RIETI World KLEMS Symposium
“Growth Strategy after the World Financial Crisis”
2014 May 20, JP Tower & Conference, Tokyo
Masahisa Fujita
RIETI/Konan University/Kyoto University
1. Introduction: The Three Priority Viewpoints of RIETI
In the face of rapid globalization, technological changes, and decreasing and aging population,
i.
how to incorporate the growth of the world economy?
ii.
how to develop new growth areas?
iii. how to create new economic and social systems for sustainable growth? i  ii  iii  enhancing the productivity and vitality of the Japanese economy and society in the long‐run
 Supporting the “Third Arrow” of “Abenomics” in the long‐run
2
2. The evolution of the global economy in the recent past: from the viewpoint of spatial economics
Rapid Progress in ICT and Transport Technology
together with the promotion of free trade through WTO･FTAs･EPAs
Globalization of production･trade･investment
and finance
dense networks
Local Agglomeration
of production  consumption  R&D
A Complex, Networked World
Efficient and growth‐enhancing under normal conditions
but
Vulnerable to major local disasters / shocks
3
World GDP and Trade
GDP
60
50
40
(2005 price trillion dollar) GDP annual growth rate
1970‐2000: 3.2%
2000‐2008: 3.0%
2008‐2009: ‐2.0%
2009‐2012: 3.9% Trade annual growth rate 1970‐2000: 5.6%
2000‐2008: 6.5%
2008‐2009: ‐5.1%
2009‐2012: 8.8% Trade
16
30
14
12
10
8
6
20
4
10
World GDP
World Trade (Right scale)
0
2
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012
0
Source: UN National Accounts Statistics Database and WTO Time Series on International Trade
4
Impact of Decreasing “Transport Costs”
ICT revolution
TT development
WTO / FTAs / EPAs
major reduction
in
“transport costs”
more even distribution
of
economic activity on earth ?
common sense
the prediction of spatial economic theory
only when transport costs
become sufficiently low
major
agglomeration
utilizing
scale economies
(home‐market effects)
“concentrated
dispersion”
further reduction
in
“transport costs”
5
6
Source: the Earth at night 2012, NASA Earth Observatory/NOAA NGDC (http://earthobservatory.nasa.gov/Features/NightLights/)
GDP shares in the world total:
East Asia, EU, NAFTA 50%
90%
Three polars total (right scale)
45%
80%
NAFTA
40%
70%
EU
35%
60%
30%
50%
25%
40%
20%
East Asia
15%
30%
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
0%
1988
0%
1986
10%
1984
5%
1982
20%
1980
10%
East Asia = ASEAN‐10 plus China, South Korea, Japan, Taiwan and Hong Kong
Source: IMF World Economic Outlook database October 2013
By courtesy of Professor Nobuaki Hamaguchi
7
GDP shares within East Asia
80%
Japan
70%
60%
50%
China
40%
30%
Japan
the Rest
the Rest
20%
10%
Source: IMF World Economic Outlook database October 2013
By courtesy of Professor Nobuaki Hamaguchi
2012
2010
2008
2006
2004
2002
2000
1998
1996
1992
1990
1988
1986
1984
1982
1980
0%
1994
China
8
Income divergence / convergence in East Asia
GDP per capita at 2005 price US$, Japan=1
Phase 2
Phase 1
Phase 3
1.6
1.4
1.2
Philippines
Singapore
Japan=1
1
0.8
Hong Kong
0.6
Korea
Taiwan
0.4
0.2
Thailand
China
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
2007
2010
0
Malaysia
Vietnam
Lao PDR
（Source） Penn World Table Version 8.0 By courtesy of Professor Nobuaki Hamaguchi
9
Share of intra‐regional trade in each region
70%
60%
EU27
50%
EU15
East Asia
40%
NAFTA
30%
North‐East Asia
ASEAN
20%
10%
Source: RIETI‐TID By courtesy of Professor Nobuaki Hamaguchi
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
0%
10
3. Is Asia still the World Factory?
International Trade Structure (2006)
Intermediate
Goods
Consumption
Goods
Asia
USA
Asia
Source: 2008 White Paper on International Economy and Trade
USA
11
Trade between the US and East Asia
(billion US dollars)
800
East Asia’s Exports to the US
700
600
500
China’s Exports to the US
400
300
US Exports to East Asia
200
100
2013
2012
2011
2010
2009
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
0
2008
US Exports to China
Figure 1. The Value of US Exports to China and East Asia and China’s and East Asia’s Exports to the US.
