Introduction

In January 1992, at the Fourth ASEAN Summit in Singapore, a framework agreement for the formation of an ASEAN Free Trade Area was signed. This called for the ASEAN countries to reduce tariffs on all manufactured items over a 15-year period. In order to have accelerated tariff reductions, items were to be brought onto a Common Effective Preferential Tariff (CEPT) scheme and enjoy significant margins of preference over five to eight years. Fifteen product groups were identified for accelerated reductions in the CEPT Scheme. The scheme excludes agricultural products and services. Agriculture is expected to continue on the existing Preferential Trading Arrangements (PTA) scheme.

The agreement to create AFTA must be seen as one of considerable political will in the wake of less successful ASEAN economic ventures in the past. The initial euphoria over the agreement, however, has become less so in the months following as industries in Thailand and, more recently, in Malaysia have called for greater protection at least in the short term. This has brought into sharp relief the question whether AFTA will actually take shape in the years to come or whether it will falter as the other ASEAN economic efforts have in the past.

The recent initial agreement to create a North American Free Trade Area (NAFTA) has been a cause for concern in ASEAN. The possibility of trade diversion resulting from closure of the North American market has made ASEAN more cognizant of the need for a ballast to overcome the loss of some of the trade with North America. Similarly, growing fears about the creation of a European Economic Area (EEA) have been voiced within ASEAN. These developments in ASEAN's traditional markets must now be analysed and understood. More importantly, ASEAN has to seek alternative markets for many of its products. Market diversification has to take place in the short term to prevent significant revenue losses as the EEA and NAFTA roll out.

One of the key factors for understanding the foreign policy of Japan lies in the dynamics of domestic politics. An examination of the decision-making process regarding major foreign policy issues provides an excellent perspective for assessing the workings of the Japanese political system. In addition to the external factors, the Fukuda Doctrine was also influenced by the effect of changing domestic politics on the process of policy-making. Of the internal factors, the ruling party the bureaucracy and the business community each with their own interests and positions, participated in the policy-making process which shaped the direction and substance of the Doctrine. In order to articulate the intentions and motivations of the Japanese Government in proclaiming the Doctrine; therefore, we will examine closely the changes in domestic politics, the Liberal Democratic Party the business community and the concerned bureaucracies in this chapter. In the following chapter, we will analyse the nature of the participants as a prerequisite for examining the process of policy-making.

THE LIBERAL DEMOCRATIC PARTY (LDP)

Since the inception of the party in 1955, the LDP's vote percentage had declined with each subsequent election (see Table 4). The party's most serious loss was in December 1976, which may be attributed to the Lockheed scandal occurring in that year. In the 1976 elections, the LDP for the first time failed to retain a majority and was able to maintain a bare majority only with the entry into the party of several independents. Facing these irreversible trends until 1980, the LDP undertook a general reconstruction of the party at least on the attitudinal base.

According to a survey compiled by the LDP in 1979, the party entered into the second phase, called “Dainiki Jiminto”, in 1976 because the 1955 system had collapsed. There were two major reasons for this collapse: the national goal of the Meiji period; that is, “catching up” modernization had been attained and a new middle class had emerged; and the international environment had improved, that is; the cold war had ended.

Since the mid-1980s, the economic strategies of Singapore, Malaysia and Thailand (or the ASEAN-3 in short) have shown a remarkable degree of convergence in one important respect: all three have adopted export-led, foreign investment-driven growth strategies. They rely chiefly on multinational corporations (MNCs) to develop export-oriented industries in the non-resource-based sector. Although Singapore is often grouped with the “little dragons” of East Asia — the newly-industrialized economies (NIEs) of Hong Kong, Taiwan and South Korea — it differs from the NIEs in that its export orientation does not depend on local entrepreneurs or local capital inputs but on MNC investments. In this respect, Singapore now has more in common with Malaysia and Thailand.

