Building Institutional Capacity in Southeast Asia: Regional Governed Interdependence

ASEAN Economic Bulletin Vol. 22, No. 3 (2005), pp. 331-39 ISSN 0217-4472 RESEARCH NOTE Building Institutional Capacity in Southeast Asia Regional Governed Interdependence Kaoru Natsuda and Gavan Butler I. Introduction The Japanese nation-state has created regionwide interdependence in association with the nationstates in Southeast Asia. Japanese government officials, perhaps particularly from the Ministry of International Trade and Industry (MITI), renamed the Ministry of Economy, Industry and Trade (METI) in 2001, consider that a close government-business relationship facilitates more rapid economic development than the laissez-faire market system. The literature on the developmental state focuses on domestic policies. However, the essence of the developmental state can be seen not only in the "domestic matter" of industrializing or restructuring industry, but also in the international strategy of the state. This study argues that the Japanese nation-state has been building institutional capacity in Southeast Asia to foster, in effect, the regionalization of the Japanese "developmental state", or a "governed interdependence " of the Japanese state, ASEAN member states and Japanese capital throughout the region. In so doing, the Japanese governmentbusiness relationship has taken the initiative, particularly in developing small- and mediumsized enterprises (SMEs) within Southeast Asia, in transferring technology selectively, fostering human resource development and expanding and elaborating physical infrastructure. The regionalization of Japanese production networks has been simultaneously a project of developing institutional and technical capacities under the guidance of the Japanese state and capital. This study begins with identifying the concepts of the "developmental state" and "governed interdependence" in East Asia. A second issue to be examined is the form of expansion of "governed interdependence" in Southeast Asia. A committee known as AEM-MITI/METI Economic and Industrial Co-operation Committee ASEAN Economic Bulletin 331 Vol. 22, No. 3, December 2005 (AMEICC), the joint product of the ASEAN Economic Ministers (AEM) and MITI/METI will be represented as an exemplar of the regionalization of governed interdependence, and as an illustration of how this development and its implications are to be understood in politico-economic terms. II. Governed Interdependence in East Asian Developmental States Developmental state theorists (or statists) stress the importance of state guidance and intervention in economic development. They argue that the remarkable aspects of Northeast Asian industrialization, in particular that of Japan, South Korea, and Taiwan, were brought about not by market forces but by the role of the state in cooperation with private capital. Development was achieved by management of the market, industrial strategies, public investment, and export strategies reflecting state-business co-operation. The notion of the developmental state was articulated by Chalmers Johnson (1982) and adopted by Amsden (1989), Wade (1990), and Weiss and Hobson (1995), among others. Johnson's contribution was to raise an alternative explanation of economic development to that being purveyed by the American-dominated "development economics" literature of the time. In Johnson's perspective, Japan's performance challenges that of the AngloAmerican "free enterprise" economies and also challenges claims made for the capacities of socialist economies. In regard to the state-business relationship in the developmental states, Johnson (1999, p. 60) mentioned that [t]he concept "developmental state" means that each side uses the other in a mutually beneficial relationship to achieve developmental goals and enterprise viability. When the developmental state is working well, neither the state officials nor the civilian enterprise managers prevail over the other. The government-business relationship in East Asia has been more institutionalized than that of other nations. Weiss and Hobson have subsequently described the mutually beneficial relationship as the "governed interdependence" of state and business (Weiss and Hobson 1995; Weiss 1995 and 1998). According to Weiss, [g]overned interdependence (GI) refers to a negotiated relationship, in which public and private participants maintain their autonomy, yet which is nevertheless governed by broader goals set and monitored by the state. In this relationship, leadership is either exercised directly by the state or delegated to the private sector where a robust organisational infrastructure has been nurtured by state policies. GI is intended to convey a reality in which both state and dominant economic groups are "strong": i.e. the state is well insulated and industry highly organized and linked into the policy-making framework via...