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July 2008

[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]

Interesting responses by Andrew MacIntyre and others follow Peter McCawley’s recent posting on the East Asia Forumblog, throwing light on Indonesia’s electricity crisis. Further to my subsequent posting on burgeoning FDI into Japan, yet the recent blocking of an English fund’s bid to expand shareholdings in the J-Power wholesaler, I wonder what Indonesia’s overall experience has been in attracting foreign investment into power projects. From Wells and Ahmad, Making Foreign Investment Safe (OUP, 2007), I do know of three major investments that resulted in arbitrations after Indonesia suspended many projects following the Asian Financial Crisis a decade ago. These already involved some involvement from Australia and especially Japan. Hence the question: why and how should we provide for investment arbitration in the Australia-Japan FTA or in ASEAN+ agreements?

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[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]

With Non-Performing Loans finally under control and economic recovery underway since 2002, Japan has also experienced a revival in FDI outflows. Many commentators focus on the large stocks built up in China, but there has also been steady interest in investing in Australia. Rather than tourism and property developments, Japanese firms have been quietly investing in infrastructure projects, and Nomura is reported recently as a possible buyer of the Australian investment banking arm of ABN AMRO.

A more remarkable development is the expansion of inbound FDI, particularly under the former Koizumi government. Fueled by a broader boom in M&A world-wide, Japan’s inflow rebounded to US$22 billion in 2007, and foreign investment stocks doubled over the last five years. But flows and stocks are still low by OECD standards relative to GDP, especially compared to the US, the UK and now Australia.

The Fukuda government has also sent more mixed messages recently. The Transport Ministry tried to include a blanket one-third cap on foreign shareholdings in Japanese airports. But others including the Financial Services Agency objected that this would choke off other inbound FDI, so this provision was dropped in March. The government is now considering the introduction of measures that more directly regulate the understandable security concerns arising from operating airports. Macquarie Airports Management Ltd, which already owns 19.9 percent of Haneda Airport, will be following this ongoing debate especially carefully.

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[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]

Australia’s Productivity Commission recommended in 2006 several ways to improve our consumer product safety regulatory regime, which dates back to the 1970s. In 2008 it published a more comprehensive Inquiry Report to strengthen our entire consumer law and policy framework. Several recommendations, like an obligation on suppliers to report serious product-related accidents to regulators, will start to bring Australia up to the higher standards expected and implemented in Japan since the 1990s. Those track the higher priority given recently to consumer protection particularly in the EU.

Japan and the EU illustrate the thesis of ANU Professors John Braithwaite and Peter Drahos that “global business regulation” can accommodate both economic deregulation of protected sectors domestically, and improved “social regulation” or a safety net for vulnerable groups of citizens. Japan also shares with the EU a greater concern about risks potentially affecting consumers or the environment. By contrast, as Berkeley Professor David Vogel has pointed out, since the 1980s the US has become much more concerned about risks to national security. Australia seems to have gone the same way. Yet such differing risk perceptions remain under-appreciated particularly in the Australia-Japan context.

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[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]

Japan’s recent re-regulation of unsecured consumer credit provides another major example of the growing consumer voice in law and policy-making in that country since the 1990s. It also highlights another “blind spot” in the Australian media’s coverage of Japan. This is despite similar underlying problems in this country, and a belated awareness of the risks involved in consumer lending following the sub-prime loans crisis in the US.

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[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]

As an Australian/New Zealander lawyer who has spent almost eight years on and off in Japan since 1990, I am concerned that both sides tend to adopt internally inconsistent positions on whaling. What can the law add to this controversial topic?

Kent Anderson rightly points out the Japan reveals a major “blind spot” in underestimating antipodean objections nowadays to commercial whaling. But some Japanese commentators are all too aware of those objections; it’s just that they think them to be hypocritical. That is, when Australia brings claims against Japan under the WTO (or potentially, soon, under our FTA), it insists that any measures impeding its agricultural trade need to be based on science and economics, not the cultural values invoked by Japanese farming communities or their politicians and bureaucrats. Yet when whales are at stake, Australia insists that this is not about science and economics. The ethics involved in killing or keeping alive these magnificent mammals become a major factor – increasingly, it seems, a definitive one. Japanese commentators tend to see this as a double standard, which is why some of them delight then in highlighting kangaroo culling or ethically debatable farming practices in Australia.

But the Japanese government’s position is also inconsistent. When it defends WTO claims, at least to its own citizens, it invokes culture and ethics. Yet when it comes to whaling, the government and the media focus instead on economics and science. A major reason for this double standard, but also Australia’s, is local politics. Rural communities retain disproportionate voting power in Japan, while an anti-whaling stance plays into growing public concerns about other environmental issues in Australia.

How can the law help in such tense situations?

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[Originally posted, with full hyperlinks, at http://eastasiaforum.org/author/lukenottage/]

As we know from postings to the East Asia Forum, especially by Peter Drysdale, Hadi Soesastro and Hugh White, it was not clear what Prime Minister Kevin Rudd had in mind when, on 4 June before his first trip to Japan, he proposed a better regional architecture for the Asia Pacific region. Views differ even further about whether such reforms are politically feasible.

Some, particularly in the mainstream media, interpreted him as proposing some European Union-like institutions for the Asia-Pacific. The analogy is not necessarily a bad one, and it’s time to take this idea more seriously. After all, the EU has emerged from small beginnings back in 1958, and is itself still a work-in-progress. Yet regional arrangements have many advantages. They can generate more transparency and public participation, and hence legitimacy, than multilateral systems. They can also minimise parochial impulses often found in national and even bilateral approaches. Such impulses may also threaten the free-trade agreement (FTA) being negotiated between Australia and Japan.

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Japanese Law in Asia-Pacific Socio-Economic Context
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