ASIAN AFFAIRS INTERVIEW WITH KOJI WATANABE Former Vice Minister (Foreign Affairs) of Japan A JAPANESE VIEW ON ASEAN Serge Berthier.- Is Japan considering ASEAN as a useful instrument ? Koji Watanabe.- For the Foreign policy establishment of Japan, the formation of ASEAN has been considered a very positive move. S.B.- In what way? K.W.- ASEAN was probably of fundamental importance in stabilizing Southeast Asia. And I have to go back to the Vietnam war. It just so happened I was in Saigon when the city fell. That was a traumatic experience, to me personally, but also for Southeast Asia. There was a pervasive feeling of a domino effect taking place, of a communist take-over of Southeast Asia on the way. It didn't happen. And ASEAN is one of the reason why it didn't happen. S.B.- ASEAN was set up in the 60s only as a loose instrument of co-operation. But what you say is that it became a very important political factor on the battlefield of the cold-war. How did it achieve this status? K.W.- Under the circumstances, ASEAN evolved rapidly into a collective exercise, enhancing the resilience of the governments. It anchored stability in the 1970s and the first part of the 80s, and therefore played a most important role in the political sense. S.B.- Could you be more precise? K.W.- To be blunt, one can say that without ASEAN efforts and scheme, the potential sources of conflict amongst ASEAN countries would have flared up. S.B.- What sort of conflict? K.W.- Territorial disputes, mostly between Malaysia and Singapore, Singapore and Indonesia, Indonesia and Malaysia, Malaysia and the Philippines, and so on. This grouping was important in that respect. It diffused the conflicts. S.B.- How did it achieve that since it is not really a policy-making instrument and nothing of the sort was ever discussed at ASEAN level? K.W.- It is not easy for the Japanese to understand the way ASEAN works, but two of the key principles, as I see it, are solidarity and non-interference in internal policies. Given such difference between the stage of their economies, the size, the religions, the culture, the ethnic of the countries it was an essential wisdom to not meddle. As a result, a level of trust was established, and when you have trust you can achieve a lot more than when you have distrust. S.B.- What is the position of Japan towards ASEAN? K.W.- Prime Minister Fukuda in 1977 made an important policy statement in Manila which was subsequently called the Fukuda doctrine. Japan's relations with Southeast Asia and ASEAN would be composed of three pillars. First, Japan would be friend with ASEAN and help to build-up resilience, two, Japan would made its best effort to facilitate the reconciliation of Indochinese countries. Third, Japan would help but would never again become a military power. S.B.- Twenty years have elapsed. ASEAN has emerged as an economic power house. Do you think it will emerge as a politic power house on the international scene? K.W.- For a long time, somewhat a bit like Japan, ASEAN countries have been regarded on the international scene as moderate. Moderate is a useful diplomatic description of benign and silenced countries partners. With its growing economic importance which started in the early eighties and global development which has been taking place since then, it is a fact that ASEAN has started to play a role to reckon with on the international scene. Particularly one key effort was the creation of the ASEAN Regional Forum (1) which can't be underestimated. S.B.- What make it so important? K.W.- It is the only forum in which the major powers in East Asia and Southeast Asia can get together in the field of security issues, in the field of preventive diplomacy, the unique forum where United States, China, Japan, Russia and Korea can seat together. S.B.- What are the other achievements of ASEAN as you see it? K.W.- ASEAN was probably instrumental in maintaining the US presence in Southeast Asia. Also ASEAN was very important in helping China into becoming an important and responsible member of Asia. China has for a long time been regarded as very slow or somewhat reluctant to engage in diplomacy and undertakings but through ASEAN efforts, it is now engaged in preventive diplomacy. S.B.- You mention only political achievement. Is there no ASEAN contribution in the economic field? K.W.- One could say that ASEAN built the necessary foundation for the economic development that took place. You may wonder what Southeast Asia would look like today without ASEAN. But having said that, there is a lot of discussion about what factor triggered the explosive economic development we have witnessed for the past 20 years in Southeast Asia. Some, like Paul Krugman (2) talk about investment, but to me, the main factor is political stability. And in Asia, political stability is very difficult to imagine without the ASEAN role. So that is where ASEAN was instrumental in the economic field. S.B.