Japan Dominates Region's Economy, but China Is Awake Asia Is the World's Most Economically Dynamic Region. Countries Are Hungry for Foreign Investment, and Big Players like Japan and the US Are Racing to Provide It. an Economic Powerhouse Is Emerging from Cooperation among China, Hong Kong, and Taiwan. Today the Monitor Continues a Series on the Competition for Regional Power. Series: CONTEST OVER ASIA. Part 2 of 4 Part Series. First of Four Articles Appearing Today

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FROM his skyscraper office in Singapore, Mikio Nomura of Toyota Motor Corporation directs one of Japan's new little empires in Asia.

As he describes it, he is in charge of "piecing markets together, country by country" in Southeast Asia for the world's third largest automaker.

In a division-of-labor scheme, Toyota makes vehicle parts in Thailand, Malaysia, Indonesia, and the Philippines, then assembles vehicles in each country, selling about one-fifth of Toyota's total overseas production and earning one-fifth of the market in those countries.

Toyota's strategy of tying together different markets has produced the kind of penetration of Asia that has helped many big Japanese firms to dominate the world's most economically dynamic region. Another reason, says Mr. Nomura, is that "we've been here longer. This is our backyard."

Japan's trade and investment boom of the 1980s is one reason why intra-Asian trade now exceeds Asia's trade with the rest of the world. Japan also helped build up trade across the Pacific to the point where it began to exceed trade across the Atlantic in 1983.

But Japan's shadow over Asia is relatively new, and vulnerable to two big opponents: a Chinese economy growing more than 10 percent a year and a United States showing new aggressiveness under President Clinton to expand exports to Asia, even as the US remains the largest import market for many Asian nations.

For now, Japan provides the "core" economy for much of Asia. Malaysia, for instance, has become the world's biggest exporter of air conditioners, all made in Japanese factories. The car market in Thailand is 90 percent Japanese.

In China, too, Japan has led an investment wave in big projects. The Japanese-owned Yaohan retailing company, for instance, plans to open 1,000 supermarkets across China by the year 2010.

Japanese dominance in Asia has been helped along by bureaucrats in Japan's Ministry of International Trade and Industry (MITI), which readily gives advice to Asian nations on how to shape their economies. Thailand's Chulalongkorn University, for instance, is tripling its engineering faculty to produce thousands more engineers, mainly for the dozens of Japanese factories around Bangkok.

MITI officials often speak of Japan's role in Asia as the lead goose in a flying-V formation, guiding other nations in forming a cohesive regional economy - with Japan always in front.

For 17 Asian nations, Japan is the largest aid donor. Last year, Tokyo put 65 percent of its $11.15 billion in foreign aid into Asia, with about one-fifth of it tied to benefit Japanese companies.

Asia's rapid growth of 6-7 percent a year and its low wages are the main attraction for Japan. Firms can get about a 5 percent return on sales in Asia, far more than in Europe or the US, according to MITI, although volumes are still low.

In 1991, Japan made $4 billion in profits in Asia compared to a loss of $1.5 billion in the Americas and Europe. And last year, Japanese investment dropped 25 percent in North America but rose by 4 percent in Southeast Asia, and jumped 260 percent in China.

"The competition in Asia for the 1990s is economic, not military strength," says Zakaria Haji Ahmad, a University of Malaya security expert. Communism's decline has opened up large new markets in China, Vietnam, Cambodia, Laos, and to some extent, Burma and even North Korea. India, too, has begun to release its economy from a socialist straitjacket. Half the planet is now hungry for foreign investment, and Japan is the richest capitalist around.

"Japan has already won the markets here. They got a head start and are about two to three steps ahead of the US," Dr. Ahmad says.

But do Asians welcome Japan's economic advance? And will China ever rise up as a regional competitor?

While many Asian nations welcome Japanese investment, they do so reluctantly, instead wishing for Western investment because it usually comes with fewer strings attached. …


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