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Hitachi Research Institute

Interview

Interviews with experts and opinion leaders from our research network

Issues and Prospects for ASEAN Economic Integration
- Seeking a path to ASEAN growth amid a slowdown in the Chinese economy -

The total population of ASEAN (Association of Southeast Asian Nations) member states has topped 600 million, overtaking the population of the EU. ASEAN is also predicted to grow to become the world’s fourth largest economy by 2020. In 2015, the ASEAN Economic Community (AEC) was established to accelerate growth through deregulation and market integration within the ASEAN region. Nevertheless, there are some grounds for concern in terms of the relationship with China, disparities in development within the region, and differences in political systems, among others. On this occasion, we invited Mr. Chua Taik Him, Deputy CEO of International Enterprise Singapore, to discuss issues ASEAN faces and its prospects for the future.

Mr. Chua Taik Him

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Deputy Chief Executive Officer of International Enterprise Singapore

Born in 1955. Graduated in 1977 from the Department of Electrical Engineering and Information Systems, School of Engineering, University of Tokyo. Awarded MBA from University of Toronto, Canada in 1983. Completed the Advanced Management Program, Harvard Business School in 1999. Served as Deputy Chief Executive Officer of International Enterprise Singapore since 2007.
Also served as Economic Counselor at the Embassy of the Republic of Singapore in Tokyo from 1984 to 1992 and Advisor for the Industry Structure Strategy Committee, the World Bank from 2009 to 2012.
At present, serves as co-Chairman of the Asia Infrastructure Centre of Excellence of the Asian Development Bank. Also served as directors of several public and private organizations.

Impact of China’s slowing economy on ASEAN

Shirai:The Chinese economy, which maintained two-digit economic growth for quite a long period, is slowing down at present. As China promotes slower growth as the “new normal,” growth has contracted to the 6 percentile level, and this has begun to have an impact on ASEAN. What is your opinion concerning issues the ASEAN economy faces in maintaining sustainable growth in the future?

Chua:At present, the total population of the ASEAN member countries is about 630 million, and the total nominal GDP approximately USD 2.5 trillion. This represents around 3% of world GDP, and the region is forecast to become a significant economic sphere in 2020 following on the heels of the United States, China, and Japan. If ASEAN maintains its current economic growth to date, it is certain to overtake Japan by 2030. In the next five years at least, it will probably be able to maintain an annual growth rate of 5% or higher. ASEAN at present is booming. Overseas investment is vigorous, and ASEAN is viewed by the world as an economic region with a high growth rate. In fact, investment from outside of ASEAN in 2014 was approximately USD 130 billion, and foreign firms see ASEAN as a promising investment destination. In tandem with the development and improvement of infrastructure within ASEAN, the middle class is also growing and their consumption activities are gaining momentum. One point I would like to make in regard to the impact of the deceleration of the Chinese economy is that ASEAN is clearly different from the EU. The industrial structure and development processes in ASEAN are different. While there are countries like Singapore, Malaysia, and Thailand, which have open economies, there are other countries like Vietnam and Myanmar, which are still developing. Therefore, we cannot make a blanket statement about how these countries will be affected by the slowing of the Chinese economy. For Myanmar, China is the largest investor, but for the Philippines, investment from China is not so significant. However, on one level or another, it is certain that the ratio of reliance on foreign investment of the ASEAN countries will increase. At present, investment from China, comprising about 17% of total direct investment from outside the ASEAN region, is not particularly high. Compared with 5% in 2010, however, this ratio has been growing. If investment from China continues to grow at the current pace for the next five years, China’s presence in the region will increase more and more. To cope with the slowdown in the Chinese economy, the following two strategies are likely to have an overall importance. The first is growth through promotion of trade and investment among the ASEAN member countries themselves. At present, dependence on the trade of member countries is about 18%. This figure is neither high nor low but it is certain to grow in the future. The other strategy is to enhance the attractiveness of the region to existing investing countries other than China such as Japan, the United States and European countries. There is a need for ASEAN members to re-examine the appeal of their countries as investment destinations. These countries must harness their own strength and the strength of foreign capital to achieve growth as they differentiate themselves from other countries. If these countries can skillfully demonstrate the respective characteristics of ASEAN to investing countries, we should be able to achieve a high growth rate.

