British Embassy Tokyo
Japan the world’s top investor in 2012. Developing markets a significant partnering opportunity for UK companies.
Japanese companies investing heavily in developing markets
Japanese companies have long been active in developing markets, particularly in Asia and the Middle East. But the volume and value of their investments is growing rapidly, fuelled by:
a shrinking domestic market: the population is set to fall from 127 million now to 90 million by 2050
healthy corporate balance sheets and readily available long-term finance
the need to secure energy and other industrial resources - PM Abe’s own commercial diplomacy push: in the past two months he has visited India, Turkey, Burma, Russia, and Poland, all with explicit commercial objectives. The announcement in early June of JPY 3.2 trillion (about £22bn) in government and private sector assistance for Africa is part of the same strategy. The Japan External Trade Organisation (JETRO – Japan’s UKTI equivalent) announced at the same time that it will set up 5-10 new offices in Africa to support Japanese companies.
Current Japanese investment majors on infrastructure projects, often with the aim of developing viable hubs for Japanese manufacturers. Japan has particular strengths in rail, water, energy, communications, and large-scale industrial and commercial complexes. In most cases, Japanese trading houses are in the vanguard, pulling together consortia involving heavy industrial conglomerates, contractors and funders. Japan was the world’s top investor in 2012, and also led in merger and acquisition activity.
Why this matters for the UK
This represents an opportunity for British companies. In some places eg Burma Japan has a stronger business footprint and political/cultural investment than the UK, so working with a Japanese partner could offer a fast track to market entry. In others the reverse is true: Japan has limited experience in India and Africa.
4. Over the past year we have, with the Japanese, been in Tokyo and London raising awareness of the opportunities, partnering with a range of UK firms. This has confirmed the high level of mutual interest, and built familiarity on both sides. Japanese companies say that British firms are attractive partners: they offer experience and knowledge of local legal and business systems, strengths in risk, project and cost management, and access to HMG political insight and support. Japanese companies for their part bring technology, funding and like-minded business values. But they also now tell us that most tie-ups will be brokered in situ rather than in London or Tokyo; action should move to the third countries.
How Posts can help UK companies access these opportunities
Posts seeing an influx of Japanese investment into their host country are well-placed to act as matchmakers at the crucial start-up phase, and to help UK companies access Japanese-led projects. The starting point will be Japanese multipliers in-market: the local offices of JETRO and JICA (Japan International Cooperation Association), the Japanese Embassy and Chamber of Commerce. Japanese trading houses and banks will also be important players. Posts that see potential for tie-ups might consider, for example:
networking between Japanese players and British companies present in or visiting the market
introductions to British banks as a possible source of funding for collaborative ventures
joint seminars on transparency, governance or PPP
collaboration in developing the necessary business infrastructure eg stock markets
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