EU-Japan businesscooperation in third markets
Focus on the digital economy
A guide for EU small and medium-sized enterprises

Florence Arnu
March 2021

© 2021 EU-Japan Centre for Industrial Cooperation
Shirokane-Takanawa Station Building 4F,
1-27-6 Shirokane, Minato-ku, Tokyo 〒108-0072
https://www.eu-japan.eu/

ABOUT THE EU-JAPAN CENTRE FOR INDUSTRIAL COOPERATIONThe EU-Japan Centre for Industrial cooperation is a unique venture between the European Commission(Directorate-General for Internal Market, Entrepreneurship and SMEs, DG GROW) and the Japanese
government (Ministry of Economy, Trade and Industry, METI). It aims at promoting all forms of industrial, tradeand investment cooperation between the European Union (EU) and Japan and at improving EU and Japanesecompanies’ competitiveness and cooperation by facilitating exchanges of experience and know-how between
EU and Japanese businesses. The EU-Japan Centre for Industrial Cooperation has its head office in Tokyo andan office in Brussels.

This report has been conducted as part of the MINERVA Market & Policy Intelligence Programme of the EUJapan Centre for Industrial Cooperation.
The author can be reached via Linkedin.
DISCLAIMER
The information contained in this report reflects the views of the author and not necessarily the views of the
EU-Japan Centre for Industrial Cooperation, the views of the European Commission or the Japanese authorities.
This report does not constitute legal or investment advice. While utmost care was taken to check and translate
all information used in this study, the author and the EU-Japan Centre for Industrial Cooperation may not beheld responsible for any errors that might appear. Reproduction of all the contents of the report is authorized
for non-commercial purposes, provided that (i) the name of the author(s) is indicated and the EU-Japan Centre
for Industrial Cooperation is acknowledged as the source, (ii) the text is not altered in any way and (iii) theattention of recipients is drawn to this warning. All other use and copying of any of the contents of this reportis prohibited unless the prior, written and express consent of the EU-Japan Centre for Industrial Cooperation is
obtained.

EXECUTIVE SUMMARY
Cooperation between European and Japanese companies for joint projects in third markets isa growing and promising business trend that has been highlighted in previous reports (see“Recommended pre-readings”, p. 3). This report, based on substantial research with industry
stakeholders, government officials, and other organisations, aims to provide an overview of business
opportunities and best practices for EU-Japanese joint projects in third markets with a focus on thedigital economy.
A substantial political momentum exists towards building cooperation with Japan in third
markets, and other countries are also working with Japan in this context, though priorities may differ
or indeed be compatible to those of the EU. There are thus opportunities to enhance cooperation
with Japan, perhaps also at the multilateral level.
Surveys in some EU Member States, such as Germany, suggest considerable cooperation withJapanese companies in third markets. This report examines examples from across the EU, and acrossa variety of industry sectors now being shaped by the digital transition, in a range of third country
markets. It suggests that in general, cooperation between European and Japanese companies in third
markets presents an opportunity for both sides to complement each other’s strengths such as intechnologies, networks, market intelligence, financing, and leveraging pre-existing subsidiaries that
may be used for joint projects in third markets.
The report also suggests that business opportunities remain largely untapped in emerging
countries, which have made ASEAN countries, African countries and Eastern European countries,
among others, particularly attractive for EU-Japan business cooperation in third markets. In the caseof Africa, EU companies, including small and medium-sized enterprises (SMEs), have a larger networkand more expertise in Africa than Japanese companies. This gives them a competitive advantage andmakes them privileged like-minded partners in the region. Indeed, Japan is increasingly looking at
Africa through discussions under the Tokyo International Conference on African Development (TICAD)
and projects undertaken under the Free and Open Indo-Pacific vision. In the case of Asia and inparticular ASEAN countries, EU companies can benefit from the well-established presence ofJapanese companies, in particular sogo shosha, to reach these markets in addition to the Japanesemarket.
This report will present an overview of business opportunities by taking into account thefollowing trends: (i) the growing need for smart cities and smart rural solutions which often requireinnovative digital solutions; (ii) the growing importance given by governments and businesses to1

development issues and the Sustainable Development Goals (SDGs); and (iii) the growing need for
digital transformation, in particular for the healthcare sector, which has been accelerated by the
COVID-19 pandemic. Despite the existence of some challenges, the report shows that EU technologies
are sought-after in various fields such as smart healthcare, smart manufacturing, smart agriculture,
smart services, smart mobility, cybersecurity and digital solutions applied to the circular economy
such as waste management and renewable energy.
The report mainly targets an audience of European companies, with a focus on SMEs as they
seem to be involved to a lesser extent than large companies in EU-Japan business partnerships inthird markets. This report attempts to create more awareness about opportunities and success stories
to show that EU SMEs can grow and achieve their international ambitions globally in cooperation withJapanese partners, and vice versa. In addition, many companies have highlighted the importance oftrilateral partnerships between European, Japanese and third-market partners, as local partners canprovide expertise to better adapt the EU-Japan business model to the local environment, local people
and their lifestyles.
The report lays out recommendations to EU SMEs to help them be involved in EU-Japan joint
projects in third markets. First, a competitive advantage such as a well-established presence and asolid network and expertise in a third market is an asset for a Japanese partner looking to set foot inthis country. Moreover, a highly innovative technology, such as digital solutions applied to industries
outside the traditional IT sector like agriculture, renewable energy or healthcare, can provide added
value for joint projects in emerging markets if this technology has already been successfully deployedin an emerging market context elsewhere.
The report also presents recommendations to the EU-Japan Centre for Industrial Cooperation
to better support EU SMEs in being involved in EU-Japan business partnerships in third markets withthe creation of a dedicated helpdesk, cooperation with European partners in third markets and thecreation of an annual survey to assess EU SMEs’ interest, experience and challenges on the topic.
Finally, the conclusion of this report is that EU-Japan business cooperation in the digital
economy in third markets is a promising trend that is likely to keep growing in upcoming years.

2

RECOMMENDED PRE-READINGSThe author recommends the following pre-readings to better understand the general trend of
EU-Japan business cooperation in third markets before reading the present report that focuses on thedigital economy:

Report published by the EU-Japan Centre for Industrial Cooperation
Marbot, M. (2020), Analysis of EU-Japan business cooperation in third countries. Available at:https://www.eu-japan.eu/publications/analysis-eu-japan-business-cooperation-third-countries



Report published by the German Chamber of Commerce and Industry in Japan
German Chamber of Commerce and Industry in Japan, KPMG (2020), Economic outlook – German
Business in Japan 2020. Available at: https://japan.ahk.de/en/infothek/surveys-and-studies



Agreement between the EU and Japan
European External Action Service (2019), Partnership on sustainable connectivity and quality
infrastructure
betweenthe
European
Union
andJapan.
Availableat:https://eeas.europa.eu/headquarters/headquarters-homepage/68018/partnershipsustainable-connectivity-and-quality-infrastructure-between-european-union-and_en3

TABLE OF CONTENTSEXECUTIVE SUMMARY

1RECOMMENDED PRE-READINGS

3

ABBREVIATIONS AND ACRONYMS

7

DEFINITIONS

9LIST OF TABLES

10LIST OF FIGURES11

INTRODUCTION

12

1.

14

POLICY BACKGROUND

1.1. AGREEMENTS BETWEEN THE EU AND JAPAN

14

1.2. WHAT IS CONNECTIVITY?

15

1.3. JAPANESE POLICY BACKGROUND

16

1.3.1. Overseas Market Expansion Strategy 2020

16

1.3.2. Japanese Free and open Indo-Pacific vision20

1.3.3. Tokyo International Conference on African Development (TICAD)

21

1.3.4. Digital Agency

21

1.4.

22

1.4.1. InDiCo

22

1.4.2. Workshop on cybersecurity

22

1.4.3. Digital4Development Hub

23

1.4.4. Initiatives by EU Member States

24

1.5.

2.

EU POLICY BACKGROUNDOTHER FOREIGN CONNECTIVITY INITIATIVES

25

1.5.1. Japan-India cooperation in the Indo-Pacific, including Africa

25

1.5.2. Japan-US cooperation in the Indo-Pacific25

1.5.3. Japan-US-Australia cooperation in Palau

26

1.5.4. China’s connectivity initiatives

27

WHY A FOCUS ON THE DIGITAL ECONOMY?

28

2.1. WHAT IS THE DIGITAL ECONOMY?

28

2.1.1. Meaning of “digital economy”

28
4TABLE OF CONTENTS
2.1.2. Digitalisation and digitisation
2.2.

A GROWING TREND THAT AFFECTS BUSINESSES AND OPEN OPPORTUNITIES

28
29

2.2.1. EU policies to support digital connectivity and the digital economy

29

2.2.2. EU SMEs affected by the digital transformation: case study of German companies in Japan

30

2.3.

RELATED TRENDS AND BUSINESS OPPORTUNITIES

32

2.3.1. Why is the digital economy relevant for EU-Japan joint projects in third markets?

32

2.3.2. Smart city and smart rural34

2.3.3. Sustainable Development Goals (SDGs)

35

2.3.4. Impact of the COVID-19 pandemic

36

2.4.

WHICH KEY AREAS OF THE DIGITAL ECONOMY ARE PROMISING?

38

2.4.1. Smart healthcare

38

2.4.2. Smart industry (or smart manufacturing)40

2.4.3. Smart agriculture

42

2.4.4. Smart services

42

2.4.5. Smart mobility

43

2.4.6. Cybersecurity

43

3.

REGIONS WITH OPPORTUNITIES FOR EU-JAPAN BUSINESS COOPERATION IN THE DIGITAL

44

ECONOMY
3.1.

45

3.1.1. Regional complementarity45

3.1.2. Strategic complementarity in Asia

46

3.1.3. Strategic complementarity in other third markets

49

3.2.

4.

COMPLEMENTARITY BETWEEN EU AND JAPANESE COMPANIESFOCUS ON 3 REGIONS

52

3.2.1. Survey

52

3.2.2. Southeast Asia

55

3.2.3. Africa

56

3.2.4. Eastern Europe/Western Balkans

61

3.2.5. Other third markets

62

TYPES OF BUSINESS MODELS

4.1. SHORT-TERM AND LONG-TERM APPROACHES

64
64

4.1.1. Short-term approach

64

4.1.2. Long-term approach

64

4.2. TYPES OF PROJECTS

65

4.3. SISTER-CITY PROJECTS

65
5

TABLE OF CONTENTS
5.

INTEREST FROM COMPANIES

67

5.1. INTEREST FROM EU SMES

67

5.2. INTEREST FROM JAPANESE COMPANIES

68

5.3. INTEREST FROM THIRD MARKETS

69

6.

71

RECOMMENDATIONS TO THE EU-JAPAN CENTRE FOR INDUSTRIAL COOPERATION

6.1. HELPDESK71

6.2. ANNUAL SURVEY

72

6.3. PARTNERS AND INSTITUTIONAL COOPERATION

73

7.

76

RECOMMENDATIONS TO EU SMES

7.1. KEY PREREQUISITES

77

7.2. MINDSET TO ADOPT

78

7.2.1. Complementarity

78

7.2.2. Trilateral approach

79

7.2.3. Localisation

80

7.2.4. Sustainability

80

7.2.5. Standards

81

7.3. CHALLENGES TO EXPECT

81

7.4. HOW CAN EU SMES START BEING MORE INVOLVED?

82

7.4.1. Get in touch with relevant SME-support offices

82

7.4.2. Show your strengths

83

CONCLUSION: KEY TAKEAWAYS

84

ACKNOWLEDGMENTS86

REFERENCES

87

ANNEX 1: MAP OF AFRICA

92

6

ABBREVIATIONS AND ACRONYMS
ADB

Asian Development Bank

AFDB

African Development Bank

AHK

German Chamber of Commerce and Industry in JapanAI

Artificial Intelligence

ASCN

ASEAN Smart Cities Network

ASEAN

Association of Southeast Asian Nations

AU

African Union

B2B

Business-to-business

BRI

China’s Belt and Road Initiative

D4D Hub

Digital for Development Hub

DFFT

Data Free Flow with Trust

DG CONNECT Directorate-General for Communications Networks, Content and Technology
DG INTPA

Directorate-General for International Partnerships

DRC

Democratic Republic of the Congo

DTT

Digital terrestrial television

EBO WWN

European Business Organisation Worldwide Network

EBRD

European Bank for Reconstruction and Development

EEAS

European External Action Service

EEN

Enterprise Europe Network

EIB

European Investment Bank

EPA

Economic Partnership Agreement

ETSI

European Telecommunications Standards Institute

EU

European Union

EurWORK

European Observatory of Working Life

FintechFinancial technology

FOCAC

Forum on China-Africa Cooperation

FOIP

Free and Open Indo-Pacific

HPC

High Performing Computing
7

ABBREVIATIONS AND ACRONYMS
ICTInformation and communication and technologies

IoT

Internet of Things

IT

Information technology

ITSIntelligent Transportation Systems

JBIC

Japan Bank for International Cooperation

JICA

Japanese International Cooperation Agency

MDB

Multilateral Development Bank

METIJapanese Ministry of Economy, Trade and Industry

MIC

Japanese Ministry of Internal Affairs and Communications

MOFA

Ministry of Foreign Affairs of Japan

MoU

Memorandum of Understanding

NDICI

Neighbourhood, Development and International Cooperation Instrument

NEXI

Nippon Export and Investment InsuranceNPOs

Non-profit organisations

ODA

Official development assistance

SDGs

Sustainable Development Goals

SME

Small and medium-sized enterprise

SPA

Strategic Partnership Agreement

TICAD

Tokyo International Conference on African Development

TPO

Trade promotion organisation

UAE

United Arab Emirates

UNCDF

UN Capital Development Fund

UNDP

United Nations Development Programme

UNESCO

United Nations Educational Scientific and Cultural Organisation

UNICEF

United Nations Children’s Fund

U.S.