Shirai:China is a very attractive country as an investment destination. It has the world’s second largest economy after the United States, and while its growth rate may have slowed, no other country is growing at a pace that matches China’s 6 percentile level. The International Enterprise Singapore (IES) where you work plays a role in assisting Singaporean firms in their forays in overseas markets. What is your opinion about the potential of China as an investment destination in the future?

Chua:We need to look at the momentum, that is, the quality and speed of the Chinese economy. Although the pace of growth may have slowed, there is still plenty of drive because China is a big country. From the viewpoint of world standards, an economic growth rate of 6 to 7% is still quite high. China has a large land mass and the breadth of its industrial structure is widening. For example, Hangzhou, where the headquarters of Alibaba.com is located, has a high economic growth rate of more than 10%, and many new enterprises and venture companies are being launched here. Chongqing, one of China’s five national central cities and said to be the “country’s factory,” is growing in all areas including manufacturing, the service industry and logistics. Its economic growth last year was 11%. On the other hand, China’s northeast, where the economy is centered on heavy industry, recorded negative growth. We hope that Singaporean firms can play a role in filling these gaps between regions. At the same time, since the commencement of China’s open door policy on foreign direct investment, domestic firms have bolstered their competitiveness, and competition is becoming very fierce. The speed of change in the Internet industry is also remarkable. While the United States has Amazon, Google, and Apple, China has Alibaba, Baidu and Xiaomi, and although China still has smokestack industries like steel, the Internet industry has been growing at a rapid pace. Despite the slowdown of the Chinese economy, China’s position as a driver of the world economy has not changed. I believe many of the foreign firms that are experiencing success in China have adeptly customized their business models and responded to the market with an understanding of the conditions and circumstances in China.

What results will economic integration achieve?

Shirai:As you pointed out, I believe ASEAN will achieve medium- to long-term growth as a growth engine in the world in a different manner from that of the EU. One milestone is the economic integration of ASEAN in 2015. Are there already noticeable changes since the beginning of integration, and what kind of development can we expect in the future?

Chua:Economic integration at present is moving ahead at a steady pace within the AEC (ASEAN Economic Community). Singapore, Thailand, Indonesia, Malaysia, the Philippines, and Brunei - the six countries member countries that have participated in ASEAN since its early days - have already abolished tariffs in 99% of items traded. Even among the other ASEAN countries, deregulation at a level of about 99% will be achieved in the next three years. I believe the pace of progress in economic integration in ASEAN is extremely rapid. This applies not only to trade in goods but also to trade in services. The ASEAN Framework Agreement of Services (AFAS) has already completed nine out of 10 comprehensive negotiations, and the elimination of restrictions on the foreign capital ratio has already been applied to approximately 100 service areas. In regard to investment, under the ACIA (ASEAN Comprehensive Investment Agreement), deregulation will be implemented in each area. Progress is also being made in establishing an environment with improved transparency in procedures and legal guarantees for investment. One typical example of the merits of economic integration in ASEAN is deregulation in air transportation under the ASEAN Open Skies policy. This enables flights to freely come and go in countries within the region, and has improved connectivity in every way in terms of human interaction and distribution of goods. In addition, in areas such as tourism and e-commerce, new services are growing significantly in an unprecedented manner. Cooperation is making headway from various angles in areas such as the abolition of tariffs, reduction and abolition of non-tariff barriers, standardization in custom procedures, and cooperation among companies. The fact that deregulation has already been achieved in 93% of priority items demonstrates that these policies have the strong support of countries. We are aiming for economic growth with every member’s belief and observance of the concept of the joint competitive power of the ASEAN countries.

