Foreign Trade and Economic Development

Japan's economy is often referred to as an “export-led economy”. The merchandise exports as a percentage of Japan's GDP, however, paint a different picture. According to the World Development Report 1986, the ratio for Japan was 15 per cent as of 1984, much lower than that for the United Kingdom, France, and West Germany, that is, 29 per cent, 25 per cent, and 31 per cent respectively. As for ASEAN member countries, the 1984 figure for Indonesia was 23 per cent, the Philippines 21 per cent, Thailand 24 per cent, Malaysia 56 per cent, and Singapore over 100 per cent. The fact that Japan's ratio has been relatively low may derive partly from its geographical and historical isolation. Moreover, since Japan's domestic market is so large with a sizeable population and a high per capita income, its dependence on the foreign markets to generate GDP is correspondingly lower. Perhaps for the same reason, the ratio for the United States has been low, registering only 8 per cent in 1983.

In the rapid growth period after World War II, the annual growth rate of Japan's export in real terms averaged 14.7 per cent during the 1965–73 period — slightly higher than the annual average growth rate of manufacturing production at 14.4 per cent, and much higher than that of GDP at 9.8 per cent. However, the contribution of the domestic demand to economic growth has consistently been larger than that of the export, as confirmed by several empirical studies.

Analysis on the Competitiveness of Manufactured Exports

Japan's Changing Trade Structure

The structure of Japan's foreign trade is dominated by the import of primary commodities and by the export of manufactured products. (See Table 2.1.) Manufactured exports as a percentage of the total merchandise exports have constituted more than 90 per cent during the last two decades. On the other hand, manufactured imports as a percentage of the total merchandise imports have been between 23 and 29 per cent.

A puzzle revealed by the previous two chapters is that, apart from PELNI, shipping firms have remained so small. At the end of 1982 no other firm owned more than 9 ships or, if ships leased from P.T, PANN are included, 12 ships. In the 1950s or 1960s this result would hardly have been surprising. At that time firms were still in their infancy and capital and foreign exchange were scarce indeed. Since the late 1960s, however, these constraints have become less pressing. Large amounts of capital have been invested in deepsea shipping — both liners and tramps — as well as in many other sectors of the Indonesian economy. Yet even interisland shipping firms associated with powerful economic groups have remained modest in size. Some explanation other than lack of capital is therefore required.

This chapter argues that interisland shipping firms are subject to diseconomies of scale beyond about 10 vessels. It is further argued that these diseconomies are associated with a life cycle of growth and decline. Such behaviour has important implications for new entry and the effectiveness of competition. The special case of PELNI will be considered in the next chapter.

THE TYPES OF INTERISLAND SHIPPING FIRMS

Under the requirements of Regulation No. 2/1969, interisland shipping firms must be legally registered perusabaan terbatas or P.T. (limited liability companies), perusabaan negara or P.N. (state enterprises), or perusahaan daerab or P.D. (regional government enterprises). Since PELNI was converted to the status of a state-owned limited liability company in November 1975, no state enterprises now remain. Apart from three surviving regional government enterprises — a form of organization introduced under the Old Order — all firms are now P.T, companies. According to the old Dutch company law and terminology which remain in force, the basic form of die P.T. company is a dewan komisaris (board) which, under a presiden komisaris (chairman), exercises supervision over the direksi (management), which is under the command of the presiden direkturot direktur utoma (general manager).'

The Sea and Its Unlimited Resources

The politico-geographical distribution of land seemed to have been resolved and consolidated on a long-term basis after the colonial era. Except in a few cases (for example, Israel/Jordan) state borders have not been altered. Changes amounted to incorporation of the entire country with its former borders, or a change in the political system. Expansion beyond a border would only be possible by means of war because nowhere on earth is there a totally uninhabited region that does not belong to anyone, and at the coast living space comes to an end.

In the past, the sea was used as a waterway or for fishing, and it seemed endless and inexhaustible; everyone had sufficient space and fish (Fulton 1911). Hugo Grotius 1 defined the principle of the mare liberum in 1609. A territorial sea with a width of three nautical miles under the jurisdiction of a coastal state was only established under the growing influence of Great Britain, the Netherlands and other European sea-powers. Beyond three nautical miles nobody could claim national rights. At that time large areas of the sea were not of value except for strategically important straits. Unlike on dry land, it was possible to use its resources without marking out claims. In 1702, Bynkershoek added an auxiliary quality to the principle of the three-nautical-mile territorial sea as a juridical support: the distance a cannon can fire, because the sea cannot be fully occupied and therefore it cannot be part of a country (Kent H.S.K. 1954). Of course, there have always been attempts to mark off territorial seas, particularly if these seas are surrounded by land on a few sides. The reasons given were either on security or on economic grounds (for example, Denmark, Norway, and Iceland were a union since 1381, but when Greenland was rediscovered in 1585 Denmark claimed exclusive fishing rights in the northern North Atlantic, as they now ruled over the opposite coast).

