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The relations between the Philippines and Japan have been cordial, vibrant, and mutually beneficial for the governments and peoples of both countries, in general. This state of affairs can be widely gleaned from the broad area of cooperative endeavors between the two countries ranging from the politico-security dimension, to trade and economic cooperation, as well as in socio-cultural concerns.

Because of shared commonalities and mutuality of interests, there is a convergence of views to further strengthen bilateral ties in the future.

The dawn of the new millennium offers a host of challenges and opportunities to further strengthen the dynamic partnership between the Philippines and Japan in the 21^st century. Through close cooperation in various areas, there is justifiable cause for optimism for the Philippines and Japan to continue to occupy their rightful place in the community of nations, striving for the preservation of peace, harmony and stability in this part of the globe.

The following are the highlights of RP-Japan relations in political; economic which includes development cooperation, trade, investments; and tourism; cultural; and consular and labor cooperation.

II. Political Cooperation

Since the establishment of diplomatic relations between the Philippines and Japan in 1956, cooperative partnership in the political arena has remained harmonious and stable. This has been characterized by high-level exchanges of visits (i.e. heads of government, top government officials, and parliamentarians), that articulate the importance of the bilateral relationship between the Philippines and Japan in all areas of cooperation.

The conduct of political exchanges between the Philippines and Japan has strengthened efforts to address bilateral issues and concerns. In this respect, policy dialogues and consultations have not only been useful in clarifying issues but also in finding a common ground upon which mutual interests could be served. Japan and the Philippines make use of available fora to discuss bilateral concerns in the areas of trade, investment, ODA, labor, immigration, and consular matters. Among these mechanisms for consultations include: the Philippines-Japan Sub-ministerial Meeting; the ASEAN-Japan Forum; and the ASEAN-Japan Informal Summit.

The Philippines and Japan have established a cooperative effort to respond to the difficult issue of former wartime comfort women through the Assistance to Lolas in Crisis Situation (ALCS) funded by the Asian Women’s Fund (AWF). The ALCS Project has successfully been completed and as of 30 September 2002, the Project has served a total of 185 comfort women (171 are living and 14 are deceased). In view of its completion, the Philippines and Japan are working on the establishment of a geriatric center that will cater to the needs of the remaining/surviving former comfort women.

The RP-Japan relations received a boost when President Gloria Macapagal Arroyo embarked on a working visit from 12 to 15 September upon the invitation of the Japanese government. The President met with Prime Minister Junichiro Koizumi. The two leaders affirmed their commitment to elevate cooperation into a higher level of partnership in the future in bilateral, regional and global concerns. Both leaders reaffirmed the need to schedule immediately the first Politico-Security Talks and decided to launch a technical cooperation framework to assist third countries under the "Japan-Philippines Partnership Program" to jointly promote human resources development particularly in ASEAN countries and East Timor. Both leaders also condemned the September 11 terrorist attack on the United States and vowed to cooperate jointly against terrorism.

Prime Minister Junichiro Koizumi visited the Philippines on 9-10 January 2002 to strengthen bilateral relations with the Philippines and to embark on a renewed Japan-ASEAN cooperation for prosperity, stability, and cooperation for the future.

On 20-24 May 2002, President Arroyo embarked on her second working visit to Japan to address the Nikkei Shimbun’s "8^th International Conference on the Future of Asia" in Tokyo and Mainichi Shimbun’s "Asia and Japan in the 21^st Century-Proposals by Female Leaders Conference" in Osaka. The President also had a bilateral meeting with PM Koizumi which gave an opportunity for the President to outline the country’s vision of Philippine-Japan partnership in "working and advancing together" for East Asia. The two leaders agreed to jointly study the possibility of signing an Economic Partnership Agreement.

H.E. President Gloria Macapagal Arroyo paid a state visit to Japan from 2-5 December 2002. She had a summit meeting with Japanese Prime Minister Junichiro Koizumi which confirmed the establishment of a relationship as "partnership for acting together toward peace and stability" and exchanged opinions on a wide range of issues as Japan-Philippines economic partnership, support for Mindanao, Philippines investment environment and terrorism and piracy countermeasures. She addressed a joint session of the Japanese Diet at the House of Councillors. She was the first female Head of State to address the Diet.

