Kaoru States, Multinational Corporations, and Institutional Arrangements

Kaoru Natsuda is an assistant professor of development economics at Rit-sumeikan Asia Pacific University, Japan. He formerly worked as an international consultant at Ernst & Young ShinNihon and has engaged in various ODA projects. His research interests include economic development and foreign economic rela-tions between Japan and East Asian countries.

96

The Japanese Economy, vol. 36, no. 3, Fall 2009, pp. 96–127.© 2009 M.E. Sharpe, Inc. All rights reserved.ISSN 1097–203X / 2009 $9.50 + 0.00.DOI 10.2753/JES1097-203X360304

Kaoru Natsuda

States, Multinational Corporations, and Institutional ArrangementsEconomic Interdependence Between Japan and Southeast Asia

Abstract: This study argues that economic relations between Japan and Southeast Asia have been moving toward greater interde-pendence in the context of the creation of regional deliberation councils. These maintain the interests of the members within a three-party economic interdependence system, namely, the Japa-nese government, governments in Southeast Asia, and Japanese multinational corporations (MNCs). Under such institutional ar-rangements, the Japanese government, in association with Japanese MNCs, has been facilitating economic development in Southeast Asia that benefits Japanese MNCs as well as the regional economy. The establishment of AMEICC, the ASEAN Economic Ministers (AEM)–Ministry of Economy, Trade, and Industry (METI) Eco-nomic and Industrial Cooperation Committee, and the Vietnam–Japan Joint Initiative (VJJI) will be examined as case studies at the multilateral and bilateral levels, respectively.

FALL 2009 97

The issue of economic relationships between governments and multinational corporations (MNCs) in the field of international development, international political economy, and international business studies has been one of controversy over the past four decades. National governments, in general, aim to enhance eco-nomic development, and MNCs are eager to expand their business activities across borders. Consequently, economic development in less advanced countries has been facilitated by the interaction between MNCs and governments. Recent international business literatures have argued that the nature of economic relationships between government and business is becoming more interdependent (Dunning 1998; Luo 2001). Furthermore, institutionalists argue that an “embedded coordination structure” has created a favorable competitive collaboration between the government and industry in East Asian countries, which enhances economic development in the region (Evans 1995; Weiss 1998).

The aim of this study is to examine the Japanese state’s involve-ment in the creation of an interdependent economic relationship between Japanese MNCs and nation-states by focusing on Vietnam as a case study within the broadly defined area of Southeast Asia. With the rise of the Chinese economy, the Japanese government as well as Japanese MNCs have needed to establish closer economic relationships with Southeast Asia in order to maintain Japan’s re-gional political and economic presence in recent years. In particular, Vietnam has become one of the most important strategic investment locations for Japanese MNCs in the region.

This study argues that the Japanese government, in association with Japanese MNCs, has been facilitating economic development in Southeast Asia: development that benefits Japanese MNCs as well as the regional economy. In particular, this article stresses that the cooperative relationship between MNCs and host govern-ments is strengthened as a result of the establishment of formal institutional networks, such as deliberation councils (and com-mittees), which involve a three-party structure, such as Japanese MNCs, the host governments, and the Japanese government. The latter, in cooperation with the business community, has constructed industrial institutional networks at multilateral and bilateral levels

98 THE JAPANESE ECONOMY

in Southeast Asia. Like free trade agreements (FTAs) between Japan and Southeast Asia, the Japanese government has formed industrial agreements with Southeast Asia at the multilateral and bilateral levels: the multilateral level focuses on regionwide issues, while in contrast, the bilateral level deals with more specific issues in each country. In addition, these arrangements seem to play a complementary role to Japan’s FTA policies. This study analyzes the establishment of the AMEICC [ASEAN Economic Ministers (AEM)–Ministry of Economy, Trade, and Industry (METI) Eco-nomic, and the Industrial Cooperation Committee] at a multilateral level, as well a case study of the Vietnam–Japan Joint Initiative (VJJI) at a bilateral level of formal industrial institutional networks between Japan and Southeast Asia.

MNCs and Government Economic Relationship

MNCs and Host Government Relationship

The economic development and environment of a state can be im-proved as a result of economic negotiations between governments and MNCs. Governments are constantly aiming to improve their state’s economic position. At the same time, MNCs are eager to expand their business activities across borders. Therefore, it stands to reason that governments and firms enter into various types of agreements with one another, such as the level of ownership, technology transfer, and the provision of incentives (Kremenyuk, Sjostedt, and Zartman 2000). Most recently, the role of MNCs in the world economy has been expanding rapidly, particularly with the rise of globalization. As a result, economic relationships between government and business have been rapidly evolving into a more complex, three-party type of structure, involving MNCs, the host government, and the home government of the MNCs.

For instance, Ramamurti (2001) argued that MNC–host gov-ernment relations can no longer be viewed as a static, two-party negotiation, but rather as a dynamic, two-tier multiparty bargaining process. He classified bargaining relationships into two stages. Tier 1 relates to the bargaining between host developing countries and

FALL 2009 99

home industrialized countries, while Tier 2 relates to the bargaining between individual MNCs and host governments. This indicates that the bargaining relationship between a host government and the home government of MNCs has become important in shaping a host country’s FDI policies in recent years.

A number of business as well as political studies over a period of years have suggested that the impact of MNCs on the host countries is neither as positive as neoclassical explanations nor as negative as old dependency explanation. The economic relation-ship between MNCs and the host government can be viewed as a contest of “bargaining power” between MNCs and the states. The bargaining power literature postulates economic resources owned by firms and governments as the result of interactions between the two. An MNC’s bargaining power derives from its contributed resources or owner-specific advantages such as marketing skills, production skills, and brand names.1 In contrast, a host govern-ment’s bargaining power relies on its control of market access or location-specific advantages. Therefore, it emphasizes the im-portance of arrangements between host governments and MNCs, identifying the strengths of MNCs and the host governments, which enable each to obtain more favorable results (Farge and Wells 1982; Grosse 1996; Strange 1992).

However, bargaining power studies seem to lack an explanation for the cooperative relationship between MNCs and host govern-ments. Luo pointed out the weakness of the bargaining power literature, stating that bargaining results, such as ownership levels and regulatory stances, which were emphasized in the bargaining power literature, fit only in explaining the market entry or invest-ment treatments for MNCs. In reality, MNCs shift their business strategies from initial entry to subsequent operations, thus these bargaining results are unable to adequately capture the outcomes concerned (Luo 2001: 402).

Studies on the economic relationships between MNCs and host governments have shown that the very nature of those relationships has been shifting from predominantly adversarial and confronta-tional to nonadversarial and cooperative (Dunning 1998; Luo 2001; Stopford 1994). Dunning pointed out two principal reasons for this.


First, there has been a deceleration of economic growth in many parts of the world, China being a major exception. In addition, many countries are feeling increasing pressure to attract foreign direct investment (FDI) in order to procure newer technologies that enable them to implement labor-saving measures and cross-border communications. Second, the opening up of new regions, such as East Asia, has enabled corporations to seek out the most cost-effective locations for their value-added activities (Dunning 1998: 282).

