Missing link: Japan’s facility operators slow to join infrastructure export drive

Missing link: Japan's facility operators slow to join infrastructure export drive

TOKYO — Japan is among the slew of countries eager to supply infrastructure technologies to developing Asia, but its efforts are notable in part for their lack of contribution from a key area — facility operators.

     Brisk demand for power grids, railways, ports and water systems in Asia is being targeted by many countries stepping up infrastructure exports, via joint efforts by the private and public sectors. China, for instance, is working to develop the Asian Infrastructure Investment Bank to help fund such projects.

     Japan and China were locked in a fierce competition to win an order for a high-speed railway system being planned in Indonesia, only to have the country scrap the project Sept. 4.

     Trading house Mitsui & Co. is working with Singapore’s PSA International to build and operate a terminal at the Port of Tanjung Priok near Jakarta. A crane was being unloaded the day the government announced it was canceling the railway project. “This crane can handle the world’s biggest containerships,” said the president of a Mitsui unit involved in the port project.

     Japanese companies have actively sought to win equipment and plant construction orders in Asia, in tandem with government support of Japanese technologies on the diplomatic front. Japan’s ability to offer funding options backed by its financial strength marks a competitive edge as well.

     But companies specializing in facility operations and maintenance are largely missing in Japan’s efforts to export infrastructure.

     “The passiveness of operators in overseas expansion has been Japan’s weakness,” says Tadashi Maeda, senior managing director of the Japan Bank for International Cooperation.

     Non-Japanese industry giants run infrastructure facilities around the world. In port operations, for instance, PSA, Hutchison Whampoa of Hong Kong, and two companies from Dubai and Denmark lead the way. In electricity, French utility Engie — formerly GDF Suez — and America’s AES dominate the market. In water systems, France’s Veolia Environment and Suez Environment are the big players.

     These companies have undergone multiple consolidations and acquisitions to hone their competitive edge over the years while Japanese peers shunned expansion abroad. This is why such Japanese names as Tokyo Electric Power and East Japan Railway, or JR East, are hard to find in global infrastructure projects.

     Japanese trading houses have filled in the gaps somewhat. Marubeni and Mitsui, for instance, have come to run power plants generating some 10 million kilowatts abroad. They started out exporting power equipment and shifted their focus in the 1990s to power plant operations abroad. They now know how to limit risks associated with political turmoil and economic crises.

     “By applying the business models we developed through power generation, we can unlock the infinite potential of the infrastructure business,” said Shintaro Ambe, executive vice president of Mitsui.

     But lacking personnel and technologies needed for running the facilities, trading houses have relied on foreign partnerships.

     Now, prompted by market liberalization at home, more Japanese companies are looking outward. JR East, for instance, is slated to take part in the maintenance of a metro rail system in Thailand. The joint effort by the government and the private sector to win infrastructure projects abroad cannot reach its full potential unless Japanese companies get involved in operating the facilities.

Missing link: Japan's facility operators slow to join infrastructure export drive