ASEAN wooes Japan's economic recovery, revival in investment

ASEAN wooes Japan's economic recovery, revival in investment

Shingo Ito, Agence France-Presse, Jakarta

While hailing Japan's initiative to form a new partnership in Asia, key ASEAN members are making earnest calls on Tokyo to speed up economic recovery and revive vigorous investment to the region.

Japanese Prime Minister Junichiro Koizumi, who ends his week- long Southeast Asian tour on Tuesday, has proposed forming a new regional economic framework and pledged Tokyo's larger role in Asia.

Leaders of the key Association of Southeast Asian Nations (ASEAN) states have given warm support for his initiative at separate talks with the popular Japanese prime minister.

But the ASEAN leaders also reminded Koizumi of their serious request for a quick recovery of the world's second largest economy, being urged to overhaul its old-fashioned operations in the private and public sectors.

"Japan's economic reform will have a great impact on not only Thailand but ASEAN and the prosperity of the world," Thai Prime Minister Thaksin Shinawatra told Koizumi.

"Japan is a very important country in the world. We would like to support Japan's reform," Thaksin said when he met Koizumi in Bangkok on Friday.

After meeting Koizumi in Manila, President Gloria Arroyo said: "In line with cooperation for prosperity, I expressed my support for the prime minister's effort to restructure and reform the Japanese economy."

A strong revival of the Japanese economy would "have a beneficial impact on the economies in East Asia, including the Philippines," Arroyo said.

Koizumi said he was aware of these calls and expressed hope that his drastic reforms would allow Tokyo to recover from a decade-long drift, with three recessions in the past 10 years.

"I believe the Japanese economy will pick up for sure with the reform so that we can be a locomotive engine again for the regional economy," Koizumi told Mahathir.

But Japan's immediate recovery is unlikely, analysts say, warning Tokyo is expected to continue suffering from a deflationary spiral which could put off any hope of recovery and bring forward a full-blown financial crisis.

The ASEAN leaders have appealed to Koizumi to boost Japan's private investment and his government's financial assistance overseas, both shrinking because of the recession.

"Prime minister Mahathir thanked our prime minister for Japan's past support, but he said his country still needs support especially for its effort to improve infrastructure," a Japanese government official said.

Indonesian President Megawati Soekarnoputri echoed the request.

"I understand that Japan is in difficult conditions, but Japan's support is necessary" for Indonesia's effort to achieve economic reforms and political stability, Megawati said.

Koizumi has decided to curtail Japan's overseas assistance by 10 percent for the fiscal year starting in April as part of his drive for a cut in massive national debt.

"I have felt strong expectations from ASEAN countries toward Japan," Koizumi said.

"We are to cut ODA (official development assistance), but we would like to keep in mind the important relations with ASEAN" when Tokyo sorts out its overseas assistance budget to each country, he said.

The ASEAN leaders have also shown concerns over weakening Japanese business activities in ASEAN and a shift of Tokyo's investment from the 10-member grouping to China.

"There is a possibility that severe competition may come out between ASEAN and China," Mahathir warned when he met Koizumi. Japan's direct foreign investment plunged 56.4 percent in Singapore and 56.3 percent in Malaysia for the year to March last year, compared with a brisk 31 percent gain in China, according to the finance ministry.

Some Japanese companies have already shifted investment to China and reviewed their fund flows to ASEAN.

Japanese electronics company Casio Computer Co. Ltd. plans to boost watch production in China and Thailand, but cut output in Malaysia, as part of their effort to review output in the region.

Business sentiment among Japanese companies operating in five key ASEAN nations -- Indonesia, Malaysia, the Philippines, Singapore Thailand -- is forecast to remain bleak early this year, said the Japan External Trade Organisation.

"Looking ahead to the next two to three months, prospects appear worse than the same period last year in all five economies," the government's trade research unit said in a report released in December.