This convergence of economic strategies among the ASEAN-3 raises a number of interesting questions. The first is: what factors brought about this convergence? The answer is by no means clear, especially since the convergence was a recent phenomenon. Singapore was the first among the ASEAN-3 to welcome MNCs in large numbers in the early 1960s. This was at a time when the wisdom of such a strategy was often questioned. In fact, much of the literature on development economics at the time was distinctly anti-MNCs and full of foreboding about the dangers of dependency on MNCs and of neo-colonialist exploitation. While Singapore, with its tiny domestic market, adopted the strategy out of necessity, Malaysia and Thailand had larger domestic markets and initially took the more prevalent route of import-substituting industrialization. It was only in the mid-1980s that the latter made decisive policy shifts away from import substitution. This raises a further question: what part did the MNCs themselves play in bringing about these policy shifts? Put another way, did MNC investment patterns in Southeast Asia, and in particular the benefits they brought Singapore, influence the governments of Malaysia and Thailand to reshape their policies?

The reliance on MNCs also raises another set of questions. In the past, each country focused on activities that made best use of its natural resources.

Cautious but steady growth of Japanese activism

After years of avoiding the political limelight, Japan is moving cautiously but steadily to play a political and diplomatic role more commensurate with its economic strength. In the words of former Prime Minister Toshiki Kaifu during his April-May 1991 trip to Southeast Asia, Japan “now hopes to play an appropriate role in the political sphere as a nation of peace”. The government of Prime Minister Kiichi Miyazawa has shown an even more ambitious attitude towards projecting Japan into the Asian and global political arena. Evidence of Japan's growing activism can be found in numerous diplomatic and regional leadership initiatives over the past several years. Less clear are the goals of Japanese activism, the ability of the Japanese political system to support a larger role, and the extent to which Japan's leadership will be accepted by other Asia-Pacific countries.

To date, Japan has pursued its expanded role within the framework of global partnership with the United States. Beneath the reality of close co-ordination and substantial policy agreement between Tokyo and Washington, however, lies another reality of a steady shift of power and influence in Japan's direction and increasing Japanese policy divergence. At almost every point in time, Japan has preferred that the United States take the lead on issues relating to the stability of the region, but it has indicated a willingness to take the initiative when necessary to protect its interests and further its own agenda. This process is most apparent in Southeast Asia, and is increasingly evident in policies towards China and the Korean peninsula.

In one sense, Japan's current diplomatic activism, and the balance between its economic and political roles in the region follow a long established pattern. Japanese Prime Ministers have been conducting personal diplomacy in the region for decades, normally, as now, amidst scepticism and with doubtful effect.

Since the announcement of the Fukuda Doctrine three major policy issues in the context of Japan's approach towards Asia have come to the fore: (1) the conclusion of the Peace and Friendship Treaty with China; (2) the execution of a Southeast Asian policy directed towards the peaceful coexistence of ASEAN and the Indochinese countries; and (3) the vigorous pursuit of a uniquely Japanese policy towards the North–South problem, focusing on the demands and interests of the ASEAN countries. As the Sino–Vietnam conflict escalated, however, all three issues combined to form an antagonistic polarization of the region – something Japan hoped to avoid at all costs. In 1980, responding to Hanoi's intervention in the Cambodian situation, Japan had to discontinue its political use of economic assistance to Vietnam until a peaceful resolution of the conflict was achieved. This would seem to mean the end of the first of the Doctrine's twin goals. We will examine Tokyo's approach to the third Indochina conflict in order to assess the way in which the positive attitude of the Japanese Government was put to use in pursuing the Fukuda Doctrine.

The unique development of Japan–ASEAN relations will also be studied in this chapter since the Doctrine promised to forge a “special” relationship with the organization. In particular, we will analyse and assess the impact of the Doctrine on Japan–ASEAN economic relations. As we have discussed in the previous chapter, however, Japan's economic co-operation with ASEAN; except for the five regional projects, did not constitute the core of the Doctrine, although the ASEAN countries had expected it. Given this reservation the Japanese attempts to play a political role in Southeast Asia and to establish a “special” relationship with ASEAN will be seen as an indication of the substantive changes that would be wrought by the Doctrine in Japan–Southeast Asia relations.

Ladies and Gentlemen, to an audience such as this, any President of the United States does not require much introduction. However, the present President requires no introduction at all. You have all seen him on television and during the Gulf War seen him often “live”. Those were moments of high drama. Everyone knew that the principal actor was under great stress. He triumphed.

The Cold War has ended and the Soviet Union has ceased to exist. The Old Order is changing. What will take its place? Just as President Truman at the end of World War II shaped the post-World War world, so President Bush will play a decisive role in shaping this New World. The world needs a strong and healthy United States and one with an experienced, globally-minded President in charge.