United States of America

USAID

United States Agency for International Development

VR

Virtual reality
8

DEFINITIONS
Keywords used in this report are defined below1:
“EU company” refers to a company registered and with headquarters located in one of the 27
Member States of the European Union: Austria, Belgium, Bulgaria, Croatia, Cyprus, Czech
Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia,
Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spainand Sweden.

“Japanese company” refers to a company registered and with headquarters located in Japan.

“Third markets” refers to any country which is not Japan or one of the 27 EU Member States.

“SME” refers to small and medium-sized enterprises as defined by the European Union2, whichmeans that SMEs employ less than 250 people and have either an annual turnover that does notexceed €50 million, or a balance sheet total not exceeding €43 million.

“Large company” refers to companies which do not fall under the definition of an SME.

“Collaboration” refers to a form of cooperation that is not necessarily bound through a legal
contract. Two or more companies collaborate when they share common interests in a certain
area of activity. Collaborations are sometimes formalised in a document such as Memorandumof Understanding (MoU).

“Partnership” refers to the broadest term to define a legal contract between two or morecompanies, whereby two or more companies agree to pursue a certain set of objectives whileremaining independent organisation. Such a relationship may induce that participatingcompanies share risk and responsibility.

1 The report has kept the definitions provided in the Centre’s previous report on EU-Japan business cooperation in third markets inorder to remain consistent with its content. Source: Marbot, M. (2020). Analysis of EU-Japan business cooperation in third countries.
2 European Commission (2012). SME definition. Website available at: https://ec.europa.eu/growth/smes/sme-definition_en
EUR-Lex (2003). Commission Recommendation of 6 May 2003 concerning the definition of micro, small and medium-sized enterprises(Text with EEA relevance) (notified under document number C (2003) 1422). Available at: https://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=CELEX:32003H0361

9

LIST OF TABLESTABLE I: Niimaru projects

17

TABLE II: Keywords – Smart healthcare

38

TABLE III: Keywords – Smart industry

40

TABLE IV: Regions of activity and of interest for EU and Japanese companies

46

TABLE V: Why is it strategic for EU SMEs and Japanese companies to partner in third markets

51

outside Asia?
TABLE VI: Top 5 African Countries according to their Mobile Connectivity Index Score and Enabler

60

in 2019 (ranked in order according to their score)
TABLE VII: Three examples of smart city topics related to the digital economy

66

TABLE VIII: Key reasons for EU SMEs to be involved in EU-Japan third-market projects

68

TABLE IX: Concrete activities of a Helpdesk dedicated to support EU-Japan business cooperation71

in third markets
TABLE X: Annual survey: publication of results and purpose

73

TABLE XI: Key prerequisites for EU SMEs

77

TABLE XII: Strengths and complementarities of the Japanese and the EU sides

84

TABLE XIII: Key points to keep in mind

85

10

LIST OF FIGURES
Figure 1: Four pillars or the EU strategy for connecting Europe and Asia

15

Figure 2: Nine priority actions for a Europe fit for the digital age

29

Figure 3. Breakdown by sector of the companies surveyed by AHK Japan in 2020

30

Figure 4. Impacts of digitalisation on the business activities of German businesses in Japan

31

Figure 5. Impact of the Japanese “Society 5.0” initiative on German companies’ business

32

Figure 6. Example of an EU SME taking part in a smart-city project with a large Japanese company in34

a third market
Figure 7. The Sustainable Development Goals

35

Figure 8. Examples of digital tools needed to tackle issues faced by businesses and the society during

37

the COVID-19 crisis
Figure 9. Digital economy: the application of digital technology to other industries

38

Figure 10: EU SMEs first interested in the Japanese market before considering other Asian markets

47

Figure 11. EU SMEs specifically interested in Japan as a gateway to Asia

47

Figure 12. Japanese companies looking for an EU partner in the digital field for a project in Asia

48

Figure 13. Example of an EU SME already well-established in South Africa and looking to scale up a50

business within the same country by partnering with a large company
Figure 14. Regions in which projects are planned, are currently in progress or have already been

52

executed with Japanese partners outside Japan
Figure 15. Preferred business destinations for the EU tech SMEs surveyed (in %)53

Figure 16. The COVID-19 pandemic revealed serious gaps that Africa needs to work on

57

Figure 17. Overview of digital connectivity in Africa

58

Figure 18. Non-EU countries in the Western Balkans

62

Figure 19. Non-EU Eastern European countries and countries of the Eastern Partnership

62

Figure 20. Buyer/Seller model

64

Figure 21. Possible forms of cooperation

65

Figure 22. Four key functions of sogo shosha in EU-Japan business cooperation in third markets

69

Figure 23. Types of EU SMEs most likely to be involved in EU-Japan business cooperation in third76

markets
Figure 24. Trilateral partnership

79

Figure 25. Key requirements for third-market partnerships

84

11

INTRODUCTIONCONTEXT AND RELEVANCE
The internationalisation of European companies, in particular small and medium-sizedenterprises (SMEs), outside the European Union (EU) is a major aspect of the EU’s competitivenessstrategy. The European Commission found evidence that the internationalisation of SMEs in non-EU
markets helps them grow, innovate and develop their competitiveness. In addition, EU SMEs generally
do not grow and innovate alone. They usually enter strategic networks to meet the right international
partners and to enter into business cooperation that will help them achieve their international
ambitions3.
While acknowledging the relevance of bilateral partnerships between EU and Japanesecompanies in the EU and in Japan, the present report deals with EU-Japan business cooperation inthird markets, with a focus on opportunities for EU SMEs and opportunities in the digital economy.
EU-Japan business alliances in third markets is a business model that has attracted many EU, Japaneseand third-market small and large companies. The business model has been supported not only bypolitical ambitions from the EU and Japan, but also by third markets which have shown interest in
seeing EU-Japan business alliances taking place in their countries to involve local companies, boost
the local private sector and contribute to the development of the country.
Industries are gradually becoming more digital which creates many new business
opportunities in various fields, but also forces companies to adapt themselves to a more digital world.
Small companies and start-ups are often at the forefront of digital innovation and are able tosupport the digital transformation of other companies in sectors such as healthcare, agriculture andmobility, hence supporting them to become more competitive, resilient and sustainable. This report
explores opportunities in the digital economy for EU-Japan business cooperation in third markets.

PURPOSEThe first report on the topic of EU-Japan business cooperation in third markets published by the
EU-Japan Centre for Industrial Cooperation provides general information on the characteristics of thecompanies involved in this type of cooperation, the characteristics of the partnerships, and general
information on business opportunities, challenges and best practices.43European Commission (2011). Small Business, Big World – a new partnership to help SMEs seize global opportunities. Available at:https://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2011:0702:FIN:EN:PDF
4 Marbot, M. (2020). Analysis of EU-Japan business cooperation in third countries.

12







The present report attempts to address the following questions:
What are the business opportunities in the digital economy for EU-Japan business cooperationin third markets? Which areas of the digital economy are particularly promising for partnerships
in third markets?
Which third markets have growing needs in the digital field and could be relevant targets fortrilateral alliances with EU, Japanese and third-market businesses?
How could organisations like the EU-Japan Centre for Industrial Cooperation promote andfacilitate such alliances?
What schemes, challenges and best practices should companies, and in particular SMEs, know
before considering such alliances?

The main purpose of the present report is to provide an overview of business opportunities inthe digital economy for EU-Japan business cooperation in third markets. Specifically, the report aims
to provide information on how EU SMEs can be involved in such cooperation. The report aims to
inform Japanese and EU companies, and in particular EU SMEs, and attempts to support the EU-Japan
Centre for Industrial Cooperation in the preparation of future activities, in the promotion of thisbusiness trend, and in its own goal of improving its services to EU SMEs.

METHODOLOGY
The research for this report was undertaken between March and December 2020. The reportis based upon desk-based research; participation to conferences, pitching and matchmaking events
related to the topic; a survey and interviews with relevant stakeholders from the EU and Japanesepublic and private sectors, ranging from SMEs to large corporations, government officials, researchers
and non-governmental organisations. The research was limited by a lack of public data on the
involvement of EU SMEs in third-market partnerships with Japanese companies in the digital economy.
However, informal information provided by companies suggested that the topic is an emerging trend
which could therefore increase the quantity of data in upcoming years.
METHODTARGET

NUMBERDATESInterviews

European companies (mainly SMEs)

20

Jun. – Dec. 2020

Interviews

Japanese companies (mainly large companies)

6

Jun. – Dec. 2020

Interviews

EU Trade Promotion Organisations, e.g. EU Member
States’ embassies and chambers of commerce

23

Jun. – Sep. 2020

Interviews

Government officials: EU, Japan, U.S., Australia

7Jun. – Oct. 2020

SurveyEuropean SMEs

40

Aug. – Sep. 2020

SurveyJapanese companies (large and small companies)

8

Aug. – Sep. 202013

1. POLICY BACKGROUND
1.1.

AGREEMENTS BETWEEN THE EU AND JAPANThree key agreements signed between the EU and Japan can support EU-Japan businesscooperation in third markets with opportunities for SMEs and in the digital economy.
a) The EU-Japan Economic Partnership Agreement (EPA)5, which entered into force on 1 February
2019, focuses on trade relations, removes tariffs and other trade barriers in key sectors and aims
to foster cooperation and harmonisation on international standards.
b) The EU-Japan Strategic Partnership Agreement (SPA) 6 , which also entered into force on 1
February 2020, focuses on political relations. The SPA highlights a commitment on both sides toshared values such as democracy, the rule of law and human rights, as well as joint efforts totackle global issues such as climate change and the security of the cyberspace. The values laidout in the SPA and the scope of the agreement on the security of cyberspace are also
fundamental when dealing with the digital economy.
c)

The Partnership on Sustainable Connectivity and Quality Infrastructure between the European
Union and Japan (hereinafter referred as the EU-Japan Connectivity Partnership)7, signed on 27
September 2019, is the cornerstone of the EU-Japan connectivity strategy and therefore a generalframework for EU-Japan business cooperation in third markets. The EU-Japan Connectivity
Partnership highlights the importance to achieve connectivity goals by involving the private
sector and to work with “partner third countries” in building more connectivity, notably in theregions of the Western Balkans, Eastern Europe, Central Asia, Indo-Pacific and Africa.
 Specifically, the sixth paragraph of this agreement mentions digital connectivity as a key
pillar of EU-Japan cooperation in third markets with an emphasis on sustainable
development in developing countries through digital and data infrastructures as well as
policy and regulatory frameworks. In the agreement, the EU and Japan confirm that thedigital economy depends on an open, free, stable, accessible, interoperable, reliable andsecure cyberspace and on data free flow with trust (DFFT). Specific areas of the digital

5

EuropeanCommission(2018).
EU-Japan
EconomicPartnership
Agreement.
Availableat:
http://trade.ec.europa.eu/doclib/press/index.cfm?id=1684
6
EUR-Lex (2018). EU-Japan Strategic Partnership Agreement. Available at: https://eur-lex.europa.eu/legalcontent/EN/TXT/?uri=LEGISSUM%3A4359401
7 European External Action Service (2019). Partnership on sustainable connectivity and quality infrastructure between the European
Union and Japan. Available at: https://eeas.europa.eu/headquarters/headquarters-homepage/68018/partnership-sustainableconnectivity-and-quality-infrastructure-between-european-union-and_en

14



1.2.

economy are mentioned as key areas for innovation: artificial intelligence (AI), cloud,quantum computing and blockchain.
The EU-Japan Connectivity Partnership also mentions three Memorandums ofUnderstanding (MoUs) expected to facilitate private sector finance for EU-Japan joint
projects in developing and emerging markets. The MoUs were signed (i) between theEuropean Investment Bank (EIB) and the Japan International Cooperation Agency (JICA)8; (ii)between the EIB and the Japan Bank for International Cooperation (JBIC)9; (iii) and between
the EIB and the Nippon Export and Investment Insurance (NEXI).

WHAT IS CONNECTIVITY?

Connectivity can be defined as networks and flows. As shown in Figure 1, the EU strategy forconnecting Europe and Asia presents four key pillars of connectivity: transport, energy, human anddigital connectivity.
Figure 1. Four pillars or the EU strategy for connecting Europe and Asia

Source: European External Action Service (2019). Connecting Europe and Asia, The EU strategy10.

Therefore, digital connectivity and efforts toward cooperation between EU and Japanesebusinesses in the digital economy in third markets is amongst the priorities of EU-Japan relations withthird markets. Among all EU institutions, the European External Action Service (EEAS) is the main
actor in the EU-Asia connectivity strategy, in cooperation with relevant Directorates-General of theEuropean Commission, such as the Directorate-General for International Partnerships (DG INTPA)11

8 Japan International Cooperation Agency (2019). Signing of Memorandum of Understanding with the European Investment Bank.

Available at: https://www.jica.go.jp/english/news/press/2019/20191018_41.html
9 European Investment Bank (2018). EIB new cooperation with the Japan Bank for International Cooperation (JBIC) and with the Nippon
Export and Investment Insurance (NEXI). Available at: https://www.eib.org/en/press/all/2018-264-eib-new-cooperation-with-thejapan-bank-for-international-cooperation-jbic-and-with-the-nippon-export-and-investment-insurance-nexi
10European External Action Service (2019). Connecting Europe and Asia, the EU strategy. Available at:https://eeas.europa.eu/headquarters/headquarters-homepage/50699/connecting-europe-asia-eu-strategy_en
11 Since 16 January 2021, DG INTPA has replaced the Directorate-General for International Cooperation and Development (DG DEVCO).

15

for development projects. In addition, the EEAS appointed an Ambassador at large for Connectivity
in 2019 to reinforce the EU’s actions and presence on the topic.
The EU-Japan agenda on connectivity aims to further develop the global presence of both
economies and in particular to present the EU and Japan as like-minded partners accessing newmarkets and creating new trade routes together with third markets. Collaboration with like-minded
third markets is also an increasingly important point for the EU. Cooperation between European andJapanese companies in third markets is the opportunity for both sides to complement each other’s
strengths such as their respective networks in Asia, Africa, Eastern Europe and Latin America, as wellas their technologies, market intelligence, financing and existing subsidiaries in third markets.