III. Economic Cooperation

1. Official Development Assistance (ODA)

The Philippines has become one of Japan’s top recipients of official development assistance (ODA). Japan, likewise, has become the Philippines’ number one source of external development funds. Since 1992, the Government of Japan (GOJ) has been extending an average of US$ 800 million worth of ODA loans to finance development projects of the Philippine government every year. This figure accounts for about 61% of total ODA financing sources available to the Philippines on a yearly basis. As of first semester 2002, Japan shares 81% of the country’s ODA commitment or a sum of US$ 634 million with the loan signing of the seven projects under the 25^th and Special Yen Loan Packages. The Philippines has been among the largest recipient of Japan's ODA. The amount of ODA extended to the Philippines was approximately US$ 299.34 million in 2000. From the fifth largest recipient of ODA in 1999, the Philippines went down to sixth place in 2000 after Indonesia, Vietnam, China, Thailand, and India.

For the period 1969 to 2000, the total Japanese ODA to the Philippines amounted to US $9.138 billion. Such financial assistance has helped in the development of key sectors of the Philippine economy like public works, transportation and communications, industry; agriculture and fishery, education and public health, power generation and mining. In particular, such assistance has helped strengthen the country’s socio-economic infrastructure and enhanced the delivery of basic services to the people.

On the quantitative side, Japanese ODA has been increasing through the years, starting from less than US $50 million in the late 60s to over hundred million dollars in the 90s. On the qualitative side, there has been a wider mix in the sectoral allocation of ODA. From a predominantly infrastructural orientation in the early years, Japanese ODA has increasingly given attention to other equally vital sectors like energy, transportation, and communications.

Japan has deliberately emphasized the importance of providing social safety nets to vulnerable sectors of society, sustainable development, and environmental conservation. For environmental projects in particular, Japan has offered ODA loans to an unprecedented interest rate of 0.75 percent per annum, with a repayment period of forty years like the projects under the Special Yen Loan Package or the so-called Obuchi Fund.

In July 2002, the Special Term Economic Partnership (STEP), the follow-on facility to the Special Yen Loan Package, has been declared effective. STEP is the tied-loan facility of the GOJ administered by JBIC, with interest rate of 0.9%, repayment period of 40 years including 10 years grace period. Prime contractors are tied to Japanese firms.

JAPAN’S ODA TO THE PHILIPPINES FOR CY 2002
(ARROYO ADMINISTRATION)

In sum, Japan’s ODA to the Philippines has helped accelerate the pace of the country’s development by providing the needed funds for the implementation of development projects. At the same time, the quantitative and qualitative changes in the administration of Japanese ODA and the accompanying policy thrusts have increased the resilience of the Philippine economy in adjusting to external shocks.

2. Trade

In the area of trade, Japan is the Philippines’ second largest trading partner and leading source of imports. Although bilateral trade has largely been in favor of Japan, it is the Philippines’ second largest market for its electronics such as semi-conductor devices, electronics data processing, office equipment, telecommunications as well as machines, transport equipment, apparatus and parts. Meanwhile, Japan exports the following items to the Philippines: intermediate goods such as materials and accessories for manufacture of electrical goods; components/parts/accessories for assembly of passenger cars.

PHILIPPINE TRADE WITH JAPAN FOB Value in $US Million
1998-2002
1.  Philippine-Japan Trade (Value in $US millions)

Japan remains the Philippines’ number two trading partner, next to U.S.A. Total trade in 2002 of $US 12.2 billion grew by 9.6% over the previous year.

At an average growth rate of 4.6%, total volume of trade was to a small degree influenced by the growth of Philippine exports, which averaged 6.2%. This outpaced the growth of the country’s imports, which only averaged 3.8%.

For the period 1998-2002, trade was very much in favor of Japan although the trade deficit has been erratic, decreasing from 1998 up to 2000 but dramatically increasing again in the last two years. The trade deficit has been growing at a very high rate of 30.1%

Philippine-Japan Agricultural Trade (Value in million US&)

Source: DTI’s Tradeline Services

In the area of agriculture, the total of US$627.3 million in 2002 is only 5.1% of the total trade of US$12.2 billion. Significantly, agriculture trade has been almost at a standstill over the past five years, actually decelerating at a rate of 1.1%. This parallels the country’s export performance, which registered a growth of – 1.7%. Import performance, on the other hand, grew at a very low rate of 0.6%.