Source: US Census Bureau.
Note: East Asia includes China, Japan, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan, and Thailand.
12
(Figure made by Dr. Willem Thorbecke at RIETI)
US Trade Deficit
(billion US dollars)
500
Trade Deficit with East Asia
400
300
200
Trade Deficit with
non‐East Asian Countries
100
Trade Deficit with China
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
0
Figure 2. US Trade Deficit with China, East Asia, and non‐East Asian Countries.
Source: US Census Bureau.
Note: East Asia includes China, Japan, Indonesia, Malaysia, the Philippines, Singapore, South Korea, Taiwan, and Thailand.
13
(Figure made by Dr. Willem Thorbecke at RIETI)
East Asia today: the World Factory based on supply chain networks centered around dozens of major cities and industrial agglomerations
Bangkok
Tohoku
Sendai
14
Agglomeration through snowball effects
Example: auto/electric machinery industry
set makers
Domestic
cars/
appliances
labor capital
auto / electric machinery
Overseas
parts
materials
suppliers of parts and materials
Domestic
key Overseas
parts
materials
Key factors for agglomeration: scale economies and low transport‐cost
15
World parts and components trade shares by region 100%
Intra
Regional
NAFTA
to the ROW
90%
80%
70%
Intra
Regional
60%
EU
to the ROW
50%
40%
Intra
Regional
30%
East
Asia
20%
10%
to the ROW
2012
2010
2008
2006
2004
2002
2000
1998
1996
1994
1992
1990
1988
1986
1984
1982
1980
0%
Source: RIETI‐TID ROW: Rest of the World By courtesy of Prof. Nobuaki Hamaguchi
16
4. Auto Industry: global supply chain and its vulnerability
Automobile production by area (All types)
25,000,000
China
20,000,000
Europe
15,000,000
NAFTA
Japan + Korea
10,000,000
5,000,000
ASEAN
South Asia
South America
Source: OICA
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
0
17
Automobile production in ASEAN
2,500,000
Thailand
2,000,000
1,500,000
Indonesia
1,000,000
Malaysia
500,000
Philippines
Vietnam
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
0
Source: OICA
18
Automobile industry (together with supporting industries) production of a car ← assembling 20,000~30,000 parts
scale economies in production
low transport costs
each key part produced at only one (or a few) locations
in Japan (or East Asia)
multilayered complex supply chain networks
from procurement of parts to delivery of finished products
minimizing inventory stocks
through just‐in‐time procurement policy
Quite efficient under normal conditions
but
Quite vulnerable to major disasters
19
Agglomeration of auto and supporting industries in Japan
Domestic production per year
10 million cars
domestic : about half
sales
exports : about half
Oversea production : 16 million cars
(using key parts from Japan)
Tohoku
Tokai
Kyushu
日経ビジネス
2010・10・18号
20
Supply chain of automobile parts in ASEAN countries
Source: IDE‐JETRO and WTO 2011, Trade Patterns and Global Value Chains in East Asia: From Trade in Goods to Trade in Tasks
21
Index of Automobile production in Tohoku and in Japan
(synchronized impacts)
Tohoku
Japan
Lehman Shocks
2008
Quakes and Tsunami
2009
2010
2011
22
Source: R. Wakasugi, RIETI Symposium on Great East Japan Earthquakes, 2011.11.07
The Global Impact of the Japanese Quake and Thailand’s Flood
2011, Japan, Guangdong (China), Thailand, and the US
Automobile production (y‐o‐y % change)
60.0
Japan
40.0
Guangdong‐China
Thailand
USA
20.0
0.0
‐20.0
‐25.2
‐60.0
Japanese Quake
‐60.1
Thailand’s Flood
‐85.0
November
July
June
May