1.3.

JAPANESE POLICY BACKGROUND

1.3.1. Overseas Market Expansion Strategy 2020
In its Overseas Market Expansion Strategy 2020, the Japanese Ministry of Internal Affairs andCommunications (MIC) lays out 20 priority digital projects, called Niimaru projects, to carry out
overseas over the next 3 years12. The aim is to facilitate the market entry of Japanese companies inthe targeted countries and regions, and to promote their technologies in these third markets, withthe help of intergovernmental dialogues and JICA’s funding.
In addition, MIC highlights that the Niimaru projects aim to achieve the following key
objectives:
 Promote international cooperation toward the achievement of the Sustainable Development
Goals (SDGs)13.
 Strengthen global competitiveness.
 Promote international digital strategies.
The Japanese government has been quite active in promoting the SDGs in its public relations
strategy and its policies in general. Achieving SDGs by working on projects in the digital economy isparticularly relevant for EU-Japan business partnerships in third markets and will be further
explained in this report.
Table I below lays out the 20 Niimaru projects which consist in 20 sub-sectors of the digital
economy to be implemented through projects in a selection of specific third markets (countries orregions) and aiming at the three above-mentioned key objectives.

12 Ministry of Internal Affairs and Communications of Japan (2020). Ministry of Internal Affairs and Communications’ Overseas

Expansion Plan 2020. Available at (in Japanese): https://www.soumu.go.jp/menu_news/s-news/01tsushin07_02000002.html, p.47.
13 United Nations (2015). The 17 Goals. Available at: https://sdgs.un.org/goals

16

TABLE I: Niimaru projects
Sub-sector

1

5G / Local 5G

Targetcountry / region

Objective toimplement

Policy initiatives and goals

Asia, India, South

PromoteFacilitate market entry and promote

America, North

international digital

Japanese 5G technologies in third

strategies

markets

Achieve SDGs with

Collaborate with JICA and local

international

governments to build sustainable

cooperation

infrastructures and provide better

America, Europe andAfrica2Land broadband

Philippines

Internet access3

4

Data centres

Mobile phone

Uzbekistan

Asia, Africa

industry
Optical submarine

Strengthen global

Enter the maintenance business of datacompetitivenesscentres in Uzbekistan

Strengthen global

Enter the telecommunication market

competitivenessAsia, South America

cables5

PromoteHave Japanese companies building

international digital

undersea cables in Asia-South America

strategies

routes and discuss security issues
through high-level intergovernmental
dialogues

Digitalterrestrial

television (DTT)67Countries which haveStrengthen global

Provide expertise and technology toadopted the Japanesecompetitivenesschange from analog television to DTT.

DTT method in Asia,

Sell Japanese broadcasting equipment

Latin America and Africa

and systems

Fibre optic forEurope and North

quantum networks

America14

High-altitude8

platform stations

Asia, Africa

and Low-Earth
Orbit satellites

PromoteExpand business overseas by improving

international digitalmarket entry and businessstrategies

environment

Achieve SDGs with

Provide support, mainly to countries

internationalright below the equator in Asia andcooperation

Africa, with the aim to commercialise
Japanese High-altitude platform
stations and Low-Earth Orbit satellites

14 The Japanese version refers to “Western countries”.

17TABLE I: Niimaru projects
Sub-sector

Targetcountry / region

Objective toimplement

Policy initiatives and goals
Cooperation between broadcasters,

Broadcasting
9

ASEAN

15

(content)

Strengthen global

local governments, local industries,

competitivenesstourism stakeholders.
Co-produce content about the charmof Japan to broadcast overseas. Aim at
4,500 items by 2022.

Cybersecurity

10

United States ofPromotePractical workshops to reinforce ASEAN

America (U.S.), Europe,

international digitaland South America’s capacity building.

Israel, ASEAN, India andstrategies

Aim at more than 650 people trained inSouth America

ASEAN by 2022. Exchange
cybersecurity information with the US,
Israel, ASEAN, etc.

11

Smart cities

ASEAN, India, SouthStrengthen global

Promote Japanese businesses overseas

America, Europe andcompetitivenessexpansion through public-private

North America

partnerships. Aim to be involved insmart city projects.

Radio systems(Intelligent
12

ASEAN, India, U.S.

Strengthen global

Introduce Japanese systems throughcompetitivenessdemonstration. Send public-private

Transportationdelegations to the target countries.

Systems (ITS),

Aim to receive orders.

Airport systems)
Radio systems
13(weather/rainfall

ThailandStrengthen global

Demonstrate the usefulness of floodcompetitiveness

control by using Japanese systems andradar)

promote their introduction in Thailand
with the aim to receive orders.

14

Information and

ASEAN, Latin America,

Achieve SDGs with

Following the success of thecommunication

Europe and North

internationalcommercialisation of Japanese mobile

technologies (ICT)

America, India andcooperation

telemedicine systems in Chile andapplied to

Africa Strengthen global

healthcare (smart

competitivenesshealthcare)

Brazil, to further expand to Latin
America + Southeast Asia, Europe andNorth America.
Promote AI-powered diagnosis
systems, medical systems using ICT.

15ASEAN refers to the Association of Southeast Asian Nations.

18

TABLE I: Niimaru projects
Sub-sector

Targetcountry / region

Objective toimplement

Policy initiatives and goals
Promote the “Maternity health recordbook” app to Africa.

ICT applied todisaster
15

Latin America, ASEAN

prevention

Achieve SDGs with

Prevention through high-levelinternational

intergovernmental dialogues andcooperation

demonstrations of Japanese strengths
in this field. Encourage the adoption of
ICT applied to disaster prevention to
boost sales of Japanese technologies.
Improve agricultural systems with ICT,

Smart agriculture

South America, Africa

16

Achieve SDGs withsupport capacity building and promoteinternational

Japanese products. Following positive

cooperation

results until now, to further expand inother countries in the target regions toboost sales.
Provide e-money services and cross-17

Postal service

ASEAN, Russia

Strengthen global

border e-commerce solutions to sellcompetitivenessJapanese products in the target
regions.

Digital government
18

services (e-Try to meet the demands of other
Europe, ASEAN

government),

Strengthen global

countries in need for e-government

competitivenessand statistical services to further

statistics
19

deploy Japanese solutions overseas.

Fire fighting

ASEAN, United ArabStrengthen global

Promote Japanese equipment,

Emirates (UAE)

competitivenessstandards and certification systems.
Support capacity building.

20

Administrative
counselling

ASEAN, Uzbekistan, IranAchieve SDGs with

Collaborate with local ombudsmen.

international

Promote the Japanese administrative

cooperation

counselling system.

Source: Ministry of Internal Affairs and Communications of Japan (2020)16(tentative translation and summary).

16

Ministry of Internal Affairs and Communications of Japan (2020), Ministry of Internal Affairs and Communications’ Overseas
Expansion Plan 2020. Available at (in Japanese): https://www.soumu.go.jp/menu_news/s-news/01tsushin07_02000002.html, p.47-51.

19

In conclusion, MIC’s Overseas Market Expansion Strategy 2020 seems to be a relevant
framework to match European businesses with Japanese companies for the Niimaru projects.
1.3.2. Japanese Free and Open Indo-Pacific vision
Japan’s Free and Open Indo-Pacific (FOIP) vision aims to create “a rule-based international
order through comprehensive efforts for the promotion and consolidation of fundamental principles,
economic prosperity with connectivity and commitment for peace and stability”17 in the Indo-Pacificregion. Therefore, from an economic point of view the FOIP vision promotes the creation of an
economic area based on stability and prosperity.
Various actions are conducted by Japan and partner countries under the FOIP vision, such as
infrastructure projects, disaster risk reduction, counterterrorism, counterpiracy and maritime security
and safety, mine cleaning and post-conflict management.
Japan intends to cooperate on the FOIP with various partners sharing the same vision. In
principle, no country is excluded to partner with Japan on projects in line with the FOIP vision. As of
May 2020, the Ministry of Foreign Affairs of Japan (MOFA) mentioned efforts and cooperation on
FOIP with the following partner countries: the ASEAN, Mekong countries, India, New-Zealand,
Australia, the Pacific Islands and Countries, the U.S. and Canada. The EU is also considered as apartner for cooperation on FOIP through the EU strategy connecting Europe and Asia and the EUJapan Connectivity Partnership. A certain number of EU Member States have also cooperated withJapan on an individual basis such as France, Germany, Italy and the Netherlands.
The FOIP vision promotes three connectivity aspects which will ultimately open business
opportunities in the digital economy in the region: (i) physical connectivity with ports, railways,
energy and digital infrastructures, (ii) people-to-people connectivity with education and training,and (iii) institutional connectivity with EPAs and the harmonisation of common rules.
Infrastructures are key for a sustainable international connectivity and Japan jointly promotes theFOIP with quality infrastructure investment as endorsed in the G20 Principles for Quality
Infrastructure Investment.18 Therefore, considerable efforts were made at the institutional level topromote cooperation and connectivity between Japan and like-minded partners in the Indo-Pacificregion.
Japan has recently promoted the FOIP more actively in Southeast Asia, Africa, and Latin
America, which is likely to stimulate trade cooperation between Japan and the targeted countries.
17

Ministry of Foreign Affairs of Japan (2020). Japan’s effort for a free and open Indo-Pacific. Available at:https://www.mofa.go.jp/policy/page25e_000278.html
18 Ministry of Foreign Affairs of Japan (2019). G20 Principles for quality infrastructure investment. Available at:https://www.mof.go.jp/english/international_policy/convention/g20/annex6_1.pdf

20

These recent moves from Japan are likely to open joint business opportunities for EU and Japanesecompanies in third markets, including in the digital economy. The promotion of the FOIP can also beseen as a strategic move to reinforce regional alliances while other countries like China have been
expanding their influence.19
1.3.3. Tokyo International Conference on African Development (TICAD)
The co-organisers of the Tokyo International Conference on African Development (TICAD)
officially decided on 16 July 2020 to hold the TICAD8 in Tunisia in 202220. This event will provide an
opportunity to address development issues in Africa and to create a platform for businesses todiscuss development projects and to showcase technologies that can tackle local issues.
MOFA announced that the field of healthcare will be a key pillar of TICAD8, not only tomaintain Japan’s ongoing efforts to support Africa in this field, but also to support the continent inrecovering from the COVID-19 pandemic.21
TICAD8 could be a relevant business matchmaking platform, not only for Japanese andAfrican businesses, but also for EU companies. For example, TICAD6 in Kenya was the opportunity
for France and Japan to organise a side-event and to promote French-Japanese businesscollaboration in Africa. The event resulted in the signature of 4 MoUs in the fields of sustainable
cities, solar energy and water management between African, Japanese and large French companies.22
This example could be replicated at a larger scale by involving EU companies, including SMEs, and byaiming at additional industries such as healthcare and the digital economy which are growing
industries.
1.3.4. Digital Agency
Since he took office in September 2020, Japanese Prime Minister Suga has set digital reforms
as a top priority for Japan. The launch of a new Digital Agency on 1 September 2021 is expected tolead to widespread digitalisation both in the public and private sectors.23 The Digital Agency aims to
improve the digitalisation of public services in Japan and to move toward the Japanese concept ofSociety 5.0. Japan proposed the concept of Society 5.0 in its 5th Science and Technology Basic Plan

19

NHK
World
Japan
(2020).
Suga
visitsSoutheast
Asia
on
first
trip.
Availableat:https://www3.nhk.or.jp/nhkworld/en/news/backstories/1340/
20 MOFA (2020). The Eight Tokyo International Conference on African Development (TICAD8) to be held in Tunisia. Available at:https://www.mofa.go.jp/press/release/press4e_002865.html
21
MOFA (2020). Fight against COVID-19 – Japan’s contribution through the TICAD. Available at:https://www.mofa.go.jp/files/100124482.pdf
22 Ministry of Foreign Affairs of Japan and French government (2016). Joint event on the France-Japan Partnership for Africa organizedin the Framework of TICAD VI. Joint press release available at: https://www.mofa.go.jp/files/000183524.pdf
23
Jiji
Press
(2020).
Japan
decidestolaunchDigitalAgency
in
Sept.
2021.
Availableat:https://jen.jiji.com/jc/eng?g=eco&k=2020122100889

21

and defines it as “a human-centred society that balances economic advancement with the resolutionof social problems by a system that highly integrates cyberspace and physical space”.24
The creation of a new agency to tackle the situation of Japan falling behind in the digital field
is potentially a major step into the digital economy. With the creation the agency, business
opportunities in the digital economy are expected to grow in Japan, which could lead to morebusiness opportunities in third markets in the future.

1.4.

EU POLICY BACKGROUND

1.4.1. InDiCo
InDiCo is a project funded by the European Union and coordinated by the European
Telecommunications Standards Institute (ETSI). 25 The project aims to build the bridges needed
between a selection of countries to facilitate the transition toward a digital economy. The project
supports the exchange of best practices regarding policies and technologies. It also aims to boost
common work on standards to build an open global market and to facilitate interoperability of
products, services and technologies between the selected countries.
InDiCo’s technical scope is on cybersecurity, distributed ledger technology, 5G, the Internet ofThings (IoT) and intelligent transport systems.
InDiCo is not a joint project between the EU and Japan, but a collaboration between the EU
and six key trading partners: Brazil, China, India, Japan, South Korea and the U.S.
Therefore, concrete work on digital standards between these countries could facilitate
bilateral trade and open more business opportunities in the digital economy for EU-Japan businesscooperation in the countries mentioned above.
1.4.2. Workshop on cybersecurity
The EU-Japan Digital Strategy Workshop takes place twice a year between the DirectorateGeneral for Communications Networks, Content and Technology (DG CONNECT), MIC, the Japanese
Ministry of Economy, Trade and Industry (METI) and EU and Japanese industries. In October 2020,
METI mentioned during the EU-Japan Digital Strategy Workshop that a cybersecurity training
initiative between the EU, Japan and the U.S. directed at participants from Southeast Asian
countries was to be carried out in a virtual format in March 2021.

