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Business

Abe's export push lifting Japan's smaller infrastructure firms

The sewage treatment plant in Malaysia designed by Nippon Joesuido Sekkei.

TOKYO -- Japan's major heavy machinery and electric equipment makers are not the only ones reveling in Prime Minister Shinzo Abe's policy push to expand infrastructure-related exports. Many of the nation's smaller, lesser known companies in related niche markets are also riding high.

     One such niche player is Nippon Jogesuido Sekkei, a Tokyo-based company specializing in consulting services for water supply and drainage projects.

     One day in mid-January, an 80-year-old employee of NJS arrived at the international airport in the Iraqi port city of Basra, which is still riddled with scars from the country's war with the U.S. The employee, a skilled engineer, was there to work for the municipal government's comprehensive water works project. He was taken to the local water works bureau in a bulletproof vehicle, protected by a unit of security guards armed with automatic rifles.

     In 2009, NJS won a 4.3 billion yen ($41.7 million) contract to provide design and construction management services for a water purification plant and water works system. The city must supply running water to more than 1 million residents. Construction for the project, financed by Japan's development assistance, could start as early as this month.

     NJS's history of overseas operations dates back to 1976, and the company has provided consulting services for water works projects financed by Japan's development aid in some 90 countries. The firm is currently involved in 70 such projects in 30 mostly emerging countries. Its sales have doubled in the past 10 years, with 30% earned overseas.

     Becoming a proficient water works consultant requires decades of training and experience, and only those who are aged 50 or older are regarded as full-fledged specialists in the field, according to the company. NJS boasts a team of highly skilled and experienced experts, including many who were rehired after retirement.

     Since it has effectively no serious competitor at home, NJS is in a perfect position to capitalize on the growing exports of infrastructure-related products and services. The firm is shooting for a 50% increase in overseas sales in five years to 6 billion yen, according to Hiroki Fujiwara, president of subsidiary NJS Consultants.

Right on track

Japanese money and technology are also powering infrastructure development in Mongolia, which late last year issued yen-denominated bonds in Tokyo for the first time to finance a coal mine development project. When the Mongolian government issued 30 billion yen in so-called samurai bonds at the end of December, Japanese institutional investors, including leading and regional banks, snapped them up. The debt securities sold out quickly, as demand outpaced supply by two to one, according to Nomura Securities.

     The money raised will be used to fund a project to develop Tavan Tolgoi, one of the world's largest untapped coking and thermal coal deposits, located in southern Mongolia. The project is backed by the Japanese government. Abe pledged his support when he visited Mongolia in March last year.

     The project includes the construction of a 1,600km railway to bring coal from the mine to the Vladivostok port in the Russian Far East. Nippon Koei has bagged the contract to design the railway for 1.7 billion yen.

     Nippon Koei is a long-established company specializing in consulting services for infrastructure-related design works. Six decades ago, it designed the large hydraulic power plant in Myanmar, built as the first overseas infrastructure project financed by Japan's development aid.

     Late last year, the company landed a 500 million yen contract to design a thermal power plant and power grid in Myanmar. The Myanmar government picked the company for the task because of its track record in the country.

     Nippon Koei racked up 18 billion yen in overseas sales in the year through March 2013, representing a quarter of its overall group sales. "Our sales began to increase markedly last year," said Ryuichi Arimoto, a senior executive. The firm is seeking to push overseas sales up even further to 37 billion yen, or 37% of the total, in eight years.

Getting the green light

Indonesia is also seeing the effects of Abe's infrastructure export drive.

     In Jakarta, the nation's capital, bidding is underway for a contract to supply a signal system for a 16km subway line that will be built with Japanese aid money and start operation at the end of 2018. Nippon Signal, which started international expansion in 2009 by setting up a new section in charge of overseas operations, has its sights set on the contract.

     Nippon Signal's original, low-cost signal system, which tracks the positions of trains using only radio waves, is winning orders from emerging countries. The system was adopted for Beijing's subway lines two years ago. Last year, the company was granted contracts to provide a signal system for Indian and South Korean subways. The two contracts were worth 5.5 billion yen in total.

     Nippon Signal now plans to take part in bidding for public works projects in other cities as well, including Hanoi, Vietnam.

     "We are facing fierce competition from foreign rivals like Siemens of Germany, but we are gaining confidence," said Hideo Oshima, one of the company's executives.

     The company is hoping to ramp up its overseas sales by more than sixfold to 20 billion yen in the year through  March 2021.

(Nikkei)

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