Shirai:The ASEAN region includes Singapore, which has a high per capita GDP even among the developed countries, as well as countries like Myanmar and Cambodia, which are still poor. Singapore has transformed its economic structure to focus on the financial and service industries. Thailand and Malaysia have established the foundation of their manufacturing industries and are continuing their economic development. There are also countries that are expected to grow in the future like Indonesia and Vietnam. This dynamism is one of the attractions of ASEAN. How do you think countries like Singapore, Malaysia and Thailand, which have always been at the helm in ASEAN, will change their roles and industrial structures within ASEAN in the future?

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Chua:Singapore is also geographically at the center of the ASEAN market. As the ASEAN economy continues to grow, Singapore will also undoubtedly grow as the regional headquarters, business management center, and center of innovation for research and the development of technology. Therefore, in tandem with the development of the ASEAN economy, it goes without saying that the role Singapore will play must also change. E-commerce is expanding worldwide, and when e-commerce expands within the ASEAN region, distribution and financial functions will become essential as a matter of course. With the expansion of the ASEAN economy, Singapore, as the hub of ASEAN in all business areas, will reap the benefits accordingly. From the viewpoint of Japanese companies, I believe the attraction of Singapore in manufacturing is low, particularly for labor-intensive industries. On the other hand, Singapore is moving toward more advanced manufacturing in high value-added industries that require a sophisticated level of technology such as aircraft engines and pharmaceutical products, for example. Singapore has the most open economy of the ASEAN countries and, with a population that includes people of Chinese, Malay, and Indian descent, it is also culturally diverse. Of all the ASEAN countries, Singapore is the country with the most favorable conditions to be able to respond to the market’s needs. For two consecutive years, Singapore has been the largest direct investor in China. This year, Singapore also became the largest direct investor in India and is also investing in Japan. In this way, Singapore is also establishing its position as a capital exporter. The provision of capital enables Singapore to bring together all functions such as information, knowledge, human resources, and finances. Cooperation with surrounding countries is one of Singapore’s economic strategies. Although Singapore is a small country, its future growth through its open economy and economic deregulation is certain.

Shirai:Do you think that perhaps countries like Malaysia and Thailand want to follow in Singapore’s footsteps?

Chua:There is free competition, and it is good for countries to make efforts to differentiate themselves from each other. Each ASEAN country has its own strengths, and there are many attributes found in other ASEAN countries that are not available in Singapore. For example, Singapore has no natural resources, and because we do not have a large land area, agriculture in Singapore is modest. A notable characteristic of ASEAN is the lack of uniformity among the 10 member countries, and this diversity in itself is very attractive. I believe one of Singapore’s roles is to coordinate, integrate, and organize this rich diversity.

CLMV will be the growth engine of ASEAN

Shirai:I would like to ask you about Cambodia, Laos, and Myanmar, known as the CLM countries, which are considered to be the growth frontiers within ASEAN. While many people recognize their high potential for growth, it is a fact that these countries have not been able to achieve their potential growth until now due to various problems. Do you think the growth of the CLM countries will accelerate as their relationships with other countries within the region strengthen through the establishment of the AEC?

Chua:First of all, I think it is a good idea to add Vietnam to CLM and to think in terms of CLMV countries. The structure of a country changes significantly when per capita GDP exceeds SGD 5,000. As consumption increases, the economy becomes energized. In terms of economic growth, Vietnam is in the lead, followed by Myanmar. Laos and Cambodia have been dependent on Thailand until now. Laos exports electricity generated by hydroelectric power to Vietnam and Thailand. Growth in Laos and Cambodia will probably be induced by growth in Vietnam and Myanmar. It is certain that the economy of Laos, a landlocked country, will also grow. Singapore established its first industrial park in Vietnam in 1993, and right now, there are industrial parks in eight locations in Vietnam’s south, central, and north. Since the signing of the Trans-Pacific Strategic Economic Partnership Agreement (TPP Agreement) last year, the growth potential of the Vietnamese economy has been attracting attention, and the infrastructure development required for overseas companies to set up their plants has been already established. Many Singaporean firms have already established plants in Vietnam. A similar pattern will develop in Myanmar and other countries sooner or later. This is indicative of the attraction of the CLMV countries. The problem is whether these countries will be able to cooperate in logistics. I believe the speed of economic development will change significantly by improving connectivity. Japanese firms are developing an industrial park in Tiwara in Myanmar, and a Singaporean consortium led by Changi Airports International is building an airport in Yangon. Infrastructure development is sure to proceed at a rapid pace. The attraction of the ASEAN market as a whole will certainly be enhanced in the near future. Furthermore, the pace of growth of Vietnam and Myanmar will be faster than that seen in Indonesia and the Philippines at the time they adopted free trade.

