Perspectives of business cooperation between
The Republic of Azerbaijan and Japan
Go To Asia Project
2014
Authors:
Abdul Waheed Rahimi
Aishen Velieva
Asif Ramazanov
Begli Annamyradov
Gulnara Hasanova
Mateusz Wysocki
Sarkhan Huseynov
Supervisors: Amb. Araz Azimov
Dr. Anar Valiyev
1 Table of Contents
Introduction .................................................................................................................................... 3
Country Overview .......................................................................................................................... 4
Geography ......................................................................................................................................................5
Climate............................................................................................................................................................5
Natural Hazards ..............................................................................................................................................6
Environmental Issues ......................................................................................................................................7
Transportation .................................................................................................................................................8
POLITICS ..................................................................................................................................... 12
Political System ............................................................................................................................................12
Political Risk Analysis ..................................................................................................................................14
ECONOMICS ............................................................................................................................... 14
Analysis of the Economy .............................................................................. Error! Bookmark not defined.
Business Environment in Japan .................................................................................................. 19
Government Policy and Openness to Foreign Investment ...........................................................................19
Challenges to investing in Japan ..................................................................................................................19
Reasons to invest in Japan ............................................................................................................................19
Doing Business in Japan: World Bank Ranking ..........................................................................................20
Registration of New Business/Firm ..............................................................................................................20
Possible Spheres of Cooperation ................................................................................................. 22
Agricultural Sector .......................................................................................................................................22
Information and Communication Technologies ...........................................................................................35
Medical Sphere .............................................................................................................................................25
Mitsubishi Corporation: Opportunities ..................................................................................... 26
Essence of the Trade House (Sogo Shosha) .................................................................................................26
Investing in Azerbaijan’s industry ................................................................................................................30
Energy: Methanol .........................................................................................................................................34
Tourism .........................................................................................................................................................31
Infrastructure ................................................................................................................................................32
Steel ..............................................................................................................................................................32
Energy ...........................................................................................................................................................33
Conclusion ..................................................................................................................................... 36
2 Introduction
Business cooperation with Japan can be both challenging and very rewarding. A country
with rich culture and highly developed society, it combines what is best of modern capitalism
with a traditional commitment to collectivity, rules, regulations and long-term partnerships. This
unique business environment requires mutual understanding and patience, which in today’s hectic
global economy can be seen as odd or even irritating. However, what makes Japan unique the
commitment to business partners, which once developed, can become a table and predictable
long-term enterprise.
Investing in Japan can benefit from a base of very wealthy consumers, reflected by a high
degree of household wealth amounting to $12 trillion. Although the Japanese are willing to pay,
they are also very sophisticated and demanding and the domestic market is already highly
developed. Nevertheless, Japan is open to foreign investment and the consumers can be attracted
by the uniqueness of products or services. When it comes to investing in the emerging markets,
Japan has slowly realized that it running behind its global competitors. The foreign direct
investment in these markets is currently on the rise, creating more opportunities for future
cooperation.
Japan also faces some comparative disadvantages due to its geographical features. As an
island, which is not rich in natural resources, it can neither extract nor import carbohydrates in
the convenient conventional way. This makes energy security one of the top priorities of Japan.
Geographical challenges also create difficulties in Japan’s agricultural sector, reflected by import
figures reaching 60 percent.
The aim of this report is to explore potentials for business cooperation between Japan and
the Republic of Azerbaijan. The findings are based on a thorough group research and interviews
with Japanese business representatives, non-governmental organizations and government
officials during a weeklong study trip to Tokyo.
3 Country Overview
Area (km ²)
Boundaries (km)
Total 377,835
Total Railways
Total roadways Total
(km)
(km)
waterways
(km)
Land
Water
Land
Coastline
374,744
3,091
0
29,751
27,182
1,203,600
1770
4 Geography
Japan is an island chain between the North Pacific Ocean and the Sea of Japan. The
country is surrounded by the Sea of Okhotsk in the north; by the East China Sea in the
southwestern part; by the Pacific Ocean in the east-southern part, and Sea of Japan and the Korea
Strait border the western part of the country. It is located in Eastern Asia to the east of China,
North Korea and South Korea, and Russia, while not having land borders with these countries.
Some sources state that Japan is comprised of 3.000, others say 6852 islands. Among them there
are four main islands that comprise 97% of the total land area in Japan: Hokkaido, Honshu,
Kyushu and Shikoku.
Japan is mainly covered by steep mountains, plains, natural lakes volcanoes and hot
springs, and therefore most of the land cannot be cultivated. As a result, majority of population
resides in the areas near the coastal lands.
Japan has a number of small and swift flowing rivers due to the presence of many
mountains making navigation almost impossible. The longest river of Japan is the Shinano,
which flows from Nagano to Niigata. The River Tone has the largest watershed and serves water
to more than 30 million inhabitants of Tokyo metropolitan area. Three major lakes of Japan are
Biwa, Kasumigaura, and Saroma.
Climate
The climate in Japan varies in different parts of islands, however, it normally faces subtropical climate. In general, Japan experiences the four basic seasons of summer, monsoon,
autumn and winter, which comprises its varying weather. Being predominantly surrounded by the
Pacific Ocean and the Sea of Japan, summers are hot and humid but winters are icy and chilly.
Maximum rainfalls happen in June to July, while facing unusual high rainfall of about 1700 to
1800 millimeters per year. Another marked weather condition is the typhoons, which generally
affects Japan from August to October. The temperature is uniformly sub-tropical but some
regions are more prone to earthquakes and volcanoes than the others. Some regions are extremely
icy but during the summers they are highly conducive to agriculture.
5 Months
Jan
Feb
Mar
Apr
May
Jun
Jul
Aug
Sep
Oct
Nov
Dec
Average
5
5
12
16
18
25
28
30
22
20
13
7
6
7
10
12
12
13
13
10
14
13
8
5
50
51
54
60
63
71
77
66
66
62
60
56
58
48
42
40
41
27
28
42
30
38
41
57
Temperature
in °C
Total
number
of
rainy days
Humidity
(%)
Average
percent
of
sunshine
Natural Hazards
Japan is affected by earthquakes, typhoons and tsunamis. In addition to these natural
disasters, Japan is also home to several volcanoes.
The Japanese archipelago is located in an area where several continental and oceanic
plates meet. This is the cause of frequent earthquakes and the presence of many volcanoes and
hot springs across Japan. If earthquakes occur below or close to the ocean, they may trigger tidal
waves (tsunami). On March 11, 2011, the strongest ever recorded earthquake in Japan triggered a
massive tsunami along the Pacific Coast of northeastern Japan. Known as the Great East Japan
Earthquake, the earthquake and particularly the ensuing tsunami killed nearly 20,000 people and
caused a nuclear accident at a power plant in Fukushima Prefecture1. After the Fukushima, the
experts warned of disaster preparedness for next big quake as Tokyo is weak to calamity. In Jan
2012, the Earthquake Research Institute, at the University of Tokyo said that 70 percent chance a
7.0 magnitude or higher will hit Japan’s capital by 2016. The experts in this field estimated one
trillion US dollar and a death of up to 11,000 people for the upcoming earthquake disaster.
