"Asia in a New Century - Challenge and Opportunity"
Speech by Prime Minister of Japan, Junichiro Koizumi at the Boao Forum for Asia

12 April 2002
Boao, Hainan Island, People's Republic of China

Your Excellency, Premier of the State Council of the Peoples' Republic of China, Zhu Rongji,
Your Excellency, Prime Minister of the Republic of Korea, Lee Hang Don,
Your Excellency, Prime Minister of Kingdom of Thailand, Taksin Shinawatra,
Your Excellency, Former Prime Minister of Australia, Robert Hawk
Ladies and Gentlemen,

It is a great honor for me to stand before you today at the First Annual Conference of the Boao Forum for Asia. I would like to express my appreciation to the organizers of this meeting--the Boao Forum for Asia and the Government of the People's Republic of China, which has provided support for the convening of this meeting.

As an economic special zone and faced to the Pacific Ocean, Hainan Island symbolizes the open character of Asia. Back in the 8th century, a monk named Jianzhen-on his way to Japan to teach the doctrines of Buddhism-found himself shipwrecked and washed upon the shore of this island. Even today the people of my country well remember the story of Jianzhen, who though blind finally succeeded in traversing the seas to Japan. Jianzhen brought with him a deep knowledge of medicine, even curing a disease afflicting the Emperor Shomu's mother. He established the famous temple, "Tosho-daiji" in Nara, which has a Greek influence in its architecture.

Jianzhen made a great contribution in sharing spiritual culture and knowledge of the world beyond national frontiers. Hainan Island with such a background, is an appropriate location to discuss Asia's future in the new century.

Ladies and gentlemen,
What values should we pursue for the prosperity of this region in the new century? I believe that the three values of freedom, diversity and openness are the driving forces behind peace and development in Asia.

Firstly, it goes without saying that freedom refers to democracy and human rights politically. Economically, it means development of a market economy. Political freedom and economic freedom are reinforcing each other in the process of their development. With some twists and turns, Asia as a whole has been taking significant steps towards freedom over the last half century. Transition to a democratic political system or its reform has been inevitable, as economic development has created the conditions for the emergence of a middle class and a civil society. I believe the historic trends that are apparent in Asia should be a source of pride for all of us.

Secondly, development in Asia has occurred against a background of tremendous diversity, where each country has its own distinctive history and social and cultural values. Naturally, we thus see differences in the processes and speed of development. While respecting diversity, however, it is important for us to promote our common interests and our shared goals, recognizing positive influences of each other based on differences among countries. In other words, we must leave behind parochial nationalism and dogmatism, promote mutually beneficial cooperation based on equality in order to enjoy prosperity - this should be our guiding principle.

Thirdly, our cooperation must not be of an inward-looking, closed nature, but one characterized by openness to the world outside Asia. In a world economy where globalization is advancing and economic integration, such as in Europe and the Americas, is proceeding, cooperation by Asia both within and with other regions must be pursued. This cooperation must be based on the principles of openness and transparency. I believe Asia should set an example for the world by seeking a regional cooperation that surpasses national and ethnic distinctions.
So, as we pursue prosperity in a free, diverse and open Asia, what are the specific challenges that face us? I would like to discuss three challenges: reform, cooperation and the importance of conveying Asia's message to the world.

Ladies and gentlemen,
When I visited the ASEAN countries in January, I emphasized my belief that for further development to take place in Asia as a whole, it is necessary to increase the economic resilience and competitiveness of each nation. Reform is the key to achieving this. Each country's individual reform efforts combined with our joint reform efforts will strengthen the competitiveness of the entire region.

I know that it is most important that Japan, which alone accounts for 60% of Asian GDP, be successful in its structural reform and the economic revival.

Since the 1990s, Japan has continuously tried economic reform, which was not sufficient enough. Since my appointment as Prime Minister a year ago, I have made the acceleration of structural reforms a matter of the highest priority. It is very clear to me that there will be "no growth without reform." In the new circumstances, Japan's past success has now become an impediment to further success. We have no choice but to transform ourselves from a government-led society to a private-sector-led society with more decentralization of power from central government to local governments. While this dramatic transformation will undoubtedly be accompanied by a great deal of pain, as are all historic transitions, I am firmly resolved to fulfill these reforms for the sake of both Japan and all of Asia.

These structural reforms include the final disposal of non-performing loans over the course of the next two to three years, the reform of government-affiliated corporations, the privatization of the post-office businesses, the abolition of regulations that obstruct free private-sector economic activities and reform of rigid fiscal and social systems.

These reforms are already underway, and the Japanese economy, in particular the private sector's new dynamism, is beginning to move forward. For example, with the rapid unwinding of the cross-holding of shares, mergers and corporate partnerships are beginning to replace the old keiretsu system. Applications for international patents are also rising dramatically.