The Philippines enjoyed a positive tade balance over the past five years but the deficit has been slowly decreasing at a rate of 3.0%.

In 2002, the Philippines’ major agricultural exports to Japan were the following: fresh fruits; fresh/chilled/frozen shrimps; fresh/chilled/frozen/canned/smokedDried tuna; coconut oil; fresh vegetables; processed fruits and mollusks.

In 2002, the Philippines’ major agricultural imports from Japan were the following: fresh/chilled/frozen tuna; natural oils, fats and waxes; tabacco; leatherhide and skins; sauce, condiments, spices, mixes; non alcoholic beverages and confectionery and honey.

Based on the 2001 report of the Bureau of Agricultural Statistics (BAS), of the Philippines’ top 10 agricultural exports, Japan was a major market for six (6) products, as follows: coconut oil; fresh banana; pineapple; shrimps and prawns; tuna; and fresh mango.

Of the Philippines’ top 10 agricultural imports in 2001, Japan was a major source only for manufactured tobacco ($US 2.0 million).

In both trade and investment sectors, opportunities abound in sectors other than electronics, which should be pursued by the Philippines such as fresh and processed fruits, wood and rattan furniture, jewelry (costume), basketworks, marine products, construction materials, ICT services, and automotive parts. In the ICT sector, Japan has provided funding opportunities for projects under the "Mori Initiative" of $20 billion announced at the G-8 Summit in Okinawa in July 2000. The Philippines should continuously tap into the funds by submitting projects that could upgrade the country’s ICT capability.

One of the challenges for the Philippines is improving trade balance. The country has experienced consistent trade deficit with Japan. While the terms of trade with Japan have shown substantial improvements in the recent past, the persistent trade deficit of the Philippines is still attributable to Japan’s exports of more value-added items than those being exported by the Philippines to Japan. But the more important reason is due to the natural practice of Japanese companies in the automotive and electronic sectors to import parts for manufacturing products in the Philippines from their mother companies or KEIRETSU Companies. The final products are of course exported to U.S.A., Japan and Europe. All ASEAN countries, except Indonesia and Brunei, have trade deficits with Japan. Indonesia and Brunei export oil and gas to Japan.

A number of market access issues also continue to hamper Philippine export performance to Japan. There is also a need to promote other agricultural products to Japan, such as asparagus and flowers. The fast depreciating Japanese yen and slowdown in retail sales show lack of business and consumer confidence in Japan’s economic outlook. These factors impact negatively on Japan’s imports from the Philippines.

3. Investments
A. JAPANESE INVESTMENTS IN THE PHILIPPINES
Value in US $ Thousand
1997-2000

In the area of investments, Japan has become the Philippines’ second largest investor. The Philippines, on the other hand, has become a strong export base for electrical and electronic products of Japanese-affiliated companies.

Japanese investments in the Philippines, particularly in the electrical and electronics industry, stimulated the development of Philippine support industry and in the process, strengthened local supplier capability. Japanese investments have likewise loosened some of the constraints on technology and finance which presently impede the development of the country’s support industry. The demand for locally-sourced components which can pass quality control standards has compelled local suppliers to upgrade their technology and look for viable sources of financing.

Japanese investments have also generated employment opportunities for thousands of Filipinos as well as contributed in the government’s efforts to promote human resources development. In particular, the Japanese scholarship programs, skills training and related technology transfer have improved the skills and competencies of Filipino workers employed in Japanese-affiliated companies.

Japan and the Philippines need to focus more on technical assistance projects of medium to long-term basis than outright financial assistance. This would accelerate the development of SMEs in the Philippines, particularly in supporting industries. The Philippines should explore the possibility of establishing an "SME Exchange" with Japan.