Changes are taking place at a breathless pace. In Asia, the countries of ASEAN are catching up with the newly industrializing economies. For the years 1987 to 1990, ASEAN's growth rates were 8 per cent per annum. In the same period, U.S. exports to ASEAN increased by 24 per cent. U.S. imports from ASEAN increased by 19 per cent per annum. On present trends, by the year 2000, the estimated gross domestic product (GDP) for East Asia excluding Japan — which means Korea, China, Taiwan, Hong Kong, Vietnam, and ASEAN — will be US$5 trillion, equal to that of the European Community and approaching that of the United States. That of Japan will be approaching two-thirds of the United States.

President Bush's visit to the Asia-Pacific region is a signal of America's determination to be a principal player in this dramatic transformation of the Pacific Basin, not just in the areas of politics and security but also in economics.

Now, Ladies and Gentlemen, I call upon President George Bush to deliver the Singapore Lecture.

Asian immigration is not a new phenomenon in Australia, nor indeed is the tendency for it to be surrounded by political controversy. From the middle of the nineteenth century, Australia was a destination for Chinese migrants who were part of a larger wave of Chinese emigration to the countries of Southeast Asia and the Pacific basin. Together with smaller numbers of other Asian groups they are estimated to have comprised nearly 3.5 per cent of the Australian population in 1861 (Price 1983). The controversy surrounding this early migration and the eventual introduction of the “White Australia” policy as one of the first legislative actions of the new Commonwealth of Australia in 1901 are well known.

The effect of this policy was to substantially reduce the extent of non-European migration so that by 1947, when the extensive post-war immigration policy was being initiated, the Asian component of Australia's population was estimated to be less than 0.4 per cent of the total. Not until 1967, when the policy was changed to allow the entry of skilled non-Europeans, was there any significant growth in Asian migration to Australia. The decision by the Whitlam Labour government in 1973 not to discriminate against applicants for immigration to Australia on the basis of ancestry or ethnicity removed the remaining restrictions on Asian immigration. The number and proportion of immigrants from this region of the world began to increase rapidly from that point and by J9H8 Australians of Asian ancestry were estimated to once again comprise more than 3 per cent of the population (Price 1988).

The arrival of large numbers of Indochinese in the mid-1970s was the first event that focused extensive public attention on renewed immigration from Asia. More recently, the issue of Asian immigration erupted into public controversy with the so-called Blainey debate in 1984, and then in 1986, when the then leader of the federal opposition, John Howard, expressed concern about the threat to social cohesion posed by Australia's increasingly multicultural population.

The aim of this chapter is to look at Asian migration and Australian immigration policy in their international context. Labour migration, settlement and the development of multicultural societies since 1945 are global phenomena. Migratory patterns have changed in the period of economic restructuring and “internationalization” that started in the 1970s, giving rise to the so-called “new” migration. The specific form of economic restructuring in Australia, and the way this has affected migration, settlement and “multiculturalism” will be examined. The increasing economic and political importance of the Asian region for Australia in the 1970s and 1980s made it impossible to sustain overtly racist national boundaries, leading to a shift from the White Australia policy to a non-discriminatory entry system. But this process has been contradictory, giving rise to a new type of racism in the mid-1980s. To appreciate the nature and significance of these changes it is necessary to first outline the international and historical developments which preceded them.

THE CHANGING WORLD SCENE

Colonialism, Industrialization and Labour Migration

Within the political economy of capitalist development, migration of people has always been a necessary complement to movements of capital, raw materials and manufactured commodities. This applies not only to the movement of workers to the new factory towns after the European industrial revolutions but, even earlier, to the mobilization of labour in the colonies. Settlers from Spain, Portugal, Britain, France and the Netherlands brought in workers from other countries or even other continents to build ports and roads and work in their plantations in America, Africa and Asia. Typically, migrant workers have been subjected to special forms of exploitation: slavery, indenture, forced labour, racial discrimination, contract labour, and inferior socio-economic and legal status.

Slavery in the West Indies and America was a major source of capital accumulation for Western Europe, making possible industrial revolutions, which in turn soon started to utilize migrant workers: the Irish in Britain, Poles and Italians in Germany and France.

In this chapter, the history of Myanmar's external trade is divided into three periods, namely, trade under the Burmese kings, trade after the annexation of Lower Burma by the British, and trade during its colonial period.