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Shirai:There are many growing countries in the areas surrounding ASEAN. In addition to China, these include India, Bangladesh, and Sri Lanka. If the Regional Comprehensive Economic Partnership (RCEP) reaches a consensus in the future, there is a possibility these countries will be united under a free trade agreement (FTA). What problems do you foresee ASEAN encountering in taking up the growth potential of neighboring countries?

Chua:The RCEP includes Japan, Korea, China, India and New Zealand. Even among ASEAN’s 10 countries, there are differences in developmental processes. The differences in developmental stages with ASEAN countries will result in a complementary relationship and lead to economic growth for Asia as a whole. Not only the supply chain but also the connectedness of the market as whole will become stronger, and these synergistic effects are significant attractions of the RCEP. Against a background of differences in industrial structure, regulations, policies, and ways of thinking among the respective member countries, the challenge is how skillfully we can mutually overcome differences in our respective internal conditions, political views, and policies. A concept of harmonization is very important, and all countries must maintain a conscious commitment to mutual cooperation. How adeptly we are able to coordinate the interests among countries will determine the economic effectiveness of the RCEP

Technological innovation will accelerate

Shirai:Technological innovation is advancing in areas such as AI and IoT. Until now, these innovations first penetrated developed countries such as the United States and Japan, and then spread to emerging and to developing counties. Right now, e-commerce and FinTech are showing growth in Indonesia, China, and Africa. Because of the undeveloped state of financial infrastructure, a reverse phenomenon is occurring where the latest technology is being introduced from the outset. In addition to FinTech, the question as to how we can make the most of digital technology such as AI and IoT in the society is very important. Do you think it is possible for ASEAN to accelerate growth by utilizing the results of technological innovation?

Chua:I believe the digital economy will be a significant driving force in ASEAN’s economic growth. AI and IoT, of course, are now aspects of this, and even at present the development of infrastructure for the provision of sightseeing and tourism information is making headway. The development of data centers and communications facilities is also moving ahead at a rapid pace. In Myanmar, where until just two to three years ago, mobile telephone services were unavailable, the penetration rate is now over 90%. In Vietnam too, Internet services are used among people of middle class income. In ASEAN countries, these are conditions that enable the application and development of e-commerce and Internet technology. One example that is easy to understand is UBER, a car dispatch service that started in the United States and is currently drawing worldwide attention. In Singapore, Grab Taxi, a similar service, is growing rapidly. The world’s latest technologies are also applied within the ASEAN area. In some countries that previously lacked technologies, new technologies are being introduced ahead of other countries. This is possible because there are not any current systems in place that might obstruct the introduction of new technologies. Opportunities for people to access information regarding IoT through newspapers and news have increased, and some people have begun to think about creating new smart cities utilizing new Internet technologies. FinTech is one of the concepts supporting economic growth in ASEAN. In Singapore, we are expanding application development by focusing on the area of finance. In ASEAN, far more people have mobile telephone accounts than bank accounts. There is a high level of confidence in the latest services, and people in ASEAN countries accept FinTech as a matter of course. Remitting and saving money via mobile telephone is making headway even in Kenya in Africa, but the penetration of these services among users in ASEAN is set to occur at an even faster pace. At the moment, there are over 200 FinTech-related firms in Singapore, and global companies are establishing offices in Singapore and undertaking application development.