Therefore, the economic relationship between a host govern-ment and MNCs has begun to play an important role in creating national competitiveness and fostering the economic development of the host country. MNCs and host governments can be seen as the best of partners, and this relationship is becoming more mutually consistent. In the perspective of MNCs, their business operations increasingly rely on the educational, technological, and industrial infrastructures provided by host governments. On the other hand, the host governments increasingly depend on MNCs for fostering their economic development, due mainly to the globalization of the world economy, in particular, promotion of the free trade and investment regime. In response to this new regime, host govern-ments in developing countries are now being required to readjust their development strategies in association with MNCs. Conse-quently, FDI-led development strategies have become commonly employed among developing countries, particularly in Southeast Asia (Felker 2003; Lauridsen 2004). In practice, host govern-ments have started to pay attention to increasing or restructuring the domestic value-adding activities of MNCs, rather than simply seeking to benefit from a maximum share of the rent generated by MNCs (Dunning 1998).

One of the most important means for MNCs to increase this domestic value-adding is through a growing interdependence, which is largely facilitated by the establishment of cooperative structures between MNCs and host governments. As cooperation proceeds, MNCs will be able to access various benefits from in-stitutional supports (Luo 2001). Kostova and Zaheer (1999) noted that high levels of organizational legitimacy (or acceptance by the

FALL 2009 101

host country’s institutional environment) enhances an MNC’s local credibility, as acknowledged by political groups and the business community, which in turn provides a better institutional environ-ment for improving the relationship between MNCs and the host government. In this perspective, building institutional networks between MNCs and host governments seems to be a key element for interdependence between the two.

MNCs and Home Government Relationship, and Institutions in East Asia

In contrast to the neoliberal and now largely discredited “Wash-ington consensus”2 economists, revisionists (or so-called statists) argue that the key element of economic development in East Asia was attributable to the existence of a strong state capacity, or a so-called developmental state (Amsden 1989; Emig 1999; Johnson 1982; Terry 2000; Wade 1990, 1996). The developmental state theory argues how a state intervenes in the economy for enhancing economic growth and development. The theory particularly em-phasizes the interventionist role of plan-rational state bureaucracy, in association with the introduction of industrial policies for the industrial transformation of East Asian nations.

After the Asia crisis in 1997, the achievements made by the East Asian developmental states were criticized by advocates of neolib-eralism and globalization. Some scholars, including Lee and Han (2006), Moon and Rhyu (2000), and Wong (2004), held the view that neoliberal reforms resulted in the end of the developmental states of East Asia, and attempted to reform them into an Anglo-American style of regulatory states or so-called global institutions. In opposition to this view, others, such as Shin (2005) and Pereira (2008), argued that the role of the state as well as interventionist measures are essential immobile factors in development, particu-larly in the creation of business environments that are conducive to that development as the pace of globalization accelerates. Fur-thermore, Chang (2005) strongly emphasizes that East Asian states should never adopt global institutions.

Although the statists emphasize state capacity for economic


development, institutionalists placed further emphasis on the role of the state in economic development, expanding the research target from state capacity to organizational issues within the state, the institutional system and arrangements of the state, and placed special emphasis on the limits of strength of the state (Aoki, Kim, and Okuno-Fujiwara 1996; Doner 1991; Evans 1995; Weiss 1998). In the perspective of institutionalists, the statist’s interpretation places too much emphasis on state autonomy, and thus it disregards influences of nongovernmental actors, including business societies and corporations. The institutionalists observe the arrangements or coordination of interests between the state and businesses and how institutional systems play a role in economic development.

Peter Evans and Linda Weiss portray the developmental states in East Asia in the perspective of interdependence between state and business and argue that an “embedded coordination structure” has created a favorable competitive collaboration between the state and business, referring this relationship to “embedded autonomy” or “governed interdependence.” In their perspective, effective state–business relations in East Asian developmental states have relied on large volumes of high quality information flow between the two bodies, and on mutual confidence that predictions and commitments are credible (Evans 1995, 1998; Weiss 1998). This relationship is maintained through institutional linkages, such as deliberation (or advisory) councils for consultation and informa-tion sharing between state and business, including MNCs. Thus, institutional structures for consultation and coordination between state and business, namely, deliberation councils, are deemed to play a central role in the policymaking structure of East Asian developmental states.

With regard to the state–business relationship in Japan, each ministry establishes a number of formal deliberation councils called shingikai, which are comprised of corporations, zaikai (economic federations) such as Nippon-Keidanren and the Chamber of Com-merce of Japan, and gyokai (industrial-specific trade) organizations, which include journalists and academics. The role of these councils is to mediate between the interests and opinions of various societal

FALL 2009 103

groups in the formation of public policies. For example, the Minis-try of Economy, Trade, and Industry coordinates eleven shingikai (deliberation councils) and over seventy bukai (subcommittees), which enable the state to consult with business societies and collect various information.3 In terms of business societies, both the zaikai and gyokai organizations, such as the Japan Automobile Manufac-turers Association (JAMA), can coordinate their economic interests with governmental organizations by means of publishing formal policy recommendation reports, dispatching executive officials to deliberation councils, and using informal contact with government officials (Yoshimatsu 2000).

Japanese-style deliberation councils have also been introduced in other developmental states of East Asia (Evans 1998). For in-stance, in 1985 the Industrial Development Advisory Council was established in Taiwan. Duplicating METI’s Industrial Structure Council, it consisted of six subcommittees—general industrial policy, industry, trade, small and medium-size enterprises (SMEs), commerce, and energy (Kondo 2005). The council (and committee) members consisted of government officials, academics, research-ers, and members of the business community. Furthermore, busi-ness organizations, such as the Taiwan Textile Federation and the Taiwan Electronics Appliance Manufacturer Association, have played important roles in coordinating economic interests with the government by collecting and publishing data and implement-ing policies (Weiss 1998). By the same token, Malaysia has also adopted Japanese-style deliberation councils. Prime Minister Mahathir Mohamad established the Malaysian Business Council (MBC) in association with the presentation of a policy paper, “Malaysia: The Way Forward,” or better known as “Vision 2020.” Contained in its pages is the blueprint for Malaysia’s development: to become an advanced nation by 2020. The MBC has been playing a role in crystallizing the Malaysian developmental state (Campos and Gonzalez 1999).

From the institutionalist perspective, the home government can formulate and implement effective economic policies in as-sociation with industry. In this relationship, the interdependence


between state and industry is the key to a prosperous nation. The institutionalists’ literature generally focuses on the state–industry relationship within the domestic market. However, we wish to propose an expansion of the concept. The Japanese government in collaboration with Japanese MNCs employs an institutional strategy to create closer political and economic relationships with Southeast Asia by creating an “embedded coordination structure” within the region. As a result, the Japanese style state–business relationship has been expanded, and is playing an important role in industrial development in the countries of Southeast Asia. Region-wide expansion of state–business economic relationships involving the Japanese government, Japanese MNCs, and governments in Southeast Asia will be examined in the next section.

Three-Party Economic Interdependence in Southeast Asia

Japanese MNCs as well as the Japanese government have been playing an important role in the regional political economy in Southeast Asia. Indeed, Japan has been one of the largest foreign investment and aid providers in the region for over four decades. Japanese MNCs have relocated their production activities from Japan to the region, and the Japanese government has provided a large number of infrastructure development projects, human re-source development programs, or proposed industrial development master plans to the governments in Southeast Asia.