Foreign Trade under the Burmese Kings

Trade relations between Myanmar and its neighbours have existed since the earliest days of Myanmar's history. The earliest accounts of trade relations with other Southeast Asian countries, for example, were noted by Barbosa (1866, p. 183, cited in Cheng Siok-Hwa 1968, p. 231). At the beginning of the sixteenth century, rice was shipped from Pegu in Lower Burma to Melaka and Sumatra. U Tun Wai mentioned that Myanmar had trade relations with the European countries as far back as AD 1520 when the Portuguese were allowed to establish factories at Martaban and Syriam (1961, p. 20). However, in the mid-1750s, when Pegu was annexed by the Burmese kingdom in Upper Burma, the Burmese king forbade the export of many products including rice, teak, rubies, and precious metals, the outflow of which was thought to reduce the wealth and importance of the country (Harvey 1925, p. 350). Towards the end of the eighteenth century, the Dutch came to Myanmar for trade and had a factory at Negrais and Bhamo. The English East India Company had a factory in Syriam from 1647 to 1657, but closed it when it was unprofitable, although private traders maintained a connection with Myanmar. In the eighteenth century, both the English and the French were interested in Myanmar's teak for shipbuilding (U Tun Wai 1961, pp. 20–21). According to the same source, between 1587 and 1743 Britain had more sea-borne trade with Myanmar than did either France or Holland. But trade during those periods did not flourish because of war and the anti-mercantilistic outlook of the kings of Burma.

The history of trade relations between Myanmar and its two giant neighbours, India and China, goes back even further.

The problem of poverty, both in absolute and relative terms, became a major policy issue in developing countries (LDCs) during the 1970s, following two decades in which the predominant policy objective was rapid economic growth. The observed deterioration of employment opportunities and income distribution accompanying seemingly satisfactory gross national product (GNP) growth rates for many LDCs led to a greater articulation of distributional concerns by development economists. “Trickle-down” theory fell into disfavour, and it became fashionable to recommend policies and programmes intended to promote a wider sharing in the benefits of economic growth. Direct poverty redressal, participatory development, rural public works, appropriate technology, integrated rural development, and meeting “basic human needs” were among the favoured policy approaches and goals.

In the early 1980s the development research and policy agenda began to be preoccupied by problems of macroeconomic stabilization and structural adjustment, nudging aside distributional and poverty issues. These problems stood in the way of economic recovery from the external shocks of the previous decade and ill-conceived policy responses that drove many LDCs into heavy foreign borrowing and eventual debt-payment crisis. More recently, poverty concerns have been raised in those countries as low-income groups appear to have suffered most from the stabilization and adjustment programmes being implemented. Once again, the issue of poverty is in the forefront of the development policy agenda.

It is clear, however, that there is a significant difference in the context in which poverty issues need to be examined in the two cases. The recent concern raises the problem of how to lift the heavy burden on the poor during the short- run period (one year to five years?) of stabilization and adjustment necessary for the economy to resume stable growth. The earlier policy concern pertains to the longer-run aspect of economic development and poses the challenge of how the poor can share equitably in the development benefits.

The development experience of market-oriented economies in East Asia during the last quarter century is not particularly relevant to the empirical analysis of the effects of macroeconomic stabilization and structural adjustment on the poor.

Many similarities and differences among the eight East Asian developing economies in the mid-1960s are discernible from Table 4.1.

(l) The comparative values of population density and share of primary commodities in merchandise exports give an indication of the natural resource abundance of the ASEAN-Four countries relative to the NIEs. In 1965 the eight East Asian countries had generally high rates of unemployment and underemployment (Riedel 1988, pp. 15-17), and could be characterized as 1 abour- abundant.

(2) The levels of per capita GNP in 1965 differed widely, as was also the case in 1987 (see Table 2.1), but the rankings among the eight countries were different for the two years. Only Hong Kong, Singapore, and Malaysia exceeded the average per capita GNP of US$260 estimated by the World Bank (Social Indicators of Development 1987) for “low-income economies” in 1965.

