Liberal Investment Policy a Key Path to Realize the National Interest

Mr. Naoyuki Haraoka's picture

Contemporary business firms face the Fourth Industrial Revolution, a large-scale ICT revolution. Innovations emerging during this transformative period have made it possible for manufacturing companies to divide the production process into many separate operations such as new product development, component production, assemble, sales, after-sales services, and so on. East Asia is no stranger to these dynamics. The horizontal division of labor in manufacturing has been common in this region since the 1980s.

Given how much business competitiveness is dependent upon the ICT edge, this segmentation of business activity is critical for East Asia to play a leading role in the global economy. Beyond this, a majority of East Asian firms currently are competing in pursuing better after-sales services or better new product development process since these are now key components of their produced value-added. Mere assembling process do not have high value-added anymore and thus East Asian firms have been transferring such processes to developing South Asian nations where firms can take advantage of cheap labor costs. The aforementioned processes rely on the free flow of FDI. Without it, businesses can neither win the competition in unbundling production process nor promote ICT innovation, the driving force of the new production system. Of note, these processes will create more services like ICT software or after-sales services which are labor-intensive and thus boost job creation, which, in turn, can make capitalism more sustainable. Therefore, it is important for East Asia to work to create an international free investment regime. Protectionists say they do not care about the possible long-term benefits of free trade and investment, but only about the short-term national interest. However, in the contemporary world, the national interest is dependent upon free investment, too. Thus, one hopes the Trans Pacific Partnership 11 will be written to encourage free investment globally.