- Few years ago, Dr. Mahathir, the Prime Minister of Malaysia proposed to enlarge ASEAN into an East Asian Economic Caucus (EAEC) where all nations of East Asia, Japan included, could work together. If ASEAN was so good for stability, why did Japan turn its back to Dr. Mutters idea? K.W.- They are several considerations there. First, Japan didn't turn its back… S.B.- It didn't move forward either… K.W- You have to look at the background. We had at the time a rather difficult dispute with the United States on trade issues. The original statement of Dr. Mahathir was a very strong one and we had a real concern that the issue could prove divisive in Japan-US relation. The concept was in a way stretching the basic factor of the US presence in Southeast Asia. Dr. Mahathir was somewhat emotional about it and that same emotional presentation was received with the same degree of emotion by the Secretary of States, James Baker. What compounded the matter was that at the United Nations, Dr. Mahathir blasted publicly the American. If America can get together, if Europe can get together, why is it, was he saying that the Asian people can't get together. There was an element of racism in that rhetoric. That was a tremendously strong statement to make. The whole affair was very unfortunate. S.B.- But the substance was in a way correct and to a certain extend what happened in Kuala-Lumpur in December 1997, with all the Asian leaders seating together, is virtually what Dr. Mahathir wanted to achieve? K.W.- The Japanese view, which is somewhat the same as the ASEAN view, is that we do not like to take policy stand in a dramatic way. Today, there is less concern about the issue and it is not done in any emotional way. It is just a pragmatic way to talk together. S.B.- So, Japan is not against an East-Asia grouping, not is it for it. What sort of regional forum then would be suitable for Japan? K.W.- APEC is for us the ideal tool of regional co-operation, but you may have noticed that we are basically the only nation not to be a member of some sort of regional arrangement. S.B.- China too, is not part of any regional arrangement (3). Is the Foreign Japanese establishment a champion of non-alignment? K.W.- China is a huge country. But the reason why we are not part of any regional arrangement is not a political stand. It has more to do with the fact that Japan has always approached globalisation with the assumption that the Japanese economy is strong and growing, so regional effort, to put it bluntly, didn't deserve attention. S.B.- I can understand when you are the main trader, the main investor, the main creditor that you feel king-maker, because to a point it is exactly what you say implies. But if in the 1980s, Japan could afford such attitude, it can hardly do so at the end of this century. K.W.- Our attitude was based on the fact that we have always been hoping and assuming that growth would resume. So, in effect, we would come back to the previous situation. S.B.- Obviously, it is not the case and the situation in Japan is now a major concern to the rest of Asia and to the world economy. K.W.- I agree. And we are in a paradoxical situation. The Japanese are not unhappy about the present life in Japan. Their frame of mind is related to the perceived fact that two national goals have been attained: growth, by catching up with the United States, and democracy, by creating a rich egalitarian society through the protection of the weak. However, they start to be uneasy about the future, especially after the collapse of some financial institutions. Considering this domestic setting, it is not surprising that we seem somehow unable to be very active in a rapidly changing environment. We have a lot of inertia, because the first feeling is that we are rich in term of financial assets. Therefore how could it be that growth will not resume? S.B.- Isn't it a wishful thinking? K.W.- I agree. The paradox therefore is that we are a cause for major concern, but we are not overly concerned ourselves. In this regards, it is quite symbolic of our predicament that Prime Minister Hashimoto announced suddenly an important tax cut, to put more money in the pocket of the consumers, the day after he came back from the leaders' meeting in Kuala-Lumpur. This means that he felt more than ever some kind of international responsibility and he had to respond, to take a stand. Then, he shifted his position further when the Diet opened (4), saying that he would hope that the situation would improve so that further measures would not be necessary. What he really meant, was that if it was not enough to trigger economic growth, there will be another cut. S.B.- All this, because of the ASEAN pressure? K.W.- Mostly, I assume. S.B.