(3) Indonesia's per capita GNP of US$30 in 1965 was the lowest not only in East Asia but also among the ninety-three developing countries for which the World Bank (Social Indicators of Development 1987) had available estimates. This has to be viewed in the light of the country's economic stagnation since the early 1950s which began to be reversed only after Soeharto's “New Order” government assumed power in 1966. On the other hand, Hong Kong and Taiwan had a substantial headstart, experiencing rapid growth since the early 1950s.

(4) Excluding the two city states (Singapore and Hong Kong), domestic production was heavily agricultural. Among the six countries, Taiwan and the Philippines had the largest manufacturing contribution to GDP, reflecting their longer history of modern industrialization.

(5) The high ratio of exports to GDP for Singapore and Hong Kong is indicative of the openness of the two economies and their traditional entrepot role. At the other extreme, the small size of Indonesia's export sector in 1965, which shrank almost continuously since the early 1950s (Paauw 1981, p. 151), reflected the lack of growth of the national economy in the previous decade.

Cross-country correlations and historical associations such as those indicated above are at best suggestive of, but do not establish, causal relationships. A country's economic growth, income distribution, and poverty incidence are, to use the terminology of econometricians, “endogenous variables” that are jointly determined by a set of explanatory factors or “exogenous variables”. To be able to say something about causal relationships, for example, to explain differing records of growth and equity among developing countries, one needs to specify the mechanisms and processes that show how endogenous variables are affected by exogenous variables.

Conventional comparative advantage theory presents a useful starting point for a general framework of analysis, considering the high degree of openness of the East Asian economies. At least three factors of production need to be distinguished, namely, land (or natural resources), labour, and capital. The dynamics of the factor-proportions theory of comparative advantage defines an efficient growth path for the economy consistent with any initial factor endowments, and provides a systematic explanation of long-run changes in the functional distribution of income (that is, in relative income shares of the factors of production).

The vast majority of the poor in most developing countries consist of landless agricultural workers and unskilled labourers in industry and services, particularly the unemployed and underemployed among them. Therefore, the income of the poor (in the form of “wages”) is crucially dependent on the state of demand for, and the productivity of, labour, and what happens to the share of labour earnings to total income over time will largely determine the course of poverty.

In applying the three-factor model to the East Asian development experiences since the mid-1960s, it is appropriate to differentiate, in terms of initial factor endowments, between two types of economies — the relatively labour-abundant (the four NIEs) and the relatively resource-abundant (the ASEAN-Four). Assuming competitive conditions and absence of domestic market distortions, wage income is expected to increase in the first type of economies as production and exports of labour-intensive goods expand over a period of time; on the other hand, the second type of economies will be characterized by rising resource rent associated with the expanding production and exports of resource-intensive goods.

This is a study of Japanese foreign policy towards Southeast Asia in the post-Vietnam war period; with special emphasis on the so-called Fukuda Doctrine of August 1977. Given the controversial nature of the Doctrine, this book attempts a scrutiny of its rationale and developments since 1977 with the view that the Doctrine in fact ushered in a new era in Japan-Southeast Asia relations. In explaining why and how changes in Japan's Southeast Asian policy occurred; four alternative perspectives are introduced: the international system, the regional subsystem, domestic politics, and ideas. These four perspectives are examined in order to assess their relevance in analysing concrete cases.

Having formulated the framework for analysis in Chapter 1, a historical evolution of Japan–Southeast Asia relations is given in the following two chapters for the purpose of comparing pre-Doctrine and current phases. Chapters 4 to 6 constitute the core of the book., which explain how a shift in Japanese foreign policy towards the region came about. Chapter 7 follows up the Fukuda Doctrine period in order to investigate the impact of the Doctrine on Japan–Southeast Asia relations. Finally the nature of the Doctrine and the four perspectives in explaining the shift are discussed, with a conclusion that the Fukuda Doctrine constitutes a major departure from Japan's traditional economic policy towards the region in two dimensions. Playing an active political role and forging a special relationship with the Association of Southeast Asian Nations (ASEAN) are major characteristics of the Doctrine, which continue to be an integral part of Japan's Southeast Asian policy to the present time.

In writing this book, I was greatly assisted by many individuals and institutions, only a few of which can be acknowledged here. First of all, I am indebted to Professors John Campbell and Russell Fifield who helped me immensely to complete my doctoral thesis, which constitutes the main part of this book. I would also like to thank Professor Masashi Nishihara and Masahide Shibusawa, Director of East-West Seminar, for their unstinting comments and guidance.