Part 1 of 2 : Japan striving to maintain partnership with Asia

Ichiro Fujisaki, Japanese Deputy Minister for Foreign Affairs, Jakarta

Today, there indeed are a lot of new issues that command our attention. It is no exaggeration to say that we are entering a new page in our history. China's emergence. War against terrorism. New economic partnerships. Changing relations between developed and developing countries. New energy outlook. You name it.

But this does not mean we may disregard what we already have. This is especially so in this part of the world. Two reasons. One, because this region itself is a success story. No major war in three decades. Remarkable economic development. There is no region which has comparable record in the world. Two, although this is a success story, we cannot take it for granted. With some mismanagement or lack of sensitivity, the fruit we have in our hands may still easily slip away.

My message is very simple.

o One, let us cope with new challenges positively without waiting to be driven by events.

o Two, in doing so, let's maintain consciously those good things we have in our hands and build anew on that basis.

o Third, let us be inclusive, open and outward looking when we discuss future regional cooperation.

Yes, maybe nothing new. But, still important to keep in mind, I believe, at this turn of events.

Let me elaborate these themes in three areas: cooperation in the economic fields, regional and multilateral institution, regional and global issues.

East Asia's remarkable success owes much to human resources with high-level working ethics, social institution and geographical location. These, together with proper industrial policies, made it possible for initial members of ASEAN for example to consolidate a virtuous cycle. Receive assistance and build infrastructures. Induce FDI utilizing those infrastructures. Export products from firms made with FDI, and earn foreign currencies to improve people's living and to pay back debts. Successful model was illustrated in IDEA (Initiative for Development of East Asia) ministerial conference held in Tokyo.

Japan has endeavored and is endeavoring to remain a partner in this process. Take ASEAN countries for example. In trade, Japan's share in 2001 was 20 percent and was the largest trading partner along with the U.S. As for FDI between 1995 and 2001, Japan's share is 22 percent and is the largest source. Regarding ODA in 2001, Japan contributes 60 percent of all the bilateral assistance from DAC countries and is still by far the top donor. Japan announced in its new ODA Guideline this year that Asia remains its priority region.

Japan's task today is to restructure and recover its economy as soon as possible. With that, it can continue to cooperate with partners in the region. A few months ago the Financial Times wrote Japan has 3Ds. Deregulation, Drastic Structural change, Definite recovery? No, not quite yet. Debt, Demographics, and Deflation were their Ds.

But we should not lose a balanced sight. Let me quote Prime Minister Junichiro Koizumi. "A decade ago when Japan was in the economic bubble, we were overconfident. Now we have lost confidence. Both recognitions are wrong; recently, there are aspects that are not going well due to lack of confidence." I think this notion may be universally applicable.

Let us maintain and fortify mutually interdependent economic ties. It took years to build these close and friendly relations. New challenges should be met on that basis.

Emerging economies such as China and India are of course a challenge to others. It is very natural that there are concerns that some investors may shift their manufacture to these new partners with cheaper wages and larger domestic market. So-called hollowing out effects. Enterprises go where they can make a profit. That is the essence of the market economy. So there is naturally competition to improve environment. Those who can continue to adapt themselves to changing situations gain more. The difference with the game of musical chair is that here chairs don't disappear. It's not a zero sum game. Win-win is possible. But just how much one win depends on one's own will and ability. It is in this sense that we say new situation is not a threat but an opportunity. We are ready to continue to extend inter alia capacity building assistance in this area.

In this regard, there is one important initiative in the financial sector. In order to prevent the recurrence of financial crisis, Japan is taking the initiative with others for the Asian Bond Market. The aim is, through issuance of bonds in local currencies, to connect high rate savings in the region with long- term investment needed for economic development. Japan will support the development of domestic bond markets.

This article is based on an abbreviated text of a luncheon speech delivered at the Conference on Security Cooperation in Asia Pacific (CSCAP) recently held in Jakarta.