May 19, 2011
Nomura Research Institute, Ltd.
We offer our sincerest condolences to those affected by the massive earthquake and ensuing tsunami that struck northeast Japan on March 11. We extend our heartfelt prayers for a speedy recovery.
On March 15, 2011, Nomura Research Institute, Ltd. (NRI) launched the earthquake recovery assistance project team under the direct control of its president, Tadashi Shimamoto. Since March 30, it has announced recommendations and survey results about disaster recovery. For further information on the recommendations and results of research NRI group has released to date, see the following website: http://www.nri.co.jp/act311/index.html (Japanese only)
The project now presents "Recommendation 11: Reviving Industry, Aiming to Form a Pioneering New Industrial Hub" to aid the recovery of the Tohoku region and the rebuilding of its industry. It is summarized as follows.
In the areas affected by the Tohoku Pacific Ocean Earthquake, the primary sector, specifically fishing, farming and forestry and their associated industries, plays an important role in the local economy, so the impact on the local economy is severe. Manufacturing in this region, moreover, is at risk of losing its foothold in the global manufacturing network of East Asia due to the disaster, which came on top of the tremendous impact of the Lehman shock of 2008.
Therefore, it is feared that companies and factories that are unable to rebuild will remain, reducing employment opportunities. Thus, industrial revival in this region will require not just a revival of existing industries but the creation of new ones, capable of creating new jobs.
In order to create new industries, the priority establishment of five industrial clusters would be desirable, taking into account the various local resources of the Tohoku region and exploiting the measures taken already to create industries there: a) seafood industry, b) super-manufacturing industry, c) environment-related industry, d) new resources industry, and e) health and medical industry.
The "seafood industry" cluster, in order to improve the value added by clustering the marine products industry, should work towards clustering the downstream production of the primary sector fishing industry and bringing more sophistication to it. It would go beyond the efforts of the existing marine processing industry - and could even strengthen the "health and medical industry" cluster - by developing a "medicine and food production collaboration" to exploit marine resources to make health foods or supplements.
The "super-manufacturing industry" cluster would be aimed at boosting the competitiveness of manufacturing against the low-cost producers of Asia through development of labor-saving technology and automation. Its objective would be to create related technology and know-how in the Tohoku region. To achieve this, a super-manufacturing promotion zone (see Figure) can be created and cutting-edge FA/robots can be used to attract business with the prospect of labor-efficient or fully automated, unmanned factories.
1 Cluster: an industrial agglomeration able to produce economically competitive projects, created by local companies coordinating with universities and research organizations.
Figure Image of a Super-Manufacturing Promotion Zone
Given the global environmental issues and electricity supply problems, an "environment-related industry" cluster would aim to bring about a revival by focusing on parts and systems related to renewable energy from biomass, solar power, and geothermal.
As the importance of rare materials has come to the fore in recent years, the "new resources industry" cluster will be aiming to be the location of maritime-based industries such as processing plants tied to shipping. It may become a base for industries related to the exploitation of undersea resources such as sea-floor hydrothermal deposits or methane hydrates in future.
The "health and medical industry" cluster will seek to create industries in the field of health and medicine, based on initiatives with universities and other institutions seen to date. A "medicine and food production collaboration" based on Tohoku's strong food processing industry based on farm and marine production, or "medicine and industry collaboration" with the mechanics production industry, which is clustered in the Tohoku region, are potential sources of an industrial renaissance that exploit the underlying strengths of the region.
As progress is made toward the revival of these industries, we would like to note the following. First, it is absolutely vital that businesses struck by the disaster are restored in short order, both for the sake of maintaining the livelihoods of employees and to solve the supply chain issues for industrial activity. Therefore, the road to revival needs to be decided on as soon as possible, and work needs to start toward that goal.
In addition to the debts run up for existing capital investments, companies hit by the disaster are increasingly likely to fall into a debt spiral to pay for investment required to recover and rebuild. In order to stop this spiral, we propose a "used industrial equipment matching service" for companies from other parts of Japan to transfer their used machinery to such companies.
In rebuilding industry, it is important that the process be led by communities to the greatest extent possible, taking into account the local resources of disaster-hit regions, and the needs of affected companies and citizens. A development agency able to make prompt decisions by working across the barriers of central government, prefectures and municipalities needs to be set up immediately.
For the process of revival to advance smoothly, more is needed than public and private financial support. A favorable environment for reconstruction must be created including the loosening of regulations hindering the development of projects, the application of schemes under consideration by the government such as "special reconstruction zones", tax breaks and easing of regulations.
Finally, for the creation of a cutting-edge industrial system that can lead the upgrading of Japanese industrial activity, development of a new infrastructure able to cope with this increased sophistication is needed. This could include strengthening airport and port functions to improve domestic and international connections and the establishment of cooperative research facilities between industry and academia.
For further details on this recommendation, see the following website (Japanese only):
http://www.nri.co.jp/opinion/r_report/pdf/201105_fukkou11.pdf
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