24 Cabinet Office (n.d.) Society 5.0. Available at: https://www8.cao.go.jp/cstp/english/society5_0/index.html
25 Indico-ICT standards (2020) Indico ICT standards. Available at: https://www.indico-ictstandards.eu/

22This cybersecurity training is a promising initiative for more connectivity between the EU,
Japan, the U.S. and Southeast Asia in terms of human connectivity, with regard to the training aspect
and the exchange of knowledge, and in terms of digital connectivity with regard to the cybersecurity
industry.
1.4.3. Digital4Development Hub
In December 2020, European Commission President Ursula von der Leyen officially launched
the Digital4Development Hub (D4D Hub). 26 The D4D Hub is a global multi-stakeholder platform
dedicated to support a human-centric digital transformation under a single European digitaldevelopment strategy.
The D4D Hub will have branches in Africa, Asia, Latin America, the Caribbean and countriesof the EU’s Eastern Neighbourhood27. The first regional branch will be the AU-EU28 D4D Hub, to belaunched in early 2021 with activities in Africa.
All relevant stakeholders can take part in the D4D Hub, which includes the public sector,
academia, the civil society and the private sector. Therefore, the D4D Hub is a new approach for the
EU regarding development initiatives. DG INTPA which is in charge of the EU development policy andto orient funds toward development projects around the world, including in the digital field, hasmainly worked with the public sector and non-profit organisations (NPOs) until now, but not directlywith the private sector. The inclusion of businesses in the EU’s development strategy is key toeffectively tackle development issues and boost the private sector in third markets.






The five key principles of the D4D Hub are:Local ownership and win-win partnerships taking into account the local demand,
Multi-stakeholder involvement and perspective,
A sustainable green and digital transformation,
A human-centric approach,Data security and protection.

Eleven EU Member States29 support the D4D Hub which was initiated by a Letter of Intent.30
The letter mentions cooperation in the digital field with partner countries for development
purposes; sustainable, responsible and inclusive digital economy investments in partner countries;
collaboration during the implementation of joint projects; and cooperation on norms, standards and
26 Digital4Development Hub (2020). D4D Hub, EU International partnerships. Available at: https://www.d4dlaunch.eu/
27

The six countries of the EU’s Eastern Neighbourhood are Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine.

28 “AU” refers to the African Union.
29 Belgium, Estonia, Finland, France, Germany, Lithuania, Luxembourg, Netherlands, Portugal, Spain and Sweden.
30 D4D Team Europe (2020). Joint Letter of Intent to foster a “Team Europe” approach implementing Digital4Development (D4D) in

partner countries. Available at: https://toolkit-digitalisierung.de/app/uploads/2020/12/MoU-D4D-Hub.pdf

23

preconditions to ensure that the goals and activities of the D4D Hub are in line with international laws
as well as with EU values and principles. The “Team Europe Approach” mentioned in the letter ofintent refers to an approach between like-minded partners among EU Member States as well as in
non-EU partner countries to achieve together joint initiatives and projects. Like-minded partners canbe understood as partners sharing the values promoted by the EU. While this point could limit thescope under which countries and stakeholders would be able to join these initiatives, and therefore
limit the coverage of the actions initiated by the EU, it would make sure that key principles and values- such as human rights, the rule of law, privacy, transparency, openness and democracy - are taken
into account when designing and implementing digital-for-development projects.
With the D4D Hub, business opportunities are likely to arise in many third markets, startingwith Africa through the new regional branch “AU-EU D4D Hub”. A close follow-up on this initiative
would be useful to better understand how the D4D Hub will involve the private sector, and if Japanesecompanies will be able to join this platform.
1.4.4. Initiatives by EU Member States
In addition to EU policies and initiatives to create more digital connectivity and more businesscooperation with Japanese businesses in third markets, some EU Member States have also launchedindividual initiatives with Japan:

In 2019, France and Japan agreed on a roadmap for future cooperation between both countries
during the 2019-2023 period which includes cooperation in the Indo-Pacific.31 The potential of
French-Japanese joint projects in Africa was also presented during the 3rd French-JapaneseBusiness Summit in November 2020, with an event focusing on “growth opportunities in Africa:
towards new business partnerships”32.
In 2019, Italy and Japan discussed possible future investments and joint initiatives for better
connectivity between East Asia and Mediterranean Europe with a focus on the FOIP.33
In 2020, Germany34 and the Netherlands35 published policy guidelines about individual and EU
cooperation with partners in Asia, and in particular with the Indo-Pacific region.

31 MOFA and French government (2019). Roadmap for French-Japanese cooperation to open new horizons between France and Japan,

within the exceptional partnership’s framework (2019-2023). Available at (in French): https://www.mofa.go.jp/files/000492473.pdf
32
CCI France Japon (2020). 2020 French Japanese Business Summit: Key Takeaways Videos. Available at:https://www.ccifj.or.jp/actus/n/news/2020-french-japanese-business-summit-key-takeaways-videos.html
33 Embassy of Italy to Japan (2019). Meetings of Minister Moavero with the Prime Minister of Japan, Shinzo Abe, and with Hon. Akira
Amari,
PresidentoftheItaly-Japan
Parliamentary
Friendship
Association.
Availableat:https://ambtokyo.esteri.it/ambasciata_tokyo/ja/ambasciata/news/dall_ambasciata/2019/06/riunioni-del-ministro-moavero-con.html
34 German Federal Foreign Office (2020) “Germany-Europe-Asia: shaping the 21st century together”: The German Government adopt
policyguidelines
onthe
Indo-Pacificregion.
Availableat:https://www.auswaertigesamt.de/en/aussenpolitik/regionaleschwerpunkte/asien/german-government-policy-guidelines-indo-pacific/2380510
35 Government of the Netherlands (2020). Indo-Pacific: guidelines for strengthening Dutch and EU cooperation with partners in Asia.
Available at (in Dutch): https://www.rijksoverheid.nl/documenten/publicaties/2020/11/13/indo-pacific-een-leidraad-voorversterking-van-de-nederlandse-en-eu-samenwerking-met-partners-in-azie

24

1.5.

OTHER FOREIGN CONNECTIVITY INITIATIVES

Similar foreign initiatives on connectivity including a digital connectivity aspect are worth
mention to show that the EU-Japan Connectivity Partnership is not the only active partnership in thisfield. Alternative initiatives may create business competition that EU SMEs should acknowledge.
1.5.1. Japan-India cooperation in the Indo-Pacific, including Africa
In 2018, Japan and India confirmed their joint cooperation for development purposes in the
Indo-Pacific region, including Africa. Both sides agreed to cooperate for more connectivity in theregion, including digital connectivity.36 India is one of Japan’s long-term partners in the digital field
and the Confederation of Indian Industry has been active in Africa for more than 20 years 37, whichmakes India a privileged partner for Japanese companies wishing to set foot in Africa, and therefore
a competitor for EU companies already established in Africa.
1.5.2. Japan-U.S. cooperation in the Indo-Pacific
While many countries have partnered with Japan under the FOIP, the U.S. has certainly been
one of the most active partners. The U.S. has shown that partnerships with Japan in third markets arehighly promising and can benefit all parties involved, which means the U.S., Japan and Indo-Pacificcountries.
First, the U.S. and Japan issued a joint statement in 2018 on advancing a free and open IndoPacific through energy, infrastructure and digital connectivity cooperation 38, and the resulting joint
cooperation has already initiated several projects. Indeed, during the Second Public-Private Sector
Roundtable Discussion on U.S.-Japan Cooperation on Third Country Infrastructure that took place in
2018, the U.S. and Japan laid out a list of 10 cases of commercial collaboration and market
development, two types of joint financing and three initiatives to reinforce capacity building in third
markets.39

36

Prime Minister’s Office of India (2018). India-Japan Fact Sheets: India-Japan Development Cooperation in the Indo-Pacific, including
Africa. Available at: https://www.pmindia.gov.in/en/news_updates/india-japan-fact-sheets-india-japan-development-cooperation-inthe-indo-pacific-including-africa/
37 Confederation of Indian Industry (n.d.). Africa. Available at:https://www.cii.in/InternationalRegions.aspx?enc=6Zpu9+0MgRzmLc1BDCqTC6Hnaop1iVSIOO5XnW3ESJ70EdhVpVHfcan+AKC6FqKC
UuzBTxB5l4p7T8V46lwHOQ==
38 White House (2018). Remarks by Vice President Pence and Prime Minister Abe of Japan in Joint Press Statements. Available at:https://trumpwhitehouse.archives.gov/briefings-statements/remarks-vice-president-pence-prime-minister-abe-japan-joint-pressstatements/
39 United States Department of State (2018). Joint Statement of the Second Public-Private Sector Roundtable Discussion on US-Japan
Cooperation on Third Country Infrastructure. Available at: https://2017-2021.state.gov/joint-statement-of-the-second-public-privatesector-roundtable-discussion-on-u-s-japan-cooperation-on-third-country-infrastructure//index.html

25

To achieve cooperation on energy and digital connectivity the U.S. and Japan have established
two strategic partnerships aiming at joint cooperation in third markets: The Japan-United States Strategic Energy Partnership (JUSEP) which aims to deepen
cooperation in the power sector and transmission grid development, in particular in the Mekong
region and in Africa.40
 The Japan-United States Strategic Digital Economy Partnership (JUSDEP) which is a working
group that was launched in 2019 under the U.S.-Japan Policy Cooperation Dialogue on theInternet Economy. JUSDEP aims to align Japanese and U.S. diplomatic, foreign assistance andfinancing efforts to support secure digital connectivity and the digital economy in developing
countries with a focus on the Indo-Pacific region. JUSDEP has prioritised cooperation on smart
cities with an initial focus on the ASEAN, capacity building on cybersecurity and the developmentof secure and reliable telecommunications infrastructures such as submarine cables.41
1.5.3. Japan-U.S.-Australia cooperation in Palau
The first project delivered under the Trilateral Partnership for Infrastructure Investment in
the Indo-Pacific between the U.S., Australia and Japan is a digital connectivity project that aims tobuild an undersea fibre optic cable to Palau.42 The official announcement took place in October 2020
during the annual Indo-Pacific Business Forum organised by the U.S.43 The $30-million project willconnect Palau to the world’s longest undersea cable, the ECHO Cable Network connecting Singapore
to the U.S.. As Palau is currently connected to only one submarine cable, the country has a vulnerable
position if the cable were to be damaged, and this second connection aims at strengthening Palau’s
telecom resiliency as soon as 2021.

Each party will contribute as follows44:
The U.S. Government will provide $4.6 million, including $3.8 million from the U.S. Agency forInternational Development (USAID) and $800,000 from the U.S. Government’s Transaction
Advisory Fund.
The Republic of Palau will use $7 million of U.S. funding made available under an agreement
between both countries. A Palauan company will contribute $1 million to undertake theconstruction of the submarine cable.

40

United States Department of State (2019). President Donald J. Trump and Prime Minister Shinzo Abe Advance the United States’ andJapan’s Global Partnership. Available at: https://2017-2021.state.gov/president-donald-j-trump-and-prime-minister-shinzo-abeadvance-the-united-states-and-japans-global-partnership//index.html
MOFA (2021) Japan’s effort for a free and open Indo-Pacific, p.9. Available at: https://www.mofa.go.jp/files/100056243.pdf
41 Idem
42 United States Department of State (2020). The United States partners with Australia and Japan to expand reliable and secure digitalconnectivity in Palau. Available at: https://2017-2021.state.gov/the-united-states-partners-with-australia-and-japan-to-expandreliable-and-secure-digital-connectivity-in-palau//index.html
43
Indo-Pacific Business Forum (2020). Indo-Pacific Business Forum - Homepage. Website available at:https://www.indopacificbusinessforum.com/
44 United States Department of State (2020). The United States partners with Australia and Japan to expand reliable and secure digitalconnectivity in Palau.

26




The Government of Australia will contribute nearly $10 million, including $9 million from theAustralia Infrastructure Financing Facility for the Pacific.
The Government of Japan will approve a financing package through JBIC and NEXI.
This recent joint collaboration between Japan, Australia, the U.S. and Palau shows theexisting possibilities for future joint projects between the EU and Japan in third markets,
including in the digital economy and in digital infrastructures. The specificity of the targetedthird market and the need for multiple partners for expensive and technical projects likeundersea cables justify alliances between foreign partners in third markets.

1.5.4. China’s connectivity initiatives
China’s large connectivity and infrastructure project known as the Belt and Road Initiative(BRI) aims at building two routes (a belt and a road): a land route called the “Silk Road Economic Belt”,
and a maritime route called the “21st Century Maritime Silk Road”. 45 These routes aim to coverCentral Asia, Europe, Africa, the Middle-East and Southeast Asia to create more connectivity andtrading routes. In addition, China mentioned in 2019 that cooperation in the digital economy would
be one of the priority areas of the BRI46, which would ultimately create a Digital Silk Road.
The Digital Silk Road would include the participation of China in providing digital
infrastructures such as fibre optic cables and network equipment, data centres, smart city projects,
e-commerce and mobile payment deals to countries involved in the BRI. If successful, the Digital Silk
Road would enable Chinese companies to enhance their growth potential in high-tech industries, andwould spread China’s cyber standards in countries involved in the BRI47.
The Digital Silk Road is an alternative to the EU-Japan Connectivity Partnership and the otherabove-mentioned initiatives involving India, the U.S. and Australia. Every digital connectivity
initiative implies the promotion of its own values, digital standards and technologies. The targetedthird markets have more and more choice among the many foreign companies interested indeveloping digital connectivity. Third markets have the possibility to make foreign companies
compete to obtain the best deal at the best price. They can also create competition by setting quality
criteria that meet their needs and reflect their values by requesting specific digital standards ensuring
secure, reliable, interoperable, sustainable, accessible and affordable digital connectivity.