A major challenge in attracting Japanese investments in the Philippines is the depreciating yen and pessimism in Japanese business circles on their country’s economic outlook and the recent developments in peace and order situation in the Philippines, such as the "Abu Sayyaf" and kidnappings, have led other foreign investors, including the Japanese, to invest in other Asian countries. Moreover, the "cost of competitiveness factor" in making investment decisions by SMEs recently surveyed by JASMEC places the Philippines at a disadvantage when measured on the length of its tax holidays. The Japanese are also worried about the Philippines’ labor unions.

On 20 November 2002, the Japanese Chamber of Commerce and Industry, Inc. raised concerns on :1) infrastructure development in the Laguna, Cavite and Batangas areas where export-oriented manufacturers are located; 2) labor disputes and illegal strikes; 3) peace and order; 4) absence of a hazardous industrial waste treatment plant; and 5) tax refunds. Concerned agencies have been requested to provide information on measures taken or planned to address these concerns.

January-December 2001

SECTOR VALUE

Manufacturing 24,376

Service Exporter 8,413

C. MAJOR INVESTORS* PRODUCT/ACTIVITY

4. Tourism

One area of bilateral relations where people-to-people contacts have been on the rise is tourism. Statistics show that Japan is the second largest single country source of tourists, next only to the United States. From a level of 215,634 in 1989, tourist arrivals from Japan have been on the upswing, reaching 390,517 in 2000. In 2001, there was a decline in Japanese tourists arrivals to 343,840 or a decrease of 343,840 tourists. The Philippines remains included in Japan Ministry of Foreign Affairs’ Travel Advisory alert level.

The challenge is to apprise the Japanese government of the measures taken and being undertaken by the Philippine government to improve the peace and order situation. The Philippines also needs to request the delisting of Metro Manila from the travel advisory to help mitigate the slowdown in Japanese outbound tourist traffic to the Philippines.

IV. Cultural Cooperation

Cultural Cooperation is one aspect of Philippines-Japan relations which has aided in liberating the Filipino consciousness from the memories of Japan’s role in the war. Cultural programs such as the Japan-ASEAN Youth Friendship Programme for the 21^st Century and the Ship for Southeast Asian Youth Program (SSEAYP) have provided opportunities for the youths of both countries to learn about each other’s culture, to appreciate the differences, and to form friendships on the basis of mutual respect and understanding. There have also been cultural exchanges between the Philippines and Japan through exchange of performing artists, film festivals, etc.

The Philippines may explore the possibility of setting up an English Language Learning Center for Japanese students. The Philippines should also secure more scholarship slots for Monbusho (Ministry of Education) scholars.

V. Consular and Labor Cooperation

The increasing number of Filipinos residing and working in Japan and the need for dialogue resulted in the first and second rounds of Bilateral Consular Consultation talks in 1998 and 1999. Among the issues discussed were the entry of criminal elements, Filipino-Japanese intermarriages, illegal workers and those who overstay, falsification of documents for visa, passport fraud, and the hiring of Filipino entertainers. The discussions focused on immigration and labor, passport and visas, protection of nationals, and joint cooperation on crime preventive measures. The Japanese Delegation also raised issues on illegal entry and overstaying of Filipinos in Japan.

The Japanese Immigration Bureau reported a total of 157,667 registered Filipinos in Japan as of 31 December 2001, marking 9% increase from the previous year. It is also estimated that there are 29,649 "overstayers", thus bringing to 187,316 the total number of Filipinos all over Japan.

The number of Filipinos living within the jurisdiction of the Philippine Embassy in Tokyo is no less than 112,000 representing 77% of the total Filipino population. The remaining 23% would fall under the jurisdiction of the Consulate General in Osaka.

For the year 2001, the Immigration Bureau reported that a total of 186,262 Filipinos entered Japan, of whom 38% (or 70,944) are classified as "re-entrants". Of the total entrants, the majority is entertainers (39%), followed by spouses/children of Japanese nationals (22%), then by holders of temporary visitor’s visa (16%).

The Proposed Japan-Philippines Economic Partnership Agreement

The Working Group (WG) on the Japan-Philippines Economic Partnership Agreement (JPEPA), a body composed of representatives of concerned government agencies from Japan and the Philippines, was formed in October 2002 to study the possible content, substance and coverage of a mutually beneficial economic partnership agreement which may include a possible element of a free trade agreement (FTA). The WG on the JPEPA has met four times since its creation. The said meetings are considered part of the preliminary stages in the process of consultations to explore the viability of proceeding towards formal negotiations in forging the JPEPA.