Foreign investment in Japan is also playing a role in revitalizing Japan's economy. In some Japanese carmakers, foreign chief executive officers have been leading in restructuring activities, and foreign capital is also pouring into the distribution industry.

Here in China, President Jiang Zemin, Premier Zhu Rongji-who is present here today-other Chinese leaders, and the Chinese people themselves are advancing the cause of reform and openness. I am proud to say that Japan, as a friend of China, has been supporting such efforts.

Some see the economic development of China as a threat. I do not. I believe that its dynamic economic development presents challenges as well as opportunity for Japan. I believe a rising economic tide and expansion of the market in China will stimulate competition and will prove to be a tremendous opportunity for the world economy as a whole. Since there are differences in our industrial structures, Japan and China can strengthen their mutually complementary bilateral economic relations. I see the advancement of Japan-China economic relations, not as a hollowing-out of Japanese industry, but as an opportunity to nurture new industries in Japan and to develop their activities in the Chinese market. Our integrated efforts for economic reform in both countries should advance the wheel of economic relations.

In this regard, it is of utmost importance for China to behave in accordance with international rules by making a smooth transition into the World Trade Organization (WTO) regime and to promote harmonious cooperation with the regional economies of Asia, including ASEAN. At the same time, it is important for the ASEAN countries to improve their investment climate to spur their self-reliant efforts so that they will be able to overcome new competition. Japan will certainly provide the necessary support to help achieve these goals.

To advance reform and mutual interdependence between Japan and China, in a manner that is harmonious with reforms of other Asian nations -that is the way to develop a wider cooperation in Asia as a whole.

Ladies and gentlemen,
In Singapore in January, I spoke about cooperation that focuses on East Asia. Today I would like to call for a widened sphere of cooperation, including Central and West Asia. Above all, we must create new momentum for cooperation in the five areas of energy, environment, currency and finances, trade and investment and development assistance.

Firstly, the development of the Asian economy requires a stable supply of energy. But do we have a sufficient cooperative structure in place to ensure this? Energy demand is increasing around the world, but the greatest increase is foreseen here in Asia, an area of remarkable economic growth. We are dependent on the Middle East for the great majority of our oil, yet most countries in our region do not have the necessary oil stockpiles. Since the 1970s, Japan has been adding to its oil stockpile, which today stands to last 160 days. We have also been promoting measures for energy conservation. Japan is eager to contribute to the region's energy security by sharing our experience and technology.

I would also like to use this forum to call for cooperation with Central Asia, which has great potential as a source of energy. I will dispatch to Central Asia this year a "Silk Road Energy Mission," comprised of Japanese industry, government and academic experts, to encourage such cooperation.

Next, I believe we should increase regional cooperation in the environmental area. Today, more than 30% of all Japanese Official Development Assistance is for environmental assistance, the largest share of which is designated for Asia. Right here on Hainan Island, Japan is contributing to the protection and utilization of tropical forests. Efforts to achieve sustainable development without environmental destruction should be made, and all the countries of the region must tackle this together. Japan is ready to share its past experiences in combating environmental pollution in order to further promote cooperation for resolving various environmental problems in Asia. In currency and financial matters, regional cooperation is steadily advancing. Japan in 1997 helped the Asian countries out of economic and currency crises by providing a large amount of assistance. Cooperation is also progressing under the Chiang Mai Initiative. Japan has also concluded a currency swap arrangement with China last month, in addition to those concluded with three ASEAN countries and the Republic of Korea. Japan is eager to promote policy dialogue and cooperation for stability of currency and financial situations in Asia. I would like to ask you to discuss how regional financial cooperation could develop in support of the international financial system, the center of which is the IMF.

In terms of trade and investment, the situation in Asia today is one that we cannot yet afford to be optimistic about. Although we see some indications of recovery, during the last year IT-related trade plunged, and direct investment in the manufacturing industry has yet to recover from the setback of the 1997 crisis. To achieve economic recovery and promote trade and investment, we must actively pursue structural reforms, boost competitiveness, and improve the business environment.

Given the situation in both Europe and the Americas, how should we in Asia proceed with our own economic partnership or integration? On a country and sub-regional level such as ASEAN, economic integration in trade, investment and other areas is already being promoted. Following the conclusion of Japan-Singapore Agreement for a New Age Economic Partnership, work has also begun to further strengthen economic relations with all ASEAN 10 nations. The Study Groups by government, industry and academia will look into the possibilities for free trade agreements between Japan and the Republic of Korea, and between Japan and Mexico. In the future, Japan will promote economic partnership or free trade agreements with other countries and sub-regions, in addition to our multilateral efforts centered on the WTO.

Our strategic challenge is to bind together our individual efforts to create a more organic and expanded regional economic integration. Such efforts have been underway in the European Union (EU) for half a century. Why should we expect less for our region? I hope that this Forum will actively discuss how to achieve economic integration in this region.

