The Idea of “East Asian Economic Community” from Business Perspective APEC　OFFICIAL　SYMPOSIUM September 27, 2006 Kakutaro Kitashiro Chairman, KEIZAI DOYUKAI (Japan Association for Corporate Executives) Chairman of the Board, IBM Japan Ltd.

AGENDA Growing East Asia and Challenges The Principles of East Asian Community Recommendations to Realize the East Asian Community

Growing East Asia and Challenges

GDP Growth Rate Projection for 2015 Japan US EU China India ASEAN４ NIEｓ World Bank(2006) 1.7 3.6 2.0 6.1 5.5 IEA(2004) 1.9 2.3 2.1 5.0 4.7 3.8 Japanese Gov.(2004) 1.5 3.1 1.8 6.9 4.1 Average 3.0 6.0 4.8 4.3 The source : 2006 White Paper on International Economy and Trade

21.2% (36.3 times in monetary terms) GDP Growth in East Asia East Asia : (ASEAN10+Japan,China,Korea) 1980 2005 2015 (Forecast) East Asia’s share in global GDP *2 16.3% 20.2% 27.0% *3 East Asia’s share in global export *4 14.1% 26.6% - East Asia’s share in World Investment *5 6.8% 21.2% (36.3 times in monetary terms) *2 Calculation is based on the IMF World Economic Outlook Database. *3 METI, Trade and Industry 2006 White Paper on Internal Economy and Trade 2006,Figure 2-1-1. *4 *5 Prepared by the Mitsui Global Strategic Studies Institute(UNCTAD World Investment Report 2005)

Intra-regional Trade Ratio EU15 East Asia NAFTA 60% 54% 45% ’93:Single Market completed ’87:Single European Act ’93:ASEAN CEPT ’94:NAFTA The source : 2005 White Paper on International Economy and Trade

Japanese Trade Dependency on East Asia 1998 2005 Increase (of which Chinese contribution) Share of Japan’s exports to East Asia 34.0% 47.9% +13.9% (+8.2%) Share of Japan’s imports from East Asia 35.6% 44.7% +9.1% (+4.8%) *7 Compiled by Mitsui Global Strategic Studies Institute based on data from IMF Direction of Trade Statistics, CD-ROM July 2006, and ADB Key Indicators of Developing Asia and Pacific Countries.

GDP per Capita 1990 2005 Japan 24,724 dollars 35,787 dollars Singapore Brunei 15,049 dollars** 17,632 dollars South Korea 5,893 dollars 16,422 dollars Malaysia 2,432 dollars 5,040 dollars Thailand 1,528 dollars 2,577 dollars China 342 dollars 1,703 dollars Indonesia 628 dollars 1,259 dollars Philippines 725 dollars 1,159 dollars Vietnam 97 dollars 612 dollars Laos 210 dollars 463 dollars Cambodia 106 dollars 375 dollars Myanmar 68 dollars *8 Sources: “Global Economic Trends” edited by the Cabinet Office, Office of the Director General of Policy Coordination, and IMF World Economic Outlook. ** Based on the figure as of 1992 for Brunei.

The World Competitiveness Factors Ranking Economy Country Ranking Government Efficiency Business Efficiency Infrastructure Hong Kong 2 1 16 Singapore 3 7 5 Japan 17 31 23 Taiwan 18 24 14 20 China Mainland 19 30 37 Malaysia Thailand 32 21 28 48 Korea 38 47 45 Philippines 49 44 56 Indonesia 60 51 57 61 Source: IMD WORLD COMPETITIVENESS YEARBOOK 2006

Tariff Comparison The source : 2006 White Paper on International Economy and Trade

Effect on Trade Promotion $191B The risk of political instability 4% Custom clearance Process 17% $148B Estimated Effect of Trade Facilitation Measures 56% Transparency*1 10% Streamlining of port operations 29% *1 : Enhance the transparency of customs clearance formalities The source : 2006 White Paper on International Economy and Trade

The Principles of East Asian Community

Various Functional and Regional Cooperation the Bali Regional Ministerial Meeting on Counter-Terrorism Japan, China and Korea Cooperation The Chiang Mai Initiative , The Asian Bond Market Initiative UK　France Germany　　Canada ＥＵ ASEAN + 3 Aus. NZ ＰＮＧ US 豪州　　ＮＺ North Korea Mongolia　　　 Indonesia Malaysia Philippines Singapore Thailand Brunei Vietnam Laos Myanmar Cambodia The East Asian summit ブルネイ　ベトナム　ラオス　ミャンマーカンボジア インドネシアマレーシア　フィリピン　　シンガポールタイ Japan China Korea 日　本　　　中　国　韓　国 Bangladesh Sri Lanka India インド Russia The Bali Process Pakistan ReCAAP ARF The Asian Bond Fund ASEAN The Source ： The Ministry of Foreign Affairs of Japan, Asian and Oceanian Affairs Bureau

Approach to the East Asian Community Road map for the realization of a　“community” Share the common goal One step at a time Building equal partnerships Expansion centering on the ASEAN Realization of an open community Creation of a disparity correction mechanism within East Asian region

Objective and Basic Principles Co-prosperity and co-existence within the East Asian region Basic Principles Democracy Market economy Basic human rights

Basic Rules of the East Asian Community Mutual cooperation Non-intervention in other countries’ internal　affairs Peaceful resolution of disputes Renunciation of the use of military force Correction of regional disparities Equal partnerships

Realize the East Asian Community Recommendations to Realize the East Asian Community

Recommendations to Japanese Gov. Early realization of heads of state summits between Japan and China/South Korea Open the market for agricultural products, etc. for the facilitation of intra-regional FTAs/EPAs Establish an East Asian Regional Development Fund Launch a Council on the Promotion of the East Asian Community

Innovation for Sustainable Growth in Asia Talent Workforce Training Public expenditure on education Promote Market Economy Maximize FDI through deregulation ODA and East Asian Regional Development Fund Commercial system within the region Corporate Social Responsibility in the local communities Key to Innovation Talent Investment Investment Infrastructure Infrastructure Council on Competitiveness, Innovate America (2004)

Conclusion Co-prosperity and Co-existence within the East Asian region Japan: Four Recommendations East Asia: Innovation for Sustainable Growth

Thank you

Back up chart

Foreign Direct Investment FDI to East Asia Foreign Direct Investment 2004 2005 Growth Rate Contribution Share East Asia Japan 7,809 3,223 △ 58.7 △ 0.6 0.3 China 54,936 79,127 44.0 3.1 8.2 NIES 60,000 61,952 3.3 0.2 6.4 Korea 9,246 4,339 △ 53.1 0.4 　Taiwan 1,898 1,625 △ 14.4 △ 0.0 　Hong Kong 34,036 35,905 5.5 3.7 Singapore 14,820 20,083 35.5 0.7 2.1 ASEAN4 7,749 11,374 46.8 0.5 1.2 　Thailand 1,414 4,008 183.4 　Malaysia 4,624 3,976 △ 14.0 △ 0.1 　Indonesia 1,023 2,258 120.8 　Philippines 688 1,132 64.5 0.1 World Total 782,839 964,744 23.2 100.0 The source : JETRO White Paper on International Trade and Foreign Direct Investment 2006