Shirai:It has been commonly understood that people could not access financial services unless they set up a bank account. On the other hand, for example, people in Indonesia can make remittances without a bank account as long as they have a mobile phone even though more than half of the population does not have bank accounts. This is a complete reversal of the conventional way of thinking until now. Do you believe FinTech’s infrastructure and services will spread throughout ASEAN with Singapore at the helm?

Chua:I believe so. But the Singapore government believes there are also significant risks with FinTech. It is important for both the government and firms to devote efforts to the development and promotion of FinTech as a new industry. Through its policy, the Monetary Authority of Singapore has created a system that allows many firms to use FinTech on a trial basis. Unless adeptly structured and managed, a financial system has the potential to create risks and affect consumers. For this financial innovation to be successful, it is essential that stakeholders proceed with caution from the trial stage. Singapore is positioned as a test bed for FinTech. The government is putting efforts into innovation development to address problems involving global financial systems through FinTech. The key to success will be to adeptly incorporate technologies from new start-ups and apply them to the development of FinTech. Singapore is taking the lead in this initiative, but ASEAN countries are also making positive efforts. It is quite plausible that new business models and technologies will be created in the process.

Potential for the “South Asia” economic community

Shirai:In regard to the TPP, which was agreed on last year, some countries within ASEAN like Singapore, Malaysia, and Vietnam are already participating, and there are some countries like Thailand and Indonesia that have not yet joined. The AEC and TPP are moving forward simultaneously, and I wonder how ASEAN countries will respond to this arrangement. Do you think the number of countries participating in TPP will increase, or that there will be some countries which join both TPP and AEC, or only participate in one of them?

Chua:I believe the situation is that each country is reviewing its own interests. Policies vary from country to country. For example, Vietnam hopes to increase its exports to the United States while considering closer relations with China, which is not participating in the TPP. Decisions on joining the TPP and AEC differ from country to country. Nevertheless, I do not see any contradiction with the idea of economic integration and promoting the development of one’s own country. I do believe, however, that economic development will proceed more smoothly if countries join both the TPP and AEC. An open economy offers an effective path for a country to pursue stable, long-term growth. If a country is unable to maintain an open economy, its competitiveness will ultimately decline. That is why we are trying to establish a free economy in ASEAN. At the same time, it is vital for each country to enter into partnerships that are suited to it. In fact, if a country opts to join one group and not the other, this does not contradict the idea of an open economy.

Shirai:Located in the western ASEAN region is India, a major power. India’s economic growth finally overtook that of China in 2015, due in part to the slowdown of the Chinese economy. However, if we consider that China’s growth was in excess of 10% at the time its economy was roughly on a par with that of India, we can assume that India has not yet fully demonstrated its underlying potential. There is also a view expressed by some that an “Indian Ocean Economic Community,” which will include India’s neighbors and be largely based on maritime connections, may develop in the future. From an ASEAN perspective, how do you view the future growth of India and its neighboring countries?

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Chua:India’s Prime Minister Modi has clearly indicated his open policy. He has shown his stance of actively trying to attract foreign investment, and visited countries like China and United States on many occasions. He is also promoting economic deregulation and the development of smart cities. In view of India’s enormous size, rapid deregulation is difficult, but it has its sights set on the world market and its overtures in that direction have been moving ahead steadily. While cooperation between India and its neighboring countries in South Asia such as Bangladesh, Pakistan, and Sri Lanka may be difficult due to the involvement of political factors, South Asia is an important economic sphere for ASEAN. It is possible to fly to those countries from Singapore in a matter of three and half to five hours. There are over 600 flights per week between Singapore and India. This is probably about five to 10 times more than the number of flights between India and China. Migrants from South Asia living in Singapore account for about 7% of Singapore’s total population, and Singapore has shared cultural links with South Asia for a long time. There is no doubt that South Asia is the economic community closest to Singapore. At present, there are about 8,000 Indian companies in Singapore. Singapore has more direct investment in India than any other country. Singapore has investments in a wide range of infrastructure development in India including industrial parks, electric power plants, ports and communications facilities. Singapore is also vigorously investing in e-commerce. As the Indian economy grows, cooperation with ASEAN will further increase. Significant synergy effects can also be expected.

