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20.11.2013 г.

Japan: from Industrial Exports to Export of Systems

Irina Timonina

Recent changes in the structure, dynamics, and trends of the global economy led to a significant transformation of the entire system and mechanism of the global economy. The new poles of growth have come into being in the global economy, especially in East Asia. Transition to a two-speed dynamics of world economic growth has been clearly delineated: there is a slowdown in the post-industrial economies of the developed countries, while the most successful countries in the developing world demonstrate high and ultra-high rates. Also growing are their export potentials, resulting in their goods and services occupying new market segments. At the same time, the economies of the developed countries and, above all, their industrial complexes are losing their competitiveness in the markets where until recently they had been undisputed leaders.

All this adds urgency to the new global positioning of developed economies and, in the wider context, of ensuring their growth potential in the long term. The challenges of the 21st century and the new situation in the world market are probably even more relevant for Japan than other developed countries. After all, Japan experienced a "lost decade" in the 1990s, a deep recession during the financial and economic crisis of 2008-10, and the effects of the 2011 natural disasters.

There is a tendency toward Japan's losing its international competitiveness. In 2011, its share in world merchandise exports declined from to 4.5% (from 10.3% in 1986) (cp. China's share of 10.4% in 2011) - a very negative factor if considered in the context of the Japanese economy's continued high dependence on foreign markets. Furthermore, with an increasingly active movement of Japanese corporations' manufacturing operations and business functions abroad, the intermediate goods increase their share in the country's exports, resulting in "losses" of added value for the Japanese industry.

As a result, Japan, like other developed countries, is faced with the need to find new market segments where Japanese companies can realize their potential and achieve competitive advantages in the medium and long term.

Strategic blueprints developed by Abe's government from February to June 2013 proposed a Strategy of Global Outreach, whose authors contend that Japan has precisely this kind of advantage in the infrastructure (electricity, roads, water, IT), healthcare, and education.

In designating ways for realization of its "global excellence" in the international context, the government suggests that companies focus on the diversification of foreign activities, namely on the promotion abroad of "integrated systems," i.e., the realization of complex projects in the industrial and social infrastructure, which should include not just supplies of equipment, other products, and implementation of construction works, but also development of designs, provision of technology and know-how, engineering, and educational services - all in one package. Such «package-type infrastructure», which was designated as early as 2010-2011, may help increase the sought added value that Japanese companies obtain from overseas operations.

The novelty of this approach lies in the fact that traditional forms of export of goods and services take on the character of strategic integrated projects based on a public-private partnership, with an increasing involvement of not only large, but also small and medium-sized businesses.

Such strategy seems quite realistic. The marketing of public goods and services that provide the required//desirable quality of life (education, health, clean energy, ecological environment, urban planning, and transport communications) is on the rise worldwide, especially in developing Asian countries, some of which are going for the strategy of "inclusive growth." This kind of growth strategy calls for reduced dependence of the country's economy on foreign markets and the expansion of domestic demand through growth in incomes and the creation and/or improvement of production and social infrastructure. For Japan, it opens up new opportunities in the emerging markets and other rapidly growing economies. Estimates by government experts indicate that by 2020, Japanese companies may be able to triple sales in the international infrastructure market (up to 30 trillion yen) and in the market for medical technologies and services (up to 1.5 trillion yen).

To assist companies on this path, the government proposes to use a mechanism of crediting the Japan Bank for International Cooperation (JBIC's Loan Facility Enhancing Global Business Development), a system of insuring exports and investments (NEXI), and tools of Official Development Assistance (ODA), including the infrastructure of the Japan Agency for International Cooperation (JICA). Moreover, Prime Minister Abe is ready to act as the "main sell person" of Japanese systems.

The set of promising "system" exports of Japanese companies is quite extensive. One of them is the "smart city" projects that rely on the latest technological, engineering, and design solutions to create friendly and comfortable living environments.

The systems approach as a key idea of ​​the Japanese companies' export strategy (and of Japan as such) is exemplified in the "joint project" of Japanese business and government called «Cool Japan». It aims at promoting abroad elements of Japanese lifestyle and culture (fashion, design, cuisine, other content).

Japanese companies can and, in fact, are already offering foreign markets system solutions in health, education, environmental services, and consumer service organization systems, i.e. the format used in Japanese department stores, restaurants and other units.

Thus, Japan is gradually moving from the exports of goods to the export of technologies and solutions, a trend closely related to promotion of the national brand "Japan." The government and business are meeting the new challenges together, relying on the tried and tested mechanisms of economic diplomacy, which is well-known for its pragmatic approach. Contributing to these efforts is a wide use of the national image capital, i.e., Japan's perception in the world, the Asian world, above all, as a country with a high standard and quality of life, which, while not any longer the largest Asian economy, remains nevertheless the most developed in the socio-economic terms and which, therefore, can serve as a model for other countries, and not necessarily Asian.
 
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