However, the geopolitical and economic balance in Southeast Asia has been changing in recent years, as China gradually increases its political and economic influence over the region. Consequently, the Japanese government as well as Japanese MNCs have been required to establish closer political and economic relationships with Southeast Asian nations in order to remain competitive with China for the following two reasons: first, and politically speaking, enhancing Southeast Asian development is a key issue for Japan to balance geopolitical power in East Asia. Second, for business and economic reasons, Japanese MNCs have realized the potentially

FALL 2009 105

high business risks involved in concentrating production activities in China, thus re-recognizing the importance of production reloca-tion to Southeast Asia. Since 2003, in particular, the Japanese busi-ness community and government organizations such as the Japan External Trade Organization have started advocating the “China + 1 strategy,” by promoting Japanese FDI outside of China.4

Until the early 1990s, Japan’s political and economic strategies were based on ODA and FDI, within initiatives such as the New ASEAN Industrial Development (New AID) Plan and the Asian Brain Scheme.5 Under these schemes, Japan tried to enhance in-dustrial development in East Asia in association with the promotion of an international division of labor within the region, employing technical cooperation, financial cooperation, investment promotion, and intraregional trade promotion. However, these schemes failed to be realized because they targeted a particular country and industry, and thus could not cover regionwide issues (Otsuji 2001: 325). As a result of these failures, the Japanese nation-state has shifted its regional economic policy. In fact, the Japanese government, in as-sociation with the business community, has started strengthening extensive institutional linkages with Southeast Asia. METI, for instance, stressed the importance of harmonized and integrated intraregional institutions, in order to promote domestic and inter-regional investment as well as economic cooperation in the region (METI 2003: 4–5).

Emergence of Japanese Regional Production Networks

Since the mid-1980s, Japanese MNCs have actively relocated their production activities to countries in East Asia, as the result of ap-preciation of the yen caused by the Plaza Accord in 1985. Conse-quently, regional production networks (RPNs) created by Japanese MNCs, particularly in the automobile and electronics sectors, have become prominent phenomena in the regional political economy of East Asia (Borrus, Ernst, and Haggard 2000; Ernst 2006; Hatch and Yamamura 1996; Peng 2002; Yusuf, Altaf, and Nabeshima 2004). To be concise, RPNs, as informal market-driven networks, have


become one of the most important elements in regional integration within East Asia (Peng 2002; Shiraishi 1997).6 It is important to note that Japanese RPNs have absorbed local businesses and in-dustries in Southeast Asia as a joint-venture partner or components supplier. In addition, Japanese MNCs have established extensive political linkages with local business elites and politicians, who encourage a favorable attitude toward Japanese business activities in the region.7

In the process of regionalizing production, Japanese MNCs bring capital, employment, technology, and human resource development to local economies, particularly those that lack supporting indus-tries. In exchange, the governments and local industries in Southeast Asia support and participate in the regionalization of Japanese pro-duction networks in their countries. The governments of Southeast Asia have individual strategies and policies for industrialization. A state’s ability to take advantage of MNCs’ assets for national de-velopment plays an important role in the economic development of each country. Particularly, man-made location-specific factors such as policy, institutions, and infrastructure, which can be provided by a state, are becoming increasingly critical for developing countries in response to globalization (Shin 2005). Consequently, Southeast Asian governments started adopting policies to complement pro-duction networks by encouraging localized capability, building both within MNC establishments and through broader efforts to create cluster dynamics in the form of specialized infrastructure, human resources, and supplier bases (Felker 2003: 273).

Government investment promotion agencies in Southeast Asia started providing various measures, such as investment guarantees and special treatment, which include tax incentives and subsidies to particular industries, technologies, or types of FDI.8 Further-more, they have started to focus on improving the investment climate and enhancing investment promotion capacity in order to attract FDI.9 FDI-related government organizations have moved to invest in specialized infrastructure, such as the establishment of special economic zones (SEZs), and improve the number of staff with special skills, which in turn complements the strategies of MNCs (Felker 2003). It is also worth noting that those activities

FALL 2009 107

are often carried out in association with Japanese ODA assistance. For example, the Japan International Cooperation Agency (JICA) dispatches investment promotion experts to investment promotion agencies in Southeast Asia, particularly new ASEAN members such as Vietnam, Cambodia, and Laos, in order to enhance Japa-nese FDI into the region.10 By the same token, the Japan Bank for International Cooperation (JBIC) provides yen loans to Southeast Asian governments to develop economic infrastructures.11

Japan’s New Institutional Strategy

The failures of the New AID Plan and the Asian Brain Scheme, along with the emergence of Japanese RPNs during this time, en-couraged a change of economic policy by Japan in Southeast Asia, leading to an enhancement of the institutional linkage between the former and latter. Since the late 1990s, the Japanese government has started articulating Japan’s political-economic framework into Southeast Asia. The most significant factor of Japan’s new strategy is based on the incorporation of formal government–government networks and informal private market-driven networks. In other words, the establishment of networks between the Japanese gov-ernment, governments in Southeast Asia, and Japanese MNCs, or the so-called three-party economic interdependence system, has become a key strategy for Japan’s new regional policy.

A good example of such a network is the AEM-METI Economic and Industrial Cooperation Committee, which originated from an agreement reached at the AEM-METI meeting in September 1994 for the establishment of the Working Group on Economic Cooperation in Cambodia, Laos, and Myanmar (CLM-WG), in order to foster economic development in that part of the region. METI had strategic concerns for promoting regional development by planning to use the committee as an industrial ministers’ forum, as distinct from a trade ministers’ forum, through which Japan could transfer basic ideas regarding industrial development to the ASEAN governments (Hatch 2002). METI’s strategy was to establish an or-ganization that worked at the director-general level in the ministries concerned (CLM-WG) and to later upgrade the organization to the


ministerial level. The committee was subsequently oriented to industrial development, including the development of infrastruc-ture, improving business environments and industrial and trade financing, instead of standard trade discussions such as trade and investment liberalization (Yoshimatsu 2003: 110). Consequently, in December 1997—just after the eruption of the Asian crisis—the minister for METI and the ASEAN economic ministers agreed to upgrade the CLM-WG to the AMEICC. They aimed to reform in-stitutional structures in ASEAN countries in order to improve the competitiveness of industries, expand industrial cooperation, and support the economic development of new ASEAN member coun-tries (Otsuji 2001: 334–35). In addition, AMEICC was expected to create tighter economic linkages between Japan and ASEAN countries with the particular inclusion of Japanese assistance during and after the Asian crisis. In the perspective of ASEAN countries, the AMEICC would enhance the competitive advantages of the regional economy because it would address their concerns about human resources, infrastructure, and technology. From the Japa-nese perspective, the productivity increases brought about by the development of human resources, infrastructure, and technology within a systematic regionalization of production could be expected to accrue principally to Japanese MNCs in the region (Natsuda and Butler 2005). In addition, the economic development of Southeast Asia would act as a bulwark against China.

Under the AMEICC, eight working groups (human resource development, small and medium-size enterprises, and support-ing industries, the automobile, chemical, electronics, textile, and garment industries, statistics, and the East–West corridor working groups) were organized.12 A remarkable aspect of these working groups is that they consist of government officials and business representatives as members, and have a structural orientation simi-lar to the Japanese deliberation council system (Yoshimatsu 2003: 110). Formal institutional linkages, such as deliberation councils, provide an　information, consultation, and negotiation process for policymaking in Japan. The Japanese government, METI in par-ticular, thinks that such a close government–industry relationship enhances more rapid industrial development than the laissez-faire

FALL 2009 109

economic system (Natsuda and Butler 2005). In this context, work-ing groups under the AMEICC seem to be institutional linkages for high quality information flow, consultation, and coordination between the Japanese government, governments in Southeast Asia, and Japanese MNCs. Most important, Japanese MNCs play a pivotal role in the AMEICC working groups as advisers in the drawing up of industrial policies for the ASEAN region.

