Japanese investors are choosing to invest in ASEAN more. Both businesses and governments seek to benefit from the increased integration that the ASEAN Economic Community (AEC) will bring to the region.

Kazuyuki Nakane, a senior official in Japan’s foreign ministry, flew to Cambodia and Laos to strike trade deals. These two Southeast Asian countries are also major targets of Chinese investment.

The results from Nakane’s visit was an aviation accord. It will allow direct commercial flights between Japan, Cambodia, and Laos. There was progress on several other deals too.

Nakane also attended the opening ceremony for a bridge in Cambodia built with Japanese aid.

Neak Loeung Bridge

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

Many observers believe competition will continue to increase over the next few years. This will happen as China, the European Union, and Japan all attempt to profit from the ASEAN Economic Community (AEC), which came 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 Singapore. “In the next year, we are going to continue to see this kind of rivalry, using economics as a tool.”

Multinational firms in Southeast Asia, whether Japanese or otherwise, generally perform well. Competition is still intense though and some businesses aren’t as fortunate.

 

Invest in ASEAN, Invest in The Future

The AEC’s goal is bringing a free flow of trade, labor, and capital to Southeast Asia. The community’s benefits are similar to the EU’s, but without deeper (and often criticized) financial and political integration. It will form an “EU of Southeast Asia”, so to speak.

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 ASEAN which borders five others. Because of this, it will be developed into a hub for land transport.

Cambodia is ASEAN’s poorest country on a per-capita basis. But the government is committed to deregulation and making it easier for foreign investors to operate. They haven’t had a single year of recession since Pol Pot left power in the 1990s, in fact.

However, both countries have historically been within China’s sphere of influence. Beijing is winning the race so far, choosing to invest in ASEAN even more than Japan.

Goals are for China to boost bilateral trade with Southeast Asia from US$444 billion in 2013 to US$1 trillion in 2020.

China is already investing in Asia’s high speed rail network. The system will go through Laos, eventually connecting the southern Chinese city of Kunming with Thailand and Vietnam. It will then pass through Malaysia and link with Singapore.

With Japan’s show of confidence in the region, the question is: should you invest in ASEAN too?

 

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About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's an accomplished stock trader and property investor in Thailand, Cambodia, and many other places. He's been featured in publications such as Forbes, Nomad Capitalist, Property Report, and Seeking Alpha. Download his free investment guide by clicking here.

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