 Conference Summary
Day 1: May 16
Day 2: May 17
Day 3: May 18
Wednesday, May 16, 2007
Opening Night Dinner
Prime Minister Shinzo Abe's Opening Address (in Japanese)
The Opening Night Dinner was well-attended, with over 1,000 delegates from 16 countries present. Opening remarks were by Vishaka N. Desai, President, Asia Society. She heartily welcomed the attendees to the Asia Society's 17th Asian Corporate Conference, and thanked Japanese Government representatives and major sponsors AIG, Philip Morris, Carlyle, Nomura, and Mori for their generous support. Following her brief remarks, Junichi Ujiie, Chairman, Nomura Holdings, introduced Prime Minister Shinzo Abe of Japan for the Opening Keynote Address.
Prime Minister Abe began his remarks noting how timely the conference's theme of integration and innovation fits with the current state of a revitalized and re-energized Japan poised for growth. Japan's structural reform program, as outlined by Prime Minister Abe, rests on two concepts: openness and innovation. Openness, as the cornerstone of a forward thinking partnership for a bright future; and innovation as a vigorous engine of growth even in the face of declining population growth.
He also recognized the roles of China and India as up-and-coming and fast growing economies, and the position of the US as a major driver and influence of growth and prosperity in the Asian Century.
He ended his comments touching briefly on the role of Japan in the Asian region, as guided by the policies set forth in the Asia Gateway initiative. These are an open and attractive Japan, a role model for the economies of the region, and a diligent and resourceful Japan, interested in fostering mutual understanding and freedom.
Following Prime Minister Abe's remarks, David M. Rubenstein, co-Founder and Managing Director, Carlyle Group, presented the Prime Minister with a small gift.
Brief closing remarks were made by Christine Brendle, Managing Director, The Wall Street Journal Asia and Far Eastern Economic Review, followed by a toast before dinner by Robert W. Clyde, Chairman, President, CEO, AIG East Asia Holdings Management.
Thursday, May 17, 2007
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I. STAYING AHEAD IN A GLOBALIZING WORLD
Vishakha N. Desai, President of Asia Society, delivered welcoming remarks.
Keynote Address:
Koji Omi, Minister of Finance, Japan
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Finance Minister Mr. Koji Omi spoke about Japan's science and technology strategy.
Finance Minister Omi was instrumental in developing Japan's Basic Law on Science and Technology, organizes the yearly Science and Technology in Society forum (STS forum), and works towards science and technology development and acceleration of innovation in Japan and Asia.
He enumerated the five points of Japan's science and technology strategy: (1) acceleration of pure research, (2) enhancement of mechanisms to commercialize pure research, (3) understanding and assistance of research needs, (4) elimination of structural bottlenecks, and (5) development of human resources. Through these efforts, Japan will try to realize sustainable development and cooperate in the development of Asia and the world economy.
He also expressed his opinion on how to best utilize ODA. He argued that it will bring long-term benefit to Asian countries to use some ODA funds not only on upgrading of basic infrastructure but also to promote science and technology and enhancing younger generation's capabilities, in cooperation between developing and developed countries.
Session 1
New Global Corporate Titans: Leading the Way in Innovation
Hosted by Mr. John Bussey from the Wall Street Journal, Mr. Yoonwoo Lee from Samsung Electronics, Mr. Graham Atkinson from United Airlines, and Mr. Venkataraman Sriram from Infosys Technologies Ltd.
In this discussion, we saw an exchange of views on environments where innovation occurs and on the acceleration of innovation.
Innovation occurs when companies or society get a sense of crisis, when they feel or are forced to feel the necessity to change the present situation. In the case of Samsung Electronics, it involved intensive executive training, while in the case of United Airlines, it involved replacing 75% of top managers.
It was also pointed out that innovation is not only about products, but also about services, business models, or management.
Session 2
What Does it Take to Develop a Society Able to Compete in Today's Global Economy?
Hosted by Mr. John S. Wadsworth, Jr. from Morgan Stanley Asia, Kr. Chen Liming from Tianjin Commission of Commerce, Ms. Sakie T. Fukushima from Korn / Ferry International, Japan, Mr. Shahid Yusuf from the World Bank, and Mr. Heang Chhor from McKinsey & Company
According to the panelists, general social competitiveness is measured by four factors: (1) natural resources, (2) infrastructure and technology, (3) capital flows, (4) human resources and expertise. Human resources and expertise includes not only technological improvement in less developed countries but also development of leadership qualities in developed country workers.