For instance, the automobile working group under the AMEICC identified the problems of the industry in Southeast Asia and issued a report proposing that the automobile industry in each country should be involved in the activities of the ASEAN Automobile Federation (AAF). In turn, the Japan Automobile Manufacturers Association should assist such activities by establishing a repre-sentative office in the region (Yoshimatsu 2003: 111). Japanese automobile MNCs have been interested in the development of supporting industries and the construction of intraregional auto-mobile parts trading networks within Southeast Asia,13 because the development of local supporting industries in Southeast Asia would be highly beneficial for Japanese automobile MNCs, allowing them to procure components locally. Consequently, the Japanese govern-ment, in association with JAMA and the Japan Autoparts Industry Association, dispatched a number of Japanese technicians to assist local assemblers and parts suppliers for the purpose of upgrading technological skills in the region (Hatch 2002). Most recently, the Japanese automobile industry has been attempting to harmonize technical and vehicle standards through the introduction of exhaust regulations, fuel specifications, and certification procedures for vehicle safety between Japan and Southeast Asia, implementing forty-five projects and dispatching twenty-two experts to the AME-ICC working groups (JAMA 2008). In this context, the Japanese government and business societies are establishing further indus-trial interdependence between the Japanese and Southeast Asian automobile industries.

Two remarkable issues can be identified in the role of the AME-ICC. The first is the role at the multilateral level of the deliberation council. Japan and ASEAN governments employ the AMEICC as a regionwide council to formulate regional industrial policies,


which can be beneficial not only for the region as a whole but also for Japanese MNCs in the region. Japan has been facilitating in-dustrial development in Southeast Asia by establishing appropriate mechanisms to exchange views and information concerning issues relating to ASEAN–Japan development cooperation, involving the three-party system. Furthermore, one of the most important issues for Japan is to harmonize institutional systems such as patents, legal systems, industrial standards, certification systems, and statistics between Japan and Southeast Asia (Otsuji 2001: 336). Indeed, harmonization or horizontal integration between Japan and Southeast Asia seems to be one of the key necessities for economic interdependence.

The second issue is the role of industrial governance in the re-gion. The AMEICC is playing a key role as a region-wide industrial development council, and sits in contrast to trade councils. On the one hand, the Japanese government is promoting FTAs with Southeast Asian countries. One the other hand, it is not merely concerned with trade but also with additional assistance in various fields of economic interest, such as technology, human resources, and infrastructure development within the region.14 Consequently, the Japanese government has been facilitating a form of economic partnership agreements (EPAs) with Southeast Asian nations.15 In this context, the AMEICC seems to be playing a complementary role for Japanese EPA policies in relation to regional industrial development and industrial harmonization between Japan and Southeast Asia.

Figure 1 outlines the three-party economic interdependence of the region. Economic development as well as the economic environment can be improved as a result of this interdependence. Three types of economic relationships can be identified. First, in the economic relationship between Japanese MNCs and the Japanese government, a collaborative and cooperative relationship between the two parties is sustained by “governed interdependence” or “em-bedded autonomy,” represented by deliberation councils. Thus, the Japanese government jointly pursues economic benefits in associa-tion with Japanese MNCs. Second, in the economic relationship between Japanese MNCs and the host governments in Southeast

FALL 2009 111

Asia, a nonadversarial and cooperative relationship, rather than adversarial and confrontational relationship, appears to be favored for the following reasons: first, the host governments in Southeast Asia have been pursuing FDI-led development in response to the globalization of the world economy. Second, the Japanese RPNs serve to encourage local business and industries in Southeast Asia to develop as business partners, such as a joint-venture partner or components supplier. Consequently, the host governments in Southeast Asia and Japanese MNCs have established mutually beneficial economic relationships. Japanese MNCs provide capital, employment, technology, and human resource development to local economies in exchange for the participation of local industry and government and provision of support for Japanese MNCs. Third, in the economic relationship between the Japanese government and the governments in Southeast Asia, a cooperative relationship was formed through the establishment of a formal institutional network, the AMEICC. Above all, Japanese MNCs are included in the struc-ture of the AMEICC. Each party participates in the creation of the AMEICC, in the form of regional deliberation councils, in order to maintain their economic benefits in Southeast Asia. In other words, regional deliberation councils play a coordinating role in maintain-ing economic interdependence among the three parties.

The Japanese government has created extensive government–

Figure 1. Three-Party Economic Interdependence in Southeast Asia

MNC-Home

Government Relation MNC-Host

Government Relation

Japanese MNCs

JapaneseGovernment

Governments inSoutheast

RegionalDCs

Deliberation Councils (DCs)

Home-Host

Government Relation

Asia


government cooperative networks in an attempt to create a harmony with the Japanese style of industrial governance system. In particu-lar, Japanese MNCs, the Japanese government, and governments in Southeast Asia have constructed regional deliberation councils in Southeast Asia. As a result, interdependence between the state and business in Southeast Asia has significantly expanded through the involvement of the three-party system.

The Vietnam–Japan Joint Initiative

The Japanese government has constructed a three-party economic interdependence system in Southeast Asia through the AMEICC at the multilateral level. By the same token, the Japanese govern-ment has employed the same institutional strategy for individual nations, in particular new ASEAN member countries. We argue that the Vietnam–Japan Joint Initiative is a successful example of bilateral economic cooperation based on three-party economic interdependence, particularly as a result of the construction of institutional networks between the two nations.16

Japanese state–business collaboration has created significant political-economic frameworks in association with the government of Vietnam. On April 7, 2003, the prime minister of the Socialist Republic of Vietnam, Phan Van Khai, and the prime minister of Japan, Junichiro Koizumi, met in Tokyo and decided to launch “the Vietnam–Japan Joint Initiative to Improve the Business Environ-ment with a View to Strengthen Vietnam’s Competitiveness,” or the so-called Vietnam–Japan Joint Initiative. The aim of the initiative was to strengthen Vietnam’s economic competitiveness through the promotion of FDI flow into Vietnam. The Japanese and Vietnamese governments jointly committed to enhancing the development of industries by establishing training and technical support centers for small and medium-size enterprises, setting up a database for the industry, building industry zones, and implementing incentive methods, such as support for capital mobilization, human resource training, and information o n technology.

In the perspective of Japanese corporations and zaikai, such as

FALL 2009 113

Nippon-Keidanren and the Chamber of Commerce, the establish-ment of a favored investment environment in Vietnam was very important for the relocation of Japanese production activities within East Asia. The Japanese business community and government organizations jointly advocated the importance of the “China + 1 strategy.” Vietnam was considered a promising “+1” because of its relatively large market, and high quality but inexpensive labor force. However, there were a variety of issues within Vietnam, such as applicable laws, the taxation system, corruption, and infrastructural deficiencies.17 Thus, the creation of a favored business environment in Vietnam was deemed both necessary and beneficial for Japanese MNCs in the region. Furthermore, it was also thought that Japan’s efforts would boost inward foreign investment into Vietnam not only from Japan but also from other countries, which would contribute to the economic development of Vietnam.18

