Japanese companies must adapt to a changed Asia

Japanese interest in South and Southeast Asia is surging for both economic and political reasons. Yet, while welcome by many in the region, the reasons for this renewed focus must be considered. There are also new factors that the Japanese must look at and adapt to. Otherwise, expectations from both sides will be frustrated.

One economic push factor comes from unconventional "Abenomics" as the new administration and Bank of Japan pump out more money at low interest rates. Domestic production cannot absorb it all, given that labour and other costs remain high, despite the managed drop in the yen's value.

But the strongest push for the Japanese comes from China. The spat between the two Asian giants over the Senkaku/Diaoyu islands is much larger than the rocks and islets themselves. The riots last year across Chinese cities against Japanese producers and products suggest that Beijing cannot or will not rein in its citizens. Some in Tokyo also feel China is assuming a sense of superiority to assert pressure on Japan, as never before.

There are also pull factors in looking to the Association of Southeast Asian Nations and India. Amid global uncertainties, these emerging markets offer some of the best prospects. The opening of Myanmar has also captured the attention of many.

Japanese companies can build on past ties and experience. There is, however, a need to realise that not all things are as they were. Three key changes bear special notice.

First, more countries are democratic and complex. Some investors will long for the days of strongmen like Suharto or when China first opened, when deals were pushed quickly from the top down, whether corrupt or clean. India was never like that, and nor is today's Indonesia. Land grabs, poor conditions and wages for workers, and the ill effects of pollution: all of these are resisted these days, and the media brings attention quickly to any woes.

Societies will be better off with the awareness to better manage foreign investment. But foreign investors must learn to navigate and manage a more multifaceted landscape.