Shirai:The EU is struggling to come to terms with the withdrawal of the United Kingdom. The economies of EU countries except Germany are facing tough times. How do you view the current situation of the EU from the perspective of ASEAN?

Chua:The EU proceeded with ambitious integration that included not only the economies but also the currencies of member states. Moving ahead with the integration of currencies despite differences in economic structures and disparities in income among countries resulted in an imbalance. At the same time, the EU increased the intake of migrants of member countries in a relatively short period. Consequently, the disparities among countries had an impact on integration. To some extent, there was also integration in social policies. One typical example is immigration, which is now a serious problem. This policy has had a direct impact on the citizens of the respective countries and has brought about undesired results. ASEAN had a different starting point, and is not ambitious in terms of full fledged economic integration either. ASEAN, which focuses on positive areas and aims for sound economic results, proceeds with plans, carefully taking into consideration political and social issues. Even though other countries were critical about Myanmar joining ASEAN, ASEAN gave its approval, and Myanmar has retained its military regime. In this way, ASEAN respects the sovereignty of each country in its promotion of participation. Recognizing differences and adjusting the pace, ASEAN integrates areas that should be integrated and spends sufficient time on difficult issues before moving ahead with discussion and adjustments. Perhaps there was some foresight on the part of ASEAN to avoid the path taken by the EU.

ASEAN as the origin of innovation

Shirai:While China is a very important market, there is a risk that its policies will change significantly, such as a sudden change in rules or a switch to domestic production. In this regard, I believe investment in ASEAN may offer greater security. While there are some areas where Japanese firms have been able to contribute to ASEAN, there are other areas where they not been able to. In what areas do you believe ASEAN has expectations of Japanese firms in the future?

Chua:Japanese firms are traditionally strong in hardware and weak in the area of software. And they are relatively weak in the area of solutions. I also believe Japanese companies are weak in the area of making contact with customers and customizing plans to address their demands in their product design. The pattern they have followed until now has been one where they created standard model products with excellent functions, good quality, and good design, and the customers purchased these standard products. However, this approach of focusing on hardware is already outdated. The present economy is application driven, and this requires expertise in application. The challenge for manufacturers is to be able to respond to customers’ needs in as short a time as possible. Customers’ needs are becoming increasingly diverse, and there are technologies available to accommodate this diversity. Japanese firms need to create new business models and platforms. For example, Japanese firms for some time have been involved in the type of business Apple currently operates. However, their failure to create an open platform to enable application by other companies has made it difficult to achieve noteworthy economic effects. The old way of thinking from Japanese firms that sought to keep moving like migratory birds in search of cheap labor no longer works in ASEAN and China. Countries have their respective policies and command a greater presence than before, which includes articulating their own conditions. My advice to Japanese companies is to view the ASEAN market as a place for innovation, and to consider how to generate ideas and put them in practice. If Japanese firms don’t do it, Chinese firms and ASEAN countries will. Japanese firms can no longer afford to keep repeating the same scenario. If they consider instead what they are capable of doing in ASEAN and what ASEAN requires, I believe both sides will be able to seize opportunities for growth. In the 1990s, I worked for the Singapore Economic Development Board during which time Singapore was a partner with Hitachi in joint investments in China. Singapore had experience creating industrial parks in China, and Japanese firms felt comfortable working in China when it was a joint project with Singapore. The situation today, however, is different from what it was then, and the conditions and environment for engaging in business in other countries vary from one country to the next, and we need to respond accordingly. I believe the outcomes that can be achieved will differ depending on how Japanese firms compete and cooperate with companies in Asia. Japan is a country with strengths in innovation. Innovation will not come to fruition without both marketing power and technological expertise of firms. Even with technological expertise, innovation will not succeed without in market insight. An Internet society can win only if it develops new mechanisms in tune with the times while cooperating with government and firms in a society that offers solutions and platforms. What Japanese firms require today are strategic partnerships. Because Japanese companies are not particularly good at forming partnerships, the potential for outcomes in various areas is diminished. In the future, Japanese firms must customize and localize business models and platforms not only in regard to ASEAN but also in regard to China, and lead these to success by putting greater effort into building equal partnerships.

