Group Invitation Program for Next Generation Experts in ASEAN（Cohort1: Economic Securities）Karthik Nachiappan

Karthik Nachiappan（Singapore）
Research Fellow, Institute of South Asian Studies, National University of Singapore

Final Report

Over the last few years, my work on global governance and multilateralism has organically moved toward economic security and geoeconomics to understand and explain how states draft, institute, and coordinate economic policy given rising security pressures. Economics and security are intertwined and countries have to better understand how to navigate and exploit great power competition while advancing their growth and development. Indeed, Japan and Southeast Asian countries have faced this reality for decades but are now faced with a more fractious regional environment, the likes of which they have not seen. This context calls for more consultation, cooperation, and coordination to better manage security tensions to safeguard and protect their economic future. The JFSEAP program clarified the need for more ASEAN-Japan cooperation on a litany of economic security issues over the near future. I have three key takeaways from the program that will also inform my ongoing work on economic security in the Indo-Pacific.

First, Japan’s economic security shows that the government has to lead and drive this agenda. There’s no substitute for direct and robust governmental involvement and leadership. The Japanese government is a pioneer in the field of economic security. The strides made and covered point to a transformation to protect Japan’s economy and security for the long term. Regional security tensions helped push Tokyo down this path. The most impressive takeaway was the bureaucratic changes that have been afoot: new agencies, staff, strategy, and a law on economic security. Generally, this is the hardest part of policy change in any country. Economic security is doubly hard to institute domestically because the logics of economics and security are different, with the former being driven by market principles (efficiency and free markets) and the latter largely shaped by the political logic of security and protection. Tokyo has managed to reconcile these two difficult aspects. Also critical is that the government has to work hand-in-hand with other societal actors, especially the private sector. I found the concept of ‘economic intelligence’, absolutely profound which involves the sharing of signals, information, and priorities with the private sector to get them on board for this critical project. I’m interested in further unpacking what and how this ‘economic intelligence’ is created and shared to drive economic security policies in the Indo-Pacific.

Second, in terms of Japan’s future partners to mainstream and expand this economic security agenda, Southeast Asia appears critical. The program left me with a profound understanding of Japan’s goodwill in the region that’s borne out of decades of economic support that Tokyo has lent to Southeast countries over the decades. It’s time for Japan and ASEAN to rediscover themselves. Southeast Asia is ready and poised for more Japanese investments, especially private investment. Japan is the #1 preferred partner in SEA, beyond the US and China. Japan’s soft power in Southeast Asia stems from long-term strategic decisions, investment, and hard work. Since the post-war years, Japan has engaged with ASEAN through official development assistance (ODA), contributing to the economic development of ASEAN members and creating a ‘donor-recipient’ partnership. Discussions in Tokyo have led me to think that we need to move towards a relationship that’s now based on mutual interest. Japanese companies have invested in Southeast Asian businesses and there’s scope to deepen that footprint. ASEAN could become an economic partner for Japan in critical areas and industries. Japan is looking to increase investments in start-ups in Japan, including foreign start-ups, and can benefit from ASEAN’s dynamic start-up ecosystem. Japan could provide technical and financial support to help Southeast Asians acquire and develop the technological capabilities for their industrial and green transitions. Japanese agencies like JBIC could further support Japanese firms in critical strategic sectors like infrastructure, green economy, and the digital economy. Japanese firms could venture out of their comfort zones to drive the ongoing supply chain restructuring that’s critical for the green transition. The economic geography of future Japan-ASEAN cooperation will have to be mutual and mutually reinforcing.

Finally, one aspect of Japan’s economic security agenda that needs more attention is the absence of effective rules and frameworks that bind Japan and ASEAN countries. We need rules and mechanisms to govern trade, technologies, and resources as Asian economies look for certainty and predictability in a competitive and volatile economic order. Yet, we lack them now. Japan’s focus on the G7 and Quad is consistent with its interests but as those interests expand in Asia, it will require collective mechanisms to advance growth and security. There’s an opportunity for Japan to work with ASEAN countries in establishing and figuring out rules and frameworks on emergent issues like digital trade, cybersecurity, artificial intelligence, climate change, and critical minerals. There’s room for Japan and ASEAN to shape key pillars of the digital economy to foster interoperability that allows for seamless digital trade, cross-border payments, and digital transactions. Rules in these areas also help ease investment and capital flows. There’s clear scope here for some leadership to figure out the governance of technologies and resources to prevent leakage, abuse, and coercion. We live in a world of mini-laterals, but there are very few that have ASEAN and Japan countries together and those that we do (like IPEF) may not last. I hope to focus more on this issue in my own work going forward as countries struggle and scramble to find new ways to cooperate.