Infrastructure services to Japan in Asia
(Last updated: 23 Aug 2013)
Trends and opportunities
The market
Following the Australian Government’s release of the Australia in the Asian Century White Paper in October 2012, greater focus has been drawn to Australia’s future engagement with Asia. One area of significant commercial potential for Australia lies in capturing the business opportunities that are emerging through increasing Japanese corporate activity across the region.
Foreign Direct Investment (FDI) into Asian markets by Japanese corporates has increased fivefold from US$7.7 billion in 2001, to US$39.4 billion in 2011. Procurements by Japanese corporates operating in ASEAN markets were valued at over A$200 billion in 2010, more than four times larger than Australia's total exports to Japan of A$45 billion in the same year. Over 4,000 Japanese firms are now active in Thailand, 1,255 in Indonesia and 940 in Vietnam. As Japanese corporates expand into Asian markets, they require additional inputs, procurements and services to support their operations and projects, and a range of Australian firms already exporting to or embedded in these Asian markets are well-placed to capture these commercial opportunities in the infrastructure services, auto, food and beverage, and corporate training sectors.
(Sources: Japan External Trade Organization (JETRO) | Australian Department of Foreign Affairs and Trade (DFAT))
The key drivers behind this increased Japanese FDI into Asia include both push and pull factors. Due to Japan’s prolonged deflationary environment and low economic growth rates over the past decade, Japanese firms in many sectors have shifted their focus from the Japanese domestic market to pursue external opportunities in growing Asian markets such as Thailand, Vietnam, and Indonesia. Japanese corporates are increasingly committing substantial resources to develop, finance and operate major infrastructure projects across Asia.
Japanese firms are also being pulled towards Asian markets. Japan is a major donor to many countries in the region, contributing A$1.8 billion in grants and A$9.5 billion in soft loans for Asian projects in 2011. This Japanese Overseas Development Assistance (ODA) continues to be a source of operational growth for Japanese companies in the infrastructure and technology sectors, as 20.6 per cent of Japanese aid loans in 2011 were tied to participation by lead Japanese contractors and/or utilisation of Japanese technologies.
(Source: Japan International Cooperation Agency (JICA))
While major Japanese construction, trading and manufacturing firms have established significant operations and project experience across Asian markets, some of the smaller Japanese service providers and suppliers that support similar major projects in Japan have not expanded into Asian markets in a similar fashion. This has created the need for Japanese corporates to identify local suppliers and service providers in Asian markets for procurement and project delivery, as well as management of issues surrounding legal compliance, regulations, engineering standards, architectural design, corporate and technical training, security and project management.
Over recent years, Austrade has worked closely with the Australia-Japan Business Cooperation Committee (AJBCC), Japan-Australia Business Cooperation Committee (JABCC) and the Japan External Trade Organization (JETRO) to facilitate capacity building between Australian and Japanese firms in Asian markets to form future consortia to bid on major infrastructure projects supported by Japanese aid funding. Major conferences and trade missions have been held in Indonesia, India, Japan and Australia to promote this new model of commercial engagement between Australia and Japan.
Marketing your products and services
Australian firms with an established track record in Asian markets are well placed to provide services to support ‘made by Japan’ supply chains, yet many Japanese corporates are unaware of Australian firms’ capabilities and project experience in Asian markets.
As there is often limited information on specific opportunities, it is important for Australian firms to proactively make contact with Japanese corporates to be involved in projects. Japanese firms require time to undertake due diligence and develop reputational trust with any potential new suppliers and/or service providers prior to consideration of project contracts. Establishing a business relationship and credentials first is an important step to winning business from Japanese firms in Asia.
Utilising its international network to access key Japanese decision-makers across Asia, Austrade can assist Australian firms to meet with these Japanese corporates in Asia to capture commercial opportunities.
Links and industry contacts
Government, business and trade resources for Japan
Ministry of Land, Infrastructure, Transport and Tourism (MLIT) – www.mlit.go.jp/en/index.html
Ministry of Foreign Affairs (MOFA) – www.mofa.go.jp/index.html
Ministry of Economy, Trade and Industry (METI) – www.meti.go.jp/english/index.html
Japan International Cooperation Agency (JICA) – www.jica.go.jp/english/index.html
Jana Bank for International Cooperation (JBIC) – www.jbic.go.jp/en/
The Overseas Construction Association of Japan, Inc (OCAJI) – www.ocaji.or.jp/en/
Contact details
The Australian Trade Commission – Austrade – is the Australian Government’s trade, investment and education promotion agency.
Through a global network of offices, Austrade assists Australian companies to grow their international business, attracts productive foreign direct investment into Australia and promotes Australia’s education sector internationally.
For more information on how Austrade can assist you, contact us on:
Australia ph: 13 28 78 | Email: info@austrade.gov.au
A list of Austrade offices (in alphabetical order of country) is also available.