Market Multiplication -
A US State Trade Office View, Part II
- by Timm Tuttle -
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In a previous article (see Computing Japan, August 1998), Timm introduced several American organizations that assist US technology firms in Japan - non-profit or government-sponsored "multiplier" organizations that use their resources to amplify the efforts of foreign companies. This month he covers helpful Japanese organizations that offer assistance to businesses from all countries.
Japan External Trade Organization (JETRO) JETRO is the Japanese government's primary agent for carrying out import promotion activities aimed at defusing trade tensions, and it has recently added investment attraction to its mandate. Below are listed the most noteworthy JETRO programs for market entrants, most of which are free or inexpensive. First, take a look at JETRO's list of English-language publications, including market entry guides, industry directories, trade show listings, and the "Your Market in Japan" series of industry-specific market reports. Several Japanese-language publications introduce goods from companies looking for Japanese distributors. JETRO's offices offer access to commercial reference libraries and a growing number of electronic databases, including a Potential Importers Database. Also, JETRO organizes and subsidizes imported goods sections at trade shows, and displays foreign products in Import Promotion Centers throughout Japan. Trade missions to Japan can receive logistical support from JETRO, and there is the "Export to Japan Study Program" that can fly you to Japan for a ten-day course in marketing your product here. Further, JETRO runs a series of Business Support Centers in Tokyo, Osaka, Yokohama, Kobe, and Nagoya providing temporary office space to foreign companies new to Japan. You can reserve small offices or cubicles with dedicated phone and fax for a period of two weeks (extensible to several more weeks), with access to meeting rooms, business support services, libraries, databases, and English-speaking market advisers. Use the time to find office space or otherwise lay market-entry groundwork. You'll be charged only for telephone usage and special services like translation. Applications must be made through a JETRO office overseas.
With so many departments juggling so many programs, JETRO can seem hard to approach. Requesting a publication is easy enough, but receiving close personal attention throughout a lengthy market entry project can be difficult. Personal relationships with the people working on your case are essential. One American who spent several years working with market entry cases at JETRO's head office said: "Companies will get out of the JETRO relationship what they're willing to put into it - which may mean repeatedly pushing the JETRO staff to answer your questions. And it never hurts to get one of the foreign staff at a JETRO office to champion your project."
JETRO's Senior Trade Advisors are active or retired employees of large Japanese companies who offer their experience and connections to foreign firms. Keep in touch with these and other contacts even after your project is finished; new trade promotion programs continually appear. And although JETRO follows a policy of strict confidentiality, as with any outside recipient, take care when disclosing sensitive information. Foreign Investment in Japan Development Corporation (FIND) FIND is a private corporation held by the MITI-affiliated Industrial Structure Improvement Fund and 100 private-sector companies and associations. Created in 1993 to provide start-up support and expansion services for foreign companies, FIND touts its government/private heritage as an asset to solving clients' problems. FIND charges for its services, which include support for corporate registration, office space and housing-search, and staff recruitment, as well as market-entry planning, market research, credit reports, mailing list preparation, appointment arrangement, and business-visit escort. A ´50,000 annual membership service for foreign firms offers a newsletter, seminars, and gratis or discounted access to other FIND services.