45

State Council of the People’s Republic of China (2015). Full text: Action plan on the Belt and Road Initiative. Available at:
http://english.www.gov.cn/archive/publications/2015/03/30/content_281475080249035.htm
46 Second Belt and Road Forum for International Cooperation (2019). Xi Jinping Chairs and Addresses the Leaders’ Roundtable of theSecond Belt and Road Forum for International Cooperation (BRF). Available at:
http://www.beltandroadforum.org/english/n100/2019/0429/c22-1392.html
47 Eder, T., Arcesati, R., Mardell, J. (2019). Networking the “Belt and Road” – The future is digital. Available at:https://merics.org/en/analysis/networking-belt-and-road-future-digital27

2. WHY A FOCUS ON THE DIGITAL ECONOMY?
2.1.

WHAT IS THE DIGITAL ECONOMY?

2.1.1. Meaning of “digital economy”
According to the European Observatory of Working Life (EurWORK), there is no official
definition of the digital economy. 48 Nonetheless, the European Commission considers that
digitalisation affects all businesses and all industries, to various extents. Therefore, the digital
economy is a cross-sectoral economy, referring to the use of digital technologies in all industries. It
is in permanent evolution thanks to companies, entrepreneurs, consumers, researchers, scientists
and programmers imagining and creating disruptive technologies day after day. New technologies
create new industries and new ways to do business. Defining the digital economy is therefore achallenge by its broad meaning, its cross-sectoral aspect and its permanent evolution.
The digital economy goes beyond the terms “information technology (IT)” or “informationand communication technology (ICT)”. Taking into account the application of digital technologies
to other industries such agriculture, healthcare and transport is important to understand theextent of the digital economy.

2.1.2. Digitalisation and digitisation
Among the many components of the digital economy, two words should be defined to better
understand the types of business opportunities that the digital economy can offer: digitalisation anddigitisation. EurWORK defines the two terms as follow:


Digitalisation transforms the way that businesses work and interact with each other as well aswith their clients. Digitalisation happens when businesses are transformed by widely adopting
digital technologies such as IoT, AI, sensors and virtual reality (VR).49



Digitisation is a component of digitalisation. It refers to processes that transform elements of thephysical world into a digital form that can be processed by a computer, for example with the helpof sensors; or vice versa, by using technologies like 3D printing that transforms digital information
into an element of the physical world50.

48 EurWORK (2018). Digital economy. Available at: https://www.eurofound.europa.eu/observatories/eurwork/industrial-relations-dictionary/digital-economy
49 Idem.
50 EurWORK (2018). Digitisation. Available at: https://www.eurofound.europa.eu/observatories/eurwork/industrial-relationsdictionary/digitisation28

2.2. A GROWING TREND THAT AFFECTS BUSINESSES AND OPENS OPPORTUNITIES
2.2.1 EU policies to support digital connectivity and the digital economy“A Europe fit for the digital age” is one of the EU’s six priorities for the 2019-2024 period.51
The EU’s digital strategy aims to address how digital technologies are changing people’s lives andtransforming businesses, as well as how they can contribute to a more sustainable and green Europe,by focusing on nine actions as shown below in Figure 2.
Figure 2. Nine priority actions for a Europe fit for the digital age

Artificial
Intelligence
EU DataStrategy

Connectivity

Europeanindustrial
strategy

A Europe
fit for thedigital age

Digital Skills

Cybersecurity

DigitalServices Act

High Performing
Computing (HPC)

DigitalMarkets Act

The EU puts digital connectivity and the digital economy at the heart of its priorities andpolicies. The digital economy is a “hot topic” which is likely to open new business opportunities
related to the digital economy and spur actions from the EU private sector, including EU SMEs. A focus
on the digital economy when analysing EU-Japan business cooperation in third markets is therefore
in line with current priorities.

51 European Commission (2019). A Europe fit for the digital age. Website available at: https://ec.europa.eu/info/strategy/priorities-

2019-2024/europe-fit-digital-age_en29

2.2.2 EU SMEs affected by the digital transformation: case study of German companies in Japan
A report about economic outlooks for German businesses in Japan published in 2020 by theGerman Chamber of Commerce and Industry in Japan (AHK Japan) shows how businesses can be
impacted by digitalisation and digitisation. The report is based on a survey which was answered by
92 German companies, the majority of which were SMEs.
Figure 3 provides a breakdown by sector of the companies surveyed by AHK for their 2020 report.
The chart shows that AHK surveyed companies across multiple sectors, with no specific focus on
traditional digital industries such as ICT and telecommunications.
Figure 3. Breakdown by sector of the companies surveyed by AHK Japan in 2020

Source: German Chamber of Commerce and Industry in Japan, KPMG (2020). Economic outlook – German
Business in Japan 202052

The report shows that 71% of the respondents mentioned that the digitalisation of services andindustries has affected their business in Japan, which is a 12% increase from the 2019 survey53. In thereport, digitalisation is ranked as the second top influence on business activities in Japan after
globalisation. In addition, the report highlights that technological development in the digital sector
is changing the way products are manufactured, the way services reach the market, the way decisions
are made and affect businesses’ daily life with a new market logic. The majority of the respondents
52 German Chamber of Commerce and Industry in Japan, KPMG (2020). Economic outlook – German Business in Japan 2020. Reportavailable at: https://japan.ahk.de/en/infothek/surveys-and-studies, p.23.
53 Idem, p.14.

30

notice the impact of digitalisation and digitisation “in every core aspect of their business”, whichmeans that it has an impact on their business model, their interactions with partners and employees,
their customer offerings and their internal processes (as shown in Figure 4). Figure 4 shows that mostcompanies across all sectors are impacted by digitalisation and are likely to transform their businessto become part of the digital economy and in order to survive. Digital transformation can open
business opportunities not only to adapt companies’ offerings to the digital economy, but also tochange companies from the inside.
Figure 4. Impacts of digitalisation on the business activitiesof German businesses in Japan

Source: German Chamber of Commerce and Industry in Japan, KPMG (2020). Economic outlook – German
Business in Japan 202054

Nonetheless, despite the need for a digital transformation, the study shows that 67% of the
respondents do not pursue any cooperation to promote digital innovation with a third party. In
addition, Figure 5 shows that when questioned about the impact of the Japanese concept of “Society
5.0”, almost half of the respondents answered that the concept had no relevance or limited chances
to impact their business. More data would be necessary to assess the opinion of more EU companies
in the long term but the German study already shows that a certain gap exists between companies’
needs and ambitions, and high-level policies and concepts such as the Society 5.0.

54 German Chamber of Commerce and Industry in Japan, KPMG (2020). Economic outlook – German Business in Japan 2020. Reportavailable at: https://japan.ahk.de/en/infothek/surveys-and-studies, p.16.

31

Figure 5. Impact of the Japanese “Society 5.0” initiative on German companies’ business

Source: German Chamber of Commerce and Industry in Japan, KPMG (2020). Economic outlook – German
Business in Japan 202055

The data provided by the German study are useful to show that German SMEs doing business inJapan are impacted by digitalisation, and are therefore part of the digital economy. Nonetheless,the German study might not reflect the opinions of all EU businesses in Japan. A more comprehensive
and systematic data collection would be necessary to better assess the opinions of EU companies
regarding the digital economy and alliances with Japanese partners in third markets.

2.3.

RELATED TRENDS AND BUSINESS OPPORTUNITIES

2.3.1. Why is the digital economy relevant for EU-Japan joint projects in third markets?
As mentioned above, the digital economy is not only a “hot topic” to discuss. The increasing
digitalisation of all industries makes the digital economy bigger and bigger and affects companies ofall sizes and from all around the world. Covering the digital economy is therefore crucial whenanalysing future business opportunities in the EU, in Japan and in third markets.
On the one hand, Japanese companies are still falling behind in the digital field, whichmakes them more open to partner with innovative foreign companies, including EU SMEs as long as
they can provide technologies that can be customised. In addition, the Japanese aging population is
likely to make the digital transition slower than other countries. On the other hand, EU companies
55 German Chamber of Commerce and Industry in Japan, KPMG (2020). Economic outlook – German Business in Japan 2020. Reportavailable at: https://japan.ahk.de/en/infothek/surveys-and-studies, p.17.

32

have been active in third markets that are still considered as unfamiliar to Japanese companies. These
two points give a competitive advantage to EU companies for projects in the digital field in third
markets. Indeed, they can be seen as excellent partners with complementary strengths for Japanesecompanies. EU tech SMEs are particularly relevant as they can add a specific digital technology
needed in a large project undertaken by a Japanese company in third markets.
The EU-Japan Connectivity Partnership highlights five regions in which the EU and Japanintend to work in the field of digital connectivity: the Western Balkans, Eastern Europe, Central Asia,
Indo-Pacific and Africa. These regions are in line with what has been done by the private sector
according to past case studies of EU-Japan business alliances in third markets.56 Among the target
regions, many countries are referred to as “economies in transition”57, “developing economies”58 and“least developed countries”59 by the United Nations60, which implies the existence of many untappedbusiness opportunities, including in the digital economy, to contribute to the development of thesethree categories of countries. The present report will refer to these three categories as a whole withthe terms “emerging countries”, or “emerging markets”.
Emerging countries have their own development issues to tackle. For example, to improve
agricultural systems and food transformation in order to reduce hunger, or to improve healthcare
systems and capacity building to improve people’s health and well-being. The use of digitaltechnologies can be very powerful to tackle development issues. That is why involving the private
sector in development projects is important to obtain effective results.
Thanks to today’s level of innovation, digital technologies can help emerging countries in
leapfrogging. Leapfrogging can help tackle development issues in a more effective way and in lesstime that it took today’s most developed countries to do so in the past.

Leapfrogging is a concept that is increasingly used in emerging countries. Leapfrogging
happens when a technology provides the capacity to skip stages of an industrial path considered
as less efficient, more expensive and more polluting to directly reach a more advanced stage.

56

Marbot, M. (2020). Analysis of EU-Japan business cooperation in third countries, p.17-19, p.129-130
Most countries in Central Asia are categorised as economies in transition by the United Nations.
58 Most Asian and African countries are categorised as developing economies by the United Nations.
59 33 out of 54 African countries were categorised among the least developed countries in the world by the United Nations.
60 United Nations (2020). World Economic Situation and Prospects. Available at: https://www.un.org/development/desa/dpad/wpcontent/uploads/sites/45/WESP2020_Annex.pdf
57

33

2.3.2. Smart city and smart rural
Smart city
Smart city is a “hot topic” in the digital economy that can open business opportunities for EUJapan business alliances in various industries such as smart mobility, smart building and smart
services. The Japanese Niimaru projects put smart cities among the priority sectors for the overseas
expansion of Japanese companies. To involve them in smart-city projects, Japan intends to promote
Japanese companies in public-private partnerships in ASEAN, India, South America, Europe andNorth America.61 Another smart city initiative aiming at the Asian market is the City of Yokohama’s
Y-PORT project.62. Y-PORT promotes innovative urban solutions developed by Japanese companies
in Yokohama for smart-city projects in Asia. Y-PORT is a platform that brings together the Japanese
private sector and the Asian public sector to encourage public-private partnerships.
The interest of the Japanese government and of Japanese companies in smart-city projects in
Asia is an opportunity for EU tech companies, including SMEs with state-of-the-art technologies, tojoin projects’ consortia. Indeed, large Japanese companies often have expertise in winning tenders
in Asia and have a lot of capital. However, they sometimes lack specific technologies, which leads
them to partner with an EU SME to work together on a project in Asia.
Figure 6. Example of an EU SME taking part in a smart-city project with a large Japanese company
in a third market

City in athirdmarketCapitalEquipment
Subsidiary
Etc.

Smart-city
project(tender)
EU SME withthe required
digitaltechnology

Smart rural
Emerging countries also need smart rural solutions to support their local communities living
in remote areas and lacking access to basic services such as electricity, water, healthcare andtransport. Smart rural projects require leapfrogging and “to do more with less” thanks to frugal
innovation.63 Innovative digital tools are used to achieve development in rural areas, which makes
smart-rural projects very promising for EU-Japan business cooperation in third markets.

61

Ministry of Internal Affairs and Communications of Japan (2020). Ministry of Internal Affairs and Communications’ Overseas
Expansion Plan 2020.
62 City of Yokohama, Y-PORT Center Office (2020). Y-PORT – Yokohama partnership of Resources and Technologies. Available at:https://yport.city.yokohama.lg.jp/en
63 Frugal innovation is needed to deliver affordable high-quality products and services with limited resources.

34

2.3.3. Sustainable Development Goals (SDGs)
The SDGs are closely related to the digital economy. Indeed, like the digital economy, theSDGs cover various development issues and therefore various industrial sectors as shown in Figure 7.
Consequently, projects in the digital economy undertaken by EU-Japan business alliances in emerging
markets should take the SDGs into account, from the preparation to the implementation phase.
Figure 7. The Sustainable Development Goals64

Addressing the SDGs is crucial, whether a project is a development project per se or not.
Indeed, industrial projects can have a high development impact. For example, an EU-Japan industrial
project in a third market can have a high development impact by creating jobs, skills, infrastructures
and added value to the goods produced locally. Addressing the SDGs and sustainability in general is
not merely a philanthropic idea. In a world with increasing inequalities and conflicts globally, and anincreasing deterioration of the planet, sustainability is necessary in order to make plans in the longterm, including for industries. Therefore, a proper assessment of the impact of a project on the local
community is important, and SDGs can be good end goals to aim for in order to better design a project.
In conclusion, development projects and industrial projects are compatible. While the workof non-governmental organisations remains important, the inclusion of the private sector canstimulate the local economy and the local community to trigger development outcomes.
64

United Nations (2015). The 17 Goals. Available at: https://sdgs.un.org/goals

35

2.3.4. Impact of the COVID-19 pandemic
The COVID-19 pandemic has urged both high-income and low-income countries to achieve a
digital transformation of businesses and of society, and to diversify their economies and their
supply chains. The pandemic has also accelerated the use of smart healthcare systems such as
telemedicine, which is a field particularly relevant for communities living in remote areas.
In 2020, a survey suggested that 70% of Japanese companies with domestic plants wereplanning to revise their supply chains, with “57.1% indicating that they will stop purchasing from asingle country in order to diversify sources”.65 The respondents also indicated that the pandemic has
accelerated the use of digital technologies with an 87% increase in spending on equipment for
teleworking, a 63.6% increase on spending for cybersecurity and 61% of respondents planning toswitch to digital tools such as e-seals to handle internal paperwork.
The pandemic has spotlighted many businesses’ flaws and revealed new needs in various
industries that could be addressed thanks to digital technologies as shown in Figure 8.
The impact of the COVID-19 pandemic will certainly last for the next few years and new similarcrises are likely to happen again. Companies have to adapt and innovate as their business model
has probably become obsolete. Digitalisation will be key for companies that will pivot theirbusiness to adapt to the “new normal” and be more resilient to future crises.

