|Conflict over Natural Resources in South-East Asia and the Pacific (UNU, 1990, 256 pages)|
|3. The Japanese economy and South-East Asia: the examples of the Asahan aluminium and Kawasaki Steel Projects|
Until the early 1970s, the investment of the Japanese overseas steel industry was only US$200 million, mostly in joint ventures in processing and manufacturing of secondary and tertiary steel products such as galvanized sheet, tin plate, and steel pipe in South-East Asia, Latin America, and Africa. Most of these plants were relatively small in scale and processed materials from Japan. The main purpose of this investment was to secure the market in those areas and not for an international division of labour or cheap labour such as that of the textile or electronics industry. Usiminas in Brazil and Malayawata Steel in Malaysia, both financially supported by the Japanese government, are exceptional. The former was set up in January 1958 and the latter in August 1965 by Yawata Steel (now Nippon Steel). Neither has been very successful.
With the slowdown of the high economic growth of the 1960s, the steel industry in Japan had to cope with several negative factors-a diminution of domestic demand, a standstill in exports to Europe and the United States, environmental damage caused by air pollution and industrial wastes, and difficulties in finding sites for expansion. As a result, the industry decided to shift its focus to Third World countries. According to the International Iron and Steel Institute, the annual growth rate of steel and iron demand in Asia (except Japan, China, and India), the Middle East, and Latin America was high-12.0 per cent, 9.4 per cent, and 6.5 per cent respectively ( Toyo Keizai, 8 November 1972: 104-10). The Industrial Structure Council felt that direct export from Japan should decrease, and that more overseas steel plants exporting semi-finished products to Japan or other countries should be constructed. In this way Japan could co-operate with and further the self-sufficiency efforts of the developing countries. The Council gave several reasons for its forecast of a rapid increase in overseas investments by the Japanese steel industry:
First, there is a strong request from the developing countries. In recent years, these countries have increasingly aimed at fostering labor-intensive basic industries in an attempt to promote their own economic development, but now they fully expect to develop steel industries which would provide large employment as well as stimulate other industries.
Second, because of the rise in labor costs and scarcity of construction within Japan, investment for new construction within Japan is becoming less advantageous compared to overseas investment. On the other hand, resource-rich countries want to level up their processing capacity. These factors, both external and internal will level off the cost of steel production abroad in the long run Third, Japan as an advanced steel-producing country should contribute to securing the supply of steel for international demand. In terms of the future of steel supply and demand on the world market, Japan is not expected to continue to increase its production as it has in the past in response to world demand because of the limitation of domestic construction as well as stronger regulation on pollution. Also the developing countries are unlikely to expand their steel production without technical and financial cooperation from advanced countries. Meanwhile, the demand for steel in the developing countries will increase rapidly as industrialization proceeds and income levels rise. Therefore there will be an increased demand for steel worldwide, and by around 1985 the shortage of supply will amount to more than ten million tons. Thus, it is necessary for Japan's steel industry, with its highly advanced technology and abundant experience to cooperate with steel production in developing countries and contribute, along with the Western steel industries, to an increase in the steel supply through overseas investment.
Fourth, from a long term viewpoint, overseas investment should be expanded in order to secure resource imports which in turn will stabilize supply and demand in Japan. Thus, it is expected that overseas investment will rapidly increase, and the total sum of steel industry investment will reach US$500-1,000 million. By 1985 the cumulative sum will amount to US$4.5 billion. (Sangyo Kozo Shingikai, September 1974.)
Not all steel makers in Japan are following this course and actively entering Third World countries to construct integrated steel mills. Nippon Steel and NKK, the two largest steel companies in Japan, are attempting to expand abroad through international consortia. But Kawasaki Steel decided to follow the first course.