However, earthquake damages are not common in Japan as all buildings are strictly required to
1
http://www.japan-­‐guide.com/e/e2116.html 6 have an earthquake resistance structure. Building Standard Act has been strictly reviewed every
time the Japanese experienced a large earthquake. Without rigorous compliance to earthquake
proof standard set by a low, one can never get an approval of construction of a building from a
public administration office in Japan2.
Typhoons occur in Japan every summer and are a feature of the Japanese climate.
Typhoons can cause flooding and landslides, both of which can be extremely dangerous to people
caught in one. The winds of a typhoon are so powerful that they can blow trees over and bring
buildings down. Typhoons cause damage that means communities have to invest time and money
to repair the damage and rebuild things that were lost.
There are 67 active volcanoes in Japan. This means that Japan has 10% of the world's
total active volcanoes. The highest mountain in Japan, Mount Fuji, has not erupted since 1707.
Mount Sakurajima, which is on the island Kyushu, still erupts. When this mountain erupts it
covers the city of Kagoshima in ash, more violent eruptions also release lava.
Environmental Issues
Air pollution is a serious environmental problem in Japan, particularly in urban centers.
Toxic pollutants from power plant emissions have led to the appearance of acid rain throughout
the country. Despite the fact that many Japanese people wear respirator masks in public, you
cannot feel air pollution: there is no dust or smoke in the air.
Water pollution is another area of concern in Japan. The nation has 430 cu km of
renewable water resources with 64% used in farming activity and 17% used for industrial
purposes. Increase in acid levels due to industrial pollutants has affected lakes, rivers, and the
waters surrounding Japan
2
http://www.realestate-­‐tokyo.com/news/earthquake-­‐resistance-­‐of-­‐buildings-­‐in-­‐japan/ 7 Transportation
Airports
Japan has almost 100 airports including military airports. Japan has five first class airports
that are major international airports. Many of the second-class airports are in Japan handle
international traffic, and mostly their flights are short domestic from South Korea or China.
JAPAN FIVE FIRST CLASS AIRPORTS :
Name of Airports
Chubu Centrair International Airport
Narita Airport (NRT)
Detailed Information
This first class airport is also known as
Central Japan international airport that is
servicing Nagoya and the surrounding area.
The airport has an easy access to the local
transports:
1.
Train: This airport is located on the
Meitetsu Tokoname Line operated by Nagoya
Railroad.
2.
Bus: The bus service is available to
different location on a schedule bases.
3.
Ferry: Two high-speed ferry services
are also available which link Centrair to the
west side of Ise Bay.
4.
Car: Taxi fare also available around the
airport.
5.
Cargo Service: FedEx and Nippon
Cargo Airlines
This is the main international gateway into
Japan. Most international flights to Tokyo go to
Narita Airport and domestic flights for Tokyo
operate through Haneda Airport. There are
several options for transferring to Central
Tokyo:
1.
Taxi: It is 70km from central Tokyo,
but due to the high cost of taxi it is not
recommended.
8 2.
Tokyo Airport Service: this is a private
service deal for small group of people or
families or those won’t to carry their luggage
on and off the trains. It is cheaper than taxi and
operates 24 hrs.
3.
Train: There are two trains service
operating close to this airport. JR Narita
Express and Keisei Skyliner, both will get you
into central Tokyo through different routes and
lines. The option depends on where in Tokyo
you have planned to go.
This airport operates domestic and international
flight located in 3km far from Hakata Station in
central of Fukuoka. The airport also has several
options for transferring to the central of
Fukuoka.
It is also known as Hiroshima-Nishi Airport
located in Mishara 50km east of Hiroshima
city. There is no rail link to this airport.
In addition to domestic flights, this airport
usually used for the flights to Korea and
Taiwan and Charter flight to Hong Kong.
Fukuoka Airport
Hiroshima Airport
Hakodate Airport
Albeit there are no direct flights from Baku to Tokyo, people can travel from different
directions:
Time
Airline
14h 15m+
Aeroflot
via Moscow
14h 40m+
Qatar Airways
via Doha
15h 45m+
Turkish
via Istanbul
16h 25m+
China Southern, ANA
via Urumqi, Beijing
18h 25m+
S7, Air China
via Novosibirsk, Beijing
18h 30m+
Azerbaijan, Emirates
via Tehran, Dubai
19h 0m+
Air Astana, JAL
via Almaty, Beijing
Direction
9 Railway Services:
Japan has a high punctuality and safety railways with advanced infrastructure system that
representing a large share of travel. According to BMI statistic, Japan has the world’s busiest rail
network with more than 18mn people using the train system daily, 40% of the total passengers
travel by rail while in U.S 90% of the people travel by road. Currently, there are more than
20,000km of railways and 26,000 daily train services in Japan that connect business cities to each
other.
Motorways:
Japan’s 7,000 km motorway network connects the entire cities. This motorway connects
Aomori, the north of Honshu, to Kagoshima including the island of Shikoku. The HonshuKyushu-Shikoku network, the island of Okinawa and Hokkaido have their own motorways.
10 The most used motorways connect different cities are as following:
•
Tohoko motorway connects Tokyo to Aomori
•
Tomei motorway connects Tokyo to Nagoya through the Pacific Coast
•
Chuo motorway connects Tokyo to Nagoya through the mountains and passing
Kanagawa, Yamanashi, Nagano and Gifu.
•
Meishin motorway connects Nagoya to Osaka through Kyoto.
•
San’yo motorway goes from Kobe to Yamaguchi through the coast of the Inland Sea and
Hiroshima.
•
Chugoku motorway goes from Osaka to Yamaguchi through the mainland.
Waterways:
The Japan waterways include the Korean Strait, Japan Sea, the sea of east China, and the
Pacific Ocean. The Japan Sea has 83 ports in four countries, which have been indicated in
waterway map of Japan as following:
11 POLITICS
Political System
The present Japanese political system is a much more recent construct dating from Japan's
defeat in the Second World War and its subsequent occupation by the United States. The postwar constitution of 1947 is an anti-militarist document that includes the renunciation of the right
to wage war and prohibits the maintenance of armed forces (Article 9) although later a limited rearmament was permitted ("self-defence forces").
•
Government type: a parliamentary government with a constitutional monarchy, where the
power of the Emperor is very limited. As a ceremonial figurehead, he is defined by the
constitution as "the symbol of the state and of the unity of the people".
