7 ASEAN and the

Japanese Role in
Southeast Asia
Lee Poh Ping

The striking thing about the ASEAN heads of state meeting in

Manila in December 1987, apart from the fact that it was held at all, is
that the only non-ASEAN leader invited to attend was the Japanese
Prime Minister of the day, Noboru Takeshita. This speaks volumes
about the importance ASEAN attaches to its relationship with Japan.
This importance is unlikely to diminish as the end of the century
approaches. If anything, it is likely to increase. It is therefore entirely
appropriate that a book on ASEAN should have a chapter devoted to
the Japanese role in Southeast Asia.
Most studies on this role have been primarily economic in orienta-
tion. While it is undeniable that the economic factor dominated, if it
did not actually monopolise, relations between Japan and Southeast
Asia for much of the post-war period, the non-economic aspects have
become increasingly significant, and cannot be ignored as Japan is
forced by circumstances to adopt a more comprehensive posture in
Southeast Asia. This chapter will therefore consider in addition to the
Japanese economic role, the political, diplomatic and military aspects
of this relationship. It will also discuss Japan as a model for ASEAN
to emulate. The focus will be on the evolution of all these aspects
since the Second World War, with the emphasis on the emergence of
possible trends and likely developments in the future.

THE JAPANESE ECONOMIC ROLE

Japanese economic relations with Southeast Asia in the post-war

period lie primarily in the areas of trade, investment and aid. In the
beginning trade was the main focus, followed subsequently by
investment. Only in more recent years has aid become important as
the Japanese economy has grown in strength.
162
A. Broinowski (ed.), ASEAN into the 1990s
© Alison Broinowski 1990
 Lee Poh Ping 163

Trade

When Japan resumed trade with Southeast Asia after the Second
World War, the primary intention was the rebuilding of its own
economy. This trade was essentially directed towards the acquisition
of raw materials from Southeast Asia for Japanese factories and in
return, value-added products from such factories were to be exported
overseas, with Southeast Asia as a primary market. Japan, a nation
with little or no raw materials, saw Southeast Asia then as a
replacement for the ex-Japanese colonies of Manchuria, Taiwan and
Korea. This trading strategy had at that time the blessing of the
United States for the Americans wanted to encourage the develop-
ment of democracy in Japan. Democracy, it was thought, could only
survive in a prosperous Japan, not an impoverished one. To ensure
the success of this trading strategy, the Japanese themselves adopted
a policy of seikei bunri, the separation of economics and politics. This
meant Japan would only concentrate on trade and other economic
activities while others played politics and went to war. Spectacularly
successful, this policy has enabled Japan today to become the largest
trader with the countries of ASEAN and one with great consequence
in their domestic economies - a far cry from the days of a devastated
and prostrate Japan. An important characteristic of this trading
relationship in the early stages was that it came close to the classical
colonial economic model without however involving Japanese poli-
tical and economic domination. There were little or no intermediary
industrial processes in the Southeast Asian countries involved in the
Japanese trade such as for example, smelters for mineral ore or
factories for processing timber, let alone much Japanese investment
in other areas not related to purely resource exploitation. Nor for
that matter did Japan import many industrial products from Sou-
theast Asia. This however was not then much of an issue with
ASEAN governments because Japan did not figure much in the
economy of Southeast Asia. What nationalistic anger did exist within
ASEAN was directed at Western economic interests. Only in 1974
when the importance of Japanese economic strength seeped into
Southeast Asian consciousness did violent demonstrations flare up
during the visit of Kakuei Tanaka, the then Japanese Prime Minister,
to the ASEAN region. The underlying causewas of course Southeast
Asian grievances against what they considered to be Japanese
economic exploitation. 1
The ironical aspect of this relationship, one can argue, is that Japan
was at that time more dependent on Southeast Asia than vice versa. 2
164 ASEAN and the Japanese Role in Southeast Asia

Japan could not do without Southeast Asian raw materials and

markets. To take just one example, that of the Malayan (now
Malaysian) iron ore industry: in 1980, Japanese iron ore imports from
Malaya constituted about as much as 43 per cent of total Japanese
iron ore imports. If the imports from the Philippines were also
included, the percentage would come to about 50. 3 Many Japanese
involved in the iron and steel industry acknowledge the critical
importance of Malayan iron ore to the post-war expansion of the
Japanese iron and steel industry. 4 This is also the case with many
other Southeast Asian raw materials. Equally, Japan needed South
east Asian markets acutely in order to earn the foreign exchange that
would help it reduce the trade deficit it was then experiencing with
the Americans5 (astonishing when one thinks of the present enor-
mous Japanese trade surplus with the United States!) Southeast
Asian countries by contrast needed Japan less and were very much
more dependent on the West.
But developments in the 1970s and 1980s were to reduce this
Japanese dependence. First of these was the rise of Japan from a
regional economic power to a global economic one that at the time of
writing produces about ten per cent of the world's gross national
product, with involvement in almost every part of the globe. One
effect of this status is the ability of Japan to diversify its sources of
raw materials away from Southeast Asia to places such as Australia,
Latin America, China and even North America. Likewise, in market
terms the North American market has now become by far the most
important market to the Japanese, not only in terms of volume of
trade but also in the critical importance of the components of this
trade. The Southeast Asian market on the other hand now occupies a
far less important part of Japanese trade than before.
The second development has been a structural change now occurr-
ing internationally, described as the miniaturisation of the world
economy. This is leading to a reduced demand by industrialised
countries for raw materials, because of their increased use of
microchips, optical fibres and other such materials in many industrial
processes. For example, a thin strip of optical fibre is more efficient
in telecommunications than a thick copper wire. Such diminished
need, according to one well-known scholar, is not a cyclical affair but
a secular trend, 6 and has contributed to the drastic drop in world
commodity prices beginning in the mid-1980s. Japan, with its
'smaller, lighter, thinner' design campaign, is a major beneficiary.
An examination of trade statistics shows that ASEAN is now more
dependent on Japan: the shoe is now on the other foot. As far as
 Lee Poh Ping 165

exports are concerned, if dependency is calculated as the value of

exports in relation to GNP, ASEAN's dependence on Japan in 1986
was eight per cent, whereas Japan's dependence on ASEAN was one
per cent. 7 As the trend towards high technology in Japan accelerated
in the 1980s, ASEAN imports from Japan, which began with a high of
15.1 per cent in 1980, showed a declining trend as the table indicates:

Table 7.1 Japan's imports from ASEAN

Year Imports (per cent)*

1980 15.09
1981 14.63
1982 14.74
1983 13.73
1984 14.50
1985 14.13

* Japan's imports from ASEAN X 100

Japan's total imports 1

Source: The percentages are calculated from

the figures for the five ASEAN countries,
excluding Brunei, as given in The Financial
Statistics of Japan, Fiscal Year 1986 (Tokyo:
Ministry of Finance, October 1968) pp. 66-7.

These changes have greatly reduced the bargaining power of

ASEAN. The association can no longer wield the ultimate threat of
denying Southeast Asian raw materials as a means of getting conces-
sions from Japan. While Japan would no doubt suffer from such
denial, its industry would not collapse. Japan can make do from other
sources, ASEAN's weak hand can be illustrated by two examples.
Firstly, for some time - particularly in the 1970s - some ASEAN
countries have urged Japan to help stabilise the prices of certain
ASEAN commodities imported by Japan by establishing some kind
of scheme whereby Japanese funds could be used to prevent wild
swings in prices that could be detrimental to the ASEAN countries
producing those affected commodities. Japan has however remained
unimpressed, fearing that its agreement would set a precedent for
other commodity producing countries such as Australia to make
similar demands. Secondly, ASEAN have for a long time been
pressing Japan to open its market for more ASEAN manufactured
166 ASEAN and the Japanese Role in Southeast Asia

goods but to little avail, as the example of one ASEAN country,

Malaysia, shows. The percentage of Malaysian manufactured goods
to Japan today is still not more than about ten per cent of total
Malaysian exports to Japan. There is little ASEAN can do about this
for ASEAN enjoys nothing like the American clout to force open the
Japanese market to certain American products. American protec-
tionist threats carry far greater weight with the Japanese than any
ASEAN threat to shut ASEAN markets. It is true the Japanese
market has opened somewhat to Asian manufactured goods recently,
but this has been a result of the revaluation of the yen, and even then
the main beneficiaries are the Asian NICs like Korea and Taiwan,
rather than the ASEAN countries. 8 To be sure ASEAN trade will
still remain important to the Japanese now and in the near future, but
in this respect ASEAN will constitute only one of the many areas
Japan trades with- not the primary one.

Investment

Japanese investment in Southeast Asia, which began cautiously in the

1950s has developed to such an extent that figures given by the
Japanese Ministry of Finance show the total value as of March 1988
to be about $15 billion. This probably makes Japan the largest
investor in ASEAN. The main aims of this investment until recently
have been import substitution (to overcome possible tariffs against
Japanese products by having as many of these as possible made in the
ASEAN countries), the development of the natural resources neces-
sary for Japanese industry and to some extent, the utilisation of cheap
labour as a means of making Japanese exports more competitive.
Other secondary reasons include the fact that land in Japan is limited,
and the Japanese are seeking to reduce pollution in Japan by siting
certain industries in ASEAN and elsewhere.
It was characteristic of such investment then, particularly in
manufacturing, that it primarily consisted of small companies with
limited paid up capital, few employees and little or no transfer of
technology. 9 Many of these ventures, particularly in industries in-
volving the assembling of electronic components in free trade zones
and elsewhere, can be rightly described as 'screwdriver' operations,
involving very little skill on the part of local labour. There was hence
 Lee Poh Ping 167

no great need for Japanese companies to train local labour. One can
conclude that if Japanese direct investment was not exploitative,
neither was it very conducive to the overall modernisation of
ASEAN. This view had particular currency with many ASEAN
intellectuals, especially those with leftist inclinations, while ASEAN
governments, though not opposed to Japanese investment, could not
be said to have been overly enamoured with it.
Things changed somewhat dramatically in the 1980s. In the first
place, as mentioned earlier, ASEAN countries suffered a deep
recession as a result of the drastic drop in commodity prices. Many of
these countries saw their high growth rates drop very low (and at one
point even the Singapore economy contracted), and some like the
Philippines developed a severe debt problem. The realisation dawned
on the ASEAN governments that they needed to wean themselves
away from over-dependence on commodities, and to accelerate the
industrialisation of their economies. One solution was the encourage-
ment of foreign investment, for which some countries like Malaysia
greatly amended its foreign investment restrictions. The ASEAN
countries looked to Japan, as one of the great industrial powers with
close proximity to Southeast Asia, to help.
Another factor was the recent and profound development in the
Japanese economy, brought about by the revaluation of the yen.
Since the Plaza Agreement in New York in September 1985- when
the finance ministers of the major industrialised countries agreed to
bring about a weaker dollar and a stronger yen in order to make for
greater competitiveness in American products - the yen has risen
from a value of Y260 to the dollar to about Y125 to the dollar. To
give an ASEAN example, 100 yen- worth about one Malaysian
ringgit in 1985 -is now worth two ringgit. The Japanese call this
endaka, or high yen. This revaluation initially created something of a
panic among Japanese industrialists who feared Japanese products
would become so expensive as to lose out in the world market. Many
industries scrambled to invest overseas, particularly in the Asian
countries, in the hope that they could make use of cheaper Asian
labour to maintain Japanese competitiveness. Where they might
previously have invested because of comparative advantage, they do
so now out of sheer necessity. 10
The combination of endaka and ASEAN receptivity to foreign,
particularly Japanese investment, has had a big impact. The first
result has been an increase in the quantum of this investment. The
figures are as follows:
168 ASEAN and the Japanese Role in Southeast Asia