FIND has not yet been widely used by market entrants. Discuss the content and cost of services with a representative; many services, such as corporate registration, require that additional fees be paid to contractors. The Japan Development Bank The Japan Development Bank (Nihon Kaihatsu Ginko, or Kaigin) was historically charged with financing projects to develop Japanese industry, but now offers long-term, low-interest yen-based loans aimed at the expansion of foreign businesses in Japan. JDB says it has extended 619 loans totaling $5 billion to foreign companies, including Applied Materials, Motorola, and LSI Logic. Eligible foreign applicants have registered Japanese branches or are incorporated in Japan with one-third or greater foreign capital. JDB loans cover a maximum of 50% of project cost (40% for R&D projects) with no maximum limit. Average maturity is 10 to 15 years, with a maximum of 25. Interest rates are currently 1.1% to 2.2% for new loans, depending upon the project, and are fixed for the entire period. Collateral and/or a guarantor are required in principle. (These are generalities; details vary with the type of project.) Loans in the past have been aimed at tangible asset acquisition and not at covering working capital (with the exception of some R&D expenditures), but the government recently enabled the Bank to take on both. Together with a big boost in JDB's overall budget and an eagerness to bring home investment, this may be a good time to give JDB a ring. A new option for high-tech ventures is a loan program - little known even inside Japan - that employs intellectual property rights as collateral. Some wrangling over conditions may be in store for the first daring foreigners willing to try it, but it's an interesting opportunity you'd be hard-pressed to find in a Japanese commercial bank. One JDB loan recipient offers a tip for applicants: appear native if possible. Let your Japan branch work with JDB in Tokyo; the process requires lots of close communication both during and after the application process. A JDB representative adds this advice: "The most important thing we need to see is a clear strategy and concrete goals for your Japanese venture. How will you raise working capital funds? Who will you partner with in Japan for finances or recruiting?" JDB maintains five "Centers for Promotion of Direct Investment" within its overseas representative offices to provide market data, consult on site selection, and assist with commissioning feasibility studies. Projects in a more advanced stage of development can request introductions to potential partners in Japan, drawn primarily from JDB's client roster. JDB's loan program is not the only government-affiliated program for attracting investment. Other incentives include loans from institutions like the Export-Import Bank of Japan, loan guarantees by the Industrial Structure Improvement Fund, and tax incentives. Ask JDB for details. New Business Investment Co. Ltd. The New Business Investment Co. Ltd. (NBI) is a unique quasi-governmental venture capital firm held by about 150 companies, JDB, and the Industrial Structure Improvement Fund. "Venture capital firms usually supply investment but no support thereafter," says Takeshi Nakabayashi, a 15-year JDB veteran who now manages NBI's Second Investment Department. "We try to provide follow-up services as well. And we take a strategic view; our investments are more 'patient' than venture capital in the private in sector." NBI targets technology-oriented firms in the start-up and early growth stages. Its "Case 2" Investment Program for Early Expansion Stage Businesses is open to foreign business as well as domestic. The program looks for ventures with existing cash flow, in one of two categories: companies less than 10 years old, and companies with new business less than five years old. NBI takes an initial 25% equity ratio on the first ´100 million of the venture, with a lower equity ratio on further levels of investment; total Case 2 investment by NBI is limited to ´100 million. Investments are in common equity and come from NBI's internal fund, not outside lenders. The investment Õbundle" includes consultation on strategies for strategic partnering, management development, and going public in Japan. Japanese Industry Associations A country whose industry forums include the Japan Mashed Potato Association and the Japan Mayonnaise Association is sure to have plenty of associations representing high-tech concerns. These are not specifically in the business of aiding foreign firms' entry to Japan. That doesn't mean they can't be of help - it's just up to you to find out what the associations can do for you. The ubiquitous year-end parties (bonenkai and shinnenkai) are great places to meet Japanese companies. If you don't have an invitation, you may be able to attend as a guest of an association member. This kind of networking with an association can be hard to maintain, though, when you're across the ocean and not even a member. If that's the case, encourage your industry association back home to keep in touch with their Japanese counterparts and develop joint events of interest to you. Face-to-face meetings are important, so also try to hook up with the never-ending stream of trade missions that flow from Japanese trade associations. Companies with Japanese branches are generally in the best position to enjoy the benefits of membership, which may provide one benefit in addition to networking: it's another small step toward that coveted status as a Japan "insider," one of those companies people sometimes mistake for a local firm. Final note The organizations introduced in this article and its predecessor are just the start of the assistance that's available out there. Don't hesitate to ask one group to put you in touch with other helpful parties. And remember that whatever organizations you turn to for aid, in the end it'll be individuals that do or do not work that additional hour, make that extra phone call, or dig out that long-lost report. Be sure to communicate often, deliver requested information in a timely manner, and send thanks when appropriate. You'll get better results from your current - and next - request!
Timm Tuttle(tt@gol.com) directs the Washington State Japan Representative Office, assisting Washington state firms in fields such as software,
telecommunications, retail, biotechnology and environmental technology. The office's website is at http://www2.gol.com/users/tt/.
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