•
Electoral system:
i. General elections to the House of Representatives: every four years (unless the
lower house is dissolved earlier);
ii. Elections to the House of Councilors: every three years to choose one-half of
its members;
iii. Local elections: every four years for offices in prefectures, cities, and villages.
•
The Executive Branch: Prime Minister is chosen for a term of four years. He must win a
majority in the National Diet in a single signed ballot. If the two houses cannot reach
agreement, the decision of the House of Representatives always prevails.
•
The Legislative Branch: The Japanese legislature is called the Kokkai or Diet and is a
bicameral structure. Generally decisions are made on a majority vote, but in special cases
a two-thirds majority is required.
-
The lower house is the Shugi-in or House of Representatives. It has 480 seats and
members serve a four-year term, although only once since the war has a full term been
served (the average is two and a half years). Of the 480 seats, 300 are elected from
single-member constituencies and the other 180 are elected from 11 multi-member
constituencies by a system of proportional representation. Candidates for election to
the House of Representatives must be at least 25 years old.
12 -
The House of Representatives has preeminence over the House of Councilors and can
pass a vote of no confidence in the Cabinet as a whole. The House of Representatives
can be dissolved by the Prime Minister or by a Cabinet no confidence vote.
-
The upper house is the Sangi-in or House of Councilors. It has 242 seats and members
serve a six-year term. Only half of its membership is re-elected at each election every
three years, using a parallel voting system. Of the 121 members subject to election
each time, 73 are elected from the 47 prefectural districts by the single transferable
vote method and 48 are elected from a nationwide list by proportional representation.
This element of proportional representation was introduced in 1982 in an effort to
combat the effect of huge sums of money being spent on election campaigns.
Candidates for election to the House of Councilors must be at least 30 years old.
-
The House of Councilors cannot be dissolved. The next election is due in July 2016.
-
If the two houses disagree on matters of the budget, treaties, or designation of the
Prime Minister, the House of Representatives can insist on its decision. In all other
decisions (such as the passage of a Bill), the House of Representatives can override a
vote of the House of Councilors only by a two-thirds majority of members present.
•
Political parties. In December 2012, the Democratic Party of Japan lost its parliamentary
majority and its administration was subsequently replaced by a government-led coalition
of the Liberal Democratic Party (LDP) and the New Komeito. The party currently holding
the greatest number of seats in the Diet is the Liberal Democratic Party (294 seats), of
which Prime Minister Shinzo Abe is leader. Other parties include the new Komeito (31
seats), the Democratic Party of Japan (57 seats), the Japan Restoration Party (54 seats),
the Your Party (8 seats), the Japanese Communist Party (8 seats), the Social Democratic
Party (2 seats), and the People's New Party (1 seat)3.
3
http://www.rogerdarlington.me.uk/Japanesepoliticalsystem.html 13 Political Risk Analysis
•
Prime Ministers rarely serve a full term due to political turbulence of the Japanese
system; for instance, current Prime Minister Shinzo Abe is Japan's seventh Prime
Minister in six years. Frequent change of political leader may lead to change in
economic policy, therefore affect businesses in the country. All in all, LDP’s return to
the government may prevent the country from making progress on foreign policy and
trade agreements, since it focuses only on certain sectors of economy. Likewise,
Abe’s rightist position can strain relations with neighboring countries and affect
Japan’s exports;
•
On the other hand, given that the ruling Liberal Democratic Party now has a majority
in both the upper and lower houses, the government could push through economic
reforms (such as free trade agreements) that could help to revitalize the private sector;
•
Security Issues. Pacifist constitution of Japan has kept it out of international conflicts;
the defense budget is limited to no more than 1% of GDP. However, Prime Minister
Abe and other political parties are looking to change this in light of the
Senkaku/Diaoyu islands disputes with China and heated rhetoric from North Korea
regarding attack on major U.S. military installations in Japan.
ECONOMICS
Economic Overview
Japan has the third-largest economy of the world. Having mastery of high
technology, strong government-industry cooperation, and well-built work ethic helps Japan to
have a remarkable advanced economy after the desolation of World War II. There were two
noteworthy features of the post-war economy of Japan: keiretsu - the close interlocking structures
of manufacturers, suppliers, and distributors, and the guarantee of lifetime employment for a
substantial portion of the urban labour force. Currently, both characteristics are now eroding
because of being under the double stresses of global competition and domestic demographic
change. Imported raw materials and fuels play significant role on industrial sector of
14 Japan. Japan’s agricultural sector is too small (1.1%) and exceedingly subsidized and protected.
Despite being self-contained in rice production, almost 60% of the food on a caloric basis is
imported in Japan. Incredible real economic growth was experienced in the country during the
last decades of the 20th century - 10%, 5%, and 4% growth in the 1960s, 1970s, in the 1980s
relatively. Starting from 1990th growth slowed noticeably-1.7%. Modest growth continued in
early 2000s. 4. Because of falling into recession three times since 2008, the massive 9.0
magnitude earthquake and the tsunami in 2011 economy of the country was disrupted. The
economy has mostly been recuperated during two years after disaster. According to the latest
indicators mentioned in the World Bank, real GDP growth is -5.5%, 4.7%, -0.6% and 2% in
2009, 2010, 2011 and in 2012 accordingly5. The same source shows that unemployment is 4.2%
in Japan in 2013 which is markedly low indicator in comparison with other countries of the
region. Jobless people decreased by 200,000 from 2012 to 2.65 million in 2013, according to the
Japanese Internal Affairs Ministry. For the year 2013, 103 positions were available for every 100
job seekers which mean country hit its highest level of job availability since 2007.
2011
2012
2013
Nominal GDP, US$bn
5,822.6
5,955.9
4,998.3
Real GDP growth, %
-0.6
1.9
2.4
GDP per capita, US$
45,732
46,805
39,312
4.3
4.2
Unemployment, % of labor 4.5
force
World Bank, Japan Statistic Bureau
According to the World Bank indicator for the year 2012, the GDP value of Japan
represent s 9.61 percent of the world economy.
% of GDP by Sectors
4
CIA World Factbook, 2013
5
World
Bank at http://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG 15 Agricultue
2%
Industry
26%
Services
72%
Source: indexmundi
6
Minimum wage: $1,348 per month. Japan has a government-mandated minimum wage,
and no worker in Japan can be paid less then this mandatory minimum rate of pay. Employers in
Japan who fail to pay the Minimum Wage may be subject to punishment by Japan's government
7
.Above-mentioned Report indicates that in 2013, the minimum wage rate ranged between $6.7-
8.8 per hour in Japan.
Traditionally, it is difficult for foreign workers to find a job in Japan because of strict
laws. Since increasing inflow of the low-skilled Asian workers have been experienced, Japan
further restricts immigration and registration procedures. Recently adopted legislations require
registering for access to the basic social services and reporting to the Immigration Bureau within
14 days in case foreign workers lose their jobs or get divorced.
