Column by the President of Hitachi Research Institute, Mizoguchi
I recently visited Singapore. The newly renovated Changi International Airport was beautifully maintained, and the immigration process was almost completely automatic and finished in no time. Singapore is the epitome of a futuristic city. Since I went during the rainy season, there were squalls almost every night, and I had to be prepared to get stuck in the rain anytime. But thanks to the rain, the temperatures also got a little cooler. Singapore has enjoyed high economic growth since its founding in 1965, and its nominal GDP per capita is approximately US$83,000, which is well over twice that of Japan. Its growth trajectory has not been driven by specific competitive factors, but rather by repeated transformations. From low-cost manufacturing and export bases to global financial hubs and innovation centers, it has built its own growth drivers in response to the times. Singapore can be said to be a corporate nation that came about by simultaneously pursuing both the deepening of current growth and the exploration of future growth, as part of “ambidextrous management” carried out by two CEOs, Prime Minister Lee Kuan Yew and Prime Minister Lee Hsien Loong. The country’s CEO manages not only the allocation of investments, but also the number of cars, manpower, rentals, and the ban on chewing gum. The criteria for obtaining a work visa for employment in Singapore have become increasingly stringent, with approval determined based on an accumulation of points such as for salary, education, job type, and skills. If the required number of points is not reached, the visa will not be granted. In terms of education, points are higher for graduates from “top-tier” universities than for other universities (only five universities in Japan are included in this list of “top-tier” universities), and in terms of skills, points are added for AI and digital talents *. From the 1990s to the 2010s, the SGD (Singapore dollar) ranged in value from 60 yen to 80 yen, but with the sharp depreciation of the yen over the past two years, one SGD is now about 110 yen. The rent for apartments leased to foreigners costs around 0.6 million yen or more per month. A university professor I met there said that he was on his way to play golf near Narita in Japan the next day, and he seemed thrilled that it was not that expensive, even including airfare.
I then traveled from Singapore to Bangkok. Although it is said that the return of tourists to Thailand after the COVID-19 pandemic has been slow, Suvarnabhumi International Airport at night was crowded with tourists from Europe and the United States. I endured a lengthy wait at immigration and experienced congestion of the terminal. As expected, the place exuded a traditional Asian atmosphere. Thailand is the second largest economy (nominal GDP) in the Association of Southeast Asian Nations (ASEAN) after Indonesia. Since the 1980s, it has become an export base with a concentration of manufacturing businesses due to active investments by foreign companies, including Japanese firms. In recent years, its economy has matured, with the service industry accounting for about 60% of GDP. Economic stagnation, however, ensued under the military regime established after the coup d'état in 2014. The country finally had its first democratic election after many years in May this year, leading to the establishment of a government led by the Pheu Thai Party. Although the Progressive Party, which advocated radical reform, garnered the most votes, it failed to establish a coalition to secure the nomination for the prime minister. As a result, a coalition was formed by the Pheu Thai Party, to which former Prime Minister Thaksin Shinawatra belonged, and parties aligned with the military, leading to the appointment of Prime Minister Srettha Thavisin. It is said that a government formed through an uneasy coalition is unlikely to last long. Some argue, however, that because of their vested interests, the government may endure for a considerable time based on each participating party’s practical calculations of gains and losses. Although Thailand was one of the first ASEAN countries to achieve growth and establish robust social infrastructures, the average age of its population is now close to 40 years old, and its recent economic growth rate is only at 2-3%, which is low compared with other ASEAN countries. It is now facing the question of whether it can break free from the “middle-income trap.” Thailand has a huge automotive industry, and the growth of EVs has been remarkable. EV sales have exceeded 10% of new vehicle sales. Thus, green growth may present an opportunity for it to break away from this middle-income trap. Most of the EVs sold are from China, except for those from Tesla. In the hotel where I stayed, I saw more than 20 golf bags lined up in the lobby. They belonged to tourists from Japan. Thailand is home to more than 70,000 Japanese nationals, and Japanese food is also popular among the locals. Although there are no Japanese-made EVs in Thailand, Japanese people enjoy visiting the place as they have always done so.
ASEAN was established in 1967 with the Bangkok Declaration initially by five countries but is now a regional cooperation organization consisting of ten countries. In 2003, it decided to establish the ASEAN Economic Community, which was officially launched in 2015. In 2018, it succeeded in implementing the elimination of tariffs among member countries. At present, trade among ASEAN countries accounts for the largest share of foreign trade income of its members. Up to this point, things had been going well. However, after the military coup in Myanmar in 2021, crackdowns on democratic forces have continued in the country, with the West continuing to impose sanctions against it. The ASEAN, however, has not shown any resolve to address this issue. Although the ASEAN region is currently benefiting from the U.S.-China friction as a “China Plus One” option, President Joe Biden and President Xi Jinping were conspicuously absent from the ASEAN summit this year. The U.S. gives priority to bilateral relations, forging individual partnership agreements with Vietnam and other countries. Indonesia, a major Islamic country, has a large growth potential due to its demographic dividend, but the country’s political landscape is in chaos. While Laos and Cambodia are under Chinese influence, the Philippines is embroiled in territorial disputes with China in the South China Sea. ASEAN is a group of countries with extremely diverse economic scales, stages of development, and geopolitical positions, and it seems that its members are heading in different directions. While it was expected that the digital economy would serve as a catalyst for the restoration of centripetal force, member countries are currently moving towards enclosing digital technologies. On the other hand, although the economies of EU countries are growing at a slow pace, for this very reason, economic measures are being promoted in the region, with their solidarity being further strengthened by the crisis brought about by the Russian-Ukrainian War. The ASEAN exhibits a contrasting scenario where regional cooperation is not deemed essential due to the prosperity of individual economies amid a favorable geopolitical landscape, wherein opposing centrifugal forces are at play. The geopolitical situation surrounding the ASEAN, however, is extremely unstable. There are also a host of issues that need to be resolved through regional cooperation—such as greening, digitalization, and social infrastructure development. Precisely because the fence is low, everyone seems to be wandering around on their own. I hope they don’t become like stray sheep that are unable to return to their herd.
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