The Vietnamese government launched the doi moi (renova-tion) policy in 1986 and has been gradually deregulating FDI policies since the late 1980s in order to enhance foreign invest-ment (Thoburn 2004). Subsequently, FDI inflow into Vietnam has significantly increased. However, this trend slowed after the Asian currency crisis, and as a result, legal and structural prob-lems in the Vietnamese investment environment became evident. Therefore, for the Vietnamese government to enhance economic development, it had to improve its attractiveness to foreign inves-tors and make this a priority issue (Freeman 2004). As one of the largest regional investors,19 Japanese MNCs were thus deemed to play an important role in Vietnam’s rapid industrialization and economic development, and the creation of an attractive in-vestment environment became necessary for attracting Japanese FDI—particularly due to the fierce competition posed by other ASEAN countries and China. In addition, Vietnam has been mak-ing the transition from central planning to a more market-based system. It appears that, for the economic transition of Vietnam, the Vietnamese government views the Japanese development state model as a potentially more effective and favorable choice than the neoclassical model.20 Thus, the government officials became


interested in Japan’s successful experiences with state-led eco-nomic development.21

In order to achieve this initiative, Japan established a joint com-mittee, which included governmental organizations and private business associations as well as various Vietnamese ministries.22 In July 2003, a private consultation team, contracted by the Japa-nese government, was dispatched to Vietnam. Their role was to identify impediments to FDI through the interviewing of Japanese corporations in Vietnam and Vietnamese governmental organiza-tions, and then formulate improvement plans. As a result of a series of negotiations between Japanese and Vietnamese parties in the committee, the VJJI was finally approved by the joint committee on December 4, 2003 (Kitano 2004). It consisted of 44 specific items and a subsequent 125 subitems for action plans, which were categorized into the following six fields:

1. establishment and implementation of an FDI attraction strategy;

2. regulations related to investment;3. capacity building of implementing authorities;4. improvement of investment-related institutions;5. improvement of economic infrastructure; and6. support to existing investors (see Appendix Table 1).

Features of the Initiative

Two important features can be identified in the VJJI. First, a joint effort between the Japanese and Vietnamese teams can be clearly identified. The Japanese government–business alliance, in association with various Vietnamese government organizations, worked together to jointly introduce the scheme. In this “three-party” system, the role of the business community was essential as an information provider during the negotiation process. The first stage was to identify investment-related problems faced by Japanese MNCs. The second stage was to facilitate common recognition and understanding of the problems through a series of negotiations and discussions. The final stage was to implement

FALL 2009 115

the best possible solutions to the problems at a policy level.In particular, requests for solving various business impediments

from the Japan Business Association in Vietnam and Ho Chi Minh City (formerly called Saigon) to the Vietnamese government became leverage for Japanese governmental organizations to negotiate with their counterparts. As one member of the Japan Business Association in Ho Chi Minh City pointed out, “local Japanese corporations in the Japanese Business Association in Vietnam strengthened solidarity and made a lot of demands to the Vietnamese government, aimed to-ward a better business environment in the country.”23 These demands became a strong support for Japanese governmental organizations. In this context, the three-party system seemed to be more effective than a two-party (government–government) system for Japanese counterparts, in order that they could exchange views and informa-tion as well as negotiate with the Vietnamese government.24 In this process, the joint committee played a central coordination role in the negotiations between the Vietnamese and Japanese parties.

Second, the Japanese government considered FDI important in aiding the development of appropriate institutions and policies, economic infrastructure, and human resources, and this should be the engine for growth in Vietnam. Thus, the Japanese govern-ment has provided effective and timely ODA assistance to sup-port the implementation of the action plan items, in accordance with Vietnam’s own efforts to improve the relevant policies and regulations. The support provided so far includes the infrastruc-tural development of roads, ports, bridges, investment promotion, SME promotion, and the formulation of an industrial development plan. For example, JICA dispatched two experts to the Ministry of Planning and Investment for policy support in the areas of invest-ment, environmental improvements, and SME promotion, and one expert for the formulation of policies for the electric/electronics and motorbike industries with the ministries concerned (Embassy of Japan in Vietnam 2005). In this regard, the VJJI seems not only to play a role in the industrial development committee, but since 2007 has also played a complementary role in EPA negotiations between Japan and Vietnam, particularly the bilateral cooperation


areas of industry, trade, investment, human resource development, tourism, environment, and transport.

Outcomes

The implementation of the VJJI has been greatly facilitated by the inclusion of a monitoring mechanism under the joint committee. The progress of the 125 subitems (including 44 specific items) within the action plan has been periodically monitored since the commencement of the initiative by both Japanese and Vietnamese sides. By November 2007, 93 percent of the items were evaluated as having achieved their respective objectives (Embassy of Japan in Vietnam 2007).

The investment environment in Vietnam was significantly im-proved after the initiative was agreed upon. Strengthening of FDI promotion capacity was conducted under the Japanese government, through dispatching investment promotion experts from Japan, Viet-namese investment promotion officers’ training in Japan, a series of investment promotion seminars in Japan, Japanese missions to Vietnam, the publishing of an investment guidebook, and so on. Infrastructure, technology transfers, and investment laws were all improved. Import tax on automobile and electronics components was significantly reduced. Anticorruption law and a waiver on short-term-stay visas for Japanese citizens were also introduced. In addition, a discriminatory minimum wage requirement for for-eign corporations was removed. More important, master plans for the development of automobile, motorbike, electronics, and sup-porting industries were also formulated in Vietnam in association with Japan (Embassy of Japan in Vietnam 2007). According to Kyoshiro Ichikawa, a JICA expert who works for the Ministry of Planning and Investment of Vietnam, there have been significant advances: “a series of industrial zones for certain industries [are] under construction with investment preferences and they have at-tracted many foreign investors in auto and motorbike parts.”25 In the Vietnamese perspective, Nguyen Thi Bich Van, vice head of the Foreign Investment Department, acknowledged the importance of the initiative for attracting Japanese investors, stating: “From our

FALL 2009 117

trip to three big cities in Japan last February we know that Japa-nese enterprises clearly understand Vietnam’s efforts to improve the investment environment. Our mission now is how to welcome them in Vietnam.”26

The economic relationship between Japan and Vietnam has been significantly strengthened under the VJJI. This is indicative of the bilateral economic figures (see Table 1). Japanese FDI in-creased elevenfold in the period 2003–7, accounting for US$120 million in 2003 and US$1.386 billion in 2007. Bilateral trade doubled between 2003 and 2006. In addition, exports from Japan to Vietnam increased from US$2.9 billion in 2003 to US$6.3 bil-lion in 2007, and imports also increased from US$2.8 billion in 2003 to US$5.5 billion in 2007. By the same token, Japanese ODA increased after 2003, accounting for US$640 million in 2007.

Table 1

Bilateral Economic Figures Between Japan and Vietnam, 2001–2007 (US$ million)

Year 2001 2002 2003 2004 2005 2006 2007

FDI 163 102 120 254 842 1,453 1,386

Trade (total) 4,322 4,648 5,693 7,007 8,504 9,424 11,790

Export 1,954 2,349 2,885 3,500 4,093 4,554 6,251

Import 2,368 2,299 2,808 3,507 4,411 4,671 5,540

ODA (total) 460 375 484 615 603 563 640

Loan aid 321 241 307 492 480 461 548

Grant aid 52 54 53 40 51 41 18

Technical cooperation 87 80 84 84 72 61 74

Sources: ASEAN-Japan Center, International Monetary Fund (IMF), and Ministry of Foreign Affairs (MOFA).Notes: FDI: Approval basis, ASEAN-Japan Center, ASEAN-Japan Statistical Pocket-book (various issues); original data from Foreign Investment Agency (FIA), MPITrade: Figures of Export (Japan to Vietnam) and Import (Vietnam to Japan) from the IMF’s Direction of Trade Statistical Yearbook (various issues). ODA: Net disbursement figures from the MOFA’s ODA data book; available at www.mofa.go.jp/mofaj/gaiko/oda/shiryo/kuni/07_databook/index.html.