Japan is facing a number of challenges: (1) decrease in worker population due to change of demographic composition, (2) lack of a sense of crisis with respect to Japan's global competitive environment in both public and private sectors; and (3) economic retardation due to the lack of management resources.
During discussion, a number of solutions were postulated, such as the utilization in the workforce of senior citizens and women and their skill building; the implementation of development of world-class capabilities and not just the skills needed to succeed in Japanese companies; and the necessity of an environment conducive to the development of human resources and capabilities.
Session 3
The Overhaul of Asia's Financial Services Sector: New Opportunities in Japan and Elsewhere
Hosted by Mr. Sebastian Moffett from the Wall Street Journal, Mr. Oki Matsumoto from Monex, Inc., Subir Gokarn, Executive Director & Chief Economist, CRISIL Ltd., and Mr. Thierry Porté from Shinsei Bank.
One of the problems Japanese banking system has is in that it is likely that the banking system globalized too slowly compared to the U.S., Europe, and other Asian countries
Even now, English has not been introduced as an official language in the Tokyo Stock Exchange and taxation policies and regulatory frameworks meeting global standards have not been introduced.
However, recently, there is a sign that Japanese Government is willing to establish uniform criteria and clarify the rules, probably because the government is beginning to feel a sense of crisis that Japan is not modern in this sector.
However, it needs to be clarified how the Japanese Government wants to carry out these reforms. For example, the UK succeeded in its efforts because the government was fully committed. In the case of Japan, it is not clear Japan has clear policies to implement.
In this situation, Japan has to (1) clarify rules and regulatory framework, (2) develop human resources, and (3) develop a cooperative approach between the public and private sectors. However, it is thought that imitating London or Singapore in Asia will not be successful. Japan has to develop its own model.
Keynote Address:
Ms. Mari E. Pangestu, Minister of Trade, Indonesia
Ms. Mari E. Pangestu, Minister of Trade, Indonesia gave a lecture on the history of the political and economic cooperative structure in Asian countries, and Indonesia's position in this structure.
She thinks harmonization of standards and trade rules among Asian countries is crucial for development in Asia as a whole. She said this is very important to avoid the Spaghetti Bowl Effect (or, Noodle Bowl Effect) resulting from multiple bilateral FTAs.
Her view is that the process of integration must be managed through the ASEAN+1 countries. Agreements must be multilateral, although regional and bilateral agreements will continue to proliferate.
When discussing Indonesia, she emphasized its growth rate, decreases in poverty, and increases in employment. She commented that they were a result of institutional reforms and the development of laws such as an upgraded new investment law, all of which have the commitment of the government.
Session 4
Developments in Asia's Private Equity Sector
Hosted by Ms. Henny Sender from The Wall Street Journal, Mr. Timothy C. Collins from RHJ International, Mr. Nobuyoshi John Ehara from Unison Capital, Mr. Jun Tsusaka from Texas Pacific, and Mr. David Rubenstein from the Carlyle Group.
In the discussion we saw a vigorous exchange of views on "Why do we see so few LBO in Japan?" using the Toshiba Ceramics example from Unison, Shinsei from Ripplewood, and Kito from Carlyle group.
The panel agreed that this is due to the fact that there are only few sellers in Japanese market. The mindset of Japanese managers is that selling your company is admitting its poor management. There is also a resistance to sell to foreign companies, and a negative image of private equity as organizations that just concentrate on making as much money as possible in a very short period of time and show their heels right away once they are satisfied.
In order to cast aside all these bad images about PE, the panelists agreed on the importance of communication regardless of whether PE is foreign invested or domestic.
The panelists, in particular Mr. Rubenstein from Carlyle, stressed the need to earn the trust of the targeted companies by clarifying and explaining who are the beneficiaries and what is the function of Private Equity Funds.
Some pointed out that it would be crucial to understand, especially in Japan, the difference of culture between Japan and the US, and to show what kind of added value they can provide for Japanese companies for their specific requirements.
Session 5
Confronting Asia's Demographics Problem: New Strategies, Shifting Realities
Hosted by Ms. Yumiko Ono from the Wall Street Journal, Mr. Robert Feldman from Morgan Stanley Japan Securities Co., Ltd., Ms. Kathy Matsui from Goldman Sachs, Mr. Stuart Leckie from Stirling Finance, and Mr. Harry Harding from George Washington University met in the discussion on mainly "population problem in Asia", from wide variety of perspectives including society, economy and education.
