Towards the Further Creation of Japan-German Business Alliances

Transcription

1 Towards the Further Creation of Japan-German Business Alliances Keynote Speech by Osamu Watanabe, Chairman and CEO of JETRO At the Japan-Germany Invest Symposium in Berlin, Germany On July 4, Introduction Thank you very much for your kind introduction, Mr. Ziesemer, editor-in-chief of Handelsblatt. First please let me express my deepest gratitude to Mr. Adamowitsch, State Secretary in the Federal Ministry of Economics and Labour, and Ambassador Takashima for giving us heartfelt congratulatory messages. I would also like to thank Professor Dr. Tsutomu Kimura for traveling all the way here to join us today, despite his busy schedule, and Professor Dr. Günther Tränkle for his inspiring speech are special years for Germany and Japan. From April 2005 to March 2006, more than 300 events will be organized across Japan to mark the Year of Germany in Japan. I hope these events will further enhance interest in Germany among Japanese people. Today s event is a part of the series of investment promotion symposiums that JETRO has been holding every year in Europe under the Japan-EU Investment Initiative issued in And it is an honor for us to hold this symposium in Berlin during this special year. Before I begin, I would like to express my sincere congratulations to Germany on its success at the 2005 World Expo, which is now being held in Aichi, Japan. I have already visited the expo several times and recently had the opportunity to visit the German Pavilion, which I very much enjoyed. The Pavilion is really quite amazing. Among the many impressive exhibitions in the pavilion, I was most interested in the Sturmflügel-modell, or storm wing, a glider model created in 1894 by the famed German engineer, Otto Lilienthal. Behind the plan for his model lies Lilienthal s extensive research on bird wings and the mechanisms of flying. Another wonderful display is the artificial bird IGOR, which was made to study bird s wings and the effects of flapping wings, with the aim of applying such gained knowledge to build an unmanned airplane. German efforts towards the coexistence between nature and technology are also highlighted in other displays, including intelligent sensors inspired by a bat s echo-orientation capability, and swimming suits that were inspired by anatomical 1

2 studies revealing that shark skin reduces drag. Through these exhibits, the German Pavilion demonstrates the country s challenging spirit and exceptional ability in advanced technologies. I am happy to report on the success of the German Pavilion, which is certainly one of the most popular at the expo, and would like to again say, Congratulations! Today, I would like to share with you my view on Japan s efforts to promote FDI in Japan, amidst an increasingly integrating East Asian economy, and also examine the future prospects of Japan-Germany investment cooperation. 2. Increased FDI into Japan and the Japanese Economy Let me begin my talk with the current state of FDI in Japan and the Japanese economy. During the mid 1990s, the ratio of Japan s outward to inward FDI was ten to one, a big imbalance. Through deregulation and economic structural reforms, the gap gradually narrowed. In January 2003, Prime Minister Junichiro Koizumi set a goal to double Japan s inward FDI stock in five years. As a result of enhanced investment promotion measures, in FY 2004, Japan s outward FDI was US$ 35.5 billion, whereas inward FDI reached US$ 37.5 billion. This year marked the first time in Japan s history for inward FDI to top outward FDI. Looking at the FDI trend in Japan, finance, insurance and service sectors now make up the majority of Japan s total inward FDI. Recently, however, high-tech industry investment in R&D has been increasing. Some examples include the American network equipment maker, Cisco Systems, and semiconductor maker, AMD. These investments, utilizing Japan as a development base, may lead to future production and distribution bases in East Asia. The same trend is seen in German investment in Japan. In 1998, the software developer SAP opened an R&D base in Tokyo (SAP Labs Japan) to develop human capital management software that meets the needs of Japanese companies. Based on key technologies developed in the labs, SAP now creates software in other Asian languages and distributes it through sales bases in countries such as India, Indonesia, the Philippines and China. These trends and the increased FDI flow into Japan are supported by the revitalization of the Japanese economy and East Asian economic integration. 2

3 After more than a decade of slow growth, the Japanese economy is firmly on the road to recovery. Japanese firms are again focusing on profitability, after completing years of restructuring efforts to eliminate what became known as the three excesses, namely: capacity, employment and debt. The recovery hit a soft patch and slowed somewhat beginning late last summer. This is due owing to cyclical factors and inventory adjustment by manufacturers. That said, the general trend remains unchanged, and I expect the adjustment period will finish in the latter part of this year, when the economy should again start to grow. I see bright prospects for the Japanese economy. I say this because a new business model has taken root over the past three years, in which Japanese firms have spread their operational structure throughout East Asia and are now well-positioned for continued profitability. 3. Economic Integration in East Asia As the Chinese economy grows rapidly, Japanese companies of all sizes continue to expand into the country. To date, however, Japan s cumulative FDI in ASEAN 5 is still more than three times that in China. Japanese companies are strategically establishing production bases in Japan, China and ASEAN, in order to optimize their procurement and production network; and they are steadily making a profit. As the EU progressed towards economic integration and NAFTA brought freer trade to the United States and its neighbors, East Asia was said to lag behind. But the economic integration in East Asia is now deepening at an amazing pace. Between 1985 and 2003, global trade grew four times in value. During this same period, trade within East Asia surged 7.8 times, or nearly double the growth in global trade. The move in East Asia now is towards free trade agreements (FTAs) and economic partnership agreements (EPAs). I personally think that the East Asian Free Business Zone will be a reality by as early as 2010, which is much sooner than many expect. The integration of the EU helped increase Europe s attractiveness as an investment destination. In much the same way, economic integration in East Asia will provide the benefit of a seamless market to European companies and others. And the sophisticated market of Japan is the gateway to this East Asia. 3