Shirai:Mr. Chua, you have been involved in business in various countries and have a very strong global sense. Can you please tell us about the business creed that you see as being important in regular everyday affairs?

Chua:What I believe to be most important is doing the right things right. Doing that requires experimenting first. All innovation is born from experimenting. If you fail in the course of testing, all you have to do is make corrections. On the other hand, if you do something faithfully that happens to be misguided in the first place, it will become a suicidal act. The ability to judge what is right or wrong is the key. To make the right decision, fundamental elements such as the ability to observe and the ability to ascertain direction are important. In a today’s society, problems are always complicated, standards we should adopt or what we should do. When this happens, we need to revisit the starting point or the basic principles again. “Doing the right things right.” It is important not only to think about what are the things that need to be done, but also how to put these into practice. We need to develop execution power. This is the same for economic policy. After formulating the right policy, if we cannot implement it and instead make adjustments on the grounds that it was strategically incorrect, it will simply end there. It is essential to approach things with a strategic perspective and the competency to execute it.

Shirai:“What is right” is fundamentally common from one country to the next, isn’t it?

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Chua:People must understand what policy suits their country. Then, ask why the country’s policy is not being implemented. For example, if something simply needs to be brought out in the open yet it is difficult to do this, the key issue that needs to be addressed is what is preventing the matter from being brought out into the open. Some people may consider a policy to be bad just because it is hard to be implemented, but it is actually the right policy, and the strategy itself is not wrong. Judgement is important. We are living in an era of open innovation. Hitachi is a company with strengths in research and development but in an innovation society, what is most important is determining how to introduce the best research and development. In some cases, firms do not have the ability to determine whether what other firms are doing is right or wrong. They mistakenly come to the conclusion that they are right and continue to carry on in the same manner. In the area of innovation, there are times when circumstances require a change in concept and mindset. In the phrase I mentioned a moment ago, “Doing the right things right,” there are deep meanings in the respective words such as “do” and “right.” If we approach our work with this in mind, I believe we can guide ourselves effectively.

Shirai:Even though the methods may change, I believe we will not make mistakes when we execute the “right thing” if we proceed with efforts underpinned by the motivation to do the right thing.

Chua:That is correct. You can do the right thing if you have the power to execute. On the other hand, if you execute the wrong thing, it will be a disaster. When we become familiar with our own work, we tend to repeat the same routines. However, the way of thinking and method of execution may already be outdated. There are many people who do not notice changes over time. It is the same in Singapore and in Japan. A successful model that worked for the past 30 to 40 years many not necessarily remain viable in the future. There are cases where such models became obstacles instead. The challenge is whether we are capable of discarding these outdated models. In the case of Japan, there are some 20 odd lost years, and there is a possibility Singapore would follow the same course. If we come to believe that the same method that has been successful for a long time will continue to work well, we are doomed to fail. It is an era that company can disappear suddenly. We are currently living in this sort of risky time.

Shirai:Thank you very much for taking the time to speak with us today.

Editor's Postscript

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For this issue, we interviewed Mr. Chua Taik Him, Deputy Chief Executive Officer of International Enterprise Singapore regarding current issues ASEAN faces and its future development. During the interview, Mr. Chua indicated that it is vital for ASEAN to promote trade and investment among member countries and to effectively utilize the growth potential of neighboring countries. To achieve this, he said that ASEAN must adeptly coordinate the interests of countries. Also very thought-provoking was his discussion on Japanese companies’ need for capability in application to develop business while accepting the conditions of the region in an environment where customers are becoming more diverse.