In Asia, especially Japan will be affected first by change in demographic structure, and we saw a vigorous exchange of views on the problems and possible solutions.
Two problems Japan or other Asian country will face were pointed out: (1) increase in pension costs due to the society of aging or a greater burden on younger generation due to increase in cost for senior citizen services such as health care, and (2) decrease in worker population due to lower birth rates.
Possible solutions include senior citizen participation in the labor force, increase in participation rate of female workers, increases in birth rates, and immigration from skilled and unskilled foreign workers. They also pointed out that infrastructure development, tax reform, and a change in attitude (acceptance of diversity in employment) are necessary to implement these solutions.
The panelists believe that China will face a population problem like Japan in 10 years and should focus on correcting the gender imbalance brought about by the one-child policy as soon as possible.
Friday, May 18, 2007
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II. ENHANCING INTRA-ASIAN PARTNERSHIPS
Continuing from the previous day, the last day of the Asian Corporate Conference had "Enhancing Intra-Asian Partnership" as the theme. The day began with welcoming remarks by Vishakha N. Desai, President, Asia Society followed by five sessions and four keynote speeches.
Session VI
Solutions and breakthroughs in Asia's Environmental Crisis: Can Japan Green the World?
Panelists: Schelle P.C. Kesavan, Distinguished Fellow, M.S. Swaminathan Research Foundation; James R. Mortensen, President, Philip Morris Japan; Katsuhiro Nakagawa, Vice-Chairman, Toyota; Tadakatsu Sano, Partner, Jones Day and Former Vice-Minister of METI
Moderator: Orville Schell, Director, Asia Society Centre on U.S.-China Relations
The session focused on approaches in resolving environmental issues in Asia. Remarkable economic growth achieved in the Asian countries including China and India simultaneously has led to renewed focus on the environment including pollution as well as global warming.
Collaboration between the public and private sector was highlighted as crucial in resolving environmental issues. The role of government to set standards and to support private sector efforts by providing subsidies and tax benefits which played an important role in the Japanese model will continue to be crucial for emerging Asian countries in resolving environmental issues.
There may be local aspects to the problem. In India, poverty and environmental disruption are closely linked as forests disappear to feed the nation. It was commented that resolution of poverty must come first before environmental issues can be resolved.
Panelists shared the importance of technology for efficient use of energy as well as for breakthroughs in developing alternative energies. Collaborative efforts on a global basis including effective standard setting and technology transfer will play an important role in this.
Keynote Address:
"Enhancing Intra-regional Partnership"
Hoang Trung Hai, Ministry of Industry, Vietnam
Introductory Remarks: Robert W. Clyde, Chairman, President, CEO, AIG East Asia Holdings Management, Inc.
Mr. Hai started off by commenting on intra-regional partnerships. He characterises the region as the most economically dynamic area in the world supported by the emergence of multinationals based in Asian developing countries. Yet he mentions that the region is still diverse in terms of development levels and current regional infrastructure is not adequate to link Asian economies.
Mr. Hai believes that intra-Asian economic integration in trade and investment will continue to develop vigorously thanks to Asian multinationals as well as China, India and ASEAN that will be push factors for increasing intra-regional trades. He mentions that the regional economic cooperation framework, expanding both in width and depth, will facilitate intra-regional trade. He expressed some concern about the uncertainty related to the progress of the Doha negotiations, unresolved security issues in Asia, regional bilateral initiatives, and diversity in the level of development.
Policy solutions to the increasing interdependence and deepening of integration of Asia would be closer and more effective cooperation, further integration and globalization, adoption of open-economy policies, liberalization of trade and investment, and productivity improvements to increase competitiveness.
Mr. Hai concluded his speech speaking about Vietnam. After joining the WTO, Vietnam has entered a new stage of development and deeper integration into the world economy. It intends to speed up industrialization and modernisation of the country.
Keynote Address:
Kozo Yamamoto, Vice Minister of Economy, Trade, and Industry, Japan
Introductory Remarks: Robert W. Clyde, Chairman, President, CEO, AIG East Asia Holdings Management, Inc.
Mr. Yamamoto spoke on Japanese ODA and economic cooperation with the Asian countries.
First, he emphasised the importance of the EPA with ASEAN to be agreed by the end of the year. The EPA covers not only reduction on tariffs but includes cooperation on building institutions and human resources for economic development. He mentioned that for the CLMV countries (Cambodia, Laos, Myanmar, and Vietnam), growth of the economy was the priority. Japan made some contributions through ODA and built the "2nd Mekong Bridge" last December which established distribution connection between Bangkok and Hanoi. Mr. Yamamoto looks forward to further contribution in Vietnam through a PPP.
