Japan is the world’s third largest economy and one of Malta’s largest trading partners and export destinations. It is no secret that the COVID-19 pandemic brought the world economy to its knees with travel restrictions, business closures, uncertainty and rising unemployment.
The major dilemma governments are facing now is to balance global health with the economic well-being of a nation. It is, therefore, paramount to have an integrated recovery plan to kick-start the economy once again after the pandemic starts to phase out – and one can do this by looking where the sun rises, to Japan.
A resilient economy
Nana korobi, ya oki (fall down seven times, stand up eight) is a Japanese proverb that symbolises the virtue of resilience. This resilience can be seen when Japan quickly bounced back after negative or catastrophic situations. The Japanese economy bounced back from heavy post-war setbacks in 1945, the 1973 oil crisis, the 1997 Asian financial crisis and the global economic crisis of 2008.
One should also not forget the natural disasters like the tsunami of 2011, earthquakes and the recent typhoon Hagibis of last October (which I had the misfortune of experiencing) that created massive infrastructural damage and extensive loss of life.
Japan’s GDP shrank 0.9 per cent during Q1 2020 compared to the previous three-month period, which translates into an annualised contraction of 3.4 per cent in real terms, according to preliminary data released by the cabinet office of Japan this month. It is the second straight quarter of economic contraction, putting the nation in a technical recession. Many experts believe the worst is yet to come as the nation has spent much of the second quarter under a COVID-19 state of emergency. This can lead to a collapse of GDP in Q2 2020 and will most likely register a negative for the whole year.
In 2021, however, the Japanese economy should recover vigorously, especially if the postponed Olympics are held in the summer (this can also provide opportunities for our enterprises). Times and rhythms of the recovery will inevitably also depend on the economic trend in other countries, especially Japan’s major export destinations. One should also not forget about the solidity of the Japanese industrial system and its strong projection in the emerging economies of Asia and Africa: a factor that could stimulate new relationships with Maltese companies and enterprises.
Reaping the fruits of EU-Japan relations
Both Japan and the EU member states have sought to consolidate economic cooperation and to encourage free trade.
On July 17, 2018, the Economic Partnership Agreement (EPA) between the EU and Japan was signed, making it the biggest trade deal the EU has signed, representing 30 per cent of global GDP and 40 per cent of global trade. It is also the largest free-trade zone in the world with 600 million people – and this includes Malta. So why reinvent the wheel and not take advantage of such a deal? Other EU member states are benefitting from such an agreement and are seeing an increase in their exports and trade volumes with Japan.
The Partnership Agreement between the EU and Japan is the largest free-trade zone in the world with 600 million people – and this includes Malta
For these last 20 years, Malta has exported tuna to Japan with outstanding success, due to its excellent quality. In 2016, for example, Malta exported a total of €121 million in fish products, roughly 89 per cent of all Maltese exports to the land of the rising sun. In the record year of 2013, exports totalled over €215 million. Last year, total exports to Japan totalled €150.1 million, the vast majority of them being in the tuna industry. Other products we export to Japan are electrical machinery, mechanical parts, plastics and optical parts.
This shows that Maltese products can be synonymous with quality – something which is a must when exporting to Japan. Thanks to the removal of trade barriers and tariffs, this success can be replicated with Maltese quality products like wine, where we are already seeing market penetration.
The government is also working with Japan to open the market in other areas, namely pork meat, dairy products and vegetable exportation. Other sectors are also worthy of attention such as biotechnology, artificial intelligence, robotics, renewable energies, airspace and technologies.
Other EU member states are achieving successes in these fields – what is keeping us from doing the same?
A bridge between Japan and Africa
Malta can also position itself strategically to act as a bridge between Japanese stakeholders and other third countries in the EU neighbourhood like Africa and the Middle East. This falls into place given the policy of the Maltese government to look at Africa as a trade partner and not only as an aid recipient.
Earlier this year, the government launched the ‘Malta and Africa: A Strategy for Partnership 2020-2025’, which aims at creating conditions to improve Africa’s development through trade, and by creating opportunities for youth in changing times.
Malta’s strategy has parallels to Japan’s strategy in relation to Africa. Back in 1993, Japan started the Tokyo International Conference on African Development (TICAD) to promote respect for African ownership and partnership with the international community. At the TICAD VI held in August 2016 in Nairobi, Kenya, Japanese Prime Minister Shinzo Abe announced that for a period of three years from 2016 to 2018, Japan will invest in the future of Africa through the implementation of measures such as human resource development to 10 million people, amounting to approximately $30 billion under public-private partnership.
There is also a push from the private sector, where Toyota set up vehicle assembly operations in Accra, Ghana, in July 2019. Malta opened its first embassy in Sub-Saharan Africa in Ghana in the same year. Earlier this year in March, a trade mission led by the Minister for the Economy, Investment and Small Businesses Silvio Schembri led to the signing of five MoUs and the deepening of both diplomatic and trade relations.
By combining Japanese excellence in production and technology with Malta as an EU country with close links to Africa, further combined with market demand in Africa, partnering with Ghana to reach and engage with millions of consumers across West Africa, there are excellent prospects to create new value chains which are reliable at a time of global challenges.
Malta and Japan could combine forces to ensure access to African markets. And all of this is happening at this time. A coincidence of similar interests and aims?
André Spiteri, non-resident, Ambassador to Japan