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Japan: an opportunity and a challenge

The Japanese domestic construction market is worth approximately £400bn/annum. In real terms, this is a per capita spend 1.6 times that of the UK, at a time when Japanese contractors consider themselves to be in recession.

The sheer scale of Japanese government investment in third countries - that is anywhere outside Japan and the UK - is similarly impressive. Japanese aid budgets are by far the largest in the world. In 2001/02, the total figure for aid is likely to be more than £6.25bn.

There is money to be made by non-Japanese firms in both markets.

Yet, UK firms earn just £100M in professional fees and from the sale of products in the Japanese domestic construction market. This is less than 10% of the amount earned by US or Canadian counterparts. Despite forecasts predicting further economic decline, there is scope for the UK to increase its penetration and share of the market dramatically .

The bulk of Japanese overseas aid administered by the Japan Bank for International Co-operation (JBIC) - worth approximately £6.6bn in 1999 - is untied. The Japan International Co-operation Agency (JICA), which finances feasibility studies and masterplans for overseas aid projects, allows for up to 50% of work to be undertaken by non-Japanese consultants.

In 1998, JICA awarded £213M worth of contracts. Current participation by non-Japanese firms in JBIC and JICA contracts is a mere fraction of what is possible.

The Japanese domestic and third country markets are not easy to crack. UK firms will find it difficult, if not impossible to win work with Japanese clients without the support of a Japanese associate.

It requires patience and effort to forge a bond of trust - Japanese business leaders are invariably anxious that theirs is not the first company to enter a relationship with an overseas organisation. An occasional e-mail or brochure is of little value in building a relationship. Face to face meetings are essential to demonstrate commitment and identify mutual strengths and weaknesses.

However, once tried and tested, Japanese partners are extremely loyal. And the conservatism and increasing adversity to risk shown by the Japanese construction and consultancy sectors could also prove to be to the advantage of UK firms.

The Japanese are starting to seek out opportunities for reducing their risk profile, favouring international collaboration and working in consortiums. There is clear scope for relationships to be forged between UK and Japanese companies.

Ron Marsh is Trade Partners UK trade promoter for design and construction.

Kim Dinham-Peren is trade promoter for third country markets.

Trade Partners UK is part of the Department for Trade & Industry responsible for furthering UK overseas commercial interests.

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