The major issues raised and discussed during the meetings were mutual recognition arrangements (MRAs), sanitary and phytosanitary (SPS) measures and possible employment of Filipino nurses and caregivers in Japan. Also discussed were issues related to investments, trade in services, financial services cooperation, government procurement, intellectual property rights, and Japanese concerns on doing business in the Philippines, among others.

The WG also agreed that prior to the commencement of any formal negotiations, both parties shall conduct separate studied to assess the sustainable impact of the proposed JPEPA.

The next meeting of the WG will be held in the last week of June 2003 in Manila.

Conclusion:

Philippines-Japan relations have strengthened in the last fifty years. The economic ties are extremely important and cooperation in the political and security spheres have also expanded. The Philippines and Japan have a mutual security treaty with the USA. Both countries are democracies and are committed to a free market system. They have cooperated with each other in the establishment of multilateral institutions like the ASEAN Regional Forum (ARF) and APEC. They support each other in the United Nations and other international organizations.

In the political and security field, both countries should continue to cooperate with each other in preventive diplomacy like the restoration of political stability in Cambodia, and peacekeeping operations in East Timor. The Philippines is going to undertake South-South cooperation in East Timor with Japan. This will involve Japan funding 85 percent of a project and the Philippines will finance the 15 percent.

The Philippines will continue to be a major partner of Japan in fortifying ASEAN-Japan relations and in accelerating the integration of ASEAN Plus Three. The Philippines should also continue to work for the early reforms of the UN Security Council and the United Nations Organization.

In the economic field, the Philippines can be more than just a production base. Because of the availability of young, skilled, and English-speaking labor force, the Philippines could help Japan operate some of the Japanese companies overseas, or even in Japan. This will become particularly important 20-40 years from now, because of Japan’s rapidly aging population. The Philippines could also provide medical and health services and IT services, in the manner it is now providing seamen to operate Japanese vessels. This cooperation can be more optimal through Japanese language training and schooling in Japan of a greater number of Filipinos.

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THE FILIPINO COMMUNITY IN AND AROUND TOKYO AREA

The Filipino Community in and around Tokyo area is composed of OFWs, students, professionals, religious and lay missionaries, spouses of Japanese nationals and other foreign nationals, and employees of international and non governmental organizations. A good number of Filipinos are long time residents, some of whom have been granted permanent residency by the Japanese Immigration authorities while some have overstayed their visas. Majority of them could be considered transients as they are OFWs with visas allowing them to stay in Japan for a maximum of only three-six months.

Most of the Filipinos, with or without proper visa, belong to one or more organizations. There are now thirty-seven (37) organizations duly registered with the Philippine Embassy. The organizations registered with the Philippine Embassy are of various orientation ranging from purely fellowship among those coming from the same province or region, sports, religious, and assistance to fellow Filipinos.

Fourteen (14) of these organizations belong to the Philippine Assistance Group (PAG), an umbrella organization directly under the guidance of the Philippine Embassy. To formalize the unification of these organizations, a Memorandum of Agreement (MOA) was signed at the end of April 1997 by the fourteen charter members. PAG members are:

Association of Filipino Students in Japan (AFSJ), Association of Filipino wives in Tokyo (AFWT), Christian Association Serving Traditional Laymen's Evangelization (CASTLE), El- Shadai Japan Chapter, Filipino Bowlers Club (FBC), Filipina Circle for Advancement and Progress (FICAP), Filipino Ebisu Group Association (FEGASSO), Filipino Maritime Network (FMN), Kalipunan ng Lakas at Adhikain (KALAHI), Overseas Workers Association (OWA), Philippine Men's League (PML), Samahang Pilipino (SP), Toyoshiki Filipino Community (TFC), and Yokohama Filipino Community (YFC). The MOA specifies the rules and regulations governing PAG and the guidelines for the disbursements of the community fund. The guidelines specify that all funds generated by PAG would be used solely for medical care and repatriation of Filipinos.

To date, PAG has extended financial assistance to 19 repatriation cases and 9 medical cases which entailed a total amount of Y 2,422,000.

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