Overseas deployment of advanced Japanese environmental technologies is included among the goals of the “Growth Strategy” under the current Liberal Democratic Party administration, and was also included in the “Comprehensive Strategy for the Rebirth of Japan” under the previous Democratic Party administration. In accordance with this, the government organizations such as the Ministry of Economy, Trade and Industry (METI) and Ministry of the Environment (MOE) have conducted large numbers of study groups and feasibility study projects on overseas deployment of environmental-related businesses. As a think-tank researcher in my previous position, I was involved in supporting related dialogue between governments and the commercialization of environmental-related businesses, and even today I am involved in related projects of METI and MOE. In this article, I would like to examine the causes behind why Japan is unable to sell its advanced environmental technologies overseas, from the perspective of my areas of specialization, environmental economics and international public policy.
2. Difficulty in Matching
In reports from various types of study groups and feasibility study projects, one will find descriptions which seek the cause behind why Japan is unable to sell its environmental technologies overseas, in developing countries. Such descriptions include how “counterfeit goods circulate since protection of intellectual property rights is not properly implemented in developing countries,” or state that “improvements in environmental awareness among citizens in developing countries are essential,” “since environmentally-related laws are not adhered to in developing countries.”
However, even if such may be the case, these cannot be the reasons why Japanese companies fall short not just to European and American companies, which are battling in the same arena, but also to Korean or Chinese environmental companies in the developing countries’ markets. Therefore, the causes for Japan being unable to sell its environmental technologies clearly lie with the entry strategy on the Japanese side.
In general, “needs” (“We need technology”) need to come together with “seeds” (“We have the technology”) for business matching to occur. However, needs in the environmental field are usually divided into 1) Users who use the environmental technology and 2) Customers who use the environmental service. In other words, careful market surveys are required to identify an area of technology where the three elements of environmental technology seeds on the Japanese side and 1) and 2) overlap. This matching is often more difficult than in other businesses since there are few prior cases for reference.
3. The Cost and Interest Issue
Furthermore, in most of these market surveys, the needs are not obvious on the developing country side, so tough negotiations are required to obtain understanding of why they should try to make environmental improvements using environmental technologies in the first place. Moreover, even if such needs can be successfully clarified, negotiations are often subsequently derailed because “Japanese environmental technologies are high spec but the price is also high.”
Even if business matching that can contribute to cost reductions can be made based upon energy-saving and recycling technologies, if the investment efficiency is only a few percent, or as high as five percent, Japanese companies that are used to low interest rates judge that they can sell their products in developing countries too. However, since real interest rates in developing countries are higher than the investment efficiency of environmental equipment, local companies make an alternative choice for investment, such as in production equipment. It will take time for real interest rates to fall in developing countries. Therefore, Japanese companies need to increase the investment efficiency of environmental equipment to similar or higher levels than real interest rates in developing countries, through local procurement of pipes and other related equipment to reduce initial investment and costs, while exporting the core element technologies from Japan.
4. Collaboration with Government is Essential
The reasons behind Japan being unable to sell its environmental technologies overseas are not limited only to problems with Japan’s environmental companies.
If one looks for a moment at the domestic environmental-related market in Japan, many environmental service providers (=users who use the environmental technology) are in fact government users. In contrast, in Europe, America, China and Korea, whose companies lead the environmental market in developing countries, public-private partnerships (PPPs) form the mainstream of environmental service provision by private companies.
In other words, much of the know-how on environmental services in Japan has, in fact, been accumulated within the government. Therefore, for Japanese companies to enter the market for development of environmental infrastructure in developing countries, collaboration with government in PPPs is often essential. In addition, collaboration with government is also crucial for improving developing countries’ capabilities for enforcement of the environmental-related laws.
Various study groups have also made this point, and the Japan International Cooperation Agency (JICA), having been advocating the slogan “Invigorating Assistance [Genki ga Deru Enjo]” since 2012, announced its policy to promote industry-government collaboration in Overseas Development Aid (ODA).
However, collaboration with government alone is not enough. In surveying and researching environmental projects in developing countries, I have witnessed how European and American support agencies not only collaborate with environmental companies from their own respective countries, but also include university researchers from the early stages of project formulation, for an industry-academia-government approach. Moreover, European and American environmental-related companies often sponsor international academic conferences held overseas, and government officials, companies and researchers from both supporting country and developing country sides make presentations in the same sessions, drawing attention to the effects that their project has produced in terms of environmental improvements, and sometimes gaining further business or achieving expansion of projects. It is fair to say that this sort of industry-academia-government collaborative environmental project hardly exists in Japan.
The creation of sustainable business is essential to the construction of a sustainable society. There can be little doubt that the overseas deployment of advanced Japanese environmental technologies into developing countries to achieve environmental improvements is a win-win situation for global economic society. For this purpose, I believe that further steps will be necessary in the future to realize global environmental business deployment through industry-academia-government collaboration.
Associate Professor, Faculty of Economics, Chuo University
Areas of Specialization: Environmental Economics and International Public Policy
Born in Sapporo, Japan. Completed the Doctoral Program at the Graduate School of Economics and Business Administration, Hokkaido University (Doctor of Economics). Worked at Mitsubishi UFJ Research and Consulting Co. Ltd., before appointment to his current position in 2012. Recent authored works include: So Sasaki (2013), “Impact of the raw material import duty reduction system on international waste trading,” Michikazu Kojima and Etsuyo Michida eds., International Trade in Recyclable and Hazardous Waste in Asia, Edward Elgar Publishing Limited, pp.134-148; and So Sasaki (2013), “The Present Conditions and the Problems of Industrial Waste Management in Thailand: For Establishment of Sound Material-Cycle Society [Junkangata Shakai Kochiku ni muketa Tai no Sangyo Haikibutsu Kanri no Genjo to Kadai],” The Journal of Thai Studies, Vol. 13, pp.43-60, among other works.