April
March
February
January
‐100.0
September
‐67.6
‐85.7
August
‐80.0
Source: JAMA, Statistic Bureau of Guangdong Province, TAIA, Federal Reserve Board
By courtesy of Professor Nobuaki Hamaguchi
December
‐39.0
‐57.3
‐27.6
October
‐40.0
23
2011, ASEAN automobile production (y‐o‐y % change) 100
Thailand
Malaysia
Indonesia
80
Philippines
74
60
30
23
20
0.7
‐8
0
‐20
‐23
‐25 ‐25
‐60
Japanese Quake
‐80
‐40
‐57
‐68
Source: TAIA, AAM, GAIKINDO, AAP By courtesy of Professor Nobuaki Hamaguchi
‐85
October
September
August
June
May
April
March
February
Januar
July
Thailand’s Flood
‐100
November
‐40
December
40
24
Impact of natural disasters and international conflicts on automobile sales in China
%
Toyota
100
80
60
East Japan Earthquake
(11/3)
Thai Flood
（11/9～）
Senkaku Conflict
(12/8~)
Nissan
40
20
0
‐20
Honda
‐40
‐60
2011/2
5
8
11
12/2
5
9
11 13/1～2 4 5
Source: The Nikkei, 10 October 2012 and 5 June 2013 (two diagrams combined by the author)
25
No place in the world would be risk‐free!
Possible large‐scale disruption of supply chains
from any major disaster:
Natural disasters
Quake
Tsunami
Flood
Typhoon / Hurricane
・・・
Social disasters
Air / Water pollution
Epidemics
Financial / Monetary shocks
Terrorism
Political conflicts
Military conflicts / War
Global warming
・・・
Secondary disasters
Transport disruptions, Nuclear Power plant accident, Demand/Supply disruptions …
International cooperation for mainstreaming the global resilience of supply chains
26
5. The Asian Century?: Prospects and Tasks
The Scenario of the Asian Century (ADB, ASIA 2050)
2050
9.2 billion
4.8 billion (52%) 2012
Global Population: 7.1 billion
Asian Population : 3.9 billion (55%)
market
Global GDP: $70 trillion FX rate
Asian GDP : $21 trillion (30%)
ME∙NA
4%
LAC
8%
Europe
29%
SSA
2%
the Rest
1%
Asia
30%
North America
26%
4.2% / year
$335 trillion
$174 trillion (52%)
5.8% / year
SSA
2%
ME∙NA
3%
the Rest
1%
LAC
6%
Europe
18%
North America
16%
Asia
52%
27
In order to realize the expected Asian Century
Asia as the World Factory today
based on the extensive supply chains utilizing huge wage‐disparity
a World Center of
Advanced Production networks
+
High Quality Markets
+
Innovation networks
International Cooperation
I. Rebuilding more resilient and inclusive Supply‐Chain‐Networks, and
II. Strengthening the Brain‐Power‐Network for the future Asia
28
6. Developing the brain‐power‐network in Asia
Development of the Brain Power Society since the late 20th century
Revolutionary development in ICT
and Transport Technology
globalization of
the world economy
Development of
Brain Power Society
The major reorganization of
global economic・political・social systems
29
NIKKEI ASIAN REVIEW
March 20, 2014
Eruption
of
Innovation
Number of papers
most cited (top 1%)
Number of papers
Number of patent
applications
Government R&D
expenditure
Private Sector R&D
30
R&D expenditure by country (OECD PPP)
trillion yen 50
47.4
US
45
40
35
30
25
18.9
20
15
10
16.9
19.8
17.1
China
Japan
Germany
S. Korea
France
UK
6.0
5
0.8
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
0
31
Number of patent applications by nationality
(thousand)
600
China
Japan
US
500
400
300
S. Korea
Germany
200
100
France
UK
Data source: National Institute of Science and Technology Policy
Diagram made by Dr. Isamu Yamauchi at RIETI
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
0
32
Number of papers cited frequently (top 10%)
60,000
50,000
US
40,000
30,000
20,000
UK
Germany
China
France
