Japanese investors are increasing their presence in Southeast Asia as both businesses and governments seek to benefit from the increased integration that the ASEAN Economic Community will bring to the region.

Kazuyuki Nakane, a senior official in Japan’s foreign ministry, flew to Cambodia and Laos to strike trade deals with the countries – whom are also major targets of Chinese investment.

The results from Nakane’s visit were the signing of an aviation accord which will allow direct commercial flights between Japan and the two countries, as well as progress made on several more deals. She also attended the opening ceremony of a bridge in Cambodia built with Japanese aid.

Neak Loeung Bridge

The Neak-Loeung Bridge spans the Mekong River and was built with over US$100 million worth of Japanese financing.

Many observers believe that competition will continue to increase over the next few years, as major economies such as China, the European Union, and Japan all attempt to profit from the ASEAN Economic Community, or AEC, which will come into effect at the end of 2015.

“There is this kind of competition among the big players,” said Sanchita Basu Das, at the Institute of Southeast Asian Studies in the city-state of Singapore. “In the next year, we are going to continue to see this kind of rivalry, using economics as a tool.”

The AEC’s goal is to bring a free flow of trade, labor and investment to the ten member states of ASEAN. The community’s benefits will be similar to those of the EU, but without its deeper financial and political integration – which has often been criticized.

Laos and Cambodia are two of Southeast Asia’s least developed countries – but each has its own potential for development. Laos is the only country in Southeast Asia that borders five others, and is planned to be developed into a transportation hub.

Cambodia is ASEAN’s poorest country on a per-capita basis, but its government has committed to deregulation and making it easier for foreign businessmen and investors to operate in the country. The country is one of the world’s fastest growing and has not had a single year with negative GDP growth since Pol Pot left power in the mid 1990s.

However, both of these countries have historically been within China’s sphere of influence and so far, Beijing seems to be winning the race in ASEAN. Beijing has goals to boost bilateral trade with the region from US$444 billion in 2013, to US$1 trillion in 2020.

China has already begun investing in high speed rail in Asia, which will go through Laos and eventually connect the southern Chinese city of Kunming with Thailand and Vietnam, passing through Malaysia to link with Singapore.

 

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