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'Africa risky but too crucial to leave'

24 January 2013, 17:01

Tokyo - Japan's resource-hungry companies in Algeria and beyond cannot contemplate withdrawing from Africa, despite the national trauma engendered by the Sahara hostage siege that claimed at least nine Japanese lives, experts say.

Africa's abundance of commodities and burgeoning markets - which have also drawn Chinese firms in droves - mean Japanese companies can do little more than tighten security amid a collective shudder over the bloodbath at In Amenas.

More than a dozen Japanese companies have operations in Algeria, including engineering firms such as JGC, whose employees perished in the standoff, and trading houses, according to the government-backed trade promotion body Japan External Trade Organisation (JETRO).

"The incident reconfirmed the risk of doing business in Africa, but unfortunately for resource-poor Japan, resource-rich countries are often politically and socially unstable," said Shintaro Matoba, director of the JETRO's Middle East and Africa division.

"Japanese companies have to face the reality that there are certain risks to doing business there," he said.

Japan has been badly shaken by the grim body count from the siege - the highest so far confirmed for any one country and Japan's worst terror toll since 24 Japanese died in the World Trade Centre attacks in September 2001.

Aid and development projects

On Wednesday, Japan shuttered its embassy in Mali and ordered the evacuation of staff because of the deteriorating security situation in Algeria's neighbour, where French forces are helping to crush an Islamist uprising.

Japan has a homogenous and often risk-averse population with relatively few immigrants, which has yielded little exposure to - and even uneasiness with - unfamiliar cultures.

However, a cramped archipelago with few mineral or energy reserves of its own has pushed Japanese companies to venture abroad, and Africa's well-endowed mines are rich pickings.

About 85% of the platinum Japan uses - mainly in the auto industry - and 67% of manganese, a key component of batteries, are imported from Africa, according to JETRO.

Tokyo's trade with Africa was a relatively small 1.8% of its total $1.67 trillion in 2011, with direct investment accounting for $18 billion of the nearly $1 trillion Japanese companies spent abroad.

But the government has done its part to support business, pushing aid and development projects on the continent.

At the start of this decade Japan was the fifth biggest donor to Africa among developed economies, according to the latest available figures from the Paris-based Organisation for Economic Cooperation and Development.

Since 1993 Japan has held a five-yearly meeting with African leaders, known as the Tokyo International Conference on African Development (TICAD). At its 2008 incarnation, Tokyo pledged to double aid to the continent to $1.8bn by 2012.

Observers noted the drive comes as China's super-charged economy searches out resources abroad, increasingly in competition with Japanese firms, and lavishes aid on Africa in exchange for access to its raw materials.

Joint infrastructure venture

Before the crisis in Algeria, a JETRO survey found nearly 90% of Japanese companies operating in Africa were worried about political and social instability.

But two-thirds of the firms said the importance of doing business there will increase in the future. More than half said the continent had become more important over the past five years.

"Even after the incident, many company officials I talked with said withdrawing from Africa or even scaling back their operations there was simply not an option," Matoba said.

Major Japanese construction firm Kajima, which is taking the lead in a joint infrastructure venture in northern Algeria, said its road-building project would continue and the 47 Japanese nationals working on it would remain.

"We've taken safety measures based on the warnings that the foreign ministry issues, and the warning level of northern Algeria and southern Algeria where In Amenas is located are different," said a Kajima spokesperson.

"After the incident, we have ordered officials not to go out unless absolutely necessary and have banned them from going out at night," he said.

"But our business policy remains unchanged - we will accept orders if they require our cutting-edge technology."



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