4 4. Current Japan-Germany Investment Cooperation Japan and Germany have had a steady investment relationship. European investment in Japan has accounted for more than a third of Japan s yearly inward FDI since the 1990 s; and Germany has always been among top investors in Japan, along with the UK, France and the Netherlands. Major German companies like DaimlerChrysler and Bosch have made large-scale investments in Japan. And in recent years, German firms in service and medical/pharmaceuticals sectors have increasingly invested in Japan. Japanese investment in Europe has also accounted for around a third of Japan s yearly outward FDI since the 1990 s, and is registering a steady growth. Speaking of Japan s investment in Germany, a survey by the Japanese Chamber of Commerce and Industry in Düsseldorf revealed that some 900 Japanese firms are currently in business across the country. For example, NTT Docomo, whose representative will later join us in the panel discussion, established an R&D base in Munich in November of 2000 and formed technical collaborations with a local technical university and several laboratories. And in November 2004, Nippon Antenna established a test and development facility in Itzehoe, near Hamburg, and is now working with local carmakers to develop car antennas. 5. Japan-Germany Business Alliances In addition to two-way investment, we can see an increase in the need for new roles to be played by both countries. As I am sure you are aware, Japan is faced with a low birth rate and rapidly ageing population. To make the best use of East Asia s young and competent workers, Japanese firms, in particular manufacturers, are expanding their business operations into the region. It is a natural progression for Japan to build a region-wide division of labor network and grow together with East Asia. Japan must also change its industrial structure to one led by more value-added sectors, including the service sector. To bring about such structural changes in the country s industries and create a new economic society, I believe that Japan must introduce excellent capital, technologies and know-how, and bring in the best outside human capital. Germany is also faced with a falling birth rate and ageing society, although not as acute as 4

5 Japan, and so also needs to pursue economic structural reforms. To make the industries of both countries more value-added, through establishing domestic R&D bases and pursuing technological innovation, I believe it is crucially important to build Japan-Germany business alliances in high-tech fields. To carry out R&D in high-tech fields in the 21 st century requires an enormous amount of money, human resources and time, which is often too much for a single company or even country to handle alone. This is the strongest argument for creating cross-border alliances, which are important not only for large companies but also for small and medium-size companies, many of which have advanced technologies. It is therefore a very important task for organizations like JETRO to offer opportunities for companies to seek such international partnerships. At present, JETRO is researching potential areas for business alliances between Japanese and European firms in the fields of IT, biotechnology, nanotechnology and the environment. They are working to narrow down the areas of cooperation and provide more opportunities for effective business matching. For example, last year in Tokyo JETRO held BIOLINK FORUM 2004, a biotech cluster networking and information gathering event that attracted some 300 participants from 37 biotech clusters in 16 countries and close to 400 people from Japan s biotech community. The event, which featured seminars, individual company presentations and business matching sessions, provided an opportunity for international biotech networking on an unprecedented level. From Germany, biotech clusters in Mecklenburg-Vorpommern and Bavaria participated in the event, which proved a great success for companies in these clusters. And this September in Yokohama we will hold the second BIOLINK FORUM and hope that many German biotech firms take part in this important networking event. It goes without saying that in order for business alliances to progress smoothly, further improvement of the investment environment is necessary, both in Japan and Germany. Enhancing protection of intellectual property rights is one important factor in improving any investment environment. And last month, I led a Japanese joint public-private sector mission to China to request stricter enforcement of intellectual property rights in the country. In business alliances between German and Japanese companies, it is of course up to the companies themselves to decide where to invest: It may be Japan, it may be Germany or even a third country that has a more attractive investment environment. Therefore, the 5

6 increase of cross-border business alliances between Japan and Germany should lead to more investment in both Germany and Japan, just as snow gradually builds up over time. Everyone gathered here today should work together to increase opportunities for creating such business alliances. I am certain that, through our efforts, mutual economic development will be realized between Japan and Germany and both countries will make significant contributions to the world economy and help it achieve sustainable growth. Thank you very much. 6