Table 7.2 Japanese direct investment: annual flows and stocks in

US$ million 11

Stock as
1973 1980 1985 1986 1987 of March
1988 +
(1951-88)

Singapore 81 140 339 302 494 3,065

Malaysia 126 146 79 158 163 1,446
Indonesia 131 529 408 250 545 9,218
Philippines 43 78 61 21 72 985
Thailand 34 38 48 124 250 1,134
ASEAN 5 415 926 935 855 1,524 15,848

The increase from 1986 of a total of $855 million to the 1987 total of
$1524 million (it takes some time from September 1985 for invest-
ment increases to show) is quite dramatic. It amounts to about 80 in
percentage terms, a very impressive figure when one sees that the
figure for the previous years of 1980 ($926 million) and 1985 ($935
million) were more than the 1986 figure! It has to be said however
that the increases are unevenly spread, with Singapore and Thailand
showing the greatest jumps.
Secondly, while the evidence is not yet conclusive, a pattern seems
to be emerging that suggests post-endaka investment in ASEAN
differs from previous investment in that it involves in the manufactur-
ing sphere more than just a simple exploitation of cheap labour.
Rather it aims to integrate Japanese industrial investment in ASEAN
into the overall global strategy of Japanese industries. This means
that many of the lower-end functions traditionally performed by
Japanese small and medium industries acting as sub-contractors to
the major firms, which concentrate of research and development,
designs and other hi-tech processes, are now increasingly performed
elsewhere as labour costs are simply too high in Japan. This is done
either by Japanese small and medium industries themselves, investing
in ASEAN, or by the major firms setting up subsidiaries in A SEAN,
or by helping to upgrade ASEAN industries which could act as
sub-contractors to these major firms. 12
Examples of such investment include those of well-known Japan-
ese companies such as Sharp and Sony. Sharp has three companies in
Malaysia producing television receivers for both domestic sales and
exports. But not all their components and parts are produced in
 Lee Poh Ping 169

Malaysia. Some come from Sharp affiliates and other electronic firms
in Singapore while some of the more sophisticated parts emanate
from Sharp affiliates in Japan and Taiwan. The Sony subsidiary,
Aiwa, which specialises in audio and video equipment, assembles 50
per cent of its global output in Singapore, again with many of its parts
coming from Japanese firms in Singapore, Malaysia, Taiwan, Korea
and Japan. 13
The question arises of whether this type of Japanese investment
will displace or continue alongside the traditional kinds (some of
which now involve very large amounts of capital, to the tune of
hundreds of millions of American dollars - such as the Asahan
aluminium extraction project in Indonesia and the joint Japanese
-Malaysian steel mill known as Perwaja). If that is the case, a further
question arises as to whether the ASEAN economies may not, along
with the other Northeast Asian economies, be increasingly integrated
into an Asian-Pacific economy dominated by Japan.

Aid

Japanese aid to ASEAN has passed through various stages of

development. In the first two phases, it was given primarily as
reparation in the 1950s to those ASEAN and Southeast Asian
countries which had suffered under the Japanese in the war. Follow-
ing this, what aid was given was used almost exclusively as an export
promotion programme. The third phase came as a result of the oil
shock in 1973, and heightened the favourable position of ASEAN as
Japan overall began to concentrate its aid on resource-rich countries
and nations located on energy shipping routes. 14 As far as ASEAN
was concerned, the highlight of this third phase was the Fukuda
promise of $1 billion to the five ASEAN countries to embark on
industrial complementation projects. This was announced in 1977 in
Manila when the then Prime Minister Takeo Fukuda was on his 'Nay
to the ASEAN heads of state meeting in Kuala Lumpur. The details
were not spelt out at that time but each of the ASEAN countries was
to be promised $200 million for an industrial project not in competi-
tion with the others, or better still complementary to them. 15 This
was well received in ASEAN, and Japan's image as a wealthy nation
took hold. This was graphically illustrated by a Malaysian cartoon
depicting a Japanese businessman, presumably Fukuda, burning a
monetary note to light his cigar while stepping down from the plane.
170 ASEAN and the Japanese Role in Southeast Asia

In the 1980s, Japanese aid took new directions. In January 1987,

the International Trade and Industry Minister Hajime Tamura,
during a visit to Indonesia, announced the New Asian Industries
Development Plan (New AID Plan) which put the emphasis on
assisting the development of the export industries of ASEAN. This
was of course welcomed by the ASEAN countries which had become
increasingly enamoured by the export-led growth strategies so
successfully adopted by Asian NICs such as Korea and Taiwan. A
potential problem however exists in the concern this could cause in
the United States which would be the likely target for such exports
unless Japan itself opens its market sufficiently to such products.
What gave an urgent impetus to Japanese aid-giving was the
development of an enormous Japanese trade surplus with the rest of
the world, particularly with the United States. Tremendous pressure
was exerted by world opinion on Japan to reduce this surplus which
was potentially destabilising to the world economy. If more Japanese
imports were not possible, at least some of the surplus could be
recycled as aid to the developing areas. Many Japanese took this
argument seriously, and the air was rife with suggestions ranging
from a Japanese Marshall Plan to various schemes to help developing
nations with huge debt problems. 16
There are however potential problems for any Japanese Marshall
Plan or some such scheme to be feasible. One consists of the
justification to the Japanese people of the dispensing of a huge
amount of money (if it were to be equivalent to the original American
Marshall Plan amount, it will be about $180 billion after taking into
account inflation and the tripling of the American GNP!) 17 in Third
World countries whose political instability will not directly threaten
Japan. Moreover, much ofthis surplus is a private sector surplus, and
it is not the Japanese government's to give, as many Japanese
themselves assert. Such Japanese reservations however did little,
when the proposal was raised in the mid-1980s, to alleviate interna-
tinal pressure, and the Japanese Prime Minister Nakasone was forced
to produce a counter-proposal at the Venice summit of the major
industrialised countries in 1986. There, he announced Japan would
recycle $30 billion as aid to developing countries - details were not
given. Subsequent Japanese Ministry of Finance statements have
indicated that some of this would be dispensed via multi-lateral
institutions and some, especially to countries with close ties with
Japan, was to be given unilaterally by Japan through the Japan
Export-Import Bank and the Overseas Economic Co-operation Fund
 Lee Poh Ping 171