Regarding emerging markets, the European Investment Bank (EIB) published in 2020 a paper
showing Africa’s digital solutions to tackle COVID-19 with the aim to create awareness on the topic,
to encourage the development of new ideas and to identify investment to contribute to the responseto the crisis.66 Indeed, Africa has been seriously impacted by the pandemic, affecting small andinformal businesses, as well as poor people the most. The paper shows 23 concrete case studies67
of digital solutions deployed in Africa and worldwide to tackle issues related to the crisis such as
remote learning, access to healthcare and virtual government business continuity. The companies
developing software for these projects partnered with various international, public and private
entities such as the United Nations (UNDP, UNICEF, UNCDF, UNESCO), local governments, and large
local companies. Most of the software developers mentioned in the EIB’s paper are African SMEs, andtwo EU SMEs are also included: KaiOS.ai (Netherlands) and Famoco (France). No Japanese company
65

Hayashi, E. (2020) 70% of Japan execs plan changes to supply chain: Nikkei survey, in Nikkei Asia. Available at:https://asia.nikkei.com/Business/Business-trends/70-of-Japan-execs-plan-changes-to-supply-chain-Nikkei-survey
66
EuropeanInvestment
Bank(2020).
Africa’s
digitalsolutions
totackleCOVID-19.
Availableat:https://www.eib.org/attachments/country/africa_s_digital_solutions_to_tackle_covid_19_en.pdf
67 Idem, p.34-57.

36

appears in the list. However, large American companies such as Zoom, Microsoft, Dataminr andZipline seem to have participated in the development of digital solutions in Africa during the crisis.
Figure 8. Examples of digital tools needed to tackle issues faced by businesses and the society
during the COVID-19 crisis

Healthcare

Need for tracing apps that respect privacy, need for telemedicine and need for3D printing to quickly manufacture a specific number of medical tools

COVID-19 crisis

Information

High number of fake news and need for tools to analyse, verify and monitor
information online, need to disseminate correct information in real timeand need for tools to educate the public on online information

PublicLack of digitalised public services or "e-government"

services

Teleworking

Manufacturing

E-commerce

Need for a wider adoption of digital tools such as videoconference
tools, virtual matchmaking platforms and e-signatures/e-seals

Need for more automated factories to reduce human contacts, to increase
the connectivity of each process and to collect data in order to better
manage the production remotely

Need for SMEs to digitalise their business and use e-commerce, delivery apps
and pick-and-go systems

At the policy level, the EU and Japan have committed to ensure an economic recovery for moresustainable, inclusive and resilient economies in line with the SDGs, a green transition and a digitaltransformation.68 Both sides have stressed the need to make global supply chains more resilient
through efforts on rule-making on e-commerce. The EU and Japan have also committed to assist
emerging countries not only with short-term assistance but also with mid-to-long term assistance tostrengthen their healthcare systems and address the economic impact of the current crisis.

68

EuropeanCommission(2020).
Joint
press
release:https://ec.europa.eu/commission/presscorner/detail/en/ip_20_942

Japan-EU

Leaders’

meeting.

Available

at:

37

2.4.

WHICH KEY AREAS OF THE DIGITAL ECONOMY ARE PROMISING?

Partnerships in the digital economy often involve tech companies that add digital solutions toexisting products and services in various industries as shown in Figure 9.
Figure 9. Digital economy: the application of digital technology to other industries

Healthcare
Agriculture
Mobility
Banking
Etc.

Digitaltechnology

Digitaleconomy2.4.1. Smart healthcare
Smart healthcare systems are needed in both high-income countries
and low-income countries, at different levels. In emerging countries, where
healthcare systems are not always fully developed and therefore not fully
digitised, the need for leapfrogging is high. When addressing healthcare issues
with digital technologies in emerging markets, foreign companies and otherstakeholders in the medical field have to develop ground-breaking solutions
that will be adapted to the local needs and environment. Healthcare systems are an important
infrastructure of a society. However, some emerging countries do not have healthcare infrastructures
covering their whole population. Communities living in remote areas with no or little access toservices in general are often deprived of basic medical support. Digital solutions such as telemedicine
can help tackle these inequalities and provide virtual infrastructures replacing the lack of physicalones. The case study provided in this report only shows a small part of the many opportunities thatsmart healthcare can offer and the COVID-19 pandemic has accelerated the need for healthtechnology, or “medtech,” that includes digital solutions.
TABLE II: Keywords – Smart healthcare
Electronic HealthPatient portals

Telemedicine

Clinical decision support

Cloud computing

Medical imaging

Robotics

Internet of Things

Artificial Intelligence

Big Data analytics

Additive manufacturing

Wearable technology(3D printing)(e.g. exoskeletons)

Records

Medical training using elearning, Virtual Reality
and Augmented Reality

Personalised health data
Biometrics

Mobile applications

platform for preventive
care
38

Case study – Smart healthcare
CHARACTERISTICS OF THE COMPANIES69

NEC Corporation

Simprints Technology Ltd.

Size

Large

Size

SME (<50 employees)

HQTokyo, Japan

HQ

Cambridge, United Kingdom

About

NEC is a Japanese multinational information
technology and electronics company thatprovides IT and network solutions, including
cloud computing, AI, IoT platform andtelecommunications
equipment
andsoftware.

About

Simprints is a nonprofit tech company
developing biometrics solutions to integratethem into existing mobile tools and workflow.
Simprints system integration and operations help
delivering essential services to vulnerable
communities in emerging countries.

The GAVI AllianceType

Global public-private partnership

About

GAVI works with governments, internationalorganisations, foundations, the vaccine
industry and the civil society to increase accessto immunisation in low-income countries.

Partnership
Type ofThird market

Year

SDGs covered
Details on joint project(s)partnership
Collaboration

Bangladesh,(MoU)

Tanzania

2019

Biometric solutions to improve
vaccine immunisation coverage

DETAILS ON THE PARTNERSHIPIn 2019, NEC signed an MoU with Gavi – the Vaccine Alliance – and Simprints Technology Ltd. to develop and use
biometrics to improve immunisation coverage of children in developing countries70. As half of all children underfive years old in Sub-Saharan Africa are not systematically registered at birth, and therefore not in possession of an
official identity, health practitioners struggle to ensure these children receive the vaccines that they need at theright time. The biometrics initiative provides the world’s first scalable fingerprint identification solution giving
children a digital ID linked to a medical record. The project combines each partners’ strengths as follow: Gavi
provides its expertise in immunisation, Simprints provides biometric fingerprint technology and NEC provides areinforced authentication engine. Both companies managed to adapt their technologies to their new target, young
children whose fingerprints tend to be blurred due to their softness. The initiative was launched in early 2020 in
Bangladesh and Tanzania and aims to boost children’s immunisation coverage, and to support health practitioners
in keeping track of children’s vaccination record. The consortium’s digital solution can help reach children living inremote areas and in impoverished communities and have the potential to become the standard for mass vaccination
in low-income countries.

69

The United Kingdom was still in the transition period with the European Union at the time of the partnership. Therefore, thepartnership counts as an example of EU-Japan business cooperation in third markets.
70 NEC (2019). Gavi, NEC, and Simprints to deploy world’s first scalable child fingerprint identification solution to boost immunisationin developing countries. Available at: https://www.nec.com/en/press/201906/global_20190606_01.html

39

2.4.2. Smart industry (or smart manufacturing)
The digital economy is often associated to the concept of “Industry 4.0” whichis regarded as the fourth and next phase in the digitalisation of the
manufacturing sector. Industry 4.0 is the term given to production processes
with fully integrated automated facilities which communicate with one
another” 71 . Smart industry can be achieved with the use of various digitalsolutions such as sensors, cameras, robots and software. The use of digitalsolutions in factories and other industrial facilities helps companies to have a better overview of theirproductivity and their flaws, and therefore to better manage their business. Smart industry can help
increase productivity, reduce costs and facilitate tasks done by humans. In light of the COVID-19
pandemic, smart industry and automation were seen as a way to better protect workers by reducing
human contacts and enabling the remote management of factories.
The present report aims to support the matchmaking of EU SMEs and Japanese companies
for joint projects in third markets. Smart industry covers a wide range of industries but the author
noticed based on the fieldwork undertaken a particular interest from Japanese companies toward EU
companies, including SMEs, in the following three sectors:


AI technologies applied to the circular economy and the waste management sector for theJapanese and the Asian market. Indeed, Europe is well-known for its expertise in recycling andmanaging waste, and AI technologies that can segregate specific minerals and materials in
waste such as plastic in order to be reused are particularly sought-after.

Software connecting and digitising each step of a given production process to one another, sothat physical information is translated into data that will be analysed and processed by acomputer. Ultimately, this process can build a digital twin of a factory and help boost productivity
and reduce costs.



Digital solutions applied to the energy, and in particular renewable energy, and mining sectors
are sought-after by Japanese companies looking to invest in these sectors in emerging markets.
TABLE III: Keywords – Smart industry
Digital twin

Automation

Internet of Things

Big Data processing

5G

3D printing

Robotics

Internet of Things

Artificial Intelligence

Big Data analytics

Additive manufacturing

Smart factory(3D printing)Industry 4.071

EurWORK (2018). Digital economy. Available at: https://www.eurofound.europa.eu/observatories/eurwork/industrial-relationsdictionary/digital-economy

40

Case study – Smart industry72

CHARACTERISTICS OF THE COMPANIESACCESS Co, Ltd

IoTerop SAS

Size

Large

Size

SME (<50 employees)

HQTokyo, Japan

HQ

Montpellier, France

About

ACCESS Co., Ltd. Develops browser
software for the Internet. The
company designs custom browsers
for manufacturers of electronics
such as cellular phones, portable email devices, handheld PCs, video
game consoles, and car navigation
systems.

About

IoTerop is a software solution provider
for the secure, interoperable andremote management of connected
objects in the world of the Internet ofThings (IoT).

Partnership
Type ofThird market

Yearpartnership

Partnership

SDGs covered
Details on joint
project(s)Southeast Asia

2019

Software / IoT solution

DETAILS ON THE PARTNERSHIPIn October 2019, IoTerop and ACCESS Systems signed a partnership agreement. This partnershipwas enabled by the fact that IoTerop executives have had a long-term relationship with ACCESS.
Some of them used to work for a company belonging to ACCESS, before this company was acquiredby another. They reconnected with ACCESS after founding IoTerop in 2016 and signed a partnershipagreement in 2019.
The partnership is as follows: as IoTerop is actively expanding its activities overseas, it relies on themarket intelligence and business development expertise of ACCESS Systems in Southeast Asia,with one of the ultimate goals being to then enter the Japanese market. According to IoTerop,
ACCESS Systems motivation in the partnership relies on its interest in IoTerop technology. 73

72

Based on Marbot, M. (2020). Analysis of EU-Japan business cooperation in third countries, p.49.
Vialatte, H. (2019). Ioterop leve 1,5 million pour ses solutions de gestion a distance des objets connectes, in Les Echos Entrepreneurs.
Available at: https://business.lesechos.fr/entrepreneurs/financer-sa-creation/0602024268598-ioterop-leve-1-5-million-pour-sessolutions-de-gestion-a-distance-des-objets-connectes-332613.php
73

41

2.4.3. Smart agriculture
Agriculture is one of the most important industries for many third markets, andin particular emerging countries. Emerging countries need various technologies
that the EU and Japan can provide, such as digital technology and biotechnology,
to better manage land, to improve productivity and to better anticipate and resist
to natural disasters. Access to quality equipment and to e-commerce for farmers
in impoverished and remote areas can be improved thanks to digital platforms
and fintech. The combination of various tools such as drones, sensors and space technologies is also
useful to make accurate analyses of land and crops. EU SMEs already active in third markets in the
agricultural sector might want to expand their business either within the same country or toward
neighbouring countries. A partnership with a large Japanese company that can bring capital can be a
way to achieve such projects and also to combine smart agriculture with smart industry if the aim is
to scale up a business from the agricultural sector to the food-processing sector.
2.4.4. Smart services
Smart services cover many industries such as, but not limited to, fintech, egovernment services and e-education. Many EU countries are far moreadvanced in e-government services than Japan and emerging countries, whichmakes EU companies relevant partners for EU-Japan joint projects in thirdmarkets. Depending on the requirements set by third markets, EU companies canoffer an added value in terms of security and standards that respect privacy and other values
defended by the EU.
As for fintech, digital “pay-as-you-go” solutions are widely used in emerging countries andcan be applied to many industries. For example, digital pay-as-you-go solutions can provide affordable
access to energy to off-grid communities if linked to energy sources such as solar power plants orwind farms. An EU SME developing pay-as-you-go solutions can partner with large Japanesecompanies operating energy projects in emerging countries.
Smart services, in particular in emerging countries, must be adapted to the local
communities and the local environment. Digital services must be affordable, easy to use and able tofunction in an environment with scarce resources such as a limited access to electricity and theInternet. Frugal innovation and leapfrogging are particularly important to effectively reach end users.
For example, Africa has achieved leapfrogging in the banking system by developing affordable fintech
services on mobile phones which do not require the Internet.

