Japanese foreign direct investment (FDI) has played an important role in the growth of the electric industry in Asia-an industry that has grown steadily over the past 40 years.
Recently, the industry has faced two crucial tests: first, the Asian financial crisis which began in the financial sector but quickly spread to involve industrial sectors; and second, the growth of China's industrial power-particularly in the electric industry, which accounts for 30% of China's exports.
On the threshold of joining the World Trade Organization (WTO), the electric industry in China is surging while its automobile, high technology, and agriculture industries are suffering.
Globally, it is commonly understood that there is over-capacity within the electric industry. This situation is resulting in a rising sense of regionalism in NAFTA and the EU region. It is inevitable that the ASEAN electric industry will need to streamline and modify operations in order to meet the global competition.
The model of the “Geese flying economy” is coming to end and we are seeing a rise in a “level playing field” in the competition for general merchandise.
Furthermore, the electric industry is transforming its position to a “knowledge driven” industry with the introduction of greater information technology, EMS and emerging industry cluster in Asia and China which are enabling to supply necessary parts and components within the region.
Facing the challenge of regional and global competition, it is critical for ASEAN governments to enact effective common industrial policies such as AICO, CEPT, AIA, MRS and others. This will force domestic and foreign firms to modernize and re-organize in both a horizontal and vertical fashion.
Continuing its role in the region, Japanese FDI must play a positive role in assisting in the transformation of this industry to one that can be competitive in the 21^st century.