In many countries in East Asia, open trade and investment have given birth to economic development and emerging economies. Japan is proud that our development assistance has been effectively utilized for their economic development. But still many countries have fallen behind, and Japan intends to continue helping these countries in the building of basic infrastructure, preservation of health, alleviation of poverty and development of human resources.

Asia also provides exemplary cases in which relatively developed countries have worked together to assist relatively less-developed countries. Japan is keen to see such South-South cooperation advanced in Asia. Japan has been conducting such joint cooperation with Singapore, Malaysia, Thailand and the Philippines to assist other ASEAN countries and East Timor.

We welcome the positive trend of Asian countries making the transition from being recipients of assistance to providers of assistance. A good example of this is the Mekong region development, an area home to some of East Asia's least developed countries (LDCs) and an area where effectively combined and utilized assistance of Japan and others is making a difference.

Moreover, Japan will make efforts toward the objective of making all imports from LDCs free from import quotas and tariffs.

I would now like to shift my focus from Asia to the world.

Ladies and gentlemen,
A great challenge that faces Asia is to collectively speak to the world and jointly contribute to world prosperity. Asia comprises approximately 60% of world population. As a force for world growth, we hold a critically important position in the global economy. It is vital for the management of the global economy that Asia's message be clear and responsible.

It is said that the word "Asia" has its origin in "asu," which means "sunrise" in Assyrian. Asia is different from the Americas or Africa, which are independent continents. Asia not only spreads across a large part of the Eurasian continent, but also has links to other regions through sea routes. Therefore cooperation in Asia inevitably stretches to worldwide cooperation.

Three large challenges currently face the global economy. These challenges are: building a world that does not yield to terrorism, expanding trade and investment, and securing sustainable development.

Terrorism threatens not only lives but also economies. A stable and revitalized world economy is indispensable in building a world that does not yield to terrorism. In the United States, signs of recovery are seen, and in the economy of Japan, movements towards bottoming are being observed.

In addition to such efforts, we must work together to support those countries that are suffering most from terrorism. We are actively cooperating in the fight against terrorism in Afghanistan and in providing reconstruction assistance to the region. It is important for all of us to continue to extend such support for peace and reconstruction. We should not allow Afghanistan to be a "country forgotten" again.

In addition, we must strengthen our measures concerning terrorist funding, information security and the non-proliferation of weapons of mass destruction and their systems of delivery. We should actively work in order to create an international system to prevent and eradicate terrorism.

To expand trade and investment, it is important for the new round of WTO trade negotiations to be a success. Asia, which has developed thanks to free and open trade and investment system, must now contribute to the improvement and strengthening of this system. In order to support non-WTO member efforts to join it and to facilitate development of developing countries, through trade and investment, Japan will promote a variety of cooperation, including human capacity building, institution-building and anti-corruption measures. How the increasingly integrated and expanded EU, the Free Trade Area of the Americas and the movement toward Asian regional integration will interact to form a global trade and investment structure-this should be one of the key agendas in this Forum.

Sustainable development requires us to simultaneously achieve environmental protection and economic development. Given the fact that Asia is responsible for approximately 30% of global carbon dioxide emissions, global warming is a particularly serious and urgent issue. Japan is working unflinchingly on the difficult tasks committed in the Kyoto Protocol. In order to reduce greenhouse gases, I sincerely hope that the Asian developing countries who are responsible for large emissions will promote policies for fuel conversion and energy conservation. We need common rules on global warming which should enjoy participation by all countries, and Asian countries should join together and take the lead for that purpose.

I am positively looking into the possibility of attending the W orld Summit on Sustainable Development in Johannesburg. In the run-up to this summit, I would like to make a strong call for the global sharing of experiences, strategies and responsibilities. Asia, which already has sustainable economic growth, can make a significant contribution by sharing its development experiences with the rest of the world. In this way, I believe we can strengthen our solidarity with Africa, the continent most burdened by poverty.

Ladies and gentlemen,
I have discussed today how the countries of Asia, building on their successes, should respond to the challenges of the new century. The reform and cooperation that I call for is based upon the shared values of freedom, diversity and opennes s. We should clearly convey our message to the world. This is what is required of Asia in the new century. As I mentioned earlier, reform may be accompanied by the pain that historic change requires, but I believe we will find strength in our uni ty of purpose. Our responsibility for the future is heavy, but I am convinced that we have the power and resource to meet such a challenge.

The success of this newly inaugurated Forum also depends on free, diverse and open discussion.

Last night, I enjoyed with the other participants a sp ectacular display of traditional Chinese fireworks. Just as t he Chinese invention of fireworks became a source of joyful i llumination for people throughout the world, I hope that this Forum will provide a burst of illumination: a beacon for a bright future in Asia.

Thank you.

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