Tokyo, Japan – While Japan’s Prime Minister and Chair of APEC in 2010, Naoto Kan and his fellow Leaders of APEC member economies met in Yokohama where they launched the region’s first comprehensive, long-termGrowth Strategy. It was quickly put to the test: four months later, Japan was hit by the devastating 11 March 2011 earthquake and tsunami.
On the eve of the 2014 APEC Economic Leaders’ Week in Beijing, which will coincide with the 25th anniversary of APEC’s founding, former Prime Minister Kan shared his views on growth today, disaster lessons and mitigating unfolding demographic challenges to keep the region’s economies on solid ground.
APEC Bulletin: What is your view of the current Asia-Pacific growth landscape?
Kan: There is no question that the Asia-Pacific is the growth center of the world and will remain the driver of global growth for some time—both in name and reality.
In APEC alone, our 21 economies account for almost three billion people, half of all trade and over half of global GDP. Trade has been at the heart of the region’s growth and, in terms of intra-regional trade, the level of integration among APEC economies is actually similar to that of the EU. It accounts for something in the neighborhood of 65 per cent of the total trade between us.
What is equally clear is that the economies of APEC must continue to address challenges through dialogue and coordinated action to improve growth. Better business opportunities, better job prospects, better wages, a better social safety net and of course a healthy living environment—these are necessities that people are looking out for and ultimately what we must work to deliver.
APEC Bulletin: Can you discuss your approach to growth during your time as APEC Chair?
Kan: My priority as the Chair of APEC in 2010 and host of the region’s Leaders that year in Yokohama was to ensure that the Asia-Pacific would continue to develop itself as the world’s growth center in the medium to long-term, meaning years and even decades down the road not just in the weeks and months ahead.
To me, it was very important that APEC as a whole identify a common direction for our engagement taking into account the changing environment in the region – for example, the dramatic shifts in population and consumption that we are currently seeing and will continue to see as living standards rise – as well as the lessons learned through the global financial crisis and related difficulties.
This is why Japan called upon member economies to work together in pursuit of “change and action” – the theme that we put forward to guide collaboration in APEC at that time – and identified the formulation of a new growth strategy as a priority for moving us in the right direction.
APEC Bulletin: How challenging was it to work out the details of a growth strategy for all 21 APEC economies and what is your take on the progress of its implementation?
Kan: There was strong agreement, in the midst of recovery from the economic crisis, that the time had come for APEC economies to develop our first ever comprehensive, long-term growth strategy. But we still needed to work out a shared view of policies to put in place across the Asia-Pacific to set the entire region into the orbit of sustainable growth.
In addition, I was of the mind that our strategy for growth should be accompanied by a plan for action so that it would be more than just talk but actually fit for implementation and make real a difference to economies and people’s lives.
It was on this basis that we created an APEC Growth Strategy which acknowledged that “growth as usual” is no longer an option and detailed measures for “the quality of growth” to be improved. Essentially, we were drawing a blueprint for building balanced economies that open a wider array of opportunities to more people, support innovation and function in a way that is sustainable and secure.
I understand that Japan and the other APEC member economies are due to report on progress in implementing the Growth Strategy in 2015. The upcoming meeting of APEC Leaders in Beijing will position the region to take the next step towards achieving this quite ambitious but essential and attainable goal.
APEC Bulletin: What are your thoughts on the 11 March 2011 earthquake and tsunami and the impact the disaster has had on growth calculations?
Kan: I would like to extend my heartfelt gratitude for the tremendous support and sincere compassion we received from overseas in the wake of the Great East Japan Earthquake. A little more than three and a half years have passed since then. Those who died at the hands of the disaster remain etched in our thoughts and we continue to address its impact and rebuild. At the same time, we must seriously consider the threat of future emergencies.
The Asia-Pacific is the region most vulnerable to natural disasters. We saw this play out again earlier this month with the eruption of Mount Ontake here in Japan that took the lives of more than 50 people—the worst volcanic incident we have experienced in almost 90 years—and now this latest wave of typhoons and super typhoons to hit Japan and our neighbors.
It is imperative that we minimize the damage caused by the onslaught of disasters and work for early recovery to protect lives and livelihoods, and safeguard growth in the region.