The VJJI has also been associated with increases in FDI inflows to Vietnam from all over the world, particularly after its introduction in 2003. Both the value and cases of FDI significantly increased during 2003–7, accounting for US$1.9 billion and 729 cases in 2003 and US$21.3 billion and 1,964 cases in 2007 (see Figure 2).

Remarkably, the contribution made by FDI to Vietnam’s gross domestic product (GDP) significantly increased from 4.7 percent in 2003 to 30.0 percent in 2007 (see Figure 3). In relation to an-nual GDP growth, Vietnam also showed a steady rise until 2007. Furthermore, GDP per capita increased from US$473 in 2003 to US$617 in 2007. These figures indicate that FDI inflow has been playing a more important role in the economic development of Vietnam in recent years.

In order for such strong improvements to occur, there is little doubt that the economic interdependence that has been fostered by the three-party negotiation system has played a vital role, and the key to this has been the establishment of deliberation councils. In the case of Vietnam, the establishment of a joint committee (deliberation council) between Japan and Vietnam has played a

Figure 2. Inward FDI in Vietnam, 2000–2007

0

500

1,000

1,500

2,000

2,500

0

5

10

15

20

25

2000 2001 2002 2003 2004 2005 2006 2007

Num

ber

US

$ bi

llion

Year

Value of FDI Number of FDI Cases

Source: ASEAN-Japan Center, ASEAN-Japan Statistical Pocketbook (various issues).Note: Approval basis, original data from FIA, MPI.

FALL 2009 119

coordination role in the three-party system, with the Japanese government, Japanese MNCs, and the Vietnamese government all being integral to the successful improvement of the Vietnamese FDI environment. The Joint Donor Report to Vietnam argued that international donors cannot buy policy reforms in Vietnam, and there is thus strong country ownership of the programs (Vietnam Development Report 2007: 29). This case study has proved that Japan’s institutional strategy might be the most effective way for influencing policy reforms in the country.

Concluding Remarks

This study has argued that economic relations between Japan and Southeast Asia have been moving toward a greater interdependent relationship in the context of the creation of regional deliberation councils, which maintains the interests of the members within a three-party negotiation system: the Japanese government, govern-ments in Southeast Asia, and Japanese MNCs. Regional deliberation

Figure 3. Economic Growth Rate and FDI/GDP Ratio in Vietnam, 2000–2007

Sources: World Development Indicators (WDI online) and ASEAN-Japan Center.Note: GDP (current US$), GDP annual growth rate, and GDP per capita (constant 2000 US$) data from WDI and FDI data from Figure 2.

6.8

6.97.1 7.3

7.8 8.4 8.2 8.56.5

7.6

4.4 4.7

9.511.3

19.1

30.0

402 423 448 473 503539

576

617

0

100

200

300

400

500

600

700

0

5

10

15

20

25

30

35

2000 2001 2002 2003 2004 2005 2006 2007

US

$

Per

cent

Year

GDP Growth Rate FDI/GDP Ratio GDP per Capita


councils play an important role in information flow, coordination, and negotiation for economic development in Southeast Asia.

In recent years, the Japanese government and business com-munity have needed to establish a closer economic linkage with Southeast Asia against China in the geopolitical perspective. Par-ticularly since the late 1990s, the Japanese nation-state has shifted its regional economic strategy by enhancing industrial institutional linkages with Southeast Asian countries. As an institutional strategy, the Japanese government and business society have cooperatively articulated a Japanese-style state–business collaboration model into the regional industrial governance system in Southeast Asia. Within this system, Japanese MNCs play a pivotal role in providing information and coordinating industrial development in the region. In addition, such industrial networks seem to play a complementary role in Japan’s FTA policies. As a result, both formal institutional networks and informal market-driven networks between Japan and Southeast Asia have been jointly strengthened.

In the multilateral economic relationship with ASEAN govern-ments, Japan has successfully established a regional deliberation council, the AMEICC, which aims to pursue Japanese-style in-dustrial development. Consequently, the economic relationships between Japan and ASEAN have become more cooperative, and have been playing an important role in the creation of national competitiveness, which in turn enhances economic development in Southeast Asia. Most recently, the Japanese government and MNCs are trying to harmonize institutional systems between Japan and Southeast Asia for further interdependence.

As an example of a bilateral relationship, a case study of the VJJI showed the successful implementation of a formal institu-tional network, through the creation of a joint committee that has improved the Vietnamese investment climate. The joint committee has played a central coordination role in negotiations between the Vietnamese and Japanese parties. Japanese MNCs, in particular, play an important role in providing information such as business impediments, and their action plans assist in providing leverage in the Japanese government’s negotiation with their Vietnamese

FALL 2009 121

counterparts. This has resulted in a rapid increase of FDI inflow to Vietnam, particularly from Japan, and has enhanced Vietnamese economic development as well as the prosperity of Japanese MNCs in the country.

In the current world, informal market-driven networks cre-ated by multinational corporations have become a prominent issue in the global political economy. In addition, nation-state boundaries are becoming less significant as a result, in part, of the globalization process under neoliberal influences. However, this study concludes that institutional arrangements between states and MNCs can be beneficial for economic development in less advanced countries.

Notes

1. See Dunning (1988) for the eclectic paradigm.2. See Stiglitz (1998) for a sustained criticism of these policy prescriptions.3. See METI’s Web site in Japanese, www.meti.go.jp/committee/index.

html#c2 (accessed January 25, 2008).4. This encourages the location of investment as one production base located

in China and one production base located in one of the other East Asian countries (establishing a production base not only in China). The reason for this was, first, after the SARS outbreak in China, there was a need to avoid potential business risks in China, leading to a strengthening of this type of investment strategy. Second, the location of Japanese FDI in China, for the first time, overtook that of ASEAN-10 in 2003.

5. See Arase (1995) and Shiraishi (1997) for more details.6. Informal means not dependent on the formal intergovernmental agreement.7. For example, Japanese automobile MNCs established extensive use of infor-

mal networks, including the sometimes “extralegal accommodation” of politicians and bureaucrats in Southeast Asia (see Hatch and Yamamura 1996, ch. 8).

8. For instance, by providing corporate tax incentives, the Thai Board of Investment (BOI) targets automobile, electronics, hard-disk drive, and biotech-nology industries. In addition, the BOI provides special incentives for foreign investment in research and development (R&D), operational headquarters (OHQ), or regional headquarters (see Economist Intelligence Unit 2007a). By the same token, the Malaysian Industrial Development Authority provides special tax incentives for R&D, OHQ, and high-tech industries (see Economist Intelligence Unit 2007b).

9. The investment climate is one of the most important issues for attracting FDI. For instance, Yeung (1996) concluded that the investment climate, rather than particular incentives, influences the location decision of MNCs.

10. JICA often advises them to establish a Japan Desk within the organization


that exclusively consults with Japanese firms in a Japanese business manner (see JICA 2007, ch. 11).

11. For example, the Eastern Seaboard project in Thailand is considered one of the successful infrastructure development projects that attracted Japanese FDI (see Arase 1995: 102–5). As a recent example, JBIC is currently engaged in rehabilitating the Sihanoukville port in Cambodia in order to establish an SEZ.