Japan
S. Korea
10,000
Data source: National Institute of Science and Technology Policy
Diagram made by Dr. Isamu Yamauchi at RIETI
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
1990
1989
1988
1987
1986
1985
1984
1983
1982
1981
0
33
Importance of International Cooperation through
diversity and culture in the Brain Power Society
The fundamental resources in the Brain Power Society
 Individual Brain Power  Diversity in people・brains
in the society
Synergy through heterogeneous
people・brains
 Diversity in cultures among different regions
Synergy through heterogeneous
cultures
34
close cooperation of
heterogeneous K‐workers
(e.g. “nominication” in Japan)
antinomy
in the short‐run
through
close communications
synergy
in the long‐run
Common knowledge
diversity
synergy
for resolving this fundamental problem
Promote active interactions among
diverse regions and countries
35
Diversity and creativity: National Institute for Materials Science (NIMS)
Table 1. The number of foreign researchers in public research
institutes in Tsukuba (2011, March)
Table 2. World ranking in terms of citations in materials science
(NIMS)
Share of foreign reseachers (%)
Figure 1: share of foreign researchers at NIMS
• Among high‐ranking papers at NIMS in terms
of citations, the number of papers written by
author(s) including foreign researcher(s)
among top‐10 papers: 8
among top‐31 papers: 24
2001
2011
SOURCE: Ariga and Urao, “Productivity enhancement of a research
institute through the contribution of foreign researchers,”
Science & Technology Trends No.127, 2012, 1•2, Ministry
of Education and Science
36
The Map of international research cooperation in Solar Cells
the number of papers and international coauthorship (published between 1945 and 2009)
Source：I. Sakata, H. Sasaki, H. Nakamura and Y. Kajikawa "Maps of international research collaboration in clean energy"
Journal of Energy and Power Engineering 7 (2013)
Ranking in the number 1st: US, 2nd: Japan, 3rd: Germany, 4th: China, 5th: India, 6th: France, 7th: England, 8th: South Korea, 9th: Spain, 10th: Italy37
of papers
(but, weak research cooperation in Asia)
7. The Growth Strategy for Implementing the “Third Arrow”
Making the economy grow while the population decreases
 Enhancing the TFP of economy
But, how? : Innovation everywhere involving everyone!
Advancing the bold new strategy reflecting new values
such as:
I. “Silver” is beautiful
II. “Small and creative” is beautiful
III. “Open and connected” is beautiful
38
Flying Geese of Aging Society in Asia‐Pacific
the population share (%) of aged people over 65: year 2010 → year 2060
4→16
Laos
5→18
Myanmar
5→21
Cambodia
5→21
Malaysia
5→16
13→24
India
US
7→29
Vietnam
11→37
8→28
Korea
China
Hong Kong
13→37
9→33
Thailand
23%→40%
Japan
9→32
Singapore
6→24
5→17
Mexico
Indonesia
5→21
4→12
Philippines
Bangladesh
14→26
Canada
Let Japan be a leader of the innovative silver society
Source: UN World Population Prospects, The 2012 Revision
Source for Japanese data: National Census of Japan, National Institute of Population and Social Security Research, “Population Projections for Japan (2012 revision)”
Who are the aged? Why fix the dividing line at 65?
The average life expectancy in Japan
actual
estimate
Data source: Ministry of Health, Labour and Welfare Diagram: Cabinet Office, Government Of Japan “Report on Aging Society, 2014” Ultimate Goal: Create a new society where everyone can happily work/enjoy in good health until the end.
