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Policy Proposals  International Cooperation Towards Strategic Promotion of the Infrastructure Export Our Interest and Challenges in Main Target Countries for 2015

November 17, 2015

The Japan Revitalization Strategy of the Japanese Government (June 2013) states that the country should strive to raise its infrastructure sales from the current 10 trillion yen to 30 trillion yen by 2020, as one of the pillars of the government's national growth strategy. In May 2015, Prime Minister Shinzo Abe proposed promoting "Partnerships for Quality Infrastructure". Although it may first appear costly, "Quality infrastructure" is cost-effective in the long run due to its durability, environmentally-friendliness and disaster resilience.

With a view to pursuing this infrastructure export-based international contribution initiative through public-private-sector scheme, KEIDANREN has been issuing policy proposals from 2013 based on surveys of its member companies on what countries / regions and infrastructure segments private-sector enterprises are interested in and on what challenges must be overcome. The proposal for 2015 was issued on November 17, in light of a total of 150 questionnaire answers received from 60 KEIDANREN member companies.

1. Overview

The high quality and disaster resilient features of Japan's infrastructure systems are highly recognized by the international community. To contribute further to the international community by disseminating these systems, the Japanese Government needs to enhance the leadership function of its Ministerial Meeting on Strategy relating Infrastructure Export and Economic Cooperation and to offer a proper combination of technologies and financing by fully reflecting private-sector needs. For example, concerning an environmental project for which Japan's technologies can be well leveraged and a project contributive to energy security, the government should provide a yen loan to middle and high-income countries which are generally not eligible for Official Development Assistance (ODA). Meanwhile, for the urban development and public transport infrastructure development projects of countries experiencing rapid urbanization due to economic growth, the investment and financing function of the Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN) should be utilized in addition to existing services such as investment, financing and guarantee by the Japan Bank for International Cooperation (JBIC), the overseas investment and financing by the Japan International Cooperation Agency (JICA) and the insurance service by the Nippon Export and Investment Insurance (NEXI).

Meanwhile, in order for Japanese companies to fully employ their superior technological capabilities Japan must assist each host country in streamlining its relevant legal structure. Especially, establishing a procurement system in which non-price factors such as environmentally-friendly technology, lifecycle cost efficiency and low environmental load are properly evaluated is the key.

When doing infrastructure projects overseas, Japanese companies often encounter operational obstacles such as the imposition of high customs duties on materials/equipment and of stringent local content requirements, coupled with insufficient protection of intellectual property rights and restrictions on money transfers. These obstacles need to be eliminated. Moreover, it is essential for the Japanese Government and the private-sector to collaborate to assist each host country in enhancing its soft infrastructure through helping develop engineers under a long-term strategy and collaborating with the host country government for its project master plan formulation, among other steps.

2. Priority regions

(1) Asia

Japan has been contributing to the international community by exporting its "Quality infrastructure" with a focus on Asian countries, the growth engine of the world. The respondents in the survey mentioned above showed a strong interest in countries such as Indonesia, Vietnam, India and Myanmar. The main sectors of interest were logistics (railways, harbors, airports, LNG terminals etc.), electric power plants, and telecommunication, which are indispensable for the private sector to pursue business activities. In addition, industrial parks are gaining attention since they serve as the base for SMEs expanding overseas.

Considering the fact that developing countries are heavily reliant on coal-fired power generation, Japan's highly-efficient technology in this field would definitely contribute to sustainable growth of the host country while protecting the environment.

(2) The Middle East and North Africa

With regard to Gulf countries and the Middle East, the sectors of interest include backbone infrastructures such as electric power, telecommunication and water supply/sewage as well as human resource development.

(3) Central and South America

Brazil, Mexico, Colombia and Chile, countries visited by Prime Minister Shinzo Abe in 2014 continue to be the main interest for the Japanese private sector.

In case of Brazil, tackling the so-called "Brazil Cost" issue by lowering the logistic cost, which amounts to double that of the USA remains to be the top priority. To redress this problem, the Brazilian government released in June 2015 the Logistics Investment Program, an initiative worth a total amount equivalent to 8 trillion yen. Japanese business community should work closely with overseas local companies to bolster efforts relating to the local government's selection and implementation of specific concession projects for railways, roads, ports and airports.

Cuba, which has restored diplomatic relations with the USA is gaining attention of Japanese companies. Cuba is showing strong demand for infrastructure projects, including those for replacing aged infrastructure components such as roads, bridges, water supply & sewage and telecommunication systems. Medical service is also one of its top priorities. The country has shown interest in introducing medical equipment made by Japanese manufacturers known as the world's top class players in technological expertise and after-sales service. Japanese companies looks forward to devise project proposals through public-private sector collaboration, thus utilizing ODA (in particular, grant aid) arrangements effectively.

(4) Other regions

The survey respondents' list of regions of their interest consisted of major African countries to which Japanese companies had expanded and of so-called developed countries such as the U.S., Russia & Newly Independent States (NIS) and Europe, nations for which Japan can leverage its technologies in natural resource development, telecommunication, high-speed rail and environment management.

3. KEIDANREN's future endeavors

Through meetings with Head of States and taking the opportunity of bilateral joint economic committee meetings, KEIDANREN will encourage host countries to promote infrastructure projects and improve the local business environment, based on this proposal. Moreover, as a private-sector organization, KEIDANREN will continue to cooperate with Government of Japan in promoting "Partnerships for Quality Infrastructure".

International Cooperation