42

Access to e-education can be challenging, in particular during the COVID-19 pandemic, inareas that do not have access to the internet and digital equipment. Appropriate digital
infrastructures and affordable equipment are necessary. In addition, the creation of proper
educational content that are qualitative, adapted to the digital format and adapted to their audienceis also part of the many business opportunities of the e-education industry.
Capacity building, or developing professional (digital) skills, is also one of the main needs inemerging countries and one of the areas in which EU SMEs could act at the grassroots level. Indeed,
the private sector can contribute to capacity building by setting up local co-creation hubs or training
programmes taking place in vocational training schools in emerging countries.
2.4.5. Smart mobility
Many countries face mobility issues such as heavy traffic, pollution, high rate ofcar accidents, lack of connection between different transportation modes andlack of transportation from stations to homes, often called the “last mile”.
Digital solutions applied to the transport industry can vary from mobile
applications to AI-powered surveillance systems to monitor traffic. Smartmobility solutions also have to be adapted to the local end users and the local
environment, with some countries using mainly two-wheelers, especially in Africa and Southeast Asia.
Large smart mobility projects are generally smart-city projects initiated by local tenders, which meansthat in the case of an EU-Japan partnership, one side should have expertise in winning tenders in thetarget country.
2.4.6. Cybersecurity
Cybersecurity does not only apply to e-government services. Industrial projects
also need strong cybersecurity systems. Many case studies of EU-Japanbusiness cooperation in third markets include large industrial projects in theinfrastructure and energy sectors. The companies involved handle sensitive
data that need to be secured. Nonetheless, local companies do not always havethe type of cybersecurity system required by a large infrastructure or energy
company. Therefore, EU cybersecurity SMEs already active in third markets would be relevant
partners for large Japanese companies looking to invest in new projects such as infrastructures, power
plants and factories.

43

3. REGIONS WITH OPPORTUNITIES FOR EU-JAPAN BUSINESSCOOPERATION IN THE DIGITAL ECONOMY
The EU-Japan Connectivity Partnership highlights five regions in which the EU and Japan intend
to work with partner countries in the field of connectivity, including digital connectivity: the Western
Balkans, Eastern Europe, Central Asia, Indo-Pacific and Africa.
What is the Indo-Pacific?
In order to be more specific in breaking down which regions have opportunities for EU-Japan
joint projects in the digital economy in third markets, the report will not refer to the Indo-Pacific asa whole and will mention individual regions included in the Indo-Pacific instead. Indeed, despite theglobal growing interest in the Indo-Pacific in recent foreign policies, no official definition on thelimitations of the region has been approved. The EU Institute for Security Studies defines the IndoPacific as a way to shift from the “traditional ‘Asia-Pacific’, focused on the US and its East Asian allies”74
to a new geopolitical construction which encompasses new strategic actors such as India, theMiddle-East and Africa.
As any imaginary space, the definition of the Indo-Pacific region may vary according to whom
is imagining it, which has resulted in the construction of a region with “contested interpretation”.75
For example, in the absence of an official definition, Germany considers the Indo-Pacific to be “theentire region characterised by the Indian Ocean and the Pacific.”76 Such a broad definition might behelpful at a political level, but it lacks precision from a business point of view and for those who wish
to identify business opportunities in specific markets.
Most definitions of the Indo-Pacific region include Oceania, and Asian and African countries
linked to the Indian Ocean and the Pacific Ocean, as well as the seas connecting both oceans.
Sometimes, definitions also cover the Middle-East as well as the American continent, and therefore
Latin America. The present report uses the Japanese FOIP vision to refer to the Indo-Pacific region,
as the FOIP shows the extent of the Indo-Pacific region with projects taking place in Asia, Africa andthe Pacific Islands, and ongoing discussions with Latin America.

74

European Union Institute for Security Studies, Pejsova, E. (2018). The Indo-Pacific – A passage to Europe?. Available at:https://op.europa.eu/en/publication-detail/-/publication/54dfc694-48fc-11e8-be1d-01aa75ed71a1/language-en/format-PDF/source69846028
75 Das, U. (2019). What is the Indo-Pacific?, in The Diplomat. Available at: https://thediplomat.com/2019/07/what-is-the-indo-pacific/
76 German Federal Foreign Office (2020) “Germany-Europe-Asia: shaping the 21st century together”: The German Government adopt
policyguidelines
onthe
Indo-Pacificregion.
Availableat:https://www.auswaertigesamt.de/en/aussenpolitik/regionaleschwerpunkte/asien/german-government-policy-guidelines-indo-pacific/2380510

44

3.1.

COMPLEMENTARITY BETWEEN EU AND JAPANESE COMPANIES

Some regions are particularly promising for EU-Japan business cooperation in third markets
because of the EU and Japan’s respective economic and cultural ties and strong presence andhistory in these regions. A study conducted by the German Chamber of Commerce and Industry inJapan shows that Africa, the Indo-Pacific, Central Asia and Southeast Europe are the most targeted
regions for EU-Japan joint business cooperation.77
3.1.1. Regional complementarity
Cooperation between European and Japanese companies in third markets is an opportunity
for both sides to complement each other’s strengths such as via existing subsidiaries overseas, andto use them for joint projects in third markets.
According to companies interviewed on the topic, as Japanese companies are often wellestablished in Asia, and in particular in ASEAN, EU companies, including SMEs, can take advantage
of a Japanese company’s network in Southeast Asia to either start a collaboration there, or to
replicate a pre-existing partnership to a foreign Asian market.
Likewise, EU companies, including SMEs, are well-established in foreign markets such as
Eastern Europe, the Western Balkans, Central Asia, Africa and Latin America because of sharedlanguages, and strong political, historical and cultural ties. Japanese companies can take advantage
of EU companies’ networks in these regions to either set foot in these markets, or to replicate an
existing partnership with an EU partner in these markets.
Depending on their origin, EU companies, including SMEs, are likely to be more present insome regions than others. For example, Spanish companies have a large network in Latin America,
French companies have a large network in Africa and Greek companies have a strong network in theWestern Balkans.
Table IV provides an overview of existing regional strengths of EU and Japanese companies,
based on the responses given by EU companies, including SMEs, Japanese companies and EU Member
States’ embassies when questioned on the topic. The responses show that EU and Japanesecompanies’ regional strengths are complementary, which reinforces the relevance of EU-Japanbusiness alliances in third markets.

77 German Chamber of Commerce and Industry in Japan (2020). EU-Japan Connectivity “The next great game”, p.3.

45

TABLE IV: Regions of activity and of interest for EU and Japanese companies
Western

Eastern

Balkans

EuropeCaucasus

Central Asia
Asia

Pacific

AfricaLatin
America

Existing
presence

EU

Limited presence
and interest to
improve businesspresence
Existing
presence

Japan

Limited presence
and interest to
improve businesspresence

3.1.2. Strategic complementarity in Asia
The companies interviewed for this study showed that every business partnership is uniqueand that a case-by-case approach is often necessary when considering partnerships between EU andJapanese companies for projects in Japan and in other Asian markets. However, their testimonials
showed some recurrent patterns leading to the conclusion below.
The expression of interest can either come from the EU or the Japanese side, and can comeeither from a large or a small company.
Expression of interest from EU SMEs
EU SMEs interested in finding Japanese partners for the Asian market can be divided into two
categories:
1. EU SMEs first interested in the Japanese market before considering other Asian markets
As shown in Figure 10, successful companies usually set up a local office in Japan. After
solidifying their business in Japan and building trust with Japanese partners for a certain time,some partnerships are extended to other Asian markets through the Japanese partner’s network.
2. EU SMEs specifically interested in Japan as a gateway to Asia (Figure 11)
Some EU SMEs specifically aim at doing business in Southern and South-Eastern Asianmarkets. They can offer a specific technology and are interested in the Japanese business
community in Asia for various reasons such as capital, complementary technology, well46

established presence and network in Asia or expertise in winning local public tenders. Such EU
SMEs often offer new technologies that support large Japanese companies in either improve an
existing business or launch new projects.
Figure 10. EU SMEs first interested in the Japanese market before considering other Asian markets
Step 1

Can take several years (case-by-case)

EU SME set up a local office in Japan

Step 2After a while, EU SME + Japanese partner expand their business
together in Asia through the network of the Japanese company

Figure 11. EU SMEs specifically interested in Japan as a gateway to Asia
Step 1

Step 2EU SMEs interested in Asian markets and

EU SMEs either try to contact the Japanese HQ or set

contacting Japanese subsidiaries in Asia are often

up a local office in Japan to discuss joint projects inredirected to the Japanese HQ in Japan

third markets with Japanese companies’ HQs

Step 3

If discussions in Japan are
successsful, joint projects can beundertaken in Asian markets

47

As shown in Figure 11, successful EU companies under the second scheme reported thata local office in Japan is often necessary to conduct business with Japanese subsidiaries in Asia.
While having a presence in Asia is helpful to approach Japanese subsidiaries, the decision-making
for projects taking place in Asia generally takes place at the headquarters in Japan. Therefore, acertain number of EU companies reported to have an office or a representative in Japan only to
conduct business in Asia with Japanese partners.

Expression of interest from Japanese companies
Japanese companies, generally large companies, can also be looking for EU SMEs withspecific technologies, including digital ones, to add value to an existing business in Asia, or toundertake a new project in Asia. These companies are often Japanese trading houses, or sogo
shosha,78 which are well-established in Asia. They are active in various industries such as mining,energy, infrastructure and manufacturing, which are part of the digital economy. Figure 12 shows how
an expression of interest from a Japanese company to an EU company can take place for a joint projectin Asia.
Figure 12. Japanese companies looking for an EU partner in the digital field for a project in Asia
Step 1
Japanese companies usually look first for Japanese partners.
However, they do not always find the right partner nationally.

Step 2
If no national company meets the required criteria, the Japanesecompany will look for foreign partners. Privileged foreign partners in
the digital field are usually from Asia, the U.S. or Israel. However,
the right partners cannot always been found in these regions, which
will open opportunities for European companies.

Asia
U.S.
Israel78

Major sogo shosha are, but not limited to, Mitsubishi, Mitsui, Sumitomo, Itochu, Marubeni, Toyota Tsusho and Sojitz.

48

Step 3
Depending on the time available to them and on their budget, Japanesecompanies look for EU partners in various ways

Japanese company

Existing network

Consultants

EU Member States’
chambers ofcommerce, EU
embassies, orother tradepromotionorganisations(TPOs)

Events related
to the digital
economy:trade fairs,
matchmaking
events,pitching events

Organisations
supporting EU
SMEs (e.g. EUJapan Centre forIndustrial
Cooperation)

EU

EU

EU

companies

companies

companiesin Europein Japanin AsiaInternet

3.1.3. Strategic complementarity in other third markets
EU SMEs which are already active in third markets such as Africa, Eastern Europe, the Western
Balkans or Latin America, can be divided into two categories:
1. EU SMEs already successful in third markets, which have not considered partnering withJapanese companies
Some EU SMEs interviewed for this study mentioned that they were already doing businessin third markets, outside of Asia, and that they have not considered partnering with Japanesecompanies in these third markets. Potential partners in third markets are generally local or49European partners. Indeed, EU SMEs and Japanese companies are often not aware of thepossibility and the benefits of partnering up for joint projects in third markets.
However, after discussing the benefits of EU-Japan business alliances in third markets, theEU SMEs interviewed were open to consider such cooperation and to receive further information
on opportunities. Once awareness is created, this first category of EU SMEs are more likely toswitch to the second category.
2. EU SMEs already successful in third markets and looking to scale up their business by partneringwith a large company
These EU SMEs have often been working with local companies, local public entities and local
end users for a while. After solidifying their business in a third market, they might aim to scale up
their business by either (i) expanding within the country, or (ii) expanding in neighbouring
countries.
Figure 13. Example of an EU SME already well-established in South Africa and looking to scale up
a business within the same country by partnering with a large company

Step 2An EU SME, which already has local partners, has been
conducting a successful small-scale business in Africa

The EU SME and its South African partners want toscale up their business by launching a large project. As
they lack capital for this new project, they look for alarge investor interested in emerging markets.

Needed to launch the new project

Step 1Business
Plan
Project

30%
Expertise

Capital

Network

Logistics

70%

and/orPotential partners: large companies
E.g. Japanese large companies (sogo shosha), EU large
companies, etc.

50

TABLE V
Why is it strategic for EU SMEs and Japanese companies
to partner in third markets outside Asia?

EU SMEs
Privileged partners for the Japanese side when

Large Japanese companies“Conservative” and less likely to consider

already well-established in third markets outside Asia:

business opportunities in “unfamiliar” markets

Expertise and existing network in third markets

alone.

More likely to have knowledge and access to
European and/or third-market insurance and legal
servicesLook for new projects to invest inCan be supported by banks (AfDB, ADB, JBIC) andby agencies like JICANeed investors or business partners to scale up an

Specificities of sogo shosha:

existing business

More likely to be active and interested in markets
outside Asia

Have a lot of capital to invest in large andexpensive projects requiring financial assets,
equipment and human resources

Have expertise in many industries covered by thedigital economy, including large infrastructures

Why would EU SMEs not partner with large EU

Large Japanese companies and sogo shosha:

companies in third markets?

Can offer more capital, a more diversified

Possibility that many EU SMEs have alreadyexpertise and a better acceptance in third

successfully exploredmarkets compared to large European partners.

EU SMEs can also join a consortium of large EU and

Indeed, many third markets outside Asia have aJapanese companies for a joint project in third

positive image of Japanese companies, notably

markets

for their reputation to provide qualitative
products and services.

51

3.2.

