The Idea of “East Asian Economic Community”

from Business Perspective

APEC 　 OFFICIAL 　 SYMPOSIUMSeptember 27, 2006

Kakutaro KitashiroChairman, KEIZAI DOYUKAI

(Japan Association for Corporate Executives)Chairman of the Board, IBM Japan Ltd.

AGENDA

Growing East Asia and Challenges

The Principles of East Asian Community

Recommendations to Realize the East Asian

Community

Growing East Asia and Challenges

GDP Growth Rate Projection for 2015

　

Japan US EU China

India

ASEAN４

NIEｓ

World Bank(2006) 1.7 3.6 2.0 6.1 5.5 6.1 6.1

IEA(2004) 1.9 2.3 2.1 5.0 4.7 3.8 3.8Japanese Gov.

(2004) 1.5 3.1 1.8 6.9 4.1 3.1 4.1

Average 1.7 3.0 2.0 6.0 4.8 4.3 4.7The source : 2006 White Paper on International Economy and Trade

Annual Average GDP Growth Rate Projection for 2015

0.01.02.03.04.05.06.07.0

J apan US EU China India ASEAN４ NIEｓ

%

GDP Growth in East Asia

East Asia : (ASEAN10+Japan,China,Korea)1980 2005 2015

(Forecast)

East Asia’s share in global GDP *2

16.3% 20.2% 27.0% *3

East Asia’s share in global export *4

14.1% 26.6% -

East Asia’s share in World Investment *5

6.8% 21.2% (36.3 times in monetary terms)

*2 Calculation is based on the IMF World Economic Outlook Database.*3 METI, Trade and Industry 2006 White Paper on Internal Economy and Trade 2006,Figure 2-1-1.*4 *5 Prepared by the Mitsui Global Strategic Studies Institute(UNCTAD World Investment Report 2005)

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

80.0

1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002

East Asia EU15

EU25 NAFTA

Intra-regional Trade RatioEU15 East Asia NAFTA

60% 54% 45%

’87:Single European Act

’94:NAFTA

’93:ASEAN CEPT

The source : 2005 White Paper on International Economy and Trade

’93:Single Market completed

Japanese Trade Dependency on East Asia

1998 2005 Increase (of which Chinese contribution)

Share of Japan’s exports to East Asia

34.0% 47.9% +13.9% (+8.2%)

Share of Japan’s imports from East Asia

35.6% 44.7% +9.1% (+4.8%)

*7 Compiled by Mitsui Global Strategic Studies Institute based on data from IMF Direction of Trade Statistics, CD-ROM July 2006, and ADB Key Indicators of Developing Asia and Pacific Countries.

GDP per Capita1990 2005

Japan 24,724 dollars 35,787 dollars

Singapore 12,219 dollars 26,835 dollars

Brunei 15,049 dollars** 17,632 dollars

South Korea 5,893 dollars 16,422 dollars

Malaysia 2,432 dollars 5,040 dollars

Thailand 1,528 dollars 2,577 dollars

China 342 dollars 1,703 dollars

Indonesia 628 dollars 1,259 dollars

Philippines 725 dollars 1,159 dollars

Vietnam 97 dollars 612 dollars

Laos 210 dollars 463 dollars

Cambodia 106 dollars 375 dollars

Myanmar 68 dollars 97 dollars*8 Sources: “Global Economic Trends” edited by the Cabinet Office, Office of the Director General of Policy Coordination, and IMF World Economic Outlook.** Based on the figure as of 1992 for Brunei.