He went on to share his ideas on economic integration in East Asia: first was the EPA with the ASEAN+6 countries (ASEAN + Japan, China, South Korea, India, Australia, and New Zealand) and second was research on FTA by the ASEAN+3 countries (ASEAN + Japan, China, and South Korea). Mr. Yamamoto said that the initiative was based on actual collaboration at the economic level and also satisfies the needs of ASEAN for their future planning. Japan will contribute JPY 1 billion for the establishment of ERIA (East Asia ASEAN Economic Research Center).
Yamamoto ended his speech by stressing his eagerness to contribute to further economic development and cooperation within the Asian countries mentioning that 2007 was 30 years from the Fukuda Doctrine which aimed to foster cooperation between Asian countries.
Session VII
Meeting Asia's Energy Demand: New Partnerships for Energy Security
Panelists: Bob Pegler, General Manager, Offshore Resources Branch, Department of Industry, Tourism, and Resources, Australian Government ; Audie Setters, Vice President, International Marketing & Business Development, Chevron; Tsutomu Toichi, Managing Director and Chief Economist, The Institute of Energy Economics; Woochung Um, Director, Energy, Transport & Water Division, Regional & Sustainable Development Dept., Asian Development Bank
Moderator: Colum Murphy, Deputy Editor, Far Eastern Economic Review
The session focused on approaches to ensure energy security in Asia given high demands in this region.
The panel echoed that diversification in multiple levels was the key to energy security including geographical diversification and stockpiling of oil as well as emphasis on LNG and environmentally friendly coal, etc. The panel also shared the view that energy conservation was another important key effort to be made along with diversification.
There may be some barriers including resource nationalism which may become discouraging factors in the short term. Governments and corporations may need longer term security when they decide on development and investment. Corporations will also need to be supported financially as development would involve huge initial investments.
Enhancing partnership between corporations and governments will be important. Co-operation between countries can be bilateral or through multilateral settings including APEC and ASEAN+3. Panelists commented that the existing institutions can be utilised rather than building a new institution for energy security in Asia.
Keynote Address:
"Global Management and the Mission for Japanese Diplomacy"
Taro Aso, Minister of Foreign Affairs, Japan
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Introductory Remarks: James R. Mortensen, President, Philip Morris Japan
Mr. Aso started off by touching on how difficult it is to forecast the future and explained that the US presence has reduced risk factors and future uncertainty for the Asian trade environment. The US Japan Alliance has played the role of safety net and supported economic growth and stability in Asia. Mr. Aso commented that Japan will continue to support Asian countries to build institutional infrastructure to promote investment in Asia. He emphasised that legal institutions that enhance economic stability and predictability in the region will promote ODA as well as the EPA process.
Mr. Aso further spoke on the value of networks. He commented that even loss of a member will have great negative effect for the network and that the North Korean case needs to be resolved in the framework of six countries.
Finally Mr. Aso touched on the mission of Japanese diplomacy. Taking the "Panama Canal Expansion Project" where Mizuho Corporate Bank became financial advisor and the ODA support given to the "Dry Canal Project" as examples, Mr. Aso emphasised the importance of focusing its diplomatic resource so as to provide "cow bell" effect to investment by the private sector.
Session VIII
Going Global: Discussing the Future of Intra-Regional Trade
Panelists: Myron Brilliant, President, U.S.-Korea Business Council; Yasuo Hayashi, Chairman, JETRO; Hugh Morgan, Chairman, Asia Society Australasia Centre; Michael Yeoh, Chief Executive Officer, Asian Strategy & Leadership Institute (ASLI), Malaysia
Moderator: Toru Kunimatsu, Economic Editor, Yomiuri Shimbun
The session focused on intra-regional trade and prospects for further economic integration of the region.
Factors key for economic integration in the region included China's healthy economic growth, ASEAN's leadership, and US involvement. It was commented that ASEAN is "open regionalism" and by sharing benefits with neighbouring countries, it could play a central role in economic integration of the region. The US also has a strong interest in engaging in the region. The idea of establishing ERIA (East Asia ASEAN Economic Research Centre) as the Asian OECD to facilitate the economic integration of the region was also shared.
There are numbers of regional agreements including those that are currently in negotiation in the region. While the Doha round of the WTO is yet to come to agreement, there are concerns that some bilateral agreements many conflict with what WTO aims to achieve.