(OECF). As far as ASEAN is concerned, $2 billion of this was

promised by Takeshita to ASEAN in Manila. Called the ASEAN-
Japan Development Fund, it was to be disbursed over three years
with terms more favourable than usual and at rates lower than those
currently given under the Japanese Official Development Assistance
and the Export-Import Bank of Japan. 18
Essentially two categories of loan, called 'A' and 'B', were to be
given. 'A' loans would be available to all six ASEAN countries on
equal terms, despite the differences of development and wealth
among them. 'B' loans, which would consist of the bulk of the $2
billion, would be given to private sector projects only in ASEAN
countries currently eligible to receive official development assistance
from Tokyo. Singapore and oil-rich Brunei would thus be excluded
from this 'B' category.
ASEAN basically received this well but nevertheless requested
certain qualifications. They hoped that this new fund, being a new
initiative, would be over and above the existing development
assistance programmes extended by Japan to ASEAN, on terms and
conditions that were meaningful and concessional. Secondly, they
wanted such loans not to be tied to the purchase of Japanese goods
and services, and thirdly, hoped the fund would include a mechanism
which would protect ASEAN borrowers against the further apprecia-
tion of the yen. 19
From being a very small donor, with practices once described by
the former Prime Minister of Malaysia, Tengku Abdul Rahman, as
usurious, 20 Japan has emerged as a very major contributor to
ASEAN and with terms more liberal than before. (Japan has
announced it will double its ODA by 1993 to a sum of $50 billion
which will make Japan the largest donor in the world). But the
aid-giving has not been without problems. These range from ill-
conceived and abandoned projects to corruption. It was revealed for
example by a Japanese trader that bribes to the Marcos regime and
even to the present Aquino government were given with Japanese
aid. 21
Whatever the problems, Japanese aid- and expectations of
further Japanese aid- to ASEAN are unlikely to diminish in the
future. It is likely that such aid will continue to be directed towards
ASEAN economic development, and also to helping the ASEAN
structural adjustment to industrialisation. But one cannot exclude a
possible strategic aim, such as aid to the Philippines to help its
political stability, which is now being considered, and even the
172 ASEAN and the Japanese Role in Southeast Asia

possible future subvention of some of the cost of the maintenance of

American bases in the Philippines.

THE POLITICAL ASPECT

While the policy of seikei bunri was assiduously pursued by Japan in

the early post-war years, it is in the nature of things that economics
and politics are inextricably linked, at least in the capitalist system.
Japan or Japanese business had to become involved, if only indi-
rectly, in politics if they were to flourish. What seikei bunri essentially
means is that Japan will not undertake by itself any independent
political initiative either in the realm of diplomacy or in domestic
Southeast Asian politics- for the truth is that Japan has been
fundamentally involved in politics since the 1950s when it made the
conscious decision fully to support American goals in Southeast Asia,
primarily those of anti-communism and the maintenance of free
market systems. In addition, it has followed American leadership in
the achievement of such goals.
One aspect of this indirect involvement is the cultivation of
political leaders in a position to dispense business favours. Indonesia
is a good example. After the reparation issue was settled between
Japan and Indonesia in 1958, Japan promised a sum of around $200
million to be tied to the purchase of Japanese goods and services.
Aware of the then Indonesian leader Sukarno's penchant for prestige
projects and of the fact that he was equipped with hard currency to
back up his plans, many Japanese businessmen, particularly con-
tractors, rushed to gain his favour. Various strategies were employed,
including the planting of a pretty Japanese girl, Nemoto Naoko, to
win Sukarno's heart. In the event, she became his wife and adopted
the name Ratna Dewi. She was subsequently to manoeuvre herself as
the conduit through which the Japanese business community must go
to reach Sukarno. 22 There are other examples of such indirect
political involvement, though of less magnitude, in other Southeast
Asian countries such as Malaysia. 23
As pressure increased for Japan to be more directly involved
politically and to abandon the policy of seikei bunri, it found itself in
some kind of a quandary. Initially it faced the dangers inherent in a
situation in which one country involves itself in the domestic political
affairs of another country, particularly if one is a developed country
and the other or others are not. The experience of the United States
 Lee Poh Ping 173

in Vietnam for example suggested to many Japanese that such

involvement could be problematic. Accusations of neo-imperialism
and other such unflattering epithets could be expected. Secondly,
even if Japan sought such involvement, or was forced to it, the
problem remained of which group would safeguard Japanese inte-
rests: the group in power or some other group that might be more
popularly based. There was also the added problem of the need to
develop some kind of national consensus at home in Japan, or at least
of avoiding divisiveness if a particular political policy were to be
adopted in Southeast Asia. 24
It cannot be said that the Japanese have found the answers to all
these questions. But the policy they eventually adopted, and still
practice, is more consciously to use Japan's tremendous economic
power to contribute to the stability of ASEAN, thus supporting the
survival of political regimes oriented to free markets and to continued
economic relations with Japan and the West. Thus they will use their
economic aid to promote social, cultural, technical and human
development in ASEAN, activities which will not be controversial
because the word 'politics' is left out, but which will nevertheless
influence politics to a desired end. Equally, Japanese trade and
investment, particularly investment, will be diverted towards coun-
tries - after the basic economic factors have been consi-
dered - where political stability can be further enhanced. The two
most obvious examples are Thailand and Singapore where Japanese
investment has contributed to their economic growth and political
stability. 25
The ASEAN countries themselves are beginning to be aware that
Japanese economic influence has political implications. And while
ASEAN is aware of Japan's economic importance, not all are agreed
on its positive effects. On the one hand, in the Philippines, Japanese
aid to the Marcos government was not appreciated by the many
Filipinos opposed to it, 26 while Thailand, on the other, has seen
Japan as a source of support for its growing economic strength. 27
Such reservations notwithstanding, the Japanese will probably
persist with this approach believing it to be the best option under the
circumstances. But whether they can avoid taking overt political
positions in Southeast Asia in the future, particularly when there are
violent political changes, remains to be seen. 28
In the area of international politics, three developments forced
Japan to take a higher profile in Southeast Asia. One was the
emergence of Japan as an economic superpower, with the obligations
174 ASEAN and the Japanese Role in Southeast Asia