Public Debt: 237.9% of GDP8
Public dept of Japan is more than 200% of its GDP which basically means it is twice the
size of the whole economy of the country. Taking into consideration, the US public debt is almost
80% of its gross domestic product which is noticeable lower in comparison with Japan.
6
http://www.indexmundi.com/japan/economy_profile.html
7
International Minimum Wage Rates 2014
8
http://www.indexmundi.com/japan/public_debt.html
16 245 240 235 230 225 220 DomesIc Debt (% of GDP) 215 Total Debt (% 0f GDP) 210 205 200 195 2009 2010 2011 2012 2013 Source: Ministry of Finance of Japan
Exchange Rate: 102.11 JPY = 1 USD
Inflation (CPI): 1.4%/January, 2014
In first month of 2014 the inflation rate in Japan was 1.40 % reported by the Ministry of
Internal Affairs & Communications. During the period between 1958 and 2014 inflation rate
averaged 3.16 %. Highest indicator was recorded at 25 % in February of 1974 while the lowest
inflation rate was -2.52 % in October of 2009.
The most important categories in the consumer price index:
Food - 25 % percent of total weight
Housing - 21 percent %
Transportation and communications - for 14%
Culture and recreation - 11.5 %
Fuel, light and water charges - 7 %
Medical care - 4.3 %
Clothes and footwear – 4% 9
9
http://forextv.com/market-news/japan-inflation-rate/
17 0.5 0 2009 2010 2011 2012 2013 InflaIon Rate -­‐0.5 -­‐1 -­‐1.5 Source: World Bank
World Bank indicators show upward increase in inflation rate during last five years. While
inflation rate was -1.3% in 2009, it was 0.4% in 2013.10
Economy Analysis
Being the largest creditor nation of the world, having well-developed and high-tech
manufacturing and services sectors make Japan to be very strong country in the world. As a
largest creditor, Japan attains a huge build-up of foreign reserves and other external assets.
Electronics and heavy engineering is key strong areas in a well-developed and high-tech
manufacturing and services sectors. Besides its strengths, there are several weaknesses of Japan’s
economy. Business costs are increased mostly because of hinder economy by excessive
regulation, state interventionism and a desire to protect politically influential special interest
groups. Population is declining in the country and among the developed economies Japan has the
highest proportion of citizens who are older than 65, placing a large funding burden on the
pension system. However there are some opportunities for Japanese economy because the
country gets from increasing demand from emerging markets, especially China and India that can
compensate for its own weak demand. On the other hand, Japan being dependent on exports as a
driver of growth is a threat for the economy of the country because the wealth of the country is
dependent on demand from the US and China.
10
World Bank, 2013
18 Japan’s domestic debt and total debt are more than 200% which should be reducing by the
government. Moreover, strain relations with China, South Korea, Russia and Taiwan on
territories are another menace for Japanese economy.
Business Environment in Japan
Government Policy and Openness to Foreign Investment
•
Japan has one of the highest tax rates in the world at 49.7%, comparing to US
46.3% ;
•
Japan remains fairly uncompetitive in comparison with other countries;
•
Japanese corporations subject to income tax on worldwide income;
•
Foreign corporations subject to Japanese taxes only on Japan-sourced income;
•
No foreign tax credit can be claimed against Japanese tax;
•
Abe’s 3rd arrow considers Corporate Taxes and many argue that a reduction in the
tax rate to 30%is needed.
Challenges to investing in Japan
•
Mature and complex market
•
Sophisticated and demanding consumers
•
Ageing/declining population
•
Stagnant growth
•
High tax rate
Reasons to invest in Japan
Japan is a good market for long term investments. Here are reasons to invest in Japan:
•
Rich and vast market
•
3rd largest economy in the world
•
Decisive Central Bank
19 •
Strategic business sectors
•
Excellence of infrastructure
•
Safe pleasurable living environment
•
Stepping stone to other Asian markets
Doing Business in Japan: World Bank Ranking
Japan is not an easy place to start business, however, once you started, it is unlikely you
to face challenges in running your business. Major indicator of this statement is that World Bank
ranked it 120th out of 189 (2014) in Starting business, 27th in Ease of doing business, and 1st in
Resolving Insolvency11.
TOPICS
DB 2014 Rank
Starting a Business
120
Dealing
with 91
Construction
Permits
Getting Electricity
26
Registering Property 66
Getting Credit
28
Protecting Investors
16
Paying Taxes
140
Trading
Across 23
Borders
Enforcing Contracts 36
Resolving
1
Insolvency
DB 2013 Rank
113
73
Change in Rank
up -7
up -18
26
64
24
16
133
24
No change
up -2
up -4
No change
up -7
up 1
36
1
No change
No change
Registration of New Business/Firm
Entrepreneurs face bureaucratic and legal hurdles in registering a new firm in Japan.
Below is detailed information about registration procedures:
11
http://www.doingbusiness.org/data/exploreeconomies/japan/#starting-­‐a-­‐business 20 Procedure
1
2
3
4
5
6
7
8
Time to Complete
Associated Costs
Make a company 3 days
seal
Obtain
the 1 day
certificate of seal
registration from the
Ward office
Register at the 1-3 weeks
Legal
Affairs
Bureau
of
the
Ministry of Justice
File the notification 1 day
of
company
incorporation
and
the opening of a
payroll office; and
Apply
for
the
approval of blue tax
returns
at
the
District Tax Office
File the notification 1 day
of commencement
of business at the tax
office
of
the
municipal
or
prefectural
government
File the necessary 1 day
labor
insurance
notifications
and
employment rules at
the Labor Standards
Inspection Office
File the applications Less than one day
for health insurance (online procedure)
and public welfare
pension at the Japan
Pension Service
File the company Less than one day
application
for (online procedure)
employment
insurance at the
Public Employment
Security Office
JPY 10,000 - JPY
20,000
JPY 400 (each)
0.7% of the capital
amount or JPY
60,000, whichever
is higher
no charge
no charge
no charge
no charge
no charge
21 As seen from the table, average time of registering business in Japan in 2-4 weeks.
Possible Spheres of Cooperation
Agricultural Sector
Since post war Japan is considered as an industrial country its main exports are nonagricultural goods. OECD estimated that the proportion of agriculture in the GDP of Japan fall
from 9% to 1% in the last 50 years12. Japan is in the same latitude with Azerbaijan which means
that they have almost the same climate and thus they could cultivate needed agricultural goods
but the main problem of Japanese agriculture is that it only 12.5% of Japanese lands are suitable
for cultivation and this cultivated areas are financially supported by Japanese government13.
Japan does not have enough suitable areas for tropical fruits and the earthquake on 2011
caused great disaster of the plants and it increased the imports of vegetables significantly. In
addition, it has limited potential in producing vegetables and fruits to achieve economies of size.
