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close this bookConflict over Natural Resources in South-East Asia and the Pacific (UNU, 1990, 256 pages)
close this folder3. The Japanese economy and South-East Asia: the examples of the Asahan aluminium and Kawasaki Steel Projects
View the document(introductory text...)
View the document3.1 The Japanese miracle
View the document3.2 Eyed of the miracle?
View the document3.3 A new vision of economic: development
View the document3.4 The vision in action: Asahan
View the document3.5 Japan's overseas steel industry
View the document3.6 Kawasaki in Mindanao: the export of pollution
View the document3.7 Conclusion: the comprehensive security system - What price?
View the documentReferences

3.3 A new vision of economic: development

The 'Vision' characterized the world following the oil crisis as plagued by inflation coupled with an economic slump, which, it said, has caused trade deficits in a series of advanced industrial countries and produced large external debts in developing countries. The Vision also referred to the 1974 declaration of a new international economic order as resource nationalism, a new trend among developing countries. From this it was concluded that Japan, dependent on foreign sources for raw materials (Table 3.2), could no longer dream of rapid economic growth and should therefore pursue long-term 'stable growth' instead. The Vision recalled that growth in the 1960s had been dependent on the expansion of equipment investment by private firms at home, but warned that this pattern of growth would not work in the future. Instead, future growth would rely on the expansion of personal consumption and government spending, which would help private firms invest in new equipment. In other words, the government and the Japanese people were being asked to spend more to ensure the expansion of private business.

A second countermeasure was also recommended; that is, the development of sophisticated high-technology industries and energy conservation. The steel, non-ferrous metals, petrochemicals, and paper and pulp industries were urged to relocate overseas; machinery, final processing, assembling, and other knowledge- and technology intensive industries were encouraged to stay in the country. The Vision specifically recommended that the former industries relocate to Asian and other Third World countries with abundant cheap labour and rich natural resources. It was proposed that these industries should undertake primary processing of local raw materials to produce, for example, pig iron, aluminium ingots, ethylene, and plywood and chips. Intermediary products would either be imported to Japan for final processing or sold by Japanese firms on the world market. This strategy was called 'offshore production aimed at establishment of a new division of labor with resources-rich countries'. The policy recommended a rapid increase in Japan's overseas investments, increasing sevenfold from US$12,666 million in 1974 to US$80,700 million in 1985.

Because the primary processing of raw materials usually involves heavy pollution, the 'new international division of labor' means, first and foremost, the export of pollution. Most of the governments of the host countries in South-East Asia welcome foreign capital and do not tolerate open opposition to foreign investment. Thus criticism of the behaviour of foreign firms by the local press is prevented. This is an ideal environment for offending companies. Moreover, most of these countries are ruled by authoritarian governments that repress nongovernment labour movements. When the world market stagnates, Japanese companies operating in these countries can dismiss workers far more easily than would be possible in Japan. In this sense relocation also means the export of recession.

But the main aim of the international division of labour is to enable Japan to control the supply of the resources in the host countries. Iron ore, bauxite, lumber, and crude oil have been imported for some time (Table 3.3). The strategy of moving the industrial processing of these raw materials to the resource producing countries will forestall and circumvent the formation of cartel-like arrangements by raw-material producers. If Japan has at its disposal raw materials produced by Japanese factories in the rcsource-supplying countries, it can simply dump these products on the world market, driving down the price and eventually destroying any cartel arrangement.

Furthermore, the 'offshore-production' schemes are not integrated production systems. Final products are not made locally raw materials are processed only into intermediary goods, and the intermediary products are brought to Japan. To make such 'development-import' projects possible, host countries must spend enormous amounts for the building of necessary infrastructure. They have also to provide cheap labour, cheap land for factories, and cheap electric power. Primary processing generates much less value-added than final processing, which is done in Japan. Thus, the development-import scheme has little to do with genuine industrialization in the host countries. The host countries could consider nationalizing the Japanese plants at some point, but nationalization would have little meaning since the plants produce only intermediary goods, which in order to be useful and marketable must be made into final products in Japan.

TABLE 3.3 Japan's Imports of Primary Resources (US$ million)

Resource Overseas


Per Cent
Number Per Cent Number Per Cent
Energy(total) 84.8              
Crude Oil 99.8 46,274 Saudi Arabia 39.0 Indonesia 15.9 UAE 14.4
Coal 83.4 5,782 Australia 37.4 USA 36.9 Canada 13. l
Natural Gas 90.9 n.a. Indonesia 49.0 Brunei 31.5 UAE 13.0
Iron Ore 99.6 3,630 Australia 40.7 Brazil 23.8 India 12.1
Copper 95.9 1,419 Philippines 24.2 Canada 20.2 n.a.  
Bauxite 100.0 n.a. Australia 46.9 Indonesia 21.4 Malaysia 13.3
Wood 68.3 4,546 USA 30.2 Malaysia 29.2 Indonesia 10.1
Wheat 90.5 n.a. USA 57.5 Canada 27.4 Australia 15.1
Cotton 100.0 n.a. USA 44.3 USSR 12.6 Egypt 5.7

The strategy of overseas relocation entails the vertical, pyramidal integration of the entire production process, from the provision of raw materials and primary processing to final processing, with Japan at the top of the pyramid. The division of labour recommended in the Vision is the diametric opposite of the new international economic order being demanded by the developing countries. It is thus a counterrevolutionary new international economic order.

By relocating stagnant industries to the Third World, Japan has been able to maintain the strong competitive/less of its products in the markets of other advanced industrial countries, and in the process, Japan's overseas investment grew 3.6 times between 1974 and 1981. Japan's overseas investments have a remarkable feature: Japan invests heavily in the developing countries, especially Asia, whereas the United States and Western Europe invest overwhelmingly in other advanced industrial countries. This preference for the Asian region became more pronounced as industrial relocation proceeded. The targets of Japanese private investment coincide with the recipients of Japanese official development aid (ODA).

A similar tendency is found in trade patterns. For some years after the Second World War, the Japanese government maintained that since Japan was a resource-poor country, it should live on trade. Under the banner of trade-oriented nation-building, export promotion became the priority task. The consequence has been that Japan imports almost 100 per cent of its raw materials and exports only industrial products. In the 19805, energy-related raw materials accounted for about 50 per cent of Japan's total imports, and the products of assembly and high-technology industries accounted for 65.2 per cent of its exports.

This pattern is distinct from that of the United States and Europe. For example, the United States is a major exporter of grain and an importer of industrial products. In Western Europe, European Economic Community (EEC) trade is high, and EEC members both import and export large amounts of industrial goods. Taking each of the Western European countries in turn, dependence on trade is much higher than in Japan, but only because they trade with each other within the EEC. This comparison shows that the trade relations between the United States and Western Europe are more or less complementary, whereas the Japanese trade relationship is totally one-sided. Japan increases without limit the exports of high-value added products of assembling and high-technology industries to all countries. This is why trade conflicts are bound to occur and why they cannot be mitigated.

The real contradictions in Japan's trade are with other Asian countries. There are many newly industrializing countries (NICs) in East and South-East Asia. South Korea, Taiwan, Singapore, and E long Kong are the primary NICs; Thailand, the Philippines, and Malaysia are the secondary NICs. In the 1980s, the share of light industrial products in their exports has invariably increased as they have begun to export these products to advanced industrial countries. However, Japan does not buy their products in significant amounts and indeed recently has drastically reduced the import of industrial products from these countries. Consequently, Japan's share in their exports has become smaller than that of the United States and Europe. The serious economic crisis besetting the Philippines stems partly from this type of trade policy, in addition to the special vulnerability of the NICs to world recession.