Overseas Infrastructure Development 1. The Changing Environment of Exports
Growing Demand for Infrastructure
Infrastructure Investment Needs in Asia, 2010-2020 Source: Estimating Demand for Infrastructure in Energy, Transport,Telecommunications, Water and Sanitation in Asia and the Pacific: 2010-2020, Asian Development Bank Institute, September 2010
The World Economic Outlook published by the International Monetary Fund (IMF) in October 2010 reported that the average economic growth rate for developed countries in 2009 was negative 3.2%, whereas emerging and developing countries in Asia (developing Asia) maintained a high positive growth rate of 6.9%. The IMF's growth projections for 2010 and 2011 were 2-3% for developed countries, but far higher -- over 8% to more than 9% -- for developing Asia. As Asian countries are expected to continue to post these high growth rates, they have to keep up with demand for infrastructure, especially for electric power and transportation. What they need is major infrastructure investment for future growth. According to the forecast of the Asian Development Bank, emerging and developing countries in Asia will require about US$8 trillion in infrastructure investment through 2020.
In developed countries, the focus is on developing infrastructure that uses energy-efficient technologies and renewable energy to build a low carbon society. One good example is the U.S. Green New Deal policy. Plans have reportedly been drawn up to invest US$150 billion over a period of 10 years for Green New Deal programs such as inter-city high-speed railways, high-efficiency power plants and the greater use of renewable energy. In Europe similar development plans, most notably for railways and power plants, are also well underway.
Rising Interest in Infrastructural Development Packages
One might expect that overseas infrastructural development could well provide opportunities for Japanese companies to take advantage of their advanced technologies. However, recent trends indicate that countries implementing development projects are increasingly shifting their needs from stand-alone machinery and equipment to infrastructure that is packaged as an integrated system incorporating business management and maintenance services as well.
Emerging and developing countries are developing infrastructure based on their national strategies as a foundation for future growth, but they generally lack experience in operating, maintaining and managing infrastructure facilities. This is why they are now more likely to request comprehensive project proposals that include cooperation in related areas, such as transfers of technology and knowhow for facility operation and human resource training.
U.S. and European companies are providing such knowhow, for their focus has been on pursuing various profit opportunities, from infrastructure planning and the delivery of machinery to operating the infrastructure after it is completed, demonstrating their expertise in overseas development programs.
In addition, over the last few years the Republic of Korea, China and other emerging economies have also entered this type of international business, and this has also contributed to more intense price competition. Japanese companies are now challenged even to remain dominant in the export of stand-alone products.
Japan therefore faces a major challenge. It needs to actively propose infrastructure project packages that meet the needs of host countries, with the core comprising Japan's advanced technologies and knowhow. Of course, such project packages will also face increased competition from experienced U.S. and European companies and from emerging economies whose own governments and companies have formed a strategic alliance. To remain competitive, it is essential that Japan's public and private sectors form a unified front to bring together the required technologies and project management expertise, and to develop comprehensive proposals that offer a wide range of financial instruments and related cooperation for host countries.