Tomato, grapes, apples, raisins and frozen canned vegetables are on the top and most imported
products to Japan. Similarly, Azerbaijan has considerable potential in producing these fruits.
Thus, it can be rewarding for Azerbaijanis to meet the Japanese demands and standard in this
sector. Also, Azerbaijan can attract the demand of dried fruits and pomegranate in Japan as there
is a strong demand for dried fruits and currently being imported from Turkey, Chili, Australia,
South Africa, China, Australia and Iran by Tokyo Seika Trading Co Ltd.
Possible imports from Japan
Japan is post-industrial highly developed country that has companies that could provide
cutting edge equipment for agricultural purposes which is in demand in Azerbaijan.
Developing agricultural sector of Azerbaijan needs high tech agricultural equipment such as
tractors, combine harvesters that could help to increase effectiveness and productivity.
12
http://www.oecd.org/eco/surveys/Overview%20Japan%202013%20English.pdf http://data.worldbank.org/indicator/AG.LND.AGRI.ZS 13
22 Fertilizers and other agricultural chemicals are other possible goods that could be
imported from Japan. Since these agricultural goods could increase productivity and effectiveness
of agriculture in Azerbaijan it is pretty sure that these high tech fertilizers will be in demand in
Azerbaijani market.
Investments to Azerbaijani agricultural sector could be one of the possible issues of
cooperation between Azerbaijan and Japan. Since Azerbaijani agricultural sector is developing
quickly, investments in this region could be profitable both for Japanese enterprises and
Azerbaijani farmers. Azerbaijan could be interested in these investments due to new technologies
that investor companies could bring to country.
Possible exports to Japan
Azerbaijani farmers could offer organic fruits to Japanese consumers such as melons,
pomegranates, tomatoes, and so forth. Pomegranates from Goychay and watermelons from
Sabirabad could be a good offer for customers in case of price and quality. Ministry of
Agriculture of Azerbaijan estimated that in 2013 Azerbaijani farmers produced 853757 tons of
fruits that was enough to fulfill needs of Azerbaijani citizens and plus to export to European
countries and former CIS countries14.
Canned fruits and fruit juices could be another way to boost exports to Japan. Different
Azerbaijani companies are professionalized in production of fruit juice that is in demand not only
in local market but also abroad; for instance, Russia, Ukraine, Turkey and European Union.
Vegetables are another agricultural product that Azerbaijan could offer for Japan for
consumption. Since Azerbaijan has a good experience in cultivating and exporting these goods to
abroad they could easily fulfill needs of Japanese people. Capacity of vegetable production of
Azerbaijan is estimated above 1 million tons annually and this number grows rapidly.
Wine produced in Azerbaijan could be a good offer for Japanese consumers due to
uniqueness of sorts of grapes that used in production of wine. Almost half of the produced wine
14
http://www.agro.gov.az/index.php?cat=197&ses=61188 23 is exported to EU, USA and former CIS countries. Azerbaijani wine “Sherg Ulduzlari” (“Eastern
Stars”) has already reached Japan, but it is not in stock. Japanese consumers order it online.
Therefore, there is opportunity for Azerbaijani business people to bring Azerbaijani wine in
Japanese markets.
Azerbaijani companies may reach the Japanese market through Russia or Kazakhstan that
have diversified trade with Japan. Likewise, it would be noteworthy to highlight that once
Azerbaijani business people have unique and high-quality product to offer to Japan, they should
approach Ministry of Agriculture, JETRO (similar to local AzPromo), and/or ROTOBO (Japan
Association for Trade with Russia and NIS) to promote this or another product. These
organizations can help in organizing so called Showrooms to advertise Azerbaijani products.
Obstacles to trade:
Transportation is one of the main problems of trade between Japan and Azerbaijan. Since
both countries are in the different edges of Asian continent trading is not easy in the matter of
time and quickness. Equipment and different agricultural goods that comes from Japan to
Azerbaijan takes a long journey by ship which reduces effectiveness of trading and almost makes
impossible to transfer nondurable goods such as foods. Well, trade from Azerbaijan to Japan also
has the same obstacles; it’s not easy to deliver nondurable goods such as vegetables, fruits and
foods without damaging its quality because of time of delivering. The airline between Baku and
Tokyo does not exist yet, which could make it easier to deliver via express delivery. So
Transportation caused by long distance is one big obstacle to trade.
Lack of Promotion of Azerbaijani goods in Japan is an obstacle that many traders-exporters
face during selling process. Well, Japanese companies are more financially and technically
supported so the advertisement of their goods such as Sushi and other foods and fruits are not that
hard. But for Azerbaijani traders it is not that easy just to promote their goods in Japan.
Promotion problem was partially solved by AzPromo and Azerbaijani embassy to Japan which
are actively involved in promotion of Azerbaijani goods.
24 Strict government control is an obstacle that all trade partners of Japan face all the time.
Since Japanese government and people are paying huge attention on the quality of the product.
This makes quite problematic of selling agricultural goods to Japan since all goods imported to
Japan has to be strictly controlled. Japanese importers are even trying to control the quality in the
country of origin to be sure that it fits to government standards.
Competition is one minor obstacle in trading between two countries. Azerbaijan faces trade
competition with other countries such as Kazakhstan and etc. which exports the same goods and
vegetables since Azerbaijan is not the only country that Japan has trade relations. Competition
comes from different countries depending on what they offer. For example, south European
countries such as France, Italy Portugal are a good quality of wines so Azerbaijan must
overwhelm the market by quality.
Medical Sphere
Japan has the largest medical device market in the world and it is about $25 billion, while
it is drug market is twice larger at about $60 billion. On the other hand, the medical sector of
Azerbaijan does not produce medical equipment and consequently there is a high demand for
good quality of equipment. Thus, considering Azerbaijanis medical market growth, it could be a
potential market for Japanese medical equipment and drugs. In this field, the Pacific Bridge
Medical office located in Tokyo with over 24 years of experience in U.S., E.U. and Asia, could
be a good partner for doing business in healthcare industry of Azerbaijan.
The steady economic growth of Azerbaijan and its government strong commitment to
healthcare service is promising market for investment in healthcare industry. The shortage of
medical expertise, equipment and personal compelled the majority of citizen to travel the
neighboring countries such as Iran, Turkey for a better treatment. For instance, 4106 Azerbaijanis
in 2012 traveled to Turkey for treatment and 1600 Azerbaijanis traveling to Iran daily for medical
procedures.
25 The government is promoting and sponsoring the education programs for the youth to
study medical in Turkey, Europe, and the U.S, in order to fill the vacuum in healthcare industry.
