Annual Report

Annual Report 2006


Industry Cooperation in the East-Asian Region
−The Role and Potential of Japanese Businesses−
Research Committee Report

 Amidst the backdrop of ever-deepening interdependence in trade in the East Asian region, traditional division of labor has transformed from vertical to horizontal specialization within the region. In addition, we are witnessing a progress of “sector-specific vertical specialization.” Although increased economic interdependence between Japan, China and ASEAN has been considered, trilateral cooperative relations have yet to be examined.
 With that in mind, our research committee will focus on mutual relationships and dynamism between three parties, Japan- China-ASEAN in 2006 for the second year in a row, highlighting the role and potential of Japanese businesses to contribute to economic dynamism in Asian region. For that end, we will examine sector-specific characteristics of a range of industries including die and mold manufacturing, IT, electronics, petrochemistry, textiles, automobile, and identify characteristics of their regional strategies, managerial styles and technological transfer and deployment.
Overview of the Report:
 We identified several patterns in the involvement of industries in each country to regional markets, or the relations between industries in each country and China.

 In electronics, we found that product-specific compartmentalization and international division of production processes have been progressed simultaneously.

 In automobile sector, we could roughly divide the region into Southeast Asia, China and India. In the former, partial division of production processes in type-specific production and complementary trade relations in auto parts production could be observed. However, trilateral regional trade will not be accelerated in the near term with the expansion and growth of respective domestic markets.

 In synthetic fiber and apparel sector, China has become the sole winner in the region with shrinking export growth in Southeast Asia and the downscaling Japanese textile industry. With the steady growth of Indian textile business, China and India will become undoubtedly two textile giants.

 In information technology sector, India is expected to be the regional leader in software development. However, it may also contribute to lower labor cost and increase competitive edge for Japanese financial institutions and service sectors through their outsourcing activities. At the same time, China may also strengthen its position in electronics by recruiting Indian engineers or adopting their software development capabilities.

 Given the circumstances, it is possible to conclude that there are three keys to succeed regional cooperation and the region-wide industry cooperation. First, active efforts to solve common issues facing the region beyond the boundary of industries are necessary. To that end, cooperative efforts to design and develop institutional infrastructures are required. Second, it is important to cooperate in developing human resources at a regional level. Third, cooperation to build an enabling framework to bring mutually beneficial and mutually complementary system for the international specialization is the key.

 Our next step will be to examine the potential for each sector and field and identify various challenges and solutions. Further, we should focus on respective stakeholders including governments, industry associations, and businesses, with a view to explore future public-private partnerships.