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Speeches by the Chairman

Invest Japan Symposium in Singapore

May 29, 2015

Mr. Chua Taik Him, Deputy Chef Officer of International Enterprise Singapore, Mr. Ronald Tay, Chief Executive Officer of Ascott Residence Trust Management Limited, distinguished guests, ladies and gentlemen.

Before beginning, I would like to take a moment to express my condolences for the passing of Singapore’s first prime minister and founding father, Lee Kuan Yew.
In January of 1991, the Japanese newspaper “Nikkei” ran a month-long series collecting the memoirs of Prime Minister Lee. Uncertain times followed Singapore’s independence from Malaysia in 1965. At that time he was happy even to have a Norwegian company establish a small manufacturing center for fishhooks in Singapore. Later multinational companies from various places like America, Europe, and Japan steadily began investing in Singapore. This is how the Singaporean economy grew, he wrote. He said that Singapore’s prosperity was due to the fact that it never opposed incorporating capital, knowhow, entrepreneurs or technicians from other countries.

I would like to express my highest regard for the economic system Singapore established after independence.

In particular, the support for the cross-border operations of companies has been inspiring. This includes both outbound support by IE Singapore, the co-organizer of today’s seminar, and inbound support by EDB. These factors have solidified Singapore’s position as a global hub within Asia.

≪ Why Japan Now? ≫

Today’s theme is promoting investment from Singapore to Japan. According to Japan’s statistics, the direct investment from Japan to Singapore in 2014 was 9.8 billion Singapore dollars. This is more than five times larger than the investment of 1.8 billion Singapore dollars from Singapore to Japan. However, Singapore is the third largest origin for investment into Japan, following the US and Hong Kong.

Previously, the origin of Japan’s inward investment had been mainly Western countries. Recently, however, the presence of Asia has been growing. Last year, 60% of direct investment to Japan was from Asian countries.

Yesterday, I met with Professor Kishore Mahbubani, Dean of Lee Kuan Yew School at the National University of Singapore. In his book entitled “The Great Convergence”, Dean Mahbubani preaches his world view of closing the gap between developed and developing countries.
In the past, Asia had been merely a recipient of foreign direct investment, or FDI. Currently, we are seeing growing investment into Japan from Asia. I am confident that this is evidence that supports the argument of Dean Mahbubani.

To enhance and further develop the bilateral economic partnership, two-way business exchange will be essential. For Singapore, Japan ranks 3rd as an investment source next to the U.S. and the Netherlands, and 15th as an investment destination. I hope for Singaporean companies to expand their business in Japan.

≪ Abenomics has changed Japan ≫

But why Japan? Some people may ask skeptically, “Isn’t there low growth and low return on investment in Japan?” To answer this question, I would like to talk about the current status of the Japanese economy.

Since its start in December 2012, the Abe administration has focused on “economic recovery” as the greatest and most immediate challenge, and implemented an economic strategy expressed as “Abenomics”.

Two years have passed. Today we have been enjoying positive figures, including GDP growth, corporate ordinary profits, business sentiments and stock prices. This is a radical change from 3 years ago. In Japan, many people, in particular those related to business, perceive that a positive growth cycle has begun.

Improved corporate earnings have attracted expanded investment and increased salaries. This has consequently expanded consumption and further increased corporate performance.

The key to leading this positive cycle toward sustainable growth is the third arrow of Abenomics that is “structural reform”. The reform of “bedrock regulations” that the Abe government is currently proceeding with as part of the third arrow will create new markets.

Who could have imagined that the regional monopoly of electricity production and distribution which had continued for 60 years would be broken up? Actually, the electricity retail market will be liberalized next year.
Who could have imagined that the agricultural cooperative framework would be fundamentally reformed?

Who could have imagined that approval procedures of pharmaceuticals and medical devices have substantially improved?
Who could have imagined three years ago that Japan would participate in TPP negotiations?
And who could have imagined that corporate governance in Japan would be in line with global standards so speedily?
I hear the criticism that the effects of the structural reform are yet to be seen. Yes, it takes time, but the full effects are coming. I would like to reemphasize that Abenomics has changed Japan.

≪ 4 appeals of Japan as an investment destination ≫

Even so, you still have doubts about investing in Japan, right? I will give you just four allures (attractiveness) of Japan as an investment destination.

The first allure of Japan is its immense, sophisticated market.

The economic scale and GDP of the Tokyo Metropolitan Area is equivalent to that of the UK. The Kinki Region centering on Osaka has almost the same economic scale as that of South Korea, and the Chubu Region, that of the Netherlands. Japan is a large market.

In addition, given its sophisticated consumers, Japan can also serve as a global test market. Professor Michael Porter based at the Harvard Business School introduced Japan as follows: “The reason why P&G tests its new disposable diapers in Japan is because Japanese housewives are the most demanding consumers”.
President and CEO Danny Risberg of Philips Electronics Japan said, “If a product meets the quality requirements of the Japanese, it will sell in any country around the world.

As many of you are aware, the “Made in Japan” brand is popular in Asia. L’Oréal, a French cosmetics manufacturer, plans to enhance its factory in Japan, to market its products in Asia under the “Made in Japan” brand. Success in Japan means expansion to Asia and the world.