Policies on trade are about economic partnership. Trade policies can no longer be confined to non-tariff barriers and may need to include policies on competition, investment, standards, and environment. For this reason, there were optimistic views that trade agreements in the region, both bilateral and multilateral, will all eventually converge into the frame of WTO.
Session IX
China, India --- and Japan: Engines on the Regional Economy
Panelists: Masahiro Kawai, Dean, Asian Development Bank Institute; Aftab Seth, Professor and Director, Global Security Research Institute, Keio University; Masaaki Yamaguchi, Managing Director, Head of Asia and Emerging Markets Department, Nomura Securities Co., Ltd.; Wang Yufu, Secretary General, China Council for the Promotion of International Trade, Zhejiang Subcouncil
Moderator: Hugo Restall, Editor, Far Eastern Economic Review
The session focused on the prospects of Japanese involvement with China and India
It was commented that Japanese FDI in China has been well received by China and China has introduced new tax policies etc. to further attract foreign capital. From the Japanese point of view, China provides attractive FDI opportunities but also has issues including treatment of intellectual properties and occurrence of sudden changes in regulation. Japanese corporations have diversified production in order to mitigate such risks. On the other hand, as China continues to enjoy capital inflows, China's capital may come back into Japan in the form of equity investment, FDI, and M&A.
Japanese FDI in India is still small relative to China due to lack of infrastructure including electricity and designation of SEZ. But current lack of infrastructure will provide opportunities for the Japanese corporation in projects to build power plants and railway networks. The productivity of India has risen dramatically and is said to compensate for the lack of infrastructure. Immigration into Japan from India is seen to stay limited to medical and IT areas due to Japanese immigration policy.
Session X
Concluding Discussion: Looking Forward at the Asian Community
Panelists: Gerald Curtis, Burgess Professor of Political Science, Columbia University; Juan José Daboub, Managing Director, The World Bank; Murray McLean, Australian Ambassador to Japan; C. Raja Mohan, Professor, S. Rajaratnam School of International Studies, Nanyang Technological University
Moderator: Vishakha N. Desai, President, Asia Society
The last session of the conference focused on prospects for the Asian community beyond integration in trade and economy.
It was commented that open regionalism in terms of economy and trade is different from a regional community as shown apparently in the low level of trust between Japan, China, and Korea while all are eager to build close relationship if limited to economic issues. Economic integration will facilitate interdependence but that by itself will not foster political integration without building common institutions and norms based on values shared by the region. Although the hurdle to building a community may be high and would take long, the process aiming for that has value in itself.
Another important issue for the region may be how to define the region and how to involve others particularly the US. The US has been a guardian of the region for the past half century and US will continue to provide security as well as be a source of prosperity through its market and investments. Although the panel agrees that US has a crucial role in the process of regional integration, there were different views towards how the US will actually be involved in the region given the multi-polar situation.
Keynote Address:
Yasuhisa Shiozaki, Chief Cabinet Secretary, Japan
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Introductory Remarks: Audie Setters, Vice-President, International Marketing & Business Development, Chevron
Mr. Shiozaki started the speech by commenting on the "New Asian miracle" characterized by the unprecedented economic prosperity throughout the Asian region given the rise of China and India. He also commented that without "openness" and "innovation", Japan can easily be left behind among rapid developments in the Asian region.
In order to promote the on-going Asian miracle, Mr. Shiozaki believes Japan must enhance productivity by reinventing itself focusing on the service sector reform including the financial markets and R&D capabilities. EPA and FDI should reinforce such reforms by opening the market to Asia and to global investors. Japan intends to enhance its role in areas with competitive edges in environment protection and energy efficiency.
Mr. Shiozaki stressed importance of maximizing diversity while minimizing conflicts among nations, societies, and cultures when building community in Asia. To this aim, he believes that a highly flexible architecture suits the region rather than a rigid framework. Most importantly, he believes universal common values forming the basis for stability and cooperation must be instilled in the region.
Mr. Shiozaki commented that Japan is ready to share its knowledge and technologies with other Asian countries to support the "new Asian miracle" so that the Asian countries can overcome various challenges and will continue to be an engine for Asia's sustainable growth. Mr. Shiozaki strongly hopes Asia to become a source of dynamism presenting a new model to the world.
Closing Remarks
The conference adjourned soon after with closing remarks by Vishakha N. Desai, President, Asia Society.
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