The Hyogo advantage: from port city to international business hub

Japan, Inc., Nov, 2002

Kobe has such a foreign brand image in Japan that bread shops and Western confectionaries are named after it. Its difference lies in its history. Since its assignment as a treaty port at the beginning of the Meiji era, it has attracted waves of immigrants and expatriate workers from all over the world. Here expats feel more at home; that's why those who have lived in both Tokyo and Kobe almost always single out the attractions of Kobe, especially for family life.

Of the major companies established in Kobe, most came years ago. Nestle, for example, moved to Kobe after the Great Kanto Earthquake in 1923. Several major pharmaceutical companies, such as Eli Lilly and Boehringer Ingelheim of Germany, have had their Japan operations based in Kobe from the very beginning. Lilly began exporting pill capsules to Shionogi in Osaka in 1909. Shionogi is still a major partner in Japan. Lilly opened its first representative office in Kobe in 1965 because many of its long-standing customers and partners were in the Kansai area--Kobe was a natural choice. Lilly maintains manufacturing, research and almost all of its operational activity in Kobe.

The crown jewel

Procter and Gamble is the major foreign presence in the port city. Whereas Lilly employs 15 expatriates out of a total work force in Japan of 1,400, P&G has around 300 expat staff within an overall work force of 4,300 in Japan. P&G is based on Rokko Island, an artificial island to the east of downtown, which the government developed primarily as a center for foreign investment. P&G was attracted by the convenience of the port facilities and the excellent lifestyle infrastructure. All told, the company is the "jewel" in the Kobe foreign investment crown.

Werner Geissler, CEO of P&G in Japan, strongly supports Kobe. "The quality of life is simply better; housing is dramatically cheaper; commute time is a fraction of what it is in Tokyo; there's very good entertainment on hand; it's very safe and very friendly," Geissler says. "Companies based in Tokyo absolutely should consider moving to Kobe."

Local authorities are trying to lure more business to the city by promoting Kobe's key selling points, such as its international infrastructure, its role as a distribution hub, the strong presence of pharmaceutical firms and other areas where it has comparative advantages, such as in environment-related technology and clothing fashion.

After the Great Hanshin Earthquake of 1995, the local government has a more open book to create a new vision for Kobe in the 21st century. At the Kobe International Economic Forum, held in October 2001, Yoshihiko Sumi, Deputy Director-General of METI, described Kobe as a "future international business hub."

Biomedicine

The government is also developing the second stage of Port Island into a biomedical center. The first major facility built there, known as the "Advanced Medical Center," is a research and business development center for the mass production of artificial tissues and organs using stem cell materials. The second facility designed for clinical testing is due to be completed this year.

The centerpiece of Port Island construction is the Kobe International Business Center. This is a six-story building with approximately 20,000 square meters of floor space, which was completed in 2001 and now has 23 foreign or foreign-affiliated tenants. The building is designed to take advantage of the proximity of the port by offering warehousing, assembly and manufacturing.

The first tenant to rent a WAM facility is Brevini Makishinko, an Italian family-owned maker of gearboxes. The company came to Japan five years ago and moved to the new facility last year. Vittorio Falconeri, its managing director and a 15-year veteran of working in Japan, says his company was drawn by the convenience to the harbor and the cosmopolitan lifestyle. Many of his customers are in Kansai anyway, he says, and Kobe is "very convenient for reaching the rest of Japan."

Attractive subsidies

Companies can receive subsidies on office rental of up to [yen] 1,500 per square meter per month (with a maximum of [yen] 2 million a year) for three years. There are also subsidies available for hiring staff, starting at [yen] 600,000 per employee and rising to [yen] 1.2 million, depending on the number employed. The government also offers reductions on community and property acquisition taxes. Overall, the package is probably one of the most generous in Japan and a sign of how much importance the local government places on the promotion of Kobe as an international business hub.

Interested companies can contact the Hyogo Investment Support Center (HIS), a "one-stop" source of advice. HIS provides pre-market entry information (investment conditions, incentive programs, office and factory location, market studies, for example), advice on how to obtain permits and authorizations, how to find joint venture partners, subcontractors, technical collaborators and information on daily living. HIS can also introduce companies to consultants and professionals (e.g. attorneys and certified public accountants) who will provide free advice in English. For companies at the pre-market entry stage, it also offers reasonably priced office rental space in its building.