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This time we're talking about Japanese investment overseas. What we say may not be what you want to hear, but the fact is conditions are harsh in Japan at present and so this is what it is like.
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Despite being burdened by an enormous national debt of \604 trillion?equivalent to more than \4 million per person?and its economy being in the doldrums for the past decade, people still think Japan is a rich country. That at any rate is what it seems like judging from the calls for more aid and investment from countries in Asia and elsewhere. |
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Foreigners who come to Japan often say "Everyone says Japan is in recession, but it doesn't look like it. Where are the signs of recession?"
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| B: |
Yes, people often say that. So what I do is show them homeless people, explain to them about the madogiwazoku in-house unemployed (i.e. the middle-aged office workers with nominal positions but no real responsibilities and works), give them the figures on the huge personnel cutbacks by major companies, and tell them how mass restructuring is resulting in mass redundancies. |
| A: |
Even foreigners who come to Japan think that, so it's hardly surprising people who haven't been here have an even more distorted picture of what it's like. They think Japan is still rich, and has, as they say in Japanese, a lucky mallet for making as much money as you like. Anyway, there are plenty of calls from other countries for aid and investment.
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| B: |
That's because there has in the past been a lot of Japanese investment overseas. You have to understand, though, that circumstances in Japan are changing. |
| A: |
You can't just think you can come to Japan and hold an investment seminar, and that firms interested in investing will turn up and start investing and expanding into your country. No one, to tell the truth, simply waits around waiting to be asked to invest somewhere. It's just not that easy.
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| B: |
Exactly. It's perfectly understandable that countries should feel they need foreign capital to develop their own economies. But before they go around asking for aid and investment, first they need to think carefully about what they themselves can do to develop. You shouldn't merely depend on others right from the outset. Japan faces its own difficulties just as other countries do, and you have to understand that. |
| A: |
Another thing you notice if you look at the materials produced to attract investors and attend the seminars on investing overseas held all over Japan is that all everyone is doing is selling the same good points: cheap energy supply, well developed infrastructure, competitive skills base, cheap and good quality manpower, high levels of education and literacy, good financial services, cheap rents and construction costs, low taxes, and so on and so on. It may be necessary for the purposes of good PR, but everywhere seems perfect in just the same way. What you have to do is sell your most outstanding feature. Drives to attract investment in many cases lack a sales point and fail to explain how the country or region in question is different from everywhere else, and they also fail to answer potential investors' questions clearly enough.
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| B: |
The fact is they can't answer because they haven't investigated what the situation is like in other places. You have to emphasize and explain what your point is in order to pitch yourself successfully. |
| A: |
There's a funny story about how someone heard there was power cut once a week in some place, but when they got there they discovered the electricity was only on one day a week, which demonstrates the huge difference between what you are told and what you find.
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| B: |
What you need to do is thoroughly research other places, and draw up a comparison with your place, region and country. |
| A: |
Absolutely. Investors can then compare at a glance the incentives afforded to foreign companies in each country, which is enormously useful in deciding where to invest.
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| B: |
Japanese investors have grown more miserly, and are now quite unlikely to embark on an investment without investigating much more thoroughly than in the past. Many companies in the past followed their parent companies without much thought and without conducting feasibility studies. Now, though, many subsidiaries and subcontractors have been abandoned by their parent companies. |
| A: |
Small and medium-sized subcontractors can barely survive by themselves as it is. They are striving to wean themselves from their dependence on their parent companies, and desperately forging ties with companies in other sectors and seeking to develop original products. Such companies don't have enough funds to expand overseas, would be left shorthanded in Japan if they sent valuable personnel overseas, and have relatively little access to information on conditions overseas. But unless they can come up with an especially original, unparalleled product in Japan, where wages are high, there are limits to what they can achieve. Hence small and medium-sized enterprises such as these really want to expand overseas. Or to put it more accurately, they have to expand overseas if they are to survive. It's true, therefore, that they are desperately looking for potential projects and joint ventures that suit them to invest in.
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| B: |
Such companies do not expand overseas until they have thoroughly studied the situation. As failure can be fatal, they have no alternative but to proceed with caution. Thus they go to the locale in question and investigate thoroughly. They go to check on the accuracy of what they have read and been told, then very cautiously, after looking both ways on a one-way street, as it were, and taking every possible precaution, they at last embark on an investment or joint venture. This means, then, that they need true, trustworthy information. |
| A: |
I heard recently that in order to attract investment in South Korea, foreign firms have all their local expenses, such as meal expenses and other expenses incurred during their stay, paid for them to enable them to have face-to-face talks with South Korean companies and other organizations seeking investment. This is of enormous help to Japanese companies interested in investing there, as it means they only need to pay the return airfare.
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| B: |
What are the most important considerations for Japanese companies planning to expand overseas? |
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Factors such as (1) a developed infrastructure, (2) how easily parts can be procured locally, (3) the character and reliability of partners, (4) whether any profits can be sent back to Japan, and (5) wage levels in the area.
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A project costing more than originally planned is also a problem. |
| A: |
Yes, investors want to be told the truth right from the start, without anything being concealed.
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| B: |
Not infrequently, organizations come to hold seminars in Japan but fail to give clear answers about things that potential investors can confirm by going to check. The fact is, investors want to know about the weak points as well, and they will have a higher opinion of a venture if they are told the honest truth. |
| A: |
Exactly so. Japanese companies want to be able to attend seminars and be given concrete information that allows them to grasp the advantages of investing immediately.
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| B: |
I agree. |
| A: |
What do you think investors look for most in a foreign company?
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| B: |
As you yourself said, they are most interested in whether they can procure parts locally. It's expensive transporting the majority of parts from Japan, and so Japanese companies want the supporting industries in the countries in which they invest to develop quickly so that they can buy parts locally. Even if the core parts are exported from Japan, supporting industries need to develop so that local produce can be used for most of the rest. |
| A: |
That's absolutely right. There is an urgent need for supporting industries to grow develop.
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