Approaches to Liberalization- Paving the way to common grounds -

Katsuhiro Yamaguchi, DirectorCivil Aviation Bureau

Ministry of Land, Infrastructure and TransportJapan

2 5th May, 2005

Geography matters

“I have spent my whole professional life as an international economist thinking and writing about economic geography, without being aware of it,” Paul Krugman (1991)

Air Transport in East Asia

Intensifying regional trade

Air Transport in East Asia

eastbound

Asia

Europe

Pacific

Asia

Europe

Japan Japan

216291

484

100 5 346

4001301

46 324

1213

Pacific

Europe

Asia

Japan

2

80

223

743

legendtransitdirect

Thousand tons

Asia

Pacific

Europe

19439 179

122

847 242Japan

westboundeastbound

westbound

Pacific

55

275

82

Air Transport in East AsiaRapidly increasing business travel

thousand passengers

Japanese travelers to East Asia

5,050 thousand

8,070 thousand

Destination for Japanese international travelers

Air Transport in East Asia

East Asia

OthersHawaii, Guam

local

Increase in frequencies (flights/week)

Share of scheduled flights from local airports in Japan to East Asia

Expanding network between local airports in Japan and East Asia

Zibo

Kuala Lumpur

Harbin

Jakarta

Bangkok

Beijing

Shanghai

Tianjin

WuhanGuangzhou

ChengduXian Nanjing

DalianJinan

Taiyuan

Zhengzhou

DongquanGuiyang

Lanzhou

Kunming

Manila

Ha Noi

Ho Chi Mihn

JuznoSahalinskVladivosto

k

Habarovsk

Denpasar

Network between local airports in Japan and East Asia

local

UlsanTaegu

Shenzhen

Hangzhou

Chaoyang

FuzhouChangsha

ChejuKwangyuQingdao

Seoul

Hong Kong

XiamenChongqing

Singapore

IncheonTaejonPusan

Taipei

ChangchunShenyang

China, South Korea, Hong Kong, Taiwan, Philippines, Thailand, Malaysia, Singapore, Indonesia, Vietnam

Geography and Air Transport

Comparison with USA

Geography and Air Transport

Comparison with Europe

Path Dependence

Progressive liberalization is necessary to avoid negative lock-in due to capacity constraints

Potential patterns of payoffs

34312825221916131074Path 22019181716151413121110Path 1109876543210

Modified from Brian Arthur (1989)

Cooperative Game

Shift from a non-cooperative to a cooperative scheme should be pursued

Cooperative scheme would need some sort of a function to enforce common policy goals

Cooperative Game

Comprehensive and repeated interaction would foster development of “common grounds”

Thank you for your attention

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- A friend made is a road paved -