This ongoing process will further the business gaps and provide lucrative opportunities for the
pharmaceutical sector, medical facilities and equipment in Azerbaijan. It attracts the interests of
neighboring countries investment in medical equipment, healthcare and training facilities from
U.S, Germany, France, Russia, Turkey and Japan. The Japanese Aloka and Shimadzu brands are
very popular in Baku due to its low-cost and high quality. Thus, investment in Azerbaijani’s
healthcare industry is promising and rewarding.
Additionally, the medical tourism is very important for Azerbaijan as the most healthcare
infrastructure is concentrated in Baku and people in the region have no easy access to medical
care. Thus, a setup of high cooperation for medical travel is needed in Azerbaijan, particularly in
the region.
Mitsubishi Corporation: Opportunities
Essence of the Trade House (Sogo Shosha)
The Sogo Shosha or General Trading Houses are quite unique Japanese business
institutions that played a direct role in development of Japanese economy both locally and
internationally. After the commercial life of Japan had been dominated by trading houses, the
Sogo Shosha “… were the pioneers of Japanese overseas investment and the first Japanese
companies to build a geographically extensive network of international operations long before
Japanese manufacturing companies ventured overseas”15. The success of Sogo Shosha
encouraged post-industrial countries to implement the experience of the Japanese business
15
Dicken, Peter and Miyamachi, Yoshihiro. ‘From Noodles to Satellite’: The Changing
Geography of the Japanese sogo shosha. Transactions of the Institute of British Geographers, News
Series, Vol. 23, No. 1. pp. 55-78. 1998. Accessed: 20/03/2014.
26 institution in order to increase their export and offer high-margin products in geographically
heterogeneous markets16.
Historically the General Trading Houses are considered the product of Meiji restoration
era. The Meiji government desiring to control Japanese international trade was supporting
“…Japanese traders by providing subsidies for shipping and insurance company formation and
for the establishment of foreign subsidiaries”17. As a result of this support by 1911 Japanese
Trading Houses were controlling 51 per cent of exports and 64 per cent of imports of the
country18.
While mentioning the experience and professionalism of Sogo Shosha one should encircle
its attention towards the very essence of this distinctive Japanese business phenomenon. John
Lancaster (1980) utilizes the following definition of a Sogo Shosha: “A trading house is a nonmanufacturing business entity conducting an international commercial activity, exporting,
importing or a combination of both between two or more countries”19. On the contrary, Ozawa
(1979) uses another definition as “industrial organizations unique to Japan, organizations whose
existence is almost unparalleled elsewhere. There are literally thousands of trading companies in
Japan (anywhere from 3,000 to 7,000, depending on the criteria used for classification)”20. All in
all, the General Trading Houses can be considered as “leaders of loosely amalgamated groups of
companies” (Sarathy 1985), which includes shipping, banking companies, insurance, and, the
most importantly, manufacturing along other business opportunities. Through analysis of 9
General Trading Houses and 32 Special Trading Houses Ravi Sarathy (1985) identified the
following key characteristic of the modern Japanese Sogo Shosha:
16
Sarathy, Ravi. Japanese Trading Companies: Can They be Copied? Journal of International
Business Studies. Vol. 16. No. 2. 1985. pp. 101-119. Accessed: 20/03/2014.
17
Ibid. 18
Yamamura, Y. General Trading Companies in Japan: Their Origins and Growth. In H. Patrick,
ed., Japanese Industrialization and its Social Consequences. Berkley: University of California Press. 1976.
19
Lancaster, John. ‘Sectoral Paper on Trading Houses in Canada’ (1980) unpublished manuscript
(Ottawa: ITC).
20
Ozawa, Terutomo. Multinationalism, Japanese Style: The Political Economy of Outward
Dependency. Princeton, N.J.: Princeton University Press. 1979.
27 (i) International marketing intelligence: one of the strengths of the Sogo Shosha
should be considered their knowledge of sensitive information about market
requirements in different parts of the world; the risk analysis department functioning
within the Sogo Shosha is focal in this sense.
(ii) Economies of scale: the General Trading Houses are specializing in trade of
various commodities “from noodles to satellites” that are produced in large volumes,
due to several branches in different parts of the world and high fixed cost structure;
“[T]his drive for volume led trading companies to gradually build up a third-country
business, where transactions take place between two countries other than Japan”.
(iii) Oligopoly and group organizations: Tsurumi (1980) described the General
Trading House as “clan” based business institution, which generally consists of a
major bank, a trading company and several major infrastructure and manufacturing
concerns21. Moreover, the fact that the Sogo Shoshas are representing more than
hundreds of companies, there is a high “internal” trade going on among the firms and
companies within that particular Sogo Shosha. Hence, the process of specialization
and profits from chain transactions are achieved.
(iv) Government support: the Sogo Shoshas as a legacy from the Meiji Government
enjoy a strong support from Japanese governments, which are using the General
Trading Houses as a channel of implementing their policies.
(v) Capital structure: The major banks in the General Trading Houses are normally
the main provider of loans. “[S]uch ease of access to capital helps withstand adverse
price swings in commodity trading, by preventing the need for forced liquidation of
commodity positions” (Sarathy 1985).
(vi) Foreign Direct Investment: Japanese General Trading Houses are active in foreign
direct investment; however, this activeness is partly defensive in nature, being
strategic reply to moves in commodity needs of Japan.
(vii) Cultural specificity: the organization and management in Japanese General
Trading Houses have their roots in Japanese culture. Japanese people have a primary
21
Tsurumi, Y. Sogoshosha: Engines of Export Based Growth. Brookfield. VT: Renouf USA.
1980.
28 obligation to be bounded with the group they belong to, and take care of its members.
This is strongly applied to employer-employee relations in business ethics in Sogo
Shosha.
The General Trading Houses that were mainly intermediaries linking the manufacturer
with the consumers in other countries without any direct involvement into the market, at the
moment are changing its characteristics. The Sogo Shoshas are not only capital providers, but
business operators as well. The challenges brought by globalization forced the Sogo Shoshas to
acquire new features. For instance, at the moment the General Trading Houses are firmly
involved into the chains of production, financing the development of the product from the very
beginning of production till trading it in the market. It is worth mentioning that the banking
system of the Sogo Shoshas, on their own turn, are providing the buyers with loans at a
reasonable interest rate in order to increase consumption of the produced goods.
To name few of the major cross border deals of Japanese Trading Houses in the world:
Daikin’s 100% purchase of Goodman Global Group (Inc.) stock and the acquisition value at 3.7
billion US dollars; acquisition of 24.5% of Chilean copper mining and smelting company by
Mitsubishi corporation; Kirin holding gained a majority stake in the Brazilian beverage maker
and added Latin America into its global footprint.
Looking precisely to the activities of Japanese Trading Houses in the region, it should be
noted that Dentsu after acquisition of Aegis in the UK decided to strengthen its position in
Central Asia as well. Through purchasing Fifty Four Media in Kazakhstan, Dentsu Aegis
Network bought the largest independent company in Kazakhstan and the cornerstone of media
industry of Central Asia.
