imports from other regions with movements of goods within the region and could reduce imports from other regions. The question is which impact will be greater. Southeast Asian countries fear that, given an increase in investment in Mexico, the negative impact will be greater than positive impact on their trade. NAFTA and the privatisation and other policies are welcome news to Mexico and other Latin American countries and imply that they can become new Newly Industrializing Economies. The question is whether such development will mean a blow to other regions.

### 4. Policy Implications of Flying Wild Geese Development

Southeast Asian Countries and Japan

The development of the Asian NIEs was brought about by the presence of Japan as an investor and a supplier of technology. Because of the sharp appreciation of the yen since the Plaza Accord of 1985, Japan had to decide on overseas investment to solve the long-lasting problems of trade friction and a labor shortage. This move to locate production facilities close to the market eventually boosted investment in neighboring countries to achieve international division of labor. These trends pushed Japan to make foreign investment.

The question, then, is where investment is targeted. Cautious investment attitude would be to choose as a destination of investment those countries with sound economic fundamentals and which provide preferential treatment to foreign capital. Those countries with stable political situation and strong entrepreneur spirit among their capitalists and workers absorb foreign capital. These factors pull in investment. Preferential treatment for foreign capital is important, but for foreign capital, political and administrative stability is more important. It is possible to cope with the lack of preferential treatment in the long term. Moreover, the preferential treatments extended to foreign capital by Southeast Asian countries are becoming almost identical. On the other hand, political and administrative instability gives rise to suspicion of policy changes and create uncertainties regarding future business management.

For Japanese companies, Southeast Asian countries had the effect of pulling in their investment. Japanese companies had made many investments in the United States and Europe, but this was prompted mostly by the need to cope with legal factors such as trade friction and the expansion of the EC. However, their expansion to Southeast Asia was prompted by purely economic factors. As the appreciation of the yen and labor shortage pushed Japanese firms to make foreign investment, the economic and social conditions made it possible for Southeast Asian countries to absorb Japanese investments. In addition, increasing mutual interdependence prompted the economies of both Southeast Asian countries and Japan to develop further. The percentage of intraregional trade in the ASEAN region is not very high, but it is growing steadily. Not only the United States and Japan but also Asian NIEs are increasing their investment in the ASEAN nations. One cannot ignore the presence of these new investing countries in discussing investments in the countries which are on their way to achieving market economies. Mutual dependence expands the gamut of investing countries and host countries and further deepen the contents of investments.

Japan is faced with the urgent task of increasing imports. Investments in Asian NIEs often resulted in the production of goods which are exported to third countries such as the United States. Japanese investment to realize international division of labor has brought