FOCUS ON 3 REGIONS

3.2.1. Survey
The present report mainly focuses on three regions that were mentioned by EU companies
and Japanese companies, and in particular SMEs, as regions of interest for projects related to thedigital economy. The three regions are Africa, Southeast Asia and Eastern Europe/Western Balkans.
A fourth point will briefly mention opportunities in other regions.
Based on a survey launched in 2019 that gathered responses from German SMEs and large
companies present in Japan in various industries, AHK Japan produced the bar chart below. The chartshows the region in which the respondents have been involved with Japanese partners outside Japan.
ASEAN, China and Europe reach the top three positions far ahead the other regions.
Figure 14. Regions in which projects are planned, are currently in progress or have already been
executed with Japanese partners outside Japan

Source: AHK Japan (2020)79

Although this chart provides a useful overview of German businesses’ activity with Japanese
partners in third markets, the results are too limited to provide information on (i) EU companies fromthe 27 EU Member States, (ii) the ambitions of SMEs specifically, and (iii) the ambitions of companies
in the digital field. Consequently, the author launched another survey in order to cover these three
key points.

79

German Chamber of Commerce and Industry in Japan, KPMG (2020). Economic outlook – German Business in Japan 2020. Reportavailable at: https://japan.ahk.de/en/infothek/surveys-and-studies, p.12.

52

Responses of EU SMEs
The author launched a survey to know more specifically which regions outside the EU andJapan were considered as holding opportunities for EU SMEs in the digital field. Companies were
informed that the aim of the survey was to assess the interest of tech companies for EU-Japan
partnerships in third markets. The survey gathered 40 responses from EU SMEs in a wide range ofdigital sub-sectors such as secure e-government systems, energy efficiency hardware, healthcare
software, smart grid analytics, digital banking tools and many more.
The question regarding promising regions for their company outside the EU and Japan was
asked in a broad sense without necessarily focusing on partnerships with Japanese companies. The
respondents could give multiple answers.
The results are summarised in Figure 15 which provides the results collected from August to
September 2020.

Figure 15. Preferred business destinations
for the EU tech SMEs surveyed (in %)Southeast Asia

17.5

USA + Canada

57.5

10

Africa52.5

15

Central Asia

37.5

20

Eastern Europe

30

10

37.5

Middle-East

5

42.5

Pacific region

7.5

40

Latin America

5Western Balkans

5
0

25
20
10

20

EU SMEs with Japanese partner(s)

30

40

50

60

70

80

EU SMEs with no Japanese partner

The interest in the U.S. and Canada was to be expected because of the dynamism of theAmerican and Canadian tech industries. However, the responses rather reflected EU SMEs’ ambition
to conclude bilateral partnerships with American/Canadian companies, with no plans to partner witha Japanese company. Therefore, the interest for the U.S. and Canada is not necessarily relevant for
the topic of EU-Japan business cooperation in third markets, but the high number of responses stillshows that Northern America is a top business destination for EU tech SMEs in general.

53

50% or more respondents showed a strong interest in three regions mentioned in the EUJapan Connectivity Partnership: Southeast Asia80 (75%), Africa (52.5%) and Central Asia (50%). Most
countries in these three regions are considered as emerging markets, which implies the existence ofmany untapped business opportunities, including in the digital economy, to contribute to thedevelopment of these countries.
The position of Southeast Asia and Africa at the top of the ranking is particularly justified as
more and more business opportunities and innovative projects involving state-of-the-art digitaltechnologies are promoted in these regions. For example, smart city projects and projects requiring
leapfrogging and frugal innovation are on the rise. These types of projects are particularly promoted
in Africa and Southeast Asia, and notably in the ASEAN which has its own in ASEAN Smart City
Network (ASCN)81.
By combining the responses for Eastern Europe and the Western Balkans, the number of
responses exceed Central, which makes the eastern and south-eastern regions of Europe particularly
promising for future projects in the digital economy.
This survey may not necessarily reflect the opinions of all EU digital SMEs due to the limited
number of answers received, but it provides a first overview of EU tech SMEs’ ambitions. The
answers may also vary depending on the type of technologies developed, which are more likely to be
used in some specific regions, and on the familiarity of respondents with some third markets becauseof language, historical or cultural ties. For example, if more Portuguese and Spanish companies had
answered the survey, Latin America could have been ranked higher in the list.
In addition to the survey, the author interviewed individually over 40 EU digital SMEs and EU
Member States’ trade promotion organisations in Japan. These interviews showed that whenplanning an internationalisation strategy, many EU SMEs first aim at neighbouring countries, often
within the EU. Then, SMEs aim at neighbouring countries outside the EU and countries with a sharedlanguage and strong political, historical and cultural ties, such as Eastern Europe, the Western Balkans,
Central Asia, Africa and Latin America. Therefore, many EU SMEs are already active in third markets
and have a network and an expertise in countries that might not be familiar to most Japanesecompanies.

80 Southeast Asia is part of the Indo-Pacific region.
81

ASEAN (2020) ASEAN Smart City Network. Available at: https://asean.org/asean/asean-smart-cities-network/

54

Responses of Japanese companies
A survey was also disseminated to Japanese tech companies but the number of responses
was too limited to draw concrete conclusions. The top three business destinations indicated were
Eastern Europe, Southeast Asia and the Pacific region, far ahead the other regions.
The responses to the survey reflect the data collected by the author during interviews
conducted in 2020 with Japanese companies and Japanese government officials. Indeed, Japanesecompanies seem to mainly aim at business expansion in neighbouring markets like Asia and thePacific region which are considered as familiar and in which their network is broad and has been wellestablished for a long time. Other markets were often referred to as “remote”, “risky” or“unfamiliar”.
Indeed, because of the unfamiliarity, the political instability and some recurring issues like
corruption in many third markets, finding bankable projects can be challenging. National agencies
and tenders launched by international organisations often provide a project framework andbankable projects which is reassuring for companies. However the number of Japanese companies
actually looking at and applying to these opportunities remains low. More promotion on
opportunities in third markets would be necessary to boost the interest and the involvement ofJapanese companies in new markets.
3.2.2. Southeast Asia
As shown in the survey results, Southeast Asia and more specifically ASEAN is a relevantmarket for EU-Japan business cooperation in third markets. EU companies that are successful in Japanare more likely to replicate their partnerships in Asia through their Japanese partners’ network.
Japanese companies are well-established in the region and are looking for new partners with specificdigital technologies that are interoperable and that can be customised for projects in Southeast Asia.
Smart-rural and smart-city projects in Asia have already caught the attention of Japanesecompanies. For example, the Y-PORT project in Yokohama has generated case studies in the fields ofwaste management, energy and water supply. As the digital economy is cross-sectoral, smart-city
projects in ASEAN are very promising for EU-Japan business cooperation in Southeast Asia.
Finally, Japan has been promoting the FOIP in Southeast Asia with the Prime Minister of Japanmaking his first official trip abroad to Vietnam and Indonesia.82 The trip can be seen as a strategic
move to reinforce regional alliances while other countries like China have been expanding theirinfluence in the region and beyond.
82

NHK
World
Japan
(2020).
Suga
visitshttps://www3.nhk.or.jp/nhkworld/en/news/backstories/1340/

Southeast

Asia

on

first

trip.

Available

at:55

3.2.3. Africa83
Overview of opportunities
In the near future, EU-Japan joint business alliances in the digital economy have good chances
to happen in Africa for three reasons: European companies, including SMEs, have a larger network and more expertise in Africa thanJapanese companies, which gives them a competitive advantage and makes them privileged likeminded partners in the region.
 The African Union (AU), African governments and the African Development Bank (AfDB) havebeen orienting their strategies toward the digital transformation of the continent and promoting
the use of digital tools for the development of Africa.84
Japan promoted the FOIP vision in Mozambique, South Africa, Mauritius and Tunisia in late
202085 and confirmed bilateral investment and support to Japanese companies wishing to enter
the African market. Finally, TICAD8 will be hosted by Tunisia in 2022. The event is likely to be a
networking and matchmaking platform for Japanese, African and European companies to discuss
trilateral projects in Africa.
The potential of Africa for trilateral partnerships was presented in November 2020 during the

3rd French-Japanese Business Summit. The event focused on the topic of “growth opportunities inAfrica: towards new business partnerships”, and promoted French-Japanese-African business
partnerships in Africa.86 The event was an opportunity for African, French and Japanese stakeholders
involved in trilateral partnerships to share their experience and success stories, to makerecommendations and to encourage further similar business partnerships in the future. The fact that
the French Chamber of Commerce and Industry in Japan decided to dedicate its annual Business
Summit on this topic is a sign that the French and Japanese business communities want to put thistype of cooperation in the spotlight to show the many opportunities still to be explored.
Although most companies attending the event were large French and Japanese companies,
their success stories remain useful for EU tech SMEs. Indeed, the success stories covered various
industries such as energy, logistics, retail and healthcare, and most of them mentioned the use ofdigital technologies. The event is therefore an additional argument in favour of the digital economy
as a key pillar for EU-Japan business cooperation in third markets, and in particular in Africa.

83

A map of Africa is available in Annex 1.
African Union (2020). The Digital Transformation Strategy for Africa (2020-2030), (p.5). Available at:https://au.int/en/documents/20200518/digital-transformation-strategy-africa-2020-2030.
85 Ministry of Foreign Affairs of Japan (2020). Foreign Minister Motegi Visits Tunisia, Mozambique, South Africa and Mauritius. Available
at: https://www.mofa.go.jp/afr/af2/page3e_001086.html
8456

Figure 16. The COVID-19 pandemic revealed serious gaps that Africa needs to work on:

Need to diversify
partners

Need to digitalise
AfricaNeed to address
technology gaps in
the healthcare andenergy sectors

Need for more andbetterinfrastructures

The African continent needs state-of-the-art technologies that can be provided by foreigncompanies such as Japanese and EU companies. However, when bringing foreign technologies to
Africa, companies need to localise them to fit the local environment, lifestyle and people. This raises
the question of affordability and availability as some African regions are poor and lack infrastructures.

EU-Africa cooperation in the digital economy
The EU considers Africa as a major trade partner. Economic partnership agreements are
currently being negotiated between the EU and Central Africa, West Africa, Eastern and Southern
Africa, the East African Community and the Southern African Development Community, which is likely
to foster e-commerce between both regions as well as other aspects of the digital economy.87 The
EU aims to combine private-sector investment and official development assistance (ODA) tocontribute to Africa’s growth and development and increase business ties with like-minded countries
in Africa.
The EU and Africa have conducted several concrete actions in the digital economy which will
be pursued in the future. For example, the EU-AU Digital Economy Task Force published a report88
with the following key actions between the EU and Africa to foster the digital economy in Africa:
 Digital economy to achieve the SDGs, through the “mobile economy”, or in other words theservices provided via mobile phones.
 African single digital market sharing the EU vision of a human-centric digital economy.
 Better and affordable access to broadband.
87

EuropeanCommission(2020).
Overview
ofEconomicPartnership
Agreements.
Availableat:https://trade.ec.europa.eu/doclib/docs/2009/september/tradoc_144912.pdf
88 European Commission (2019). New Africa-Europe Digital Economy Partnership – Report of the EU-AU Digital Economy Task Force.
Available at: https://ec.europa.eu/digital-single-market/en/news/new-africa-europe-digital-economy-partnership-report-eu-audigital-economy-task-force

57




Improvement of digital skills through education and vocational training, in particular for girls andwomen.
Improvement of business environment and access to finance for companies and entrepreneurs.

These actions aims to improve the African business environment and digital transformation, inorder to attract more and more foreign businesses and to grow the African digital economy.
Finnish study on digital connectivity in Africa
In 2020, the Finnish Ministry of Foreign Affairs published a study on connectivity in Africa
which focused on four key sectors: energy, transport, research & innovation and digitalisation 89. The
study includes an analysis of each sector and provides recommendation on complementary actions
that the EU and Finland could undertake to contribute to digital connectivity in Africa.
First, the study provides an overview of digital connectivity in Africa, which clearly highlights
the importance of mobile phones in the African digital economy, and which can be presented from4 perspectives:
Figure 17. Overview of digital connectivity in Africa90,91
Mobile coverage• 70% of the population in sub-Saharan Africa was covered by a 3G
network in 2018, and 34% was covered by a 4G network. Nonetheless,
150 million people in the region would still not have access to a 2G
network.

Mobile Internet coverage• The mobile Internet penetration only reached 24% of the population in
sub-Saharan African by 2018.
Barriers• The main barriers for mobile Internet use in Africa are the lack of digital
literacy and digital skills (34%), the affordability (30%) and therelevance (13%). The rural gap and the gender gap to access mobile
Internet are still high in Africa.

89 Sutinen E. (2020). ‘Digital connectivity’, in Hodzi, O., et al. (2020).

Connecting Africa – Perspectives for Energy, Transport,
Digitalisation and Research and Innovation. Ministry of Foreign Affairs of Finland. Available at: https://um.fi/publications//asset_publisher/TVOLgBmLyZvu/content/kehityspoliittinen-tilausselvitys-connecting-africa-perspectives-for-energy-transportdigitalisation-and-research-innovation, p. 42-56.
90 Idem, p.45.
91 GSMA (2019) GSMA Mobile Connectivity Index. Available at: https://www.mobileconnectivityindex.com/

58

Mobile connectivity index• The Global System for Mobile Communications Association (GSMA), which
represents the interest of mobile operators worldwide, created a mobile
connectivity index measuring countries’ performance in mobile Internet use
based on four key enablers: infrastructure, affordability, consumer readiness,and content & services. Countries can be categorised as:• Leaders (score above 75): countries that generally perform very well acrossenablers and have very high levels of mobile internet penetration.
• Advanced (score above 65): countries that perform well on 3 enablers andusually have high penetration rates.
• Transitioners (score above 50): countries that perform well on at least 2
enablers.
• Emerging (score above 35): countries that perform fairly well on one or two
enablers but show room for improvement on others.
• Discoverers (score below 35): countries that show room for improvement
across all 4 enablers and have correspondingly low levels of mobile Internet
penetration.

Table VI shows that in 2019, among the 48 African countries92 covered by the GSMA Mobile
Connectivity, no African country was ranked among the “leaders” and only Mauritius was ranked as“advanced”. Only 2 sub-Saharan African countries – Ghana and Botswana – were ranked as“transitioners”. North African countries were mainly considered as “transitioners” with Tunisia andMorocco almost ranked as “advanced”. 29 African countries were ranked as “emerging” and 