29 Mitsubishi Corporation is taking part in the construction of “Gizildash Cement Plant”
which is the largest cement producer in Caucasus with the capacity of 5000 MT cement per day
and 2 million clinkers per year. The owner of the cement plant project applied to Mitsubishi
Corporation for recommendations of an Engineering, Procurement and Construction (EPC)
company which had to carry the whole process of building the plant. Mitsubishi Corporation
presented a Chinese company China Triumph International Engineering Co. (CTIEC). Some
equipment for the construction of the plant has been provided by the Mitsubishi Corporation’s
Dusseldorf Office.
Investing in Azerbaijan’s industry
According to the State Statistical Committee of the Republic of Azerbaijan the number of
Azerbaijan-based enterprises has dropped by 4.3 %22.
This can mean two things: either
Azerbaijani investors lack funding to invest into new enterprises or they just do not want
(because they do not see a potential for making an investment). Either way, this creates a window
of opportunities for Mitsubishi Corporation (MC) to appear on Azerbaijan’s business market as a
corporation that is has capabilities and is willing to invest into Azerbaijani companies (or new
start-up businesses).
If the number of Azerbaijan-based enterprises decreased, the number of enterprises
established by Turkey has increased and is now makes 31.7 % of foreign enterprises in
Azerbaijan. This shows that there are still a lot of opportunities to invest into new businesses and
Turkish companies (investors) are making good use of it.
The idea is that MC can establish a small separate agency in Baku that will be responsible
for overlooking the new business projects. If the project seems promising, the agency can then
pass it on or present it to business development office of MC.
22
http://www.internationalshow.it/pdf/newsfiere/Azerbaijan%20Industry%20Report%20August2013.pdf 30 MC can invest in new business enterprises in two ways. First, MC can just give a
short/long-term (depends on a scale of project) loan to the newly-established enterprise and then
receive that amount of money plus the interest rate. Second, MC can invest money in exchange
for the future profit-sharing, i.e. whatever profit the enterprise makes, it will share the certain
amount of it with the MC.
Tourism
Tourism is also one of the fields of business that MC can become actively involved in
Azerbaijan. The numbers show that the tourism is becoming more popular every single year since
2006. The number of tourism related enterprises in Azerbaijan has increased to 170 in 2012 from
96 in 2006. Amount of trip sheets sold to foreigners to travel within the Azerbaijan was equal to
3.893.000 AZN (4.962.000 foreigners crossed the border of Azerbaijan in 2012). Unfortunately,
at the moment the tourism agencies are mostly working on sending Azerbaijan citizens abroad
rather than attracting foreigners.
This can be a window of opportunity for MC. Because of the remote location and Japan is
not one of the famous destinations for Azerbaijani tourists. The same works other way around as
well. Since the average age of population in Japan is rapidly increasing, soon there will be a huge
amount of senior people who can afford travelling abroad. It is known that in 2012 the net
amount of Japan’s household wealth was equal to 12 trillion USD.
In addition, there is also a chance for establishing medical tourism in both directions.
Since Japan is highly developed country and is a leader in technological innovations, Azerbaijani
people can visit Japan for medical treatment. Of course, it would be more costly to travel to Japan
for the treatment purposes rather than Iran for example, but the result will also be much better.
The same goes for Japanese people; they can visit the Nakhchivan Salt Caves for the treatment of
asthma or other medical conditions. Either way it would be good enough reason to travel: first, to
receive medical treatment; second, to travel around the world and visit different country with
completely different culture and lifestyle.
31 It is important to keep one thing in mind. There is a tiny amount of three-star hotels in
Baku. Japanese people have enough money to travel, but they are not willing to spend extra
money for a five-star hotel. MC could develop the idea of hostels and 3-star hotels construction
and/or provide any construction firm with equipment and service.
Infrastructure
The frequent of earthquakes in Japan caused millions of environmental damage
particularly the tsunami in 2011 that ruined at least 270,000 buildings and hundreds of cars and
boats. This was a good lesson for Japan to be well prepared for further environmental threats.
Hereafter, Japan has developed and improved the technology to predict and detect any further
environmental threats effectively and efficiently through the utilization of ICTs.
Albeit, the environmental threats in Azerbaijan are not alike Japan, but it is location in
Caucasus Mountains and the Caspian Sea plus the finding of MIT research which says that the
region is ripe for a future earthquake that could have shocking effects for the country.
Considering the environmental threats in Azerbaijan and Japanese raped development
of technology in detection of environmental threat, it will be rewarding and lucrative for Japanese
to support Azerbaijan in environment protection and disaster prevention. Currently, JICA is
helping many other countries in this specific field. Due to close ties with JICA, Mitsubishi
Azerbaijan could also request for cooperation in high technology to detect the environmental
threat plus standard code of construction of buildings under such kind of circumstances and
threats. This cooperation can be realized through MC’s Global Environmental and Infrastructure
Business Group which handles trade and related business in transportation, water and other
infrastructure.
Metallurgy: Steel
The main producer of steel in Azerbaijan is the Baku Steel Company LLC. The maximum
production capacity of the Baku Steel Company is around 1.100.000 tons of steel per year. Due
to its high production levels the company is among the top taxpayers in Azerbaijan in the non-oil
sector. The products of the company include: angles, channels, double-T-iron and rolled wire.
32 Moreover, Baku Steel Company has an extensive experience in exporting its goods
abroad to the countries such as Russia, Georgia, and Turkmenistan. Yet again, there are two
different ways for Mitsubishi Corporation to get involved in steel business together with the Baku
Steel Company. First, MC can simply buy shares of the company or invest in the future projects
of the Baku Steel Company (Baku Steel Company started operating in June 2001, so it is a stable
and risk-safe organization). Second, MC can provide conduct an international market research
and cooperate with Baku Steel Company in exporting its products to the new destinations.
Mitsubishi will be building a 10 billion dollar chemical complex in Turkmenistan23.
High demand for different steel products and close location to Azerbaijan might make
Turkmenistan a perfect market for Baku Steel Company. Existing involvement of MC in the
building of complex will make it even easier to use Baku Steel Company’s steel during the
construction process.
Energy
Without any doubt energy market in Azerbaijan is the most attractive one. There are about
20 energy products produced in Azerbaijan only. Some of those are: crude oil, natural gas,
kerosene (type jet fuel), bitumen, and many others. In 2012 alone Azerbaijan has produced
43374.8 thousand tons of crude oil and 17242.1 million cubic meters of natural gas. Comparing
to 2007, the oil production has not increased a lot. However, there is a different tendency with the
natural gas. The increase since 2007 was almost 6.4 million cubic meters.