- Do you think that the financial difficulties in Asia will force Japan to be pro-active rather than neutral as it seems it has been for the past few years as regards reforms and co-operation in the global system? K.W.- As you know, being neutral is a way to express suspended decision. For example, on the question of the yen to be used as an international currency, we have always been neutral. Can we be neutral now? With the coming of the Euro, we are facing a new world. What will be the strength of the Euro, will it be stable enough to be used as a reserve currency? Euro will affect the dollar. And in between there is the Yen. Where does it fit in the Asian financial market? This is the type of question we have to consider when the dust settled in ASEAN and in Korea. S.B.- There is growing argument in Thailand and in other countries to see Japan play a more important role in stabilizing the currency game going on in Asia. It is in a way an opportunity for Japan who has been in the past hamper by his recent history in his dealings with ASEAN. Can Japan afford it now? K.W.- There is so far only a vague feeling about the yen question which is central to what you say. This might be, I have not been able to verify my assumption, because, although we have a sizable surplus in our current account, the yen continues to depreciate. What does that mean? That Japanese money is leaving the country because the yield is too low. The common sense dictates that we have first to put our house in order before moving forward. S.B.- Yet, it was said that Japan had been pushing the idea of an Asian Monetary Fund. Do you know anything about it? K.W.- I am still not clear on the genesis of that rumor about an Asian Fund (5). Maybe, it was promoted by an ASEAN country and some Japanese officials took it on. It had some effect in the form of the Manila Frame work. where the rescue for Indonesia was arranged. S.B.- So, in effect, that was not a very strong policy statement, rather a follow-up? K.W.- The idea had some effects on the way the Manila Frame work was conceived. As regards leadership, American institutions did not participate in the rescue of the Thai economy. Indonesia is a different and more serious matter. I am sure that Japanese tried to persuade Americans to come in. In Korea American institutions are jumping in a large scale. Overall, it is probable that the view that Japanese wish to have an Asian solution to the crisis had definitely an impact in inducing the United States to come in. S.B.- Do you mean that it could have been a trick played by ASEAN countries with the, say, neutral, endorsement of Japan, to trigger some kind of response? K.W.- Let's put it that way. The United States were not very interested at the beginning. We were of the view that ASEAN economic house has grown to such a size that a crisis in the house cannot but have negative effect on a global dimension. The United States did not, at first, share that view. S.B.- The United States are the first to claim that we are now living in a global world. Furthermore their analysts are now all over the financial markets to explain what and why it went wrong in Asia. Yet, the same analysts thought the United States were insulated. It seems rather unbelievable. K.W.- There was some kind of a preventive element in their denial. The psychology of the Americans is that of a stock-holder. They are volatile. I was told that 50% of the population own stocks. So, I think the American public must be told that the American economy is sound to such an extent that whatever is going on elsewhere is irrelevant. Therefore the line was that the Southeast Asia economic crisis that was unfolding was not going to affect the fundamentals of the American economy. S.B.- That's a bit short-sighted when you know it is not going to be the case… K.W.- But all this is all psychological. Furthermore, they had to deal with the fact that the American stock-market is at a all-time high. So it is an element when you deal with problems like that. S.B.- Remain the fact that we are now in a tripolar economic house, and no one is insulated from the others. At least, that is one of the lessons of the current crisis. What do you think will emerge in Asia when the dust settle? W.K.- There are several challenges. One, important, has been for ASEAN to engage Myanmar and Cambodia. Whether the ASEAN way of dealing will have a positive effect of stabilizing and changing domestic political situation in Cambodia and Myanmar is an open question. S.B.- Is the enrollment of Myanmar in ASEAN a point of contention between Japan and ASEAN as it is between ASEAN and the Western powers? W.K.- We have a different view, but as we have a common ground with Burma, the culture, the Buddhism view of things, we do not share the view of the European. However we have cut off aid so far. Our position is to let ASEAN do the work. Once in, we hope that both Cambodia and Myanmar, by internal ingress, will change. S.B.