www.eria.org FRAMES news . thoughts . updates February 2018 Japan LDP’s Secretary General Toshihiro Nikai Visits ERIA INDEX The Economic Research Institute for ASEAN and East Asia was very honoured to receive a special visit from the Secretary Featured Story 1 General of Japan’s ruling Liberal Democratic Party, Honourable Thoughts from ERIA 3 Toshihiro Nikai, on Saturday 20 January 2018. Top Stories 5 Mr Nikai was in Jakarta as the special envoy on behalf of Prime Minister Shinzo Abe to celebrate the 60th anniversary of bilateral ties between Indonesia and Japan. Publications 10 Considered the ‘father of ERIA’ since he conceived ERIA as the ‘OECD of East Asia’ in 2006, Mr Nikai was pleased with ERIA’s progress over the past ten years since it was Call for Proposals 11 created. Upcoming Events 12 ‘It gives me a great pleasure to see that ERIA has extended its activities and received high international recognition as I engaged in the launch of ERIA,’ said Mr Nikai. 1 www.eria.org Featured Story President of ERIA Prof Hidetoshi Nishimura and the Special Advisor to the President of ERIA Prof Akiko Yamanaka welcomed the delegation. Prof Nishimura acknowledged Mr Nikai’s enormous contributions to ERIA, saying that ‘the position of ERIA as an international organisation was established with the assistance of Mr Nikai.’ Mr Nikai was accompanied by a delegation that included Ambassador of Japan to ASEAN Amb Kazuo Sunaga, Ambassador of Japan to the Republic of Indonesia Amb Masafumi Ishii, as well as other diplomats and dignitaries. The new ASEAN Secretary Mr Toshihiro Nikai and his delegation visit ERIA’s newly opened Information Centre. General Dato Paduka Lim Jock Hoi also joined the meeting. After a meeting in ERIA’s Chairman’s room to discuss ERIA’s past achievements and future plans, Mr Nikai and his delegation proceeded to ERIA’s newly opened Information Centre. Mr Nikai viewed ERIA’s publications Members of the Delegation and a short video about ASEAN@50, ERIA’s signature project in 2017 with • Hon Toshihiro Nikai, Secretary • Mr Shigeki Kobayashi, a member the Philippines government who General, Liberal Democratic of House of Representatives was chair of ASEAN during its 50th Party Member of the House of • Mr Nobuyasu Nikai, Executive anniversary. n Representatives Secretary to SG of LDP • Mr Koichi Hagyuda, Deputy Chief • Mr Hiroto Izumi, Special Advisor Cabinet Secretary of LDP to the Prime Minister • Mr Motoo Hayashi, Acting • Mr Kazuo Sunaga, Ambassador ‘It gives me a great Secretary General of LDP of Japan to ASEAN pleasure to see that • Mr Tetsushi Sakamoto, Deputy • Mr Masafumi Ishii, Ambassador ERIA has extended its Secretary General of LDP of Japan to the Republic of activities and received • Mr Keiichiro Tachibana, Deputy Indonesia. n Secretary General of LDP high international • Mr Hideki Miyauchi, a member of recognition as I House of Representatives engaged in the • Mr Toshitaka Oooka, a member launch of ERIA,’ of House of Representatives said Mr Nikai. • Mr Takaaki Katsumata, a member of House of Representatives • Mr Toru Miki, a member of the House of Councilors 22 Thoughts from ERIA Thoughts from ERIA February 2018 Rethinking a Circular Economy in the Face of Climate Change ‘ Most climate scientists agree the main cause of the current global warming trend is the burning of fossil fuels, which emits greenhouse gases into the atmosphere and Rizqy Anandhika trap heat. Research Associate at ERIA ‘ World leaders and climate everyday activities to agriculture and reusing, recycling, and minimising negotiators have continued efforts deforestation, also contribute to landfills. to address climate change despite the increase in greenhouse gases. the United States relinquishing The trapped heat increases the On the production side, the circular leadership. So it was perhaps with Earth’s temperature and changes the economy aims to minimise any some irony to observers when US climate. negative effects to the environment, President Trump visited Viet Nam and waste from the production earlier this month, just after Typhoon With cheap fossil fuels as the main process is minimised or even Damrey claimed scores of lives engine of economic growth, many eliminated as firms shift toward amid widespread flooding, since political and corporate leaders are ‘closed loop’ production cycles. researchers believe that extreme reluctant to reduce or replace it. Hence, ensuring an efficient use of environmental events like hurricanes And the business community has resources is the best way to balance and typhoons are likely exacerbated often seen environmental policies economic growth and environmental by climate change. as a threat to competitiveness concerns. - but there are reasons to view The 2017 Atlantic hurricane season