Japanese Companies Ready to Discover Serbia & SEE

Once very much uncharted territory, Southeast Europe is today becoming a new interesting target for Japanese investors. While Serbia already hosts some prominent Japanese companies, huge potential for further cooperation has yet to be explored.

For this special edition we spoke with Satoshi Abe, General Director of the Japan External Trade Organization (JETRO) Vienna Office, about preconditions for furthering cooperation between Serbian and Japanese companies, JETRO’s engagement in Serbia and the region, and the synergies created between the Japanese Business Alliance in Serbia (JBAS), the European Enterprise Network – Chamber of Commerce & Industry of Serbia (CCIS), and JETRO in developing business opportunities between Japan and the Western Balkans.

What are the characteristics of Japanese Investments in SEE, and particularly Serbia, today?

These are mainly investments by the manufacturing industry. For example, the Yazaki Corporation, a Japanese giant of wire-harness manufacturing, opened its first factory in Šabac in September 2017. As a recent development, the Mayekawa Manufacturing Company, which is a manufacturer of industrial refrigeration systems, has opened its first office in Smederevo and is set to eventually launch production there.

Although the level of investment is limited, it is also important that major IT companies, such as SRA, which opened its development centre last year, and NTT Data, which is gradually expanding its office, exist in Serbia.

What has held back Japanese investments and trade with SEE?

A lack of business information regarding SEE countries, perhaps, and also a lack of Japanese “pioneers”.

There are actually some big Japanese companies already doing business in SEE, but compared to the CEE region that number is still small. If the number of influential Japanese companies operating in SEE increases, that will provide encouragement for other Japanese companies to follow suit. In that sense, the investments by Yazaki and Mayekawa were a good start and I think many Japanese companies are now carefully watching to see how successful they will be in Serbia. However, we need more information, including information about the status of reforms in the political and economic areas etc.

One good example of the promotion of Japanese FDI is in the Czech Republic. In Prague there is a “Japan Desk” within Czech Invest, so that Japanese companies can come to the desk for follow-up support even after having invested in Czechia

According to one JETRO report a decade ago, SEE was perceived by Japanese companies as “distant” physically & psychologically.

How would you describe today’s understanding of these two business cultures?

I would say that the physical distance is no longer an issue, as many Japanese companies have already invested, for example, in Serbia’s neighbouring countries, such as Hungary and Romania.

As for the psychological distance, I have to admit that there is still a certain psychological distance. That distance might be caused by a lack of correct information. For example, even many Japanese expats resident in Europe don’t know enough about the technologic level and quality of workers in SEE.

How would you describe the difference between CEE and SEE in terms of opportunities and challenges for doing business with Japan today?

I think SEE has more opportunities than CEE, in the sense that infrastructure is getting much better and economic development accelerated recently. It is important that you promote such aspects, as well as the existence of CEFTA and strong ties with the EU. The challenges for SEE are ensuring the transparency and stability of the business environment and a clear strategy to promote Japanese FDI in SEE.

Today in CEE, due to increasing FDI not only from Japan but also from China, Korea and, of course, from the EU, it is becoming increasingly tougher to hire skilled workers and engineers. You may stress that it is much easier to hire good people, including multilingual workers.

Regarding administrative issues, for example, Czech Invest, the investment promotion agency of Czechia, has a clear strategy to promote Japanese FDI. It opened its own office in Japan and provides plenty of business information in the Japanese language. In Prague, there is a “Japan Desk” within Czech Invest so that Japanese companies can come to the desk for follow-up support even after having invested in Czechia.

In which areas is JETRO most active in Serbia?

In the promotion of foreign direct investments from Japan and help for Japanese companies to find new suppliers in Serbia. During the so-called “lost twenty years,” the business activities of Japanese companies in Europe became sluggish compared to those in the U.S. and China, for example, but now it seems to me that they again regard the European market as being important, because they gained strength following the economic recovery and began to utilise their resources again, and also because a new EPA has been signed between Japan and the EU.

This is a great chance for Serbian companies. Additionally, we support Serbian agricultural producers exporting to Japan.

Which Japanese companies could find the Serbian market interesting?

I would say those in the manufacturing industry for sure. This should not be limited to the automotive industry, since the Japanese car industry has already invested heavily in Czechia, Poland, and other Western European countries. The Serbian IT industry may also have an opportunity to work with Japanese companies, and perhaps also the agricultural sector.

The manufacturing sector, in a much broader sense than the automotive industry, the Serbian IT industry and perhaps the agricultural sector have opportunities to work with Japanese companies

What are your expectations when it comes to the inclusion of Serbian suppliers in Japanese value chains?

It is not my expectation, but I think Japanese companies definitely expect cost-benefit and quality.

What does it mean for the Japan External Trade Organisation Vienna office to become an honorary member of the Japanese Business Alliance in Serbia? How do these two organisations cooperate?

It is a great occasion for us to listen to Japanese companies in Serbia regarding how things are going in Serbia and what challenges they face. Once issues arise that require the necessary support of the Serbian government to resolve, together with the Japanese Embassy in Serbia and JBAS, JETRO can officially request the support of the Serbian Government.

What kinds of opportunities for future mutual cooperation do you see?

Of course, JETRO finds potential “customers” who’re considering doing business with or in Serbia and introduced them to JBAS. And JBAS provides practical advice based on the experiences of JBAS members. Furthermore, In my view, JBAS is an extremely active organisation and I expect that we, together with JBAS and CCIS, can work together on the development business between Japan and the Western Balkans. Actually, this is already starting.