Businessweek Archives

Breaking Ground For A New, Improved Japan


Industries

BREAKING GROUND FOR A NEW, IMPROVED JAPAN

In a vast construction site near Kobe, Japan, there's a hole in the ground as wide and deep as a huge oil-storage tank. Giant backhoes and bulldozers scrape up dirt and rock, filling 220 dump trucks each day. Looming over the crater is an eight-silo cement plant, readying for the day the hole will be filled.

It's the first stage of what will be the longest suspension bridge in the world. By 1998, the Akashi Bridge, costing $2.8 billion, will connect Japan's main island of Honshu with a large island in the Inland Sea. In an engineering tour de force, the bridge's central span of 6,567 feet will be half again as long as the Golden Gate's.

That's just a taste of what's to come. Japan is embarking on a decade-long development binge, spending the almost unimaginable sum of $3.2 trillion. In May, the Japanese Diet will officially launch the program by approving a 6% hike in such spending for fiscal 1991. By 2000, new airports, bridges, expressways, magnetic-levitation trains, sewers, housing projects, and gargantuan waterfront development schemes will have transformed Japan's landscape.

TOUGH TERRAIN. To some extent, this spending is only the latest chapter in an endless effort to conquer Japan's California-size territory, which is fragmented into dozens of islands and dominated by nearly impenetrable central mountains. But the megabucks program is also the most dramatic part of a package of measures that Japan agreed to last year to pry open its markets. The package, known as the Structural Impediments Initiative (SII), is the result of pressure from the Bush Administration to lessen Japan's huge trade surplus. The idea: divert the Japanese economy away from exports and instead stoke domestic demand. In short, restructure the Japanese economy.

Japanese citizens, having taken a backseat to industry for decades, are expected to be big winners of the country's impending largess, as new, large-scale services and amenities improve daily life. And the pump-priming, experts say, will encourage consumers to buy more than before, and at least part of that will be imports. An additional benefit, of great interest to Washington, is new business for American engineers and construction companies in Japan.

But if Washington is looking for a sudden reversal of fortune in the race against Japan, it will most likely be disappointed. Rather, Japan probably will become even more efficient as it pours money into advanced fiber-optics systems, other telecommunication networks, and smart buildings. "If you ever wanted to do something that would accelerate Japan into the 21st century and do little for the U. S., SII is the perfect vehicle," says Ronald A. Morse, executive vice-president of the Economic Strategy Institute in Washington.

LIMITED ROLE. To be sure, U. S. contractors are gaining a toehold in Japanbecause of pressure from Washington. Bechtel Group, Fluor, and Daniel International are members of two U. S.-Japan consortiums that recently won bids tobuild two terminals at Kansai International Airport. Cleveland-based Austin Co. will install the airport's baggage-handling system, and American Telephone & Telegraph Co. has landed several consulting jobs.

But there is little chance that the Americans will be able to break up the dango, or the collusive bidding practice through which a small number of Japanese construction groups dominate the bidding for public projects. U. S. contractors will be limited largely to consulting and systems integration. "If we're talking about infrastructure in Fukushima prefecture, dams in Miyazaki, or sewers in Niigata, there's not a lot for U. S. companies to try for," says Thomas P. Logan, Asia regional director for Austin. Access could prove so tough that Washington may retaliate.

No matter who reaps the greatest business rewards, Japan's need for improved infrastructure is real. The nation's per-capita income of $23,000 may be one of the highest in the world, but you wouldn't know it from living conditions. Traffic gridlock, long commutes, a paucity of parks and recreational facilities, and cramped housing make urban life hard to bear. Rural dwellers suffer from surprisingly primitive road and sewage systems.

The new infrastructure program sets out to rectify many of the disparities. Housing, which is notoriously inadequate throughout Japan, will be a major target. "The social infrastructure must be improved to achieve a really affluent life," says Takuma Yamamoto, chairman of computer giant Fujitsu Ltd. Yamamoto is also head of an influential committee at the Keidanren, the mighty Federation of Economic Organizations.

But to what extent the $3 trillion goes toward improving Japanese living standards and not just increasing the country's efficiency will hinge on how the money is spent. So far, the really big bucks are being lavished on monster projects. In Tokyo, construction companies are hard at work on an audacious bridge-tunnel link across Tokyo Bay. When completed in 1996, the 9.4-mile, $8.9 billion highway should spark rapid development of a huge industrial zone in Chiba prefecture. On the Tokyo side of the bay, meanwhile, the domestic Haneda Airport is undergoing a $7 billion expansion.

SYMBOLIC TARGET. For the biggest concentration of brash schemes, however, the Osaka area goes unrivaled. Japan's third-largest city and traditional commercial center is in the throes of breathtaking change as civic and business leaders strive for the kind of growth and international status they think Tokyo has unjustifiably cornered. Altogether, the local Chamber of Commerce & Industry counts 700 infrastructure projects worth $190 billion under way or planned in the Osaka region.

Boldest of all is the already infamous Kansai International Airport, which the U. S. has turned into a symbolic target for cracking Japan's construction market. For the first airport ever built in the open sea, contractors are creating 1,262 acres of land in the Sea of Japan with soil trucked in from miles away. By the time Kansai opens in 1994, the airport will have cost more than $10 billion.

On shore, five minutes across the uncompleted bridge from Kansai airport, contractors are preparing 740 acres of land that will become home to Rinku Town, an "intelligent city" that will serve as the gateway to Kansai airport. Across the bay is emerging what Osaka authorities not-so-modestly describe as the "project of the century." Properly known as Techno-Port Osaka, this waterfront project is spread over three man-made islands totaling 1,914 acres. Boasting commercial, recreational, communications, research, and residential facilities, it will be home to some 90,000 people.

Slated for completion by 1994 are a towering World Trade Center being developed by Osaka City and the Mitsui group, and an Asia-Pacific Trade Center. The Asian trade center in particular will help open up the Kansai region and western Japan to more imports. The plan: build a $1.1 billion wholesale market with a heavy concentration on imports. Foreign tenants will be able to show their wares, from fashion to home furnishings, to visiting purchasers from throughout the country.

Development schemes such as these may encourage imports, but they will also help Osaka and different regions of the country build communications and transportation links to help tap world markets. The net effect will be "a booster rocket that will increase the efficiency, openness, and dynamism of the Japanese economy," says Morse.

So although the outside world will share in some of the fruits, the most significant gains from the infrastructure boom will go to Japan. Having transformed their island nation into a 21st century model, the Japanese could merely be poised to move on to the next phase of their international economicexpansion. America will thus have prodded Japan into a mission that is overwhelmingly in its own self-interest.Robert Neff in Osaka, with Amy Borrus in Washington


Too Cool for Crisis Management
LIMITED-TIME OFFER SUBSCRIBE NOW
 
blog comments powered by Disqus