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 will bring to the region.

Kazuyuki Nakane, a senior official in Japan’s foreign ministry, flew to Cambodia and Laos to strike trade deals. Both of these 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, 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 Singapore. “In the next year, we are going to continue to see this kind of rivalry, using economics as a tool.”

 

Invest in ASEAN, Invest in The Future

The AEC’s goal is to bring a free flow of trade, labor and investment to Southeast Asia. The community’s benefits will be similar to those of the EU, but without its 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 Southeast Asia 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 its government has committed to deregulation and making it easier for foreign investors to operate in the country. Cambodia is one of the world’s fastest growing economies. In fact, it hasn’t had a single year of recession since Pol Pot left power in the mid 1990s.

However, both of these countries have historically been within China’s sphere of influence. So far, Beijing seems to be winning the race, choosing to invest in ASEAN even more than Japan. 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. The system will go through Laos and eventually connect 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?

 

About Reid Kirchenbauer

Reid Kirchenbauer is the Founder of InvestAsian. He's experienced with trading stocks and buying property in Thailand, Cambodia, and elsewhere. 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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