAN made by
Japanese banks fell from almost 70% of their porfolio, to
The tide is turning once again, however, and over the last
3 years China's cost base has started to inflate. Now, out
of habit caused by the last 20 years of externally forced
migration, Japanese manufacturers are once again starting
to trawl ASEAN nations for lower cost manufacturing. This
time, though, instead of Thailand and Malaysia, they are
turning to Vietnam, where already some 700 Japanese firms
have set up business.
JETRO and various other Japanese government bodies are
encouraging this diversification of manufacturing base,
calling the strategy "China Plus One". According to the
Nikkei, 62% of Japanese firms in Vietnam say that it is
cheaper for them to be in Vietnam than China, as well as
enduring less competition for resources. Right now, the
minimum wage in Hanoi and Ho Chi Minh City is about $50-$60
per month, just half that of Chinese coastal cities such as
Guangzhou and Shanghai, or wages in Bangkok.
ASEAN as an economic bloc actually represents a larger
population than the entire EU, although the GDP is just
1/6th that of Europe. In 2006, the GDP was US$1.066trn,
increasing at a rate of about 4% per annum. 12.8% of
Japan's trade and 13.8% of its FDI is into ASEAN, in both
cases exceeding capital and trade flows with the EU.
Back in August, Japan took its relationship with ASEAN a
step further, by finalizing the terms of an ASEAN-Japan
Free Trade Agreement (FTA) due to by signed next month
(November 2007), and which will be effective from April
2008. The FTA lops off tariffs from 90% of imports to all
the countries concerned and is expected to have a huge
beneficial effect in the area of manufacturing and
agriculture, other than of course rice and some other
Some would say that the ASEAN FTA is simply a case of Japan
balancing the region against its exposure in China, and of
course, this has certainly been an impetus. However, we
suspect that many ASEAN countries themselves want the FTA
just as badly, and in light of the steady flow of trade and
investment over the years, see Japan as a more benevolent
partner than China will probably shape up to be -- despite
its penchant for paying top prices for raw materials and
How does knowing about ASEAN help those of us doing
business in Tokyo? Well first of all, it is important to
know that the Japan sees itself as being a big brother in
SE Asia, and so there is a strong feeling of commitment and
interest in developing new business opportunities there.
This means that it you want to do business in ASEAN
nations, besides doing the usual biz dev in-situ, it may be
worth considering detouring via a Japanese partner.
Ranging from major trading companies to small software and
technology firms, thousands of these companies want to be
doing better in SE Asia than they are. They went there in
the 1980's and 1990's with their Japanese manufacturing
customers and are now trying to figure out how to increase
their customer base. If you have technology know-how, IP,
and/or business contracts, you have desirable enhancements
for a Japanese partner.
Secondly, the ASEAN countries themselves are becoming
bolder and more interested in Japan, especially in the
areas of real estate and finance. While doing business in the
major cities requires competition with Chinese and Western
firms, the best pickings are to be had in the regions
where deal size is smaller and more manageable, and
where Japanese local companies under pressure to
internationalize don't trust Western or Chinese interests.
Perhaps more patient ASEAN capital is just the answer
for such companies.
As an example of a deal that creates an ideal combination
of synergies, imagine a small third-country (not
necessarily third world) software company with a low-cost
but good quality enterprise solution. Imagine that they
have done their homework and have found an attentive
audience in SE Asia -- there is certainly a rising demand
for IT there. At the same time, we know that Japanese SI
firms, such as Fujitsu, Oki, CTC, Kanematsu, and Mitsui
are all active in SE Asia, trying to supplement their
initial base of Japanese customers with some local
The opportunity, then is to do a joint venture with the SE
Asia arm of such Japanese firms, tapping their capital and
possibly the Japanese home market, while offering
technology and potential customers in return. While this
approach may seem a bit too creative for conservative
Japanese firms, given the continued resurgence of the
Japanese economy, head offices from Sapporo to Naha
are bound to be putting pressure on their branches in
the region, and this represents an ideal opportunity for
the rest of us.
