economy, empoyment, livelihood, nikkei, small business

Thursday, January 26, 2012 Tohoku Enjoying Flurry Of New Business Activity, nikkei, 1/26/12

TOKYO (Nikkei)–New businesses are sprouting up in the Tohoku region, which was pummeled by the earthquake last March, and together they may even blossom into the basis for a new growth center for Japan’s sluggish economy.

Zoomlion Heavy Industry Science and Technology Development Co., a major Chinese manufacturer of construction machinery and sanitation equipment, plans to set up a Japanese branch in Aizuwakamatsu, Fukushima Prefecture in April, where it will build a concrete pump-truck factory.

Entrepreneurs in the disaster-struck Tohoku region are serving up fresh ideas that could potentially pull the economy out of its current slump.

Where the money is

The project is due to the efforts of Shohei Muroi, the mayor of Aizuwakamatsu, to revive the city. Muroi, 56, visited the headquarters of Zoomlion in China’s Hunan Province last September and urged its management team to set up an office in the city.

The mayor had never dreamed of going to China to solicit investment before the Great East Japan Earthquake. But as he battled rumors of radioactive contamination from the Fukushima Daiichi nuclear plant, he became desperate for help from the Chinese firm.

But business is business. Companies do not make decisions out of compassion. What attracted the Zoomlion executives was the prospect of enormous demand for construction work, as the Japanese government seeks to rebuild numerous areas in three prefectures affected by the quake.

One thing that was holding them back was the risk of another large earthquake or exposure to radiation. Muroi, however, spearheaded the final push that brought four Zoomlion employees to Aizuwakamatsu late last year to conduct market research on a pump-truck factory project. The specifications for the vehicles will be modified to suit the Japanese market.

Crisis and opportunity

Start-ups are also part of Tohoku’s rebound. Makiko Kumagai, president of Sharks, a company in Kesennuma, Miyagi Prefecture that sells shark-skin products, is a new entrepreneur. Before the disaster she was just an employee in a firm in a similar line of business.

Kumagai was overwhelmed by the loss of her livelihood when the company was swept away in the tsunami that followed the quake. Then she was approached by the Sanriku Reconstruction Tomodachi Fund, which is jointly managed by Kesennuma Shinkin Bank and a nongovernmental organization set up by French economist Jacques Attali, with a proposal to start a business.

These examples may offer insights into resolving Japan’s long-festering problem, which is that more businesses are dying every year To stimulate the sluggish economy, higher foreign investment and more entrepreneurs could be key.

Risk and reward

The Tohoku initiative had been on the table for a while because in normal times, few people dare to risk what they have for something new. And credit for small and midsize firms has shrunk over the past 15 years, with the balance of outstanding loans to such firms at private banks falling 35% to a little over 170 trillion yen from its peak in the mid-1990s.

But those who have weathered the hardships of the March 11 disaster are now boldly taking risks. The Japan Finance Corp. approved 398 loans to entrepreneurs in Miyagi Prefecture in the nine months after the quake, up 20% on the year. Iwate Prefecture has seen similar growth, with 83 loan approvals, up 30% on the year.

Yet the government’s reconstruction aid has been slow to trickle down to these entrepreneurs, so businesspeople are raising capital on their own. For example, Hiromitsu Ito, who raises sea squirt — an edible marine invertebrate — in Ishinomaki, Miyagi Prefecture, launched a joint venture with his colleagues last August. His company sold shares in the firm nationwide for 10,000 yen apiece on the Internet to raise funds to rebuild an oyster and scallop farm. The shares entitle investors to a portion of the harvest.

The company aims to increase its profits by selling directly to consumers, rather than fishery cooperatives. So far, the company already raised about 20 million yen. “Since we lost everything, we seriously set out to come up with an entirely new fishery business model,” he said.

Many farmers are also trying to start new projects. One 62-year-old man whose vegetable field was damaged by the tsunami was initially teetering on the verge of despair in the months after the disaster. His applications for loans from the Japan Agricultural Cooperatives were rejected and the national and local governments were not offering assistance. Suddenly, he was offered help by a fund set up through donations from citizens to help disaster-struck areas.

The realization that he would have to start from scratch helped lift him out of his sense of helplessness. He quickly set up a company with his friends and launched a hydroponic farm that grows lettuce and salad greens. He is now targeting annual sales of 300 million yen and may send out his first shipments by as early as April.

Further development of these kind of “post-quake companies” will create a relatively small number of jobs, but they are likely to offer sustainable employment. A string of successes created by risk takers could, in turn, offer a way for the Japanese economy to emerge from the gloom.

If even a small portion of the roughly 18 trillion yen in reconstruction aid is channeled to these budding entrepreneurs, the Tohoku region could spark an economic transformation throughout the entire country.

–Translated from an article by Nikkei staff writers Katsuya Yamagoshi, Yohei Muramatsu, Maki Sagami, Katsuji Kamei, Takashi Kawakami, Yohei Matsuo

(The Nikkei Jan. 25 morning edition)

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About liz

from the u.s., recently moved from kobe to sendai, japan, researching community-based housing recovery after disaster.

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