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NEW UPDATES Asean Affairs  13 July 2015  

Japan expands its Mekong footprint

Japan is increasingly eyeing Southeast Asia as an investment destination as the island nation moves to boost its own economy and check China’s rising influence in the region.

On Saturday, at the 7th Mekong-Japan summit which Prime Minister Hun Sen attended, Japanese premier Shinzo Abe pledged $6 billion in economic aid to Laos, Vietnam, Thailand, Myanmar, and Cambodia.

The Post’s Charles Rollet sat down with Masashi Kono, director of the Japan External Trade Organization (JETRO) in Cambodia, to discuss the implications of Japan’s increasing interest in the area.

You were part of the delegation that travelled to Japan with Prime Minister Hun Sen last week, which involved attending several seminars with Japanese investors and others.

What kind of response did you receive?
I think it was a good response. At the Tokyo seminar, more than 1,000 attended, while in Kitakyushu, more than 100 did. Kitakyushu is a small or medium-sized city with only about one million people, but they are very interested in Cambodia.

With the Cambodian market already saturated with cheap Thai, Vietnamese, and Chinese goods, what kind of opportunities do Japanese firms see here?

It’s a rare case for Japan to come and invest directly [in Cambodia]. At this moment, we’re promoting the Thailand Plus One or China Plus One [strategy].

For example, a Japanese company already has a presence in Thailand, so it considers setting up in a country nearby – at that moment Cambodia is the first candidate.

The minimum wage may have increased, but if you compare total expenses for workers in Cambodia, it’s still reasonable compared to Thailand or China.

And there are also advantages brought by the special economic zones.

Even in Kitakyushu, some businesses in automotive parts and education expressed interest in Cambodia following our visit. They were very eager for Cambodia.

Still, the [Cambodian] market is small, with just 15 million people, so not many businesses are not considering direct investment or exporting [Japanese] goods here.

In 2010, only 19 Japanese businesses were registered at the Ministry of Commerce. Last year, that number was 246. Can you explain the recent boom in Japanese businesses coming to Cambodia?

After the economic crisis in 2009, Japanese companies tried to move outside the domestic market and do business overseas, and they found Cambodia had huge potential. And investment in Cambodia is easy.

When a Japanese firm was interested in Myanmar, they found some difficulties there, with the army controlling the politics.

But in Cambodia, [dealing with the government] is easier.

Cambodia wants more investment from foreign countries, especially Japan.

They have a Japan desk with Japanese staff at the CDC (Council for Development of Cambodia).

When manufacturers want to set up a factory, they can go directly to the CDC and discuss this with Japanese staff.

Additionally, JETRO was set up in Phnom Penh only in 2010. So we’ve supported the growth as well.

And how does JETRO do this?

JETRO provides information and organisation to potential investors with our three specialists here. We’re government-run.

We can support investors who come here, but we don’t have funds, just information.

What are the biggest hurdles for Japanese business looking to move here?

Electricity prices are the biggest problem: the price is maybe 20 cents per kilowatt hour, two to three times as high as Vietnam and 1.5 times higher than Thailand.

Additionally, in Phnom Penh electricity supply is no problem, but in Bavet next to Vietnam, sometimes power is cut two days per week.

The educational level here is also lower than Vietnam or Thailand, so Japanese companies have to provide basic education.

For example [electronics producer] Minebea has an internal school within its factory for employees to learn after they start working.

Lastly, sometimes the government suddenly makes a new or special policy.

For example, traditionally if an investor was as a Qualified Investment Project, it did not need to pay import taxes on its materials.

But the government unexpectedly changed the policy, imposing a special tax which would affect [imported] plastics.

So all of a sudden, Japanese companies had to pay extra.

The Japanese Business Association of Cambodia and the Japanese embassy had to negotiate with the government about this, and the program has now been removed, but it caused problems for Japanese investment.

Prime Minister Abe says he wants to promote “quality growth” in the Mekong.

But many analysts also say Japan’s increasing economic activity in the region is an indirect response to rising Chinese influence.

Do you think Japan can compete with China in Cambodia, given China’s greater investment here?

It’s difficult to say. We understand there is large investment coming from China.

But when it comes to the kind of investment, China and Japan are different.

In the case of Japan, Japanese companies are very strict – they are doing business according to the law.

But, in some cases, for Chinese investment . . . sometimes it’s not a good case.

I don’t know all the facts, but some of them operate outside the law. For Japan, the companies are very serious, have a good attitude, and of course we obey the law.

That’s why the Cambodian government wants Japanese investors, I think.

This interview has been edited for length and clarity.

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AseanAffairs   04 January 2011
By David Swartzentruber      

It is commonplace in journalism to write two types of articles at the transition point between the year that has passed and the New Year. As this writer qualifies as an “old hand” in observing Thailand with a track record dating back 14 years, it is time take a shot at what may unfold in Thailand in 2011.

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