12. See Natsuda and Butler (2005) for more details on the AMEICC.13. For instance, the Japanese government and MNCs negotiated the ASEAN

Industrial Cooperation scheme, a low-tariff automobile parts trading scheme set up in conjunction with the ASEAN Free Trade Area and the ASEAN govern-ments. See Yoshimatsu (2002) for more details.

14. For instance, Dent (2005) views Japan’s EPA approach as an extension of Japan’s development assistant diplomacy. Hatch (2004) observes that Japan’s foreign economic policies toward East Asia are oriented primarily toward indus-trial harmonization, rather than trade liberalization.

15. EPAs aim not only to eliminate or reduce tariffs and other barriers to trade but also to cover widely comprehensive issues such as economic cooperation, harmonization of economic systems, and free movement of people, goods, and capital. In Southeast Asia, Japan formed bilateral EPA agreements with Singapore in 2002, Malaysia in 2005, Thailand, the Philippines, Brunei, and Indonesia in 2007. The Multilateral EPA agreement—the ASEAN-Japan Comprehensive Economic Partnership (AJCEP) Agreement—entered into force with Singapore, Laos, Vietnam, and Myanmar in December 2008, Brunei in January 2009, Ma-laysia in February 2009, and Thailand in June 2009, and aimed to complement bilateral EPAs, particularly focusing on components trade between Japan and ASEAN member countries. For instance, AJCEP allows Japanese corporations to export high value-added components to a member country that conducts as-sembly operations and exports to other member states under preferential tariff rates, which cannot be covered in a bilateral agreement.

16. The Japanese government tried to introduce the VJJI style negotiation for enhancing the FDI environment in Cambodia, the so-called Study on Economic Policy Support in the Kingdom of Cambodia, in 2006–7. However, it was not as successful as the Vietnamese case due to small and limited voices from Japanese MNCs (only two Japanese manufacturers) in the country at that time.

17. The above-mentioned specific issues can be solved on only a bilateral basis, not on a multilateral basis.

18. Interview at the Embassy of Japan in Vietnam on February 25, 2008.19. Japan has been the largest investor in Vietnam on a balance of payment

basis, but not on an approval basis.20. For example, Vietnamese Communist Party Leader Do Muoi invited the

Japanese government to formulate a five-year development program, which included industrial development, investment, and fiscal monetary policy for 1996–2000 in April 1995 (see Terry 2000: 90–91).

21. Interview at the Embassy of Japan in Vietnam on February 25, 2008.22. Japanese government organizations: Ministry of Foreign Affairs, Ministry

of Finance, Ministry of Economy, Trade, and Industry, Japan International Co-

FALL 2009 123

operation Agency, Japan Bank for International Cooperation and Japan External Trade Organization; Japanese Private Business Associations: Nippon-Keidanren and Japan Business Association in Vietnam and Ho Chi Minh City; Vietnamese Ministries: Ministry of Planning and Investment, Ministry of Trade, Ministry of Finance, Ministry of Science and Technology, Ministry of Transport, Ministry of Industry, Ministry of Post and Telematics Telecommunications, Government Of-fice, Ministry of Labor Invalids and Social Affairs, Ministry of Natural Resources and Environment, Ministry of Justice (Embassy of Japan in Vietnam 2005).

23. Interview, February 8, 2007.24. In the case of Cambodia, which was based on essentially a two-party

negotiation system due to the very limited voice of Japanese corporations in the country, could not succeed in comparison with VJJI case, due to a lack of pressure from the Japanese business sector on the Cambodian government.

25. Vietnam Net Bridge, VN: A Model for Improving Investment Climate, March 24, 2006, available at http://english.vietnamnet.vn/reports/2006/03/553517/ (accessed January 28, 2008).

26. Ibid.

References

Aoki, M., H.K. Kim, and M. Okuno-Fujiwara. 1996. The Role of Government in East Asian Economic Development: Comparative Institutional Analysis. Oxford: Oxford University Press.

Amsden, A. 1989. Asia’s Next Giants: South Korea and Late Industrialization New York: Oxford University Press.

Arase, D. 1995. Buying Power: The Political Economy of Japan’s Foreign Aid. Boulder, CO: Lynne Rienner.

Borrus, M., D. Ernst, and S. Haggard. 2000. International Production Networks in Asia: Rivalry or Riches? London: Routledge.

Campos, J.E., and J. Gonzalez III. 1999. “Deliberation Councils, Government-Business-Citizen Partners, and Public Policy-Making: Cases of Singapore, Malaysia, and Canada.” Asia Pacific Journal of Management 16: 429–47.

Chang, H.J. 2005. “Globalization, Global Standards, and the Future of East Asia.” Global Economic Review 34, no. 4: 363–78.

Dent, C. 2005. “Bilateral Free Trade Agreements: Boon or Bane for Regionalism in East Asia and the Asia-Pacific.” European Journal of East Asian Studies 4, no. 2: 287–314.

Doner, R. 1991. Driving a Bargain: Automobile Industrialization and Japanese Firms in Southeast Asia. Berkeley: University of California Press.

Dunning, J. 1988. “The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions.” Journal of International Business Studies 19, no. 1: 1–31.

Dunning, J. 1998. “An Overview of Relations with National Governments.” New Political Economy 3, no. 2: 280–84.

Economist Intelligence Unit. 2007a. Country Commerce: Thailand. New York.


———. 2007b. Country Commerce: Malaysia. New York.Embassy of Japan in Vietnam. 2005. The Vietnam–Japan Joint Initiative.

Pamphlet. Hanoi.———. 2007. Evaluation on the Progress of the Vietnam–Japan Joint

Initiative. Hanoi.Emig, A. 1999. “Japan’s Challenge to the World Bank: An Attempt at

Intellectual Contribution.” Japanese Economy 27, no. 1: 46–96.Ernst, D. 2006. “Searching for a New Role in East Asia Regionalization–

Japanese Production Networks in the Electronics Industry.” In Beyond Japan: The Dynamics of East Asian Regionalism, ed. P. Katzenstein and T. Shiraishi, 161–98. Ithaca: Cornell University Press.

Evans, P. 1995. Embedded Autonomy: States and Industrial Transformation. Princeton: Princeton University Press.

———. 1998. “Transferable Lessons? Re-examining the Institutional Prerequisites of East Asian Economic Policies.” Journal of Development Studies 34, no. 6: 66–86.

Fagre, N., and L. Wells. 1982. “Bargaining Power of Multinationals and Host Governments.” Journal of International Business Studies (Fall): 9–23.

Felker, G. 2003. “Southeast Asian Industrialisation and the Changing Global Production System.” Third World Quarterly 24, no. 2: 255–82.

Freeman, N. 2004. “Harnessing Foreign Direct Investment for Economic Development and Poverty Reduction.” Journal of the Asia Pacific Economy 9, no. 2: 209–22.

Grosse, R. 1996. “The Bargaining Relationship between Foreign MNEs and Host Governments in Latin America.” International Trade Journal 10, no. 4: 467–99.

Hatch, W. 2002. “Regionalizing the State: Japanese Administrative and Financial Guidance for Asia.” Social Science Japan Journal 5, no. 2: 179–97.

———. 2004. “Japan’s Agenda for Asian Regionalism: Industrial Harmonization, Not Free Trade.” Japanese Economy 32, no. 2: 86–97.

Hatch, W., and K. Yamamura. 1996. Asia in Japan’s Embrace: Creating a Regional Production Alliance. Cambridge: Cambridge University Press.

Japan Automobile Manufacturers Association (JAMA). 2008. Hand-in-Hand: Partnership in the Auto Industry Between ASEAN and Japan. Singapore.