In the modern world oil and gas have become irreplaceable products, but there is only one
problem: transportation. Extracting the natural resources is just a part of the problem; the
exporting country also needs to ship it to the country that is interested in buying them. This is
where Mitsubishi Corporation can be actively involved in oil and gas business in Azerbaijan.
Because of its vast network, MC can not only find parties that are interested in importing energy
resources from Azerbaijan, but also come up with the best and cheapest routes and means of
transportation to do so.
23
http://www.constructionboxscore.com/project-­‐news/japan-­‐to-­‐build-­‐$10b-­‐gas-­‐chemical-­‐complex-­‐in-­‐
turkmenistan.aspx 33 The potential in this area is very high. Last year along Japan imported Azerbaijani oil
worth of 650 million USD. Taking into account the fact that the energy demand in Japan goes up,
Japanese government will be very interested in MC being the middleman between Azerbaijan in
Japan. In addition, MC already has experience in providing Japan with the natural resources from
other states, for example: Sakhalin 2 project.
In addition, natural resources of Azerbaijan have an extremely high demand in Europe as
well. High quality, relatively cheap price, and abundance of resources are what European
countries are trying to benefit from. Mitsubishi Corporation can help the government of
Azerbaijan to hold negotiations with potential customers and later on build pipelines that will
transport oil or gas to the country of final destination.
Energy: Methanol
Methanol industry in Azerbaijan is a great opportunity for MC. Despite the fact that the
construction of the methanol producing plant was finished in March 2013, MC can still invest in
Azerbaijan Methanol Company (AzMeCo - founded in 2007) by buying the shares or simply
taking part in the process of exporting the ready product – methanol. Since Mitsubishi is already
involved in the methanol business, the process of finding customers and routes should not take a
lot of effort. In addition, MC can cooperate with AzMeCo in bringing new technologies or
engineers that will help the production process more cost-effective. Needless to say that MC can
also take care of the logistics part.
The maximum production capacity of AzMeCo is 720 000 tons per year. To compare,
Russia exports about 1.1 million tons of methanol to West Europe. One of the standard routes of
exporting methanol from Azerbaijan is to transport 560 KTA (Kilo Tons per Annum) to the
seaport Poti in Georgia. After that, methanol can be either sold directly to a customer or be stored
in Constanta, Romania, where MC has a tank with the capacity of 5000 KL (Kiloliter). Another
possible route is to transport methanol through railroad connection to Turkey. The transportation
capacity is 430 KTA (although China is a vast market for methanol, remote location makes it
difficult to transport methanol in that destination).
34 In addition, there are many other different reasons to invest in the methanol industry in
Azerbaijan. The chairman of Board of Directors of AzMeCo Mr. Nizami Piriyev in his interview
has announced that AzMeCo is currently having negotiations with Sumgait Industrial park to be
able to build a plant for production of goods for which methanol is a raw material. It was also
mentioned that foreign enterprises will also be able to build their plants there24.
Moreover, methanol is also referred to as energy of the future. Chinese market is wellknown for using methanol as a fuel for cars. That is why China has announced its plans to build
almost 220 methanol units by 2020.
Mr. Piriyev has also mentioned MC during his interview and said that it will be able to
take part in future investments after AzMeCo announces a tender for building other plants related
to methanol.
The first-quarter European contract price was confirmed at €445/tonne ($610/tonne)
(2014).
Information and Communication Technologies
ICT sector has an enormous impact on economic development and it contributes 40
percent in Japanese GDP. Japanese dominated the technology markets worldwide as they have
69.4% share of DVD recorders, 54.1% in plasma display TV, and 74.2% in digital cameras.
Considering Japanese capability and the recent visit of Japan Aerospace Exploration Agency,
Mitsubishi, TEPIA high technology Corporation, Nippon Electric Corporation (NEC), Japan
Broadcasting Corporation (NHK) with the Ministry of Communications and Information
Technologies of Azerbaijan (MICT) and many local companies certain field of cooperation is
recognized.
The cooperation between these two countries could be highlighted on developing, space
technologies, nanotechnologies, microelectronic, creating digital infrastructures, Cyber Security,
software development, promoting ICTs application in development projects and better project
management through ICTs utilization, and most importantly enhancing the ICTs capacity in
24
http://abc.az/eng/interview/134.html 35 Azerbaijan which is currently implemented by JICA in many developing countries and could be a
good contributor to this field in Azerbaijan, as well.
There is a possible cooperation for NEC and Mitsubishi to integrate further into ICT field
as they are already engaged in Azerbaijani market. Furthermore, the Azerbaijan government is
also interested to attract the Japanese companies in this field and invited NEC to participate in
tender of construction of the second telecommunications satellite [Azerspace-2] in Azerbaijan
which is scheduled to launch for 2017. Moreover, NEC Corporation could cooperate in the areas
of producing tablet computers in Azerbaijan, as well. These corporations may also be interested
in broadband service and Internet, fiber optic plus wireless networking.
Conclusion
With only 12.5 percent of land suitable for cultivation, Japanese agricultural sector is
heavily dependent on imports. This opens up opportunities for exporting Azerbaijani agricultural
products, both fresh (organic) and dry. However, the distance between the two countries, the
strict quality regulations of Japan and unawareness about Azerbaijan among the Japanese people
challenge business cooperation in this field. Having said that, Japanese consumers are generally
interested in unique and exotic products, pomegranates, tomatoes or watermelons could be of
particular interest. On the other hand, Japan can offer specialized agricultural equipment and
machinery, as well as quality fertilizers.
With the ICT sector being identified by the government of Azerbaijan as one of the top
priorities, Japan can also offer substantial support and expertise. This cooperation is already
ongoing and could develop even closer in the areas of telecommunication, aerospace technology
and cyber security.
Given the demand for enhancing healthcare capabilities of Azerbaijan and the fact that
Japan has the largest medical device market in the world and drug market worth about $60
billion, the medical sector is another possibility for close cooperation. Another area of expertise
where Japan could support Azerbaijan is the environmental protection and disaster prevention
technology.
36 This report has also focused at the opportunities of cooperation through a trading house,
in particular Mitsubishi Corporation’s Sogo Shosha. A trading house is an intermediary for
importing, exporting or a combination of both between one or two countries, but it can also
provide capital for investment. The report identified methanol distribution, energy, steel and
tourism as main sectors where Mitsubishi Corporation’s trading house could cooperate with
Azerbaijani businesses.
Business cooperation between Japan and Azerbaijan can be very fruitful, but it requires
certain degree of understanding on both sides. On one hand, the Azerbaijani partners should
acknowledge the highly demanding customer base in Japan and the strict regulations and checks
by both the Japanese companies and the government. This should be done bearing in mind the
long run and stable benefits for Azerbaijan. At the same time, Japan is slowly realizing that it has
to become more flexible when dealing with partners from Central Asia and the Caucasus.
37