The impact of climate change adds another layer of concern and is increasing the level of disaster risk. The need for action is magnified by the level of interconnectedness that exists between economies today and the ripple effect that disruptions in directly affected areas – to business, to travel, to communications – can cause elsewhere.
APEC Bulletin: In your mind, what are the most important lessons of the 3-11 disaster for Japan and the region?
Kan: The earthquake taught us that there must be no unanticipated scenarios and that we need to be prepared for all kinds of contingencies and avoid wishful thinking. In addition, we learned that minimizing damage from emergencies requires a combination of structural and non-structural measures supported not only by government but also by businesses, international organizations and the public.
Mobilizing resources for rescue, relief and rebuilding, and improving systems to deploy them to disaster zones in an efficient, coordinated way is obviously important. At the same time, simply building greater awareness of the need for disaster planning and facilitating the adoption of appropriate measures right down to the grassroots level must be a priority.
The auto and electronics sectors that are pillars of our economy and employ many Japanese people were greatly affected by the 3-11 disaster and again during the flooding at the end of that year in Thailand where many Japanese companies have invested. This was not only because of damage suffered by big manufacturers like Toyota or Sony but also because many of the suppliers that they depend on were unable to operate normally, or even at all, for some time.
Certainly Japan has accumulated a great deal of experience and expertise in dealing with disasters, and planning for them, and is today sharing many of the lessons we’ve learned with others to improve the resilience of communities all across the Asia-Pacific. APEC is a convenient mechanism for strengthening disaster preparedness which Japan and the other members engineered into our Growth Strategy and we must continue to support. The incentives, and cost of insufficient action, are too great for us not to.
APEC Bulletin: How do energy security concerns figure into the growth equation moving forward?
Kan: After the Great East Japan Earthquake, it has become urgent for Japan to accelerate the introduction of clean, renewable energy and realize a multi-dimensional energy saving society.
The development of renewable energy and promotion of energy saving are important for the world, particularly the Asia-Pacific region on account of its size, from the viewpoints of enhancing energy security, addressing climate change, promoting low-carbon growth and improving global energy access.
I would like to expect that APEC will intensify its coordinated efforts to advance such energy issues—taking further steps to elevate the role of solar, wind and other green technologies in the region’s energy mix, for example.
APEC Bulletin: What about the development of cooperation to address aging populations and the seismic shifts underway in this regard?
Kan: In Japan, as a “super aging society,” we are confronted with a population whose characteristics are changing at an unprecedented pace given that people are living longer and having fewer children. Currently, about a quarter of all Japanese are 65 years of age or above and the ratio is expected to reach as high as 40 per cent by 2060.
It can be said that declining birthrates and aging societies are common challenges in much of Europe, the United States and, increasingly, across the Asia-Pacific as living standards rise. Korea, China and even Indonesia are all facing major demographic shifts in the coming decades. When you add all of this together, the result is greater pressure on workforces, social safety nets and capacity for economic growth.
We are at the point where we need to thoroughly review existing social security systems and employment practices. Exchanging ideas on reform and the implementation of it can facilitate positive change in this sense. Technology must play a greater role too, for example, to improve the management and provision of healthcare, insurance and pension services. ICT cooperation to accommodate aging populations should be deepened given the strength of the sector in the region.
To sustain economic growth, it is also critical that we foster an environment where the elderly and women are encouraged to pursue a more active role in the labor force. There is still much ground for us to cover in this regard.
APEC Bulletin: What more needs to be done to improve gender balance in the workplace and to what extent could this impact the region’s economic outlook.
Kan: There has been growing recognition in recent years about the need to promote women’s participation in our economy which is now regarded as a pillar for growth in Japan.
As I mentioned, a greater level of inclusive growth is an objective that the region’s Leaders and I prioritized during my time as APEC Chair and widening business opportunities and the training and skills to capitalize was among the directives we agreed upon to set things in motion.
Dialogue between policymakers and the private sector, including the sharing of experiences by women business leaders, can be a useful guide for the development and implementation of policy measures to open new opportunities for women in the economy. But this is only the next step in a far longer journey that has both economic and social and cultural dimensions to it.
Clearly, much more needs to be done to address the demands on women at home and the impact this can have in the workplace as well as income disparities and glass ceilings that persist. This is not just a question of fairness. Our economic future in many ways rides on the successful outcome of this effort.