concomitant with such status. The second was pressure from the
Americans who believed that Japan had a 'free ride' in Southeast
Asia and the third was resentment from Southeast Asians that they
were taken for granted by Japan, resentment that expressed itself in
violent anti-Japanese demonstrations in 1974.
But what kind of a role could Japan play in the complex Southeast
Asian region? Southeast Asia has four big powers contending for
influence: the United States, the USSR, China and Japan. There is at
present no power balance among all four regarding their roles in
Southeast Asia. Japan's ability to play a role in Southeast Asia will
thus be checked by the other three powers. At the same time,
Southeast Asia is much more heterogeneous than the countries of
Eastern Europe, Latin America and Africa. There is the ideological
division of communist and non-communist states; the fact of ethnic
and religious diversity; and the fact of economic disparity between
states such as Singapore and Burma. Nor is there a clearcut stable
elite throughout Southeast Asia that a big power can work with.
Because of all these factors, the Japanese have come to believe the
emergence of ASEAN and their partnership with it presents a way by
which they can overcome the complexity of the Southeast Asian
situation and retain the advantages that Southeast Asia offers them.
One of these advantages is that the ASEAN group of countries,
Thailand, Indonesia, Malaysia, Philippines, Singapore and now
Brunei constitute that part of Southeast Asia with which Japan has
the most economic dealings. The bulk of the raw materials that Japan
desires in Southeast Asia such as tin, oil, rubber, timber and so on are
found in the ASEAN countries. In addition, the ASEAN market is
huge and attractive, not only because of its population size but also
because of its potential to develop a huge purchasing power for
Japanese goods. Also, the strategic waterway of the Straits of
Malacca, though which the bulk of the oil Japan purchases from the
Persian Gulf passes, is situated between the three littorial states of
Indonesia, Malaysia and Singapore.
Additionally, ASEAN economies are open to Japanese trade and
investment. In fact such trade and investment is actually encouraged
subject to certain local regulations. The political systems are also
non-communist and basically pro-Western in orientation. Two of the
countries, Singapore and Malaysia, have governments which actively
encourage the Japanese model for their countries.
However, despite ASEAN's attractiveness, potential problems
have always been inherent in a close Japanese association with
ASEAN. The Japanese, like many others, were not at first sure that
 Lee Poh Ping 175

ASEAN could be taken seriously. There seemed to be too much

rhetoric and not enough substance. Such a reservation was partly
overcome by the Bali summit of ASEAN in 1976. The determination
of ASEAN to hold together in the face of the American defeat in
Vietnam and the effect of economic recession on the ASEAN
countries impressed many Japanese, and paved the way for a kind of
Japanese imprimatur on the organisation that was exemplified by
Fukada's visit in 1977. Secondly, many Japanese feared ASEAN
might make demands on Japan such as asking for special considera-
tion for commodity agreements, 29 where the problem for Japan might
be more intractable. It may have been as an attempt to prevent too
close a relationship between ASEAN and Japan brought about by
Fukuda that his successor, Ohira, announced the Pacific Community
initiative. His assumption was that such a grouping would include the
United States, Canada, Australia and New Zealand together with the
other developing countries of Asia, undefined but including ASEAN,
and so might prevent Japan being the main focus of ASEAN
demands. Until late in the 1970s, Japanese officials remained hesitant
about dealing with ASEAN as an entity, and stressed the bilateral
nature of Japanese aid and investment. Thirdly, ASEAN initially
faced hostility from communist powers, and close identification with
the association could complicate Japanese relations with the Soviet
Union in Southeast Asia. However, American backing and subse-
quent modification of the USSR's attitude towards ASEAN over-
came the problem.
This close relationship eventually began to find some substance on
the diplomatic front. Even though initially during the Indochina crisis
the Japanese hoped to act as a bridge between communist Indochina
and A SEAN, they began to back the A SEAN position after the
Vietnamese invaded Kampuchea in 1978. 30 The ASEAN countries
welcomed this and expected Japan to support them unreservedly.
When it was recently discovered that some Japanese trading compa-
nies contemplated giving aid to Vietnam in the hope of promoting
their business, the ASEAN countries, particularly Singapore, raised
an outcry. In the event, the Japanese companies did not go ahead.