It was intimated earlier that the course of future population trends is such that the question of an adequate supply of labour in the country will be of great concern in the future. The size of the labour force will depend primarily on changes in the size and age composition of the total population in the future. To some extent, changes in the age-specific labour force participation rates may affect the size of the population, but such changes in the future are extremely difficult to predict. Partly because of this, it is assumed that the participation rates will remain constant during the whole period of projection. What this implies is that the changes in the future labour force, to be discussed in this chapter, would be solely a reflection of the fertility trends assumed in our computation. This fits our objective well since our prime purpose is to demonstrate the impact of the different paths of fertility trends on the growth and structure of the labour force.

The total labour force at every five-year time-interval and the increase for every five-year period from 1985 onwards according to Projection A are presented in Table 6. The labour force is estimated to rise from 1,219,889 in 1985 to 1,300,200 in 1990, an increase of 80,311 or 6.6 per cent. In the next five year period 1990-95, the labour force is expected to increase by a small number of 54,500 or 4.2 per cent. The increase will continue to slacken until it amounts to only 6,400 or 0.4 per cent during 2010–15. By 2015 the labour force would have attained its peak level of 1,441,900, and thereafter it is expected to fluctuate slightly around the 1.4 million level with small negative growth rates at certain periods and small positive growth rates at others.

The figures for Projection B reveal that the labour force will follow a somewhat different but more clear-cut path in the future.

Maritime law regionalization in the western part of the Pacific Ocean is characterized by difficulties of varying degrees. Both Australia and New Zealand as well as the South Pacific island states and territories have proved that the demarcation of maritime law borders can be facilitated if the general political situation is positive and if the distances between neighbouring states are large. The sea-bed in these areas can be unequivocally assigned to the respective coastal states. In addition, based on present knowledge, the sea-bed contains no exceptional deposits. A number of relatively valuable fish live in the column of water of the fishery and economic zones, but the coastal states are at present not, or only partly, able to utilize these resources completely. This means that the distant fishing nations do not have to give up fishing in these large areas but are able to continue working there as a result of numerous contracts, although they do have to pay licence fees. Potential disputes between distant fishing nations and states in the Australia-New Zealand-South Pacific region are made less likely by the fact that the world market demand for fish is growing, and the resulting competition forces the long-distance fishery nations to compromise.

More complicated problems concerning the association and utilization of sea zones have been experienced in East and Southeast Asia. Here, one finds sea areas which are surrounded by a number of coastal states, whose political conflicts with foreign countries are naturally transferred to maritime law regionalization. These sea areas are also not large enough to permit each country to expand its sea zone as far as it would wish (cf. Alexander 1974).

These partly enclosed seas present a rather difficult starting point, and this is even more the case if they contain a large number of islands: according to the new Convention on the Law of the Sea, islands have a great effect on the size of maritime law zones. These islands, even if they are small, uninhabited, lacking in natural resources and mainly forgotten, thus gain unusual importance, and the question of possession can even result in military confrontations.

The 1960s signalled the beginning of a totally new phase in the history of the country. Malaya gained its independence on 31 August 1957, and as a result the 1960s were characterized by a complex interplay of the political, social and economic forces brought into being by the circumstances of an immediate post-independence era. Inevitably, the complexity of events during these years made themselves felt in certain significant ways in the literary development of the period.

The 1960s were generally referred to as zaman mengisi kemerdekaan or an era in which to give substance to (the meaning of) independence. In line with this aspiration, the administrative sector undertook to accelerate what was known as the process of Malayanization. Prior to independence in 1955, a committee was set up to look into this process, and it recommended that for every five officers recruited into the Malayan Civil Service (MCS), four should be Malays. Between 1957 and 1962, the number of British officers in the MCS decreased from 220 to 26, while that of Malays increased from 128 to 219. By 1968, the number of these Malay officers had reached 709. The 1960s were thus to witness the emergence of these MCS officers as a distinct Malay group. Alongside the MCS officers, there also grew a group which came about as a result of the adoption of parliamentary democracy, namely the parliamentarians and councillors (Wakil Rakyat). Together with the MCS officers, they drew attention to the phenomenon of Malay leadership as a whole. To be sure, this question was evident in earlier years, but it became more pertinent in the context of independent Malaya where the leadership of the country was now solely in the hands of the indigenous population. Within Malay society in particular, the Wakil Rakyat and the MCS officers, especially the latter with their pervasive presence in all ministries and the various statutory bodies, were seen as the body with the authority and power to shape the fortunes of the Malays.