40
The Silver is beautiful:
Big customers for new products / industries
• housing  goods  services  entertainments tailored for the aged
Senior Citizen
•
•
•
•
•
•
•
Creating the best matching
Younger generations
medical / nursing services
medical / nursing equipments
friendly and helpful robots
lifetime education
all kind of resorts / retirement villages
Big resources
• human resources for
workers / managers, skills / knowledge,
innovation / creation / ventures
• financial resources
Creating the most innovative silver society through international cooperation
41
Increasing share of consumption expenditure by senior households
Source: Nikkei Shimbun, May12, 2014
American labor force participation rate: aged 62‐74
Source: The Economist, April 26, 2014
42
Irodori Project in Action (with All Smiles): Kamikatsu, Tokushima
43
Products of Irodori Project: Tsumamono for Japanese Dishes
44
Irodori (Color) Project in Kamikatsu Village, Tokushima
• Initiated in 1986 by Mr. Yokoishi (then 24 years old) of JA and four senior ladies
• Now 150 members (all farmers)
average age: 67 (mostly females), the oldest: 94
• Average revenue per member: 1.7 million yen
Kamikatsu village today
•
•
•
•
•
Irodori project + four similar projects (the third‐sector)
population: 2092 (U‐turn + I‐turn: 6.3%)
aged people over 65: 47% (the highest in Tokushima)
only two persons are bedridden
per capita medical expenditure (National Health Insurance): 260 thousand yen (vs. 460 thousand yen at the village with the second highest ratio of elderly)
45
“Small and Creative” is beautiful.
Ranking of Japanese per capita GDP in OECD
0th
rank
rank
Country
1 Luxemburg
2
3 3
3 3 3
4 4
3
4
4
5
5th
6
7 7
8
8
9
9
10th
11 11
12
14
15
15th
15
17
18
18
19 19
20th
Source：OECD Factbook 2010: Economic, Environmental and Social Statistics,
and http://www.esri.cao.go.jp/jp/sna/h20-kaku/percapita.pdf
2008
117,967
2 Norway
94,763
3 Switzerland
64,885
4 Denmark
62,054
5 Ireland
59,944
6 Netherlands
53,094
7 Iceland
52,568
8 Sweden
51,954
9 Finland
50,931
10 Austria
49,527
11 Australia
48,049
12 United States
47,186
13 Belgium
47,151
14 Canada
44,950
15 France
44,550
16 Germany
44,519
17 United Kingdom
43,237
18 Italy
38,455
19 Japan
38,371
20 Spain
34,971
46
The top 10 countries in the OECD in terms of per capita GDP (2008)
1. All small countries located in the northern part of Europe
2. The total population of the 10 countries: 63 million (about ½ of Japan)
The average population: 6.3 million (vs. 5.5 million in Hokkaido)
To achieve economic growth in a Brain Power Society, population size is not essential.
3. Most countries are already in the advanced “silver society”. (the share of people over 65 in 2010: Sweden 18%, Denmark 17%, Switzerland 17%, Finland 17%,…)
4. Each is an independent country, having its own language and culture, with a unique set of economic  social  educational policies.
5. Each spends a high proportion of GDP on education (Denmark 7.8%, Sweden 6.7%, Norway 6.7%, Finland 5.9%, vs. Japan 3.4%, in 2007)
6. Each is highly globalized with high GDP ratios of exports, out‐FDI and in‐FDI, and with a high proportion of immigrants
7. Most multi‐national firms are concentrated on knowledge‐intensive activities (e.g. HQ‐management, R&D, design) with high profit‐ratios, while all workers in each country get relatively high wages, (cf: Grossman and Ross‐Hansberg, 2008, AER 98)
8. The ten countries together form a Brain Power Society, rich in diversity
47
Let Japan be a union of semi‐independent shining regions
We Love Hokkaido
D
A
We Love Japan
Tokyo
B
We Love the World
We Love Kansai
We Love Japan
C
We Love the World
48
“Open and connected” is beautiful
Promoting the Regional Integration of Asia‐Pacific
Europe
FTAPP
RCEP
TPP
China  Korea  Japan
ASEAN
NAFTA
49
Connect or Perish: International coauthorship
50
Source: Nikkei Shimbun, May 12, 2014