Japan International Cooperation Agency (JICA). 2007. The Study on Economic Policy Support in the Kingdom of Cambodia. Tokyo.

Johnson, C. 1982. MITI and the Japanese Miracle. Stanford: Stanford University Press.

Kitano, M. 2004. “Toushi Kankyou Seibi he ODA wo Katsuyo: Nichi Etsu Kyoudou Inichiachibu” (The Utilization of ODA for Improvement of the Investment Environment: The Vietnam–Japan Joint Initiative). Kokusai kaihatsu (April): 42–44.

Kondo, H. 2005. Comparative Analysis of Governance: Relationship Between Bureaucracy and Policy Co-ordination Capacity with Particular References to Bangladesh. Tokyo: Institute of International Cooperation, Japan International Cooperation Agency.

FALL 2009 125

Kostova, T., and S. Zaheer. 1999. “Organizational Legitimacy under Conditions of Complexity: The Case of the Multinational Enterprise.” Academy of Management Review 24, no. 1: 64–81.

Kremenyuk, V., G. Sjostedt, and W. Zartman. 2000. “International Economic Negotiations: Research Tasks and Approaches.” In International Economic Negotiation: Models versus Reality, ed. Kremenyuk and Sjostedt, 5–28. Cheltenham, UK: Elgar.

Lauridsen, L. 2004. “Foreign Direct Investment, Linkage Formation and Supplier Development in Thailand during the 1990s: The Role of the State Governance.” European Journal of Development Research 16, no. 3: 561–86.

Lee, S.J., and T. Han. 2006. “The Demise of Korea, Inc.: Paradigm Shift in Korea’s Developmental State.” Journal of Contemporary Asia 36, no. 3: 305–24.

Luo, Y. 2001. “Toward a Cooperative View of MNC-Host Government Relations: Building Blocks and Performance Implication.” Journal of International Business Studies 32, no. 3: 401–19.

Ministry of Economy, Trade and Industry (METI), Study Group on Technical Cooperation. 2003. Asian Dynamism and Prospects for Technical Cooperation Policies. Tokyo.

Moon, I.C., and S.Y. Rhyu. 2000. “The State, Structural Rigidity, and the End of Asian Capitalism: A Comparative Study of Japan and South Korea.” In Politics and Markets in the Wake of the Asian Crisis, ed. Robison et al., 77–98. London: Routledge.

Natsuda, K., and G. Butler. 2005. “Building Institutional Capacity in Southeast Asia: Regional Governed Interdependence.” ASEAN Economic Bulletin 22, no. 3: 331–39.

Otsuji, Y. 2001. “Ajia tsusho senryaku no shinka” (The Deepening of Commercial Strategy in Asia). In Ajia Seiji keizai ron (The Theory of Asian Political Economy), ed. A. Suehiro and S. Yamakage, part 2, ch. 4. Tokyo: NTT Shuppan.

Pereira, A. 2008. “Whither the Developmental State? Explaining Singapore’s Continued Developmentalism.” Third World Quarterly 29, no. 6: 1189–203.

Peng, D. 2002. “Invisible Linkages: A Regional Perspective of East Asian Political Economy.” International Studies Quarterly 46: 423–47.

Ramamurti, R. 2001. “The Obsolescing ‘Bargaining Model?’ MNC-Host Developing Country Relations Revised.” Journal of International Business Studies 32, no. 1: 23–39.

Shiraishi, T. 1997. “Japan and Southeast Asia.” In Network Power: Japan and Asia, ed. P. Katzenstein and T. Shiraishi, 169–95. Ithaca: Cornell University Press.

Shin, J.S. 2005. “Globalization and Challenges to the Developmental State: A Comparison Between South Korea and Singapore.” Global Economic Review 34, no. 4: 379–95.

Stopford, J. 1994. “The Growing Interdependence Between Transnational Corporations and Governments.” Transnational Corporations 3, no. 2: 53–76.


Stiglitz, J. 1998. “More Instruments and Broader Goals: Moving Toward the Post-Washington Consensus.” Speech delivered as the WIDER Annual Lecture 2, Helsinki, United Nations University-World Institute for Development Economics Research.

Strange, S. 1992. “States, Firm and Diplomacy.” International Affairs 68, no. 1: 1–15.

Terry, E. 2000. “How Asia Got Rich: World Bank vs. Japanese Industrial Policy.” Japanese Economy 28, no. 2: 76–96.

Thoburn, J. 2004. “Globalisation and Poverty in Vietnam.” Journal of the Asia Pacific Economy 9, no. 2: 127–44.

Vietnam Development Report. 2007. Vietnam Development Report 2007: Aiming High. Joint Donor Report to the Vietnam Consultative Group Meeting, Hanoi, December 14–15, 2006. Hanoi: Vietnam Development Information Center.

Wade, R. 1990. Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization. Princeton: Princeton University Press.

———. 1996. “Japan, the World Bank, and the Art of Paradigm Maintenance: The East Asian Miracle in Political Perspective.” New Left Review 217: 3–36.

Weiss, L. 1998. The Myth of the Powerless State: Governing the Economy in a Global Era. Cambridge, UK: Polity Press.

Wong, J. 2004. “The Adaptive Developmental State in East Asia.” Journal of East Asian Studies 4: 345–62.

Yeung, H.W. 1996. “Attracting Foreign Investors: The Role of Incentives in ASEAN Operations of TNCs.” Pacific Review 9, no. 4: 505–29.

Yoshimatsu, H. 2000. Internationalization, Corporate Preference and Commercial Policy in Japan. London: Macmillan.

———. 2002. “Preferences, Interests, and Regional Integration: The Development of the ASEAN Industrial Cooperation Agreement.” Review of International Political Economy 9, no. 1: 123–49.

———. 2003. “Japanese Policy in the Asian Economic Crises and the Developmental State Concept.” Journal of the Asian Pacific Economy 8, no. 1: 102–25.

Yusuf, S, A. Altaf, and K. Nabeshima. 2004. Global Production Networking and Technological Change in East Asia. Washington, DC: World Bank.

FALL 2009 127

To order reprints, call 1-800-352-2210; outside the United States, call 717-632-3535.

Appendix Table 1

Items of the Vietnam–Japan Joint Initiative

No. Fields Major issues Items

1. Establishment and implementation of an FDI attraction strategy

The development of supporting industries in Vietnam, corporate income tax, personnel income tax, FDI promotion activities (introduction of one-stop service), introduction of a master plan, and visa waiver for short stays

6 specific items, 31 subitems for action plans

2. Regulations related to investment

The removal of restrictive investment rules, various legal issues such as labor, land, foreign investment, technology transfers, and so on


3. Capacity building of implementing authorities

The enhancement of transparency and administration capacity in tax and intellectual property, and so on


4. Improvement of investment-related institutions

Inhancement of accounting standards, statistical capacity, industrial standardization, metrology improvement, and so on


5. Improvement of economic infrastructure

Improvement of urban traffic, transport efficiency, the power sector, telecommunications, and so on


6. Support to existing investors

Promotion of the automobile industry, the motorbike industry, the electronics industry, and so on


Copyright of Japanese Economy is the property of M.E. Sharpe Inc. and its content may not be copied or

emailed to multiple sites or posted to a listserv without the copyright holder's express written permission.

However, users may print, download, or email articles for individual use.

Kaoru States, Multinational Corporations, and Institutional Arrangements

Documents

Transcript of Kaoru States, Multinational Corporations, and Institutional Arrangements