The World Competitiveness Factors Ranking

Economy Country Ranking

Government

Efficiency

Business Efficiency

Infrastructure

Efficiency

Hong Kong 2 1 1 16

Singapore 3 2 7 5

Japan 17 31 23 2

Taiwan 18 24 14 20

China Mainland 19 17 30 37

Malaysia 23 20 20 31

Thailand 32 21 28 48

Korea 38 47 45 24

Philippines 49 45 44 56

Indonesia 60 51 57 61

Source: IMD WORLD COMPETITIVENESS YEARBOOK 2006

Tariff Comparison

The source : 2006 White Paper on International Economy and Trade

0.05.0

10.015.020.025.030.035.040.045.0

All Products Agricultural products Non-Agricultural products

TariffCuts40%

Effect on Trade Promotion

Estimated Effect of

Trade Facilitation Measures

56%

$148B

The source : 2006 White Paper on International Economy and Trade

$191B

Streamlining of port operations

29%

*1 : Enhance the transparency of customs clearance formalities

Custom clearance Process

17%

Transparency*110%

The risk of political instability

4%

The Principles of East Asian Community

ブルネイ　ベトナム　ラオス　ミャンマーカンボジア

インドネシアマレーシア　フィリピン　　シンガポールタイ

日　本　　　中　国　韓　国

豪州　　ＮＺUS

インド

Russia

Bangladesh Sri Lanka

UK　France Germany　　CanadaＥＵ

Pakistan

North Korea Mongolia　　　

ＰＮＧ

ReCAAP

the Bali Regional Ministerial

Meeting on Counter-Terrorism The Chiang Mai Initiative , The Asian Bond Market Initiative

ARF

The Bali Process

The East Asian summit

Japan, China and Korea

Cooperation

ASEAN The Asian Bond Fund

ASEAN + 3

Various Functional and Regional Cooperation

The Source ： The Ministry of Foreign Affairs of Japan, Asian and Oceanian Affairs Bureau

JapanChinaKorea

IndonesiaMalaysia

PhilippinesSingaporeThailand

BruneiVietnam

LaosMyanmarCambodia

India

Aus. NZ

Approach to the East Asian Community

Road map for the realization of a 　“ community” Share the common goal One step at a time

Building equal partnerships

Expansion centering on the ASEAN

Realization of an open community

Creation of a disparity correction mechanism within East Asian region

Objective and Basic Principles

Objective Co-prosperity and co-existence within the

East Asian region

Basic Principles DemocracyMarket economyBasic human rights

Basic Rules of the East Asian Community

Mutual cooperation

Non-intervention in other countries’ internal affairs

Peaceful resolution of disputes

Renunciation of the use of military force

Correction of regional disparities

Equal partnerships

Recommendations to Realize the East Asian Community

Recommendations to Japanese Gov. Early realization of heads of state summits

between Japan and China/South Korea

Open the market for agricultural products, etc. for the facilitation of intra-regional FTAs/EPAs

Establish an East Asian Regional Development Fund

Launch a Council on the Promotion of the East Asian Community

Innovation for Sustainable Growth in Asia

Workforce Training Public expenditure on education

Promote Market Economy Maximize FDI through deregulation

ODA and East Asian Regional Development Fund

Commercial system within the region

Corporate Social Responsibility in the local communities

Key to Innovation

Talent

Investment

Infrastructure

Council on Competitiveness,Innovate America (2004)

Talent

Investment

Infrastructure

Conclusion

Japan: Four Recommendations

East Asia: Innovation for Sustainable Growth

Co-prosperity and Co-existence within the East Asian region

Thank you

Back up chart

FDI to East Asia

Foreign Direct Investment

2004 2005Growth

Rate Contribution Share

East Asia Japan 7,809 3,223 △ 58.7 △ 0.6 0.3

China 54,936 79,127 44.0 3.1 8.2

NIES 60,000 61,952 3.3 0.2 6.4

Korea 9,246 4,339 △ 53.1 △ 0.6 0.4

Taiwan 1,898 1,625 △ 14.4 △ 0.0 0.2

Hong Kong 34,036 35,905 5.5 0.2 3.7

Singapore 14,820 20,083 35.5 0.7 2.1

ASEAN4 7,749 11,374 46.8 0.5 1.2

Thailand 1,414 4,008 183.4 0.3 0.4

Malaysia 4,624 3,976 △ 14.0 △ 0.1 0.4

Indonesia 1,023 2,258 120.8 0.2 0.2

Philippines 688 1,132 64.5 0.1 0.1

World Total 782,839 964,744 23.2 23.2 100.0The source : JETRO White Paper on International Trade and Foreign Direct Investment 2006