German Industry Eyes Asian Market

German President Johannes Rau opened the Ninth Asia Pacific Conference for German Industry and Trade in Tokyo on Wednesday by urging German industry leaders to attach greater importance than they have in the past to developing Asian markets.

More than 3.5 billion people - or 60 percent world's population - live in Asia, and Asian countries represent a quarter of the world's gross national product and close to a third of its overall trade. China maintains the most dynamic of Asia's economies, but despite years of economic doldrums, Japan, which hosted the conference of close to 750 German businesses and executives, remains the economic engine of east Asia. Japan is the second-most powerful economic force in the world after the United States.

Calling all mom-and-pop companies

Japan is also Germany's most important trading partner in Asia. Bilateral trade during the past year rose to the 36 billion euro ($35.3 billion) mark. But having delivered 13 billion euro ($12.8 billion) worth of exports, Germany still has a considerable trade deficit with Japan, and that served as a major theme at the conference.

German firms invested 9 billion euro ($8.8 billion) in Japan last year, but Rau says it is necessary that Germany's small- and medium-sized businesses also jump into the fray.

Citing the trade deficit between Germany and Japan, German Economics Minister Werner Müller called on companies to increase their efforts to gain a foothold in Japan's difficult, but lucrative market. Müller said that the entire region represented considerable opportunities for German firms - especially for small and mid-sized businesses whose expansion in the region he described as a "necessity."

Müller praised recent free-trade agreements in Asia that made investment easier. He said the implementation of these agreements is leading to the creation of a 500-million person-strong market that would be of great interest to German investors in Asia.

Siemens CEO Henrich von Pierer, the chairman of the committee sponsoring the event, echoed Müller's plea, saying that investment could be "lucrative" because Asian markets are extraordinarily receptive to German products.

Incredible growth opportunities

In Vietnam, for example, German exports grew by 55 percent last year. German companies also experienced strong growth in Indonesia and the Philippines, where German exports increased by 20 percent last year. In Thailand, that figure was 18 percent. Overall Asian investments made by German companies also increased by 20 percent.

Though Japan is still at the top of list of Germany's trading partners in Asia, China is quickly catching up. Last year, German exports to China rose by almost 28 percent, with nearly 12 billion euro ($11.8 billion) in products and services – just one billion euro less than the figure for Japan.

Pierer said that even though major German companies were already investing in the three-digit millions in countries across Asia, there is a major need for small and mid-size companies to catch up.

Japanese business and government leaders call for reforms

Japanese leaders also sought at the conference to make the country more attractive to German investors. Economics Minister Takeo Hiranuma pointed out that Germany and Japan both shared some common problems - including a general lack of raw materials important for industry and high unemployment. He noted that Japan is currently in an economic upheaval, but said it was showing signs of upward momentum again.

Like Germany, he said, Japan should introduce long neglected structural reforms - from tax reform to a reduction of public spending to a strengthening of entrepreneurial iniatives. With the planned new free-trade zone in East Asia, he said, his government was hoping for a push in economic growth.

The chairman of the Japanese Business Federation, Toyota Chairman Hiroshi Okuda, said that in the course of those reforms, the role of foreign capital and businesses should be increased in Japan. He said financially successful partnerships between DaimlerChrysler and Mitsubishi and Renault and Nissan had proven that such initiatives do not represent a threat. Instead, they represent an opportunity, Okuda said.