resource efficiency (in other words, On the other hand, the circular is now among the top 10 all-time profitability and sustainability) as an economy can optimise consumption most active seasons on record after opportunity. while minimising waste through Harvey, Irma, and Maria and these the mindset of the consumer who seemingly back-to-back catastrophic Resource efficiency is the hallmark embraces extending product lives. events should make us look deeper of the ‘circular economy’, a concept Such a consumer would repair an at ourselves. that has been around for decades item rather than replace it, or choose and is gaining traction as a reaction a more durable product instead of a Most climate scientists agree the to the traditional ‘linear’ business cheaper but less durable alternative. main cause of the current global model of ‘take, make and dispose’. It warming trend is the burning of encourages firms to change the way And leading the way of the circular fossil fuels, which emits greenhouse they operate, and pursue sustainable economy, are millennials and their gases into the atmosphere and trap economic growth by managing propensity for a ‘shared economy’. heat. Other human activities, from resources more effectively through According to a 2015 Goldman Sachs 3 www.eria.org Thoughts from ERIA report, millennials are poised circular models that highlights the that encourages corporations to to reshape the global economy uncertainty and risks regarding the think creatively about the circular because they are reluctant to buy value of circular inputs, balance economy and cooperate on a global items like cars, homes and luxury sheet extensions, longer lifetime level. This would hopefully reduce goods, preferring instead to access of assets and the cross-industry the pressure on natural resources products without the burdens of nature of circular models. Financial and temper the human-induced ownership. Juniper Research’s latest institutions should redesign climate change. n attempt to quantify the so-called ‘sharing economy’ sees it place investment strategies and eligibility a value on the sector of US$40.2 criteria to ensure the benefits of billion by 2022, compared with this circular supply chains. year’s US$18.6 billion. Finally, it is undeniable that we The circular economy is forecast to need energy to recycle waste. The circular generate US$4.5 trillion in additional But it doesn’t take away from the economy model economic output by 2030 according necessity to substantially reduce the to Accenture, which identifies consumption of natural resources, to is still far from business models that decouple intensify reusing and repairing, and perfect, but it growth from natural resources enforce longer product durability. and turn the focus to generating has a necessary revenue from waste and innovative, objective to customer-focused products Many politicians are wary of the restructure the and services. By comparison, circular economy model because economy in a PricewaterhouseCoopers predicted the effects of reducing the use that Germany’s gross domestic of materials and the production sustainable way. product by purchasing power parity of goods, and an extended use Policymakers have in 2030 would be the seventh largest and lifespan of goods, do not all a responsibility to at US$4.707 trillion. count towards economic growth. set a regulatory Therefore, governments have to However, there are four main environment support innovative business models challenges to the circular economy. that encourages based on closed cycles and resource corporations to First, is integrating the entire product efficiency. lifecycle from raw material extraction think creatively to disposal (or preferably reuse and In many developing countries, about the circular recycle) and completely closing population numbers and economies economy and it. Governments can promote the are forecast to grow in the cooperate on demand of circular products by fiscal coming decades. The increased a global level. incentives such as VAT reduction demand would have an impact on for secondary raw materials, tax commodity prices, and pressure This would on landfilling and tax incentives for industries to use cheaper alternatives hopefully reduce producers or public procurement, like second-hand raw materials. the pressure on which favour circular products. Hence, there would be room for natural resources Second, is the lack of a common negotiations between governments, and temper the framework that supports a circular businesses and civil societies to human-induced economy and modes of sustainable consider social, business and production and consumption. commercial benefits. climate change. With one, there would be greater The circular economy model is international