allows the race in development and starts from the effort to advance further. Protectionism may be an argument which has forgotten efforts to “advance further”.

In connection with these trends, the role of Japan is sometimes being questioned. This is because, while Japan is a major investor and an exporter of technology, it has not been a major importer. The theory of flying wild geese development, which views development in terms of the passage of time, assumes there are exports and imports, and that the means to achieve them are exports of capital goods and capital investment. However, Japan was relatively slow in contributing to the development of other countries through an increase in imports from them. As the Asian NIEs and ASEAN countries push on with industrialization, they will also experience demand from less developed developing nations to open up their market. Mutual interdependence is created by opening of the market.

An important key for spreading flying wild geese development from the Asian NIEs to the ASEAN nations and further to Asian socialist countries, which are about to switch their economies into market economies, is market opening. This will prompt the transfers of technology and industries. If the Asian NIEs and the ASEAN nations open up their markets to the countries in Indochina and China arid if the United States and Japan support such trends, this would trigger flying wild geese development.

## I mportance of fostering small and medium-sized enterprises

The Asian NIEs and the ASEAN countries have a large weakness. That is, the weakness of small and medium-sized enterprises. While they are posting huge trade surpluses, Taiwan and South Korea are posting large deficits in their trade balance with Japan. This is because they have to depend on Japan for parts and intermediate materials essential for the production of export goods. The ASEAN countries, where Japanese companies are active, also face the same problem.

The largest cause for this is that various measures, including investment promotion law, are geared to fostering large enterprises. Most of the approvals under the investment promotion law are based on the number of jobs, the amount of investment and the ratios of domestic and foreign capital. At the same time, the absence of local subcontractors has encouraged large firms to produce parts in-house. In addition, it has been difficult for small and medium-sized companies to enter as pioneers into sectors where there is no competition with domestic enterprises. The preferential treatment in corporate tax and other measures extended to pioneer enterprises adversely affected the development of domestic small and medium-sized enterprises. The mandatory requirement for domestic procurement rate on designated products only deterred entry of foreign companies.

The theory of product cycles was based on the theory of multinational companies in that foreign capital makes investment in a country where the level of technology is low and builds new enterprises which will be competitive locally. This is the theory that profits of late starters are realized by direct foreign investment. On the other hand, flying wild geese development basically assumes the presence of initiatives by domestic entrepreneurs. If we look at the actual situations in Asian countries, while South Korea has achieved flying wild geese development by following a policy which gives priority to domestic capital, while introducing foreign capital, development in Thailand and Malaysia has been product-cycle.