The second allure of Japan is its technology.

Singapore, whose manufacturing accounts for one-fourth of the country‘s GDP as a national policy, seeks improvement in quality, technology, and innovation in order to maintain its competitiveness in the global marketplace.
Needless to say, Japan, who boasts the largest ratio of R&D expenditure to GDP and number of researchers per 10,000 citizens in the world, has technology that Singapore seeks. Partnering with Japanese companies to add Japanese technology to Singaporean products will be a great strength for Singapore. In Japan, there are organizations and companies that have excellent R&D capabilities, especially in the fields of environment, energy conservation, healthcare, robotics, and nanotechnology. In addition, Japan has fostered small- and medium-sized companies which have the number-one or only-one technology in the world.

The potential for overseas companies to partner with these companies will dramatically increase by establishing their bases in Japan.

The third allure of Japan is its tourism market.

Currently Japan is seeing an accelerated number of visitors from around the world. The number increased to 8 million in 2012, 10 million in 2013, and 13 million in 2014. Among visitors, those from Asia, in particular Chinese-speaking countries and regions including China, Taiwan, Hong Kong make up nearly half (46%) of the total number of visitors, and are increasing by 30 to 40% each year.

According to a survey conducted by the Development Bank of Japan, among seven countries (excluding South Korea), Japan ranked first as “a country they want to visit in the future”. This is a precise sign of a “Japan travel boom”. The Japanese Government set a target of increasing the number of travelers from abroad to 20 million by 2020. I am confident that this target will be easily achieved at the current pace.

Tourism is an industry broadly encompassing not only transportation and accommodations, but also services such as retail, restaurants, and entertainment.

The expanding Japanese tourism market is an attractive destination for investment by other countries. In fact, JETRO has received significant interest in this field from Asian countries.

The fourth allure of Japan is its advanced initiatives for the issues characteristic in developed countries.

The declining birth rate and aging population has become an issue many Asian countries are currently facing, including Singapore. Regarding other issues such as medical services, pension, environment, energy, and aging infrastructure, Japan is the first country that has faced and addressed them in Asia.

For example, its advanced initiatives related to welfare and medical care for the elderly have drawn great attention from Asian countries. Many missions were dispatched from these countries to Japan to learn from Japan’s experience. In the fields where Japan and Singapore face the same issues, I am confident that through partnerships with Japanese companies, Singaporean companies will be able to build new business models and acquire knowhow.

≪ Towards becoming the most business-friendly country in the world ≫

You’re still not convinced? You are very skeptical. I understand your skepticism.

In considering investment in Japan, the most challenging issue used to be high cost. You still think costs are high in Japan? However, you should change your mindset. I will tell you why.

First, Prime Minister Abe declared that he would make Japan the most business-friendly country in the world. A leader’s commitment is important.

Second, corporate tax, which has symbolized high business cost in Japan, is being reduced. The government is committed to moving toward further reducing the rate down to the 20’s, though there still remains a gap with the 17% of Singapore.

When thinking of Japan even after the reduction of corporate tax, many may have the image of “a country of high costs”. In actuality however, the office and house rent for expatriates in Tokyo is lower than Singapore or Hong Kong, and the same level as Shanghai. The salary level is the same, and for management it is actually low in Tokyo.

A bowl of “ramen” at “Ippudo” costs 15S$(without tax and service) in Singapore, but only 8S$(all included) in Japan. It is time to change the image of Japan as a country of high costs. Your mindset must be abolished. Japan is a low cost country.

≪ Talk to JETRO First ≫

Now let me briefly talk about my organization, JETRO, in this respect. JETRO is an organization that has 76 overseas offices in 57 countries and 44 domestic offices to promote trade and investment with the rest of the world. Under the Abe government’s plan to double inward FDI in Japan, JETRO was given the role of core organization to promote it.

In the past 12 years, JETRO has supported over 12 thousand companies interested in investing in Japan, and over 12 hundred of those companies have successfully made their investments in Japan. 395 companies from Singapore have received support and 38 companies have set up bases in Japan.
JETRO’s Invest Japan Business Support Centers, or IBSCs, located in six cities in Japan, provide free office space for two months for overseas companies to prepare for establishing business bases in Japan. Free consulting services, including those covering administrative procedures and market information, are also provided as one-stop services for companies starting their business in Japan.

Speaking of one-stop centers, on April 1st, the Tokyo One-Stop Business Establishment Center was established inside JETRO Headquarters. At start-up, overseas firms and venture companies are provide face-to-face services for various procedures including corporate registration, taxes, pensions, social insurance and immigration control, all in one room. That is a photo of Opening Ceremony, from left hand side, Minister Ishiba, Governor Masozoe, Prime Minister Abe and who? Myself.

Now I believe you are convinced you should invest in Japan. If you are not convinced, I will introduce Mr. Teng, as our ultimate weapon. Mr. Teng, please stand up. He will approach you individually. Be careful.

When is the time to invest in Japan?
Now! Now is the time!

When you expand your business with Japan, please “Talk to JETRO first!
Thank you for your kind attention.