Ever since the end of the economic reconstruction of post-war Japan in 1952 or so, there has been a steady process of unidirectional industrial restructuring, moving from a composite of the labour-intensive light industries to what the Japanese nowadays call the heavy, thick, long, and large (HETHILL) industries and on to the so-called light, thin, short, and small (LITHISS) industries. The prima donnas in the leading industries have shifted from textiles, low-cost apparel, toys, and plywood manufacturing industries through petro-chemicals, iron and steel, nonferrous metals, and heavy general and electrical machinery, and shipbuilding to consumer and industrial electronics including VTRs and semiconductors, precision equipment, biotechnology, and new materials such as optical fibres and new ceramics.

The process of Japan's industrial restructuring had proceeded very smoothly during the first phase in the 1950s and 1960s from the labour-intensive light industries lo the heavy and chemical industries. It coincided with the period when the Japanese economy, assisted by the ongoing international economic environment toward trade liberalization and the expanding world economy, fully took advantage of the well-educated and hard-working labour force, the high rate of domestic savings, the active entrepreneurial spirit precipitated by the structural reforms installed by the Allied Occupation Forces and the government's high-growth policies, and was growing at the annual average rate of over 10 per cent.

While there were some declining industries such as coal-mining appearing on the industrial scene even during the first phase, it was relatively easy for the Japanese economy to absorb the adverse impact on capital and human resources, since there were so many rapidly expanding industries creating new jobs and growth opportunities for all the enterprising private sector industrialists. All that the Japanese Government had to do was “not to stand in their way” and assist the private sector entrepreneurs to obtain the required technologies and markets overseas.

NOTES ON RESEARCH METHODOLOGY

The tables presented in the text are based on data derived from questionnaires related to daily income and expenditure administered to 16 households in the village (the questionnaire is to be found in Appendix II). Each questionnaire was designed for three days, and every three days the questionnaires were collected. If the questionnaires had not been filled in, as was often the case, a return visit was made later in the day, or three days later, when the next questionnaire was finished. A three-day interval was designed so that a control could be kept over the regular recording of accounts, before too much was forgotten.

The sixteen households were chosen according to three principles: that of stratification, that is, five of each category of rich, middle and poor households as identified by a village informant (for a discussion on these categories, see the chapter on “The Village as a Unit of Analysis”); that of variability, that is, where possible, different family structures; and thirdly, the limits of the possible were set by personal access and the availability of a family member willing and able to fill in the questionnaire everyday. Naturally, the quality of the data varied from household to household and improved by the second month, when everyone was sure of how the questionnaire worked. On the whole, the information given is as accurate as any other methodology would have been able to ensure.

These sample households were not chosen by the author but by the author's adoptive father (according to the parameters set above). As such, they reflect very much his personal friendships in the village, but seem to be fairly representative and, significantly, included households from both the major political factions in the village.

THE QUALITY OF THE DATA

The first major problem is the lack of data on labour utilization, especially for household production.

One of the central objectives of the Association of Southeast Asian Nations (ASEAN), as embodied in the Bangkok Declaration under which ASEAN was founded, is the promotion of Southeast Asian Studies. In this context, ASEAN warmly welcomed the offer of Mr Zenko Suzuki, Prime Minister of Japan, in early 1981 to support the launching of an ASEAN Regional Studies Promotion Programme (ARSPP).

After extensive consultations among ASEAN member countries and between ASEAN and Japan, it was agreed that the ASEAN Regional Studies Promotion Programme, initially to extend over a period of five years (FY 1982–86), should focus on policy-oriented socio-economic research. Thus far, the co-operative effort has resulted in the publication of two joint ASEAN-Japan overview papers: ASEAN-Japan Industrial Co-operation: An Overview published in September 1984 resulting from the first phase; and Effective Mechanisms for the Enhancement of Technology and Skills in ASEAN: An Overview published in March 1986, from the second phase. This volume is the product of the third phase of the programme on “Industrial Restructuring and Adjustment for Japan-ASEAN Investment and Trade Expansion”. Like the two previous volumes, it is based on the results of studies conducted by the Japanese research team and the ASEAN country research teams.

The recent history of ASEAN-Japan relations has been marked by a degree of ambivalence. As the first Asian nation to industrialize successfully and to have risen as a phoenix from the ashes of war-time destruction to the leading heights of industrial and technological power, Japan has always been regarded with a degree of awe and admiration by its southern neighbours. Such awe and admiration have, however, been tinged with a certain amount oi anxiety, especially as the impact of Japan's post-war economic expansion becomes increasingly felt in the ASEAN region.

On the Japanese side, historical circumstances and the need for economic reconstruction in the early post-war years made it unavoidable that its external relations were initially to a large extent oriented towards the West, especially the United States.