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...The information janitors/
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- Let the Phone do the talkin'
- Mild winter predicted
- Japan accused of faking tuna numbers
- Nova files for bankruptcy
- Foreign freight firms complain about Japan Post
-> Let the Phone do the talkin'
Maybe only in Japan, but a new cell phone software
application called the "Anti-Groping Appli" has become the
seventh most popular download last week. A sleeper
originally released in 2005, the application allows young
women who feel threatened by a nearby male, to pop up
warning messages on her cell phone screen and show them to
the potential molester. Apparently the messages escalate,
starting with "Excuse me, did you just grope me?" "Groping
is a crime," then "Shall we head to the police?" ***Ed: You
really have to wonder about an application like this. One
wonders why woman wouldn't simply speak out, OR even if the
messages were shown and seen, whether an inveterate groper
would even care. It all sounds a bit over-polite to what
must be a nasty situation.** In 2005, 1,853 people were
arrested for groping passengers on trains in Tokyo.
(Source: TT commentary from ap.google.com, Oct 25, 2007)
-> Mild winter predicted
The Meteorological Agency is predicting that most of Japan,
including Tokyo, will experience an average-to-mild winter
this year, between the months of November to January. The
Agency is saying that there is a 40% chance of an average
winter, meaning temperatures in Tokyo of 13 C in November,
8.4 C in December, and 5.8 C in January, and a 40% chance
of higher temperatures than this. In Agency-speak, this
means that temperatures will probably be higher than
average. ***Ed: Certainly 25+ C in Tokyo on Halloween
Sunday is higher than normal...** (Source: TT commentary
from reuters.com, Oct 25,
-> Japan accused of faking tuna numbers
Australia has claimed that Japan is under-reporting its
Southern Bluefin tuna catch by at least 50% each year, a
fact that if proven true would make a mockery of Japan's
claims to be engaged in sustainable fisheries management.
The Australian government says that in 2005 it conducted
a forsenic analysis of tuna sales in the Japanese fish
markets and compared these with the reported catch numbers.
What they found was a wide discrepancy: with sales
exceeding up to 200% of the stated catch. The Australians
say, for example, that during the years 2002 through 2004,
the amount of Tuna available through Tsukiji and other markets
was about 8,696 to 11,260 tonnes higher than reported,
annually. ***Ed: The good news is that Japan is reducing
its quotas of Southern Bluefin tuna, from 6,000 down to
3,000 tonnes. Unfortunately, whether you can actually
believe those numbers is a matter for some conjecture...**
(Source: TT commentary from radioaustralia.net, Oct 26,
-> Nova files for bankruptcy
No sooner than we predict that Nova will keep going for a
while, than the company declares bankruptcy and the CEO,
Saruhashi, goes missing. The remaining directors took
matters into their own hands this last week and declared
bankruptcy, so as to protect the company's assets and try
to sort out the mess. ***Ed: The news media are saying that
Nova has liabilities of JPY43.9bn. A review of the July
financials will show that assets and receivables offset
this amount substantially and the real deficit is a lot
less -- but still a daunting number to be sure.** (Source:
TT commentary from nikkei.co.jp, Oct 26, 2007)
Foreign freight firms complain about Japan Post
Four of the world's largest freight companies last week
held a news conference to complain about the unfair
preferential treatment Japan Post is receiving at their
expense for international mail. Apparently, Japan Post's
parcels will not only enjoy cheaper rates, they will also
get priority handling by customs for duty and import
procedures. The four said that the government should have
a concrete schedule for ending the favoritism, and that
Japan Post needs to be supervised by an independent
regulatory body. ***Ed: Actually, we can think of a few
semi-governmental operations that this idea needs to be
applied to...** (Source: TT commentary from nikkei.co.jp,
Oct 26, 2007)
NOTE: Broken links
Many online news sources remove their articles after just a
few days of posting them, thus breaking our links -- we
apologize for the inconvenience.
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+++ UPCOMING EVENTS/ANNOUNCEMENTS
----------- Entrepreneur Association of Tokyo -------------
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-> No feedback this week.
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+++ ABOUT US
Written by: Terrie Lloyd (terrie.lloyd at japaninc.com)
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