How to attract Japanese private-sector investments
The following is excerpted from a speech by Japanese Ambassador Hiroshi Yamaguchi on 'Foreign Direct Investments for 2012: Trends and opportunities from Japan' at the Mayberry Investors Forum, on February 15, 2012.
Thirty-one years ago a Japanese coffee company, UCC, invested in a coffee plantation in Jamaica's Blue Mountains, and set out on a mission to maximise the quality of the coffee beans exported to Japan.
The result achieved was the creation of a world-class coffee brand commanding the highest price of coffee in the entire world, with demand far exceeding the quantities available - price is little hindrance to demand once quality is delivered in the Japanese market.
I personally think this UCC model is the most ideal pattern to further enhance our bilateral relations for the future, creating jobs and increasing Jamaica's exports.
I also appreciate that many Jamaican dealers have brought Japanese brands into the Jamaican market.
The filling up with Japanese brands in the Jamaican market seems to me a welcoming move from the viewpoint that Japanese brands have created so many jobs among Jamaicans.
Here in Jamaica, we see nobody from Japan selling or repairing these products. The unfortunate thing about this trend is that Jamaicans led the bilateral trade pattern in Japan's favour and in Jamaica's deficit, which in 2010 stood at US$105 million and for the first eight months of 2011, stood at US$71 million.
Five years ago in 2007, one of the major Japanese trading houses, Marubeni Corporation, purchased an 80 per cent stakehold in Jamaica Public Service Company (JPS) and recently alongside a Korean company which now holds 40 per cent of the total JPS shares, in partnership with the Jamaican government, has already made power failures a rare event now in Jamaica, stabilising the constant supply of electricity which is an essential component to drive productivity in the island.
Thus Japan's investment in JPS has already started rendering better services to Jamaican consumers so far. What is lacking in this JPS investment model is that it does not directly materialise an increase in exports to Japan.
The embassy has been spearheading efforts to identify Japanese corporations which can bring foreign direct investments to Jamaica, with the most recent economic mission visiting Jamaica in November 2011.
Probably for the first time in our nearly 50-year bilateral history, executives from big giants like Marubeni, Hitachi and Fujitsu, in addition to officials from the Ministry of Foreign Affairs and the Ministry of Economy, Trade and Industry of Japan, received presentations from Jampro and toured prospective investment sites across Jamaica - including a power-generation site at Old Harbour, the Kingston port and Caymanas Economic Zone.
It has been found out as a result of this mission that right now, Japan's private sector has a lot of interest in infrastructure projects that include power generation, but interest in the Kingston port or Caymanas Economic Zone is still unclear.
THE SECURITY THREAT
Here I have to add a challenge Jamaica faces - that is, the crime rate in spite of its remarkable improvements during the past two years.
When Japanese investors look at possible overseas investments, they focus on: theft and security, among other things, and become cautious on their optimism to turn a profit.
Japan's overseas investments have long been well-known for bringing the creation of locally generated jobs and also the merits of value-added technology.
Japan's investors will not consider investments wherever they think they are in danger of safety and security. They always compare the safety situation of potential investment candidate countries, with that of their homeland, where they have been enjoying one of the safest business climates in the world.
An area Jamaica must seek to actively address is removing the security threat.
This would not only help companies in Jamaica but also encourage overseas investors in general, as it will reduce their overall cost of production and increase their competitiveness.
CONSIDER THESE IDEAS
Looking over on what has been taking place during the past two and a half years of my tour of duty in Jamaica, I wish to convey to you some of my personal scenarios on what I expect to see in future steps to be taken to invite investments from Japan's private sector.
1) Think about something unique which is not available in other countries - for example, something to do with your history, culture and music, scenic spots for tourism, agricultural products, minerals and water sleeping quietly and waiting to be developed for future use;
2) A mining sector has potential. This is a unique sector which is usually not available in other nations. If there is something which can be drawn out from Jamaican soil through an environmentally friendly method, which can be double-connected to export to and production in Japan, such products, if any, can also contribute to balancing our bilateral trade pattern from our favour to yours;
3) Very importantly, if something you are aiming at is available in other countries, that means Jamaica has to compete with the rest of the world with your labour and electricity costs. The final product, therefore, will need to be highly differentiated, in order to compete - creating a high-value, high-quality product which can command high prices; and
4) Anything to do with energy conservation is an area Jamaica can actively seek to develop business models around. This is particularly important in light of the high energy bills facing Jamaica.This might increase Jamaica's imports from Japan, in the short term, but will bring greater benefits to Jamaica down the road in reducing the production cost base. For example, using LED - a low energy-consuming lighting technology which is related to an invention of a Japanese scientist who received a Nobel Prize. But so long as conservation is introduced for the benefit of Jamaica's future, that will contribute to further building of Jamaica towards becoming energy-saving island nation.
Whatever options Jamaica pursues, you need to build a business society filled with competitive and high-level productive small- and medium-size enterprises creating high value which are capable of delivering an exceptional quality of products.
An example of this in Japan is where Lexus, Toyota, Nissan or any other big-name motor vehicle giants collect spare parts used in their manufacturing process on a just-in-time-basis by thousands of small family-owned businesses throughout Japan. Without these SMEs producing high-quality spare parts the big companies in Japan cannot survive.
As the first stage forward in building a small business-oriented society in Jamaica, Japan has, through its technical cooperation arm, JICA, dispatched a superstar expert to Jamaica's Ministry of Industry, Investment and Commerce upon the request of the Jamaican Government.
A couple of seminars in August and September 2010 were held at this very hotel by our expert Akihito Urata on how to start steps towards creating a highly productive small, business sector in Jamaica, just as we have in Japan.
I am inviting attendees tonight who wish to receive further technical cooperation from Japan through JICA's future volunteers who specialise in quality and capacity building of small/medium enterprises, to contact my office no later than the end of this month.