- You said there are several challenges ahead beyond the present crisis. What are the others? W.K.- Those linked to Japan. Prime Minister Hashimoto has often said that Japanese socioeconomic system which has supported promoted Japanese reconstruction after the war is having systemic fatigue. Systemic fatigue is typical in the sense that very few know how to deal with it and where. And as I said the legacy of inertia still dominates while elsewhere things keep moving. Of course, the crux of the problem for the Japanese economy is its financial system (6). We are trying to overhaul it. Whether the market is convinced is a different story. And I am wondering if our financial arrangement system is not a product of what we might call the Asian way, which somehow has been reproduced elsewhere. S.B.- What is this "Asian" way then? K.W.- The lack of transparency, the lack of some kind of governance or accountability. The problem, which is a psychological one, is that we live now in an international environment where trillions of dollars are moving fast, on the whim of the moment, as we have seen recently. It means that we have to be rather careful in such a world, yet something has to be done. There are two issues: one is can Tokyo capital market maintain its position? Are there going to be Japanese financial institutions playing an active role in that system? You may have heard of the term used in Japanese circle, it is the Wimbledonization of the Tokyo market, meaning something like Wimbledon, which is a world famous professional tennis tournament site, in England, but where very few British players play. S.B.-So, is Japan determine to maintain the status of Tokyo as a major capital market even at the risk of "Wimbledonization"? K.W.- I think so. The alternative will be to have a hollow capital market or to see in Asia Singapore or Hong Kong emerging as financial centre. But then in such a case, it means that globalization would be by-passing Japan, which is unthinkable. Then the next issue is to see if we will end up with three economic houses, the Asian one, the American one and the European one, and only two currency system or a third one? We shall see. Winter 2000 Notes: 1.- See the article of Eric Teo and the comments of Foreign Minister S. Jayakumar on the ARF. 2.- Paul Krugman, Professor at the Massachusetts Institute of Technology. He concluded that productivity gains had played no role in Asia's unprecedented growth which he attributed to a factor of accumulation, particularly of capital. His conclusion was that the Asian economies would soon slow as they exhausted the benefits of such accumulation. In a way, he has been proven right since the growth of the Asian economies will be reduced to a trickle in 1998 and most likely 1999. However the irony is, while his pessimistic outlook has been proven right in 1997, which today make him a celebrity, his thesis has somehow been proven wrong since what triggered the fall of the growth rate is a monetary phenomena, not a lack of productivity in the recipient countries. 3.- See on this point the interview of Wang Ying Fan, Vice-Foreign Minister (China) 5.- Japan's bureaucrats of the Ministry of Finance seem to have been the first to float the "Asian Monetary Fund" idea at a meeting of the G7 held in Hong Kong. Then, the idea came back at a regional meeting of finance officials in Manila in November 1997. At issue was whether the fund, a multi-billion dollar pool to be formed by regional contributions should set its own conditions for rescuing members. Philippines Finance Secretary Roberto Ocampo forecasted that the said fund would be finalized quickly when the vice-finance ministers from Japan and ASEAN were holding talks on 18 November 1997. What actually emerged from the talk was not the "Asian Fund" but what is now called the "Manila Framework" which basically empowered the IMF to decide how to use the "Asian rescue fund". In effect, it was the end of an Asian Monetary Fund as the very idea was to have a new fund independent from the perceived dominance of the U.S Treasury in the IMF. Nevertheless, at the subsequent meeting of the ASEAN leaders in Kuala-Lumpur, the idea was broached again under a different guise. 6.- The system, that is now subject to a reform planned to be completed by 2001, was called the "convoy-system". The financial sector was divided into the banking, securities and insurance. Each sector was and still is insulated by regulation from the others. The banking sector itself was further divided into various categories. Fees, commissions and interest rates are all stipulated in such a way as to protect the weaker institutions; financial authorities guide all activities which are not open to competition. Winter 1998 | |||
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