THE MILITARY FACTOR

The constraints on a Japanese military role are well known. Firstly, as

interpreted, Article Nine of the Japanese Constitution prohibits
Japan from maintaining any offensive external military capacity.
176 ASEAN and the Japanese Role in Southeast Asia

Secondly, there is the force of public opinion. Most older Japanese,

having tasted the bitter fruit of the Second World War and two
atomic bombs, would not easily countenance any military involve-
ment whether in Southeast Asia or elsewhere. Thirdly, it is clear
many of Japan's Asian neighbours would be very unhappy at the
prospect of a massive Japanese rearmament. Yet perennial pressure
is applied by the Americans on Japan to do more for the security of
the Asian-Pacific region, including Southeast Asia.
From the ASEAN perspective, it is quite clear that most shades of
opinion reject any unilateral Japanese military role in Southeast Asia.
The reason most often given is that there are still many Southeast
Asian people who remember the Second World War when Japan
took the role of a harsh conqueror. 31 Many are not sure whether a
renewed Japanese military role would not be a repeat of that. There
is some basis for their reservations, but 40 years and more have
elapsed since the war, and moreover not all Southeast Asians are
unanimous about the negative consequences of the Japanese occupa-
tion, even if they are agreed on its harshness. Indonesians and
Burmese will argue that the Japanese conquest had given their
nationalist movement a great boost. It must be said that the way in
which many Southeast Asian people, including those of the older
generation, are doing business with Japan suggests that they have
overcome their antipathy towards the Japanese people. If they can
now accept the soroban (the Japanese abacus), they may yet learn to
live with the Samurai sword. But what worries ASEAN funda-
mentally is the possible upset of the regional balance of power a
rearmed Japan might bring. Such a rearmed Japan would not be a
military pygmy. The estimated Japanese budget expenditure for the
military in 1989 will be about $30 billion, an enormous sum which
puts Japan in the same league as other great defence spenders such as
West Germany. Add to this Japanese technological prowess and their
sense of nationalism, and Japan could well be tempted to become a
free floating agent not tied to the United States. This capacity will
become even greater if they spend more than the one per cent of the
GNP on the military that they are now doing. They could align
themselves with China or the USSR, thus creating tremendous
difficulties for ASEAN policy planners, particularly if the Americans
were to be forced out by any such new alignments. 'Everybody is
relaxed because the Americans are still in the region', an Indonesian
authority on regional security has commented. 32 This echoes wides-
pread ASEAN sentiment of the fear of any upset in the present
power balance.
 Lee Poh Ping 177

But given the present geo-political and economic realities, some

kind of Japanese military involvement in Southeast Asia in the future
cannot be excluded. Already there is some hint of the possibility of
some ASEAN countries accepting this, as exemplified by the recent
visit of the former head of the Japanese Defence Agency, Kawara
Tsutomo, to Indonesia and Singapore, not to mention similar visits
by lower-level Japanese military functionaries. There is also talk of
possible Japanese aid to modernise ASEAN defence systems, and
even joint Japanese military exercises with ASEAN or with the
United States in Southeast Asia. 33

JAPAN AS A MODEL

The present interest in the Japanese model in Southeast Asia is so

great that it even has a policy aspect. This is evidenced by the
Singaporean 'Learn from Japan' campaign started in 1978 and
Malaysia's 'Look East' policy launched in 1982. Both are officially
sanctioned by their respective governments. Other ASEAN countries
have also expressed some intention of emulating Japan. The latest
example is the Philippines where the Trade and Industry Secretary,
Jose Concepcion, was quoted as saying that his country 'must become
something like Japan Incorporated'. 34
Interest in the Japanese model however predates the 1970s, and
that could largelybe explained within the context of the Cold War. 35
The West was then locked in an ideological battle with communism.
Southeast Asia was one of the areas where this battle was fought
quite intensely. In particular, the Chinese model of revolution caught
the imagination of many Southeast Asians. Many of them were
impressed by the liberation of Chinese energies by the Chinese
Communist Party towards some revolutionary goals and by the ability
of China to fight the mightiest western nation, the United States, to a
standstill in the Korean peninsula. It appeared necessary for the West
to offer an alternative model, especially a successful Asian one.
Japan then fitted this bill nicely, and its evolution from a feudal 36
country to a modem one during the Meiji period was emphasised.
But by the 1970s and late 1980s the international situation had
changed. The world has become ideologically more complex while
the Chinese model has lost much of its lustre, brought about by the
excesses of the Cultural Revolution and the inability of the Chinese
Communist Party to modernise China. Even more striking is the
attempt by the Chinese to emulate Japan and the East Asian NICs.
178 ASEAN and the Japanese Role in Southeast Asia

On the other hand, Japan has emerged as a force to be reckoned with

in the international arena, particularly in the economic sphere. It has
rebuilt its economy from the destruction of the Second World War to
its current status as one of the largest in the world. In the process,
Japan has made a great impact on the Western economy itself.
Japanese prowess in the export of cars, computers, videos and other
hi-tech appliances has made many Southeast Asians wonder how an
Asian country like Japan can achieve such a thing. Coincident with
this, many Southeast Asians perceive a decline in the work ethic of
the West, particularly in Western Europe. The apparently lacklustre
Western economic performance and stories of innumerable strikes
are among the reasons for this perception. In addition, Japan has
been the object of worldwide interest as mentioned previouslyY
Finally, Japan has become increasingly important to the Southeast
Asian economy and it is hardly surprising that some Southeast Asian
countries in looking for some example for their own modernisation
programmes should look to Japan: and this time to post-war Japan.
The adoption of the post-Second World War Japan model has not
been psychologically easy for some Southeast Asians. There are
memories of Japanese atrocities during the Second World War, and
many Southeast Asians are anyway not necessarily disposed to
imitate any nation at all, sensitive as they are to continued Western
tutelage. However it seems that the passage of time and the develop-
ment of a pragmatic attitude (in addition to the other factors
previously mentioned) has led to a rather more enthusiastic official
embrace of the Japanese model, at least in Singapore and Malaysia.
Thus the Prime Minister of Singapore summed up the mood when he
described the Singaporean population as being hard-headed and
realistic enough to prevent any antipathy towards Japan affecting
their economic relations and any other benefits that could be derived
from Japan. 38 Nor did Dr Mahathir Mohamed, the Malaysian Prime
Minister, find it politically impossible to 'Look East', particularly
when such a policy would jolt Malaysians from their complacency and
over-dependence intellectually on the West. Moreover he saw some
similarity between Malaysia and the Japan of the not-too-distant
past. For each was 'a small economy dependent on international
trade, with a young but rapidly growing work force- both share high
levels of national investment and savings and have enjoyed relatively
low levels of inflation'. More important, Dr Mahathir continued, 'we
share a common belief in monetary stability, and financial discipline
as preconditions to growth'. 39 A similar commonality is perceived by
the Singaporeans. Apart from some vague underlying feeling that the
 Lee Poh Ping 179

Singaporean Chinese population share a common Confucian herit-

age, they see themselves, even more than Japan, as a nation
completely without any natural resources and hence dependent on
their human resources. 40 Added to this, Dr Mahathir is most keen to
wean Malaysia away from continued dependence on the exports of
primary commodities, in which he sees very little future in the long
run, and push Malaysia into at least the ranks of the newly industria-
lised countries. In this respect, he sees the experience of Japan to be
particularly pertinent.
The exact features of post-war Japan to be imitated however are
not uniform among ASEAN countries. Some in Thailand have
expressed interest in some aspects like the sogo soshas or the General
Trading Companies. Among other things, Malaysia is influenced by
the practices of Japan Incorporated, company welfarism and the sogo
soshas. Japan Inc. has been associated with many things from all
kinds of governmental-private sector interaction such as privatisation
to the need for efficiency and incorruptibility41 in government.
Essentially what is meant is a government which is not in confronta-
tion with the private sector but helping it to flourish instead. The
welfare model involves the inculcation of employee loyalty to the
company and the sogo sosha example pertains to the encouragement
of exports.
But such emulation is not without problems. The first may be
called political in that many Southeast Asians tend to associate the
emulation of Japan with the foreign relations of Japan with Southeast
Asia. In the Malaysian case, many Malaysians equate the 'Look East'
policy with official favouritism towards Japanese businessmen, and
hence expect Japan to be more forthcoming towards Malaysia as a
kind of quid pro quo. Second, it is not clear that many of the ordinary
citizens have been sufficiently educated as to what adoption of the
Japanese model means. There is a joke in Malaysia that 'Look East'
means that politicians or ministers should commit hara kiri if their
ministries do not perform well, as the Japanese were supposed to do!
It is thus likely that interest in the Japanese model, though not
necessarily in Japan itself, will wane as Southeast Asians begin to
realise the complexity of such emulation.

CONCLUSION

The trend seems clear in the economic field. Japan will increasingly
have the upper hand and possibly even dominate the economies of
180 ASEAN and the Japanese Role in Southeast Asia

ASEAN. That there is today much talk of a 'yen bloc', or a Japanese

controlled trading bloc that will include ASEAN even if ASEAN
might not like it, 42 suggests this is not impossible. This is a develop-
ment anticipated by few Southeast Asians (but for that matter how
many Americans could have predicted that Japan, considered by
many Americans not too long ago to be a developing country, would
wield such enormous influence on the American economy?) Whether
Japanese domination will eventuate will be greatly influenced by
developments in America or more accurately by developments in the
Nichibei (Japan and America) economy. In the political arena, Japan
might be less indirectly involved while the Japanese military role
remains uncertain. Finally, while there may be an element of
faddishness in ASEAN interest in the Japanese model, ASEAN will
continue to be fascinated with various aspects of Japan, if not with
the model as a whole.

NOTES

1. See Kernail Singh Sandhu and Eileen P.T. Tang (eds), Japan as an
Economic Power and its Implications for Southeast Asia, Singapore:
Singapore University press, 1974.
2. For some reference to the dependency in relations between Japan and
Southeast Asia, see Franklin Weinstein, 'Multinational Corporations
and the Third World: The Case of Japan and Southeast Asia',
International Organization, 30, 3, 1976.
3. The figures given by the Resource Bureau of the Ministry of Interna-
tional Trade and Industry (MITI) show that for the year 1960, of total
Japanese iron ore imports of 14 861 000 tons, 6 354 000 tons came
from Malaya and 1 202 000 tons came from the Philippines.
4. From interviews with some Japanese iron and steel personnel in 1977.
5. See K. V. Kesavan, Japan's Relations with Southeast Asia, 1952-60 with
particular reference to the Philippines and Indonesia, Bombay: Somaiya
Publications, 1972.
6. Peter F. Drucker, 'The Changed World Economy', Foreign Affairs,
Spring 1986.
7. Willard H. Elsbree and Khong Kim Hoong, 'Japan and ASEAN',
RobertS. Ozaki and Walter Arnold (eds), Japan's Foreign Relations,
A Global Search for Economic Security, Boulder and London: West-
view Press, 1985, p. 21.
8. See 'US, Regional Demand Fuel Asia's Trade', Asian Wall Street
Journal, 4 October, 1988.
9. There are one or two exceptions such as Malayawata Steel Mill, a joint
venture originally between Nippon Steel Corporation and certain
Malaysians.
 Lee Poh Ping 181

10. However like their previous success in overcoming the oil shock in
1973, the Japanese seemed to have weathered this crisis of the high
yen, and have emerged with a stronger economy.
11. Source: Japanese Ministry of Finance.
12. For an interesting discussion of this, see Pasak Phong Paichit, 'Jap-
anese Yen Appreciation and the Impact on Foreign Investment in
ASEAN', paper presented at the 13th Annual Conference of the
Federation of ASEAN Economic Associations, 17-19 November,
1988, Penang, Malaysia.
13. Ibid., see also 'Singapore Gains from Japanese Exodus. Firms Such as
Aiwa Co. Benefit but Trade Problems may lie Ahead', Asian Wall
Street Journal, 5 October 1987.
14. Robert Orr, Jr., 'The Rising Sun: Japan's Foreign Aid to ASEAN, the
Pacific Basin and the Republic of Korea', Journal of International
Affairs, Summer/Fall, 1987, p. 47. See also Suzuki Yuji, Tonan Ajia no
Kiki no kozo, Tokyo: Keiso Syobo, 1982, pp. 68--76.
15. The final outcome was that only two factories, both producing urea,
were set up, one in Indonesia and the other in Malaysia, see 'Poor
ASEAN Meets Rich Japan' in the Economist, 26 March, 1988.
16. One of such plans is that by Saburo Okita for a Japanese endowment
fund to be situated in the World Bank for use to aid developing
countries. See 'Se Gin Ni Nihon Kihonkin 0', Manichi Shimbun, 26
November, 1986.
17. See Leonard Silk, 'The Marshall Plan, Would the Effort Be Made
Today?' by Leonard Silk, International Herald Tribune, 6-7 June, 1987.
18. See 'A New Era for ASEAN', New Straits Times, 17 December, 1987.
19. See 'Japan Plans More Aid to Asian Nations', and 'Japan's ASEAN
Aid Packages Aimed at Private Sector', Asian Wall Street Journal, 14
December and 16 December 1987 respectively.
20. The Tengku is a harsh critic of Japanese lending practices, 'Although
Japan furnishes loans', the Tengku was quoted as saying, 'it takes back
with its other hand, as if by magic, almost twice the amount that it
provides', The Times, 29 April, 1971.
21. 'Japanese Aid Comes Under Mounting Criticism', New Straits Times, 4
January, 1988.
22. See Nishihara Masashi, Japan and Sukarno's Indonesia,
Tokyo-Jakarta Relations 1951-1966, Honolulu: University Press of
Hawaii, 1975.
23. In the course of my research on the origins of a Japanese-Malaysian
joint venture in steel making called Malayawata, I came across one
such Japanese intermediary with a good knowledge of Malaysian
conditions and Malaysian politicians.
24. This paragraph is based on my conversations with some Japanese
intellectuals.
25. See 'Japan fuels rocketing economies of Asian NICs', The Japan
Economic Journal, 25 July, 1987.
26. Carolina Hernandez, 'Political and Security Dimensions of Philip-
pine-Japanese Relations' in Frances Lai, ibid.
27. See Sukhumbhand Paribatra, 'Thai-Japan Political and Security Rela-
tions' in Frances Fung Wai Lai and Charles E. Morrison (eds), Political
182 ASEAN and the Japanese Role in Southeast Asia

and Security Co-operation, Tokyo: Japan Centre for International

Exchange, 1987.
28. The interesting case is Burma today. Japan is the outside power with
the most economic influence there, and is now faced with the choice of
whether to continue economic aid to an increasingly repressive military
regime which, while consolidating its power, is without popular
support, or to support the popular forces in opposition to the repress-
ive military government. At the time of writing, Japan appears still
non-committal.
29. There was suspicion that ASEAN might turn out to be according to the
Nihon Keizai Shimbun, 'a pressure group of primary producers knock-
ing on Japan's door'. Quoted in Masahide Shibusawa, 'Japan's Evolv-
ing Interest in ASEAN' in Charles E. Morrison (ed.) Presence and
perceptions, Tokyo: Japan Center for International Exchange, 1987.
See also Masahide Shibusawa, Japan and the Asian Pacific Region,
Profile of Change, London: Croom Helm, 1984.
30. See K.V. Kesavan, 'Japan's Policy Towards the Kampuchean Ques-
tion', Asian Survey, November 1985.
31. According to a survey of ASEAN opinion released by the Japanese
Foreign Ministry, there are still quite a lot of ASEAN people who
cannot forget Japanese actions during the Second World War. Asahi
Evening News, 23 July, 1987.
32. 'Japan, Changing Image, Moves Into Role as Asia's Advocate', Inter-
national Herald Tribune, 27 June, 1988.
33. Sheldon W. Simon was quoted as saying that the tension in the Spratly
Islands has made the ASEAN states, with the exception of Indonesia,
more willing to accept Japan performing a security role in ASEAN
waters together with the United States. See New Straits Times, 29 July,
1988. See also the Manichi Daily News, 15 July, 1988 for an editorial
about Indonesia and Singapore accepting Kawara's explanations about
Japan's defence posture.
34. Asian Wall Street Journal, 10-11 July 1987.
35. See Edwin 0. Reischauer, Wanted, An Asian Policy, New York:
Alfred Knopf, 1955, and The United States and Japan, New York: The
Viking Press, 3rd edition, 1965.
36. I use the word 'feudal' very broadly simply to mean pre-Meiji Japan
though I am aware that it may better apply to pre-Tokugawa Japan as
Tokugawa Japan was a more centralised policy than many of the feudal
regimes of Europe.
37. Some Southeast Asians may also have been impressed by the fact that
the Japanese model is not only good for Southeast Asia but also for the
West. The many times that the Harvard Professor Ezra Vogel, who
argued basically for Western emulation, has been invited to Singapore
to speak on this subject is indicative of this. See C. V. Devan Nair, Ezra
F. Vogel, Nobuyoshi Namiki and Lim Chong Yah, Learning from the
Japanese Experience, Tokyo: Maruzen Asia, 1982.
38. Chin Kin Wah 'Singapore Perceptions of Japan' in Charles Morrison
(ed.), op.cit.
 Lee Poh Ping 183

39. Dr Mahathir Mohamed, 'The Japanese Model: Its Relevance for

Malaysia', in M. Pathmanathan and David Lazarus (eds), Winds of
Change, Kuala Lumpur: Eastern Productions Sendirian berhad, 1984.
40. See Chin Kin Wah, op.cit.
41. The extent to which incorruptibility is a myth has received renewed
exposure with the Recruit-Cosmos scandal of 1988-89. A further stage
in the emulation of Japan will be reached when Southeast Asians and
others realise that many of the foreign advocates of the Japanese
model have uncritically accepted only what Japan would like them to
see.
42. See 'Asians Aren't seeking a "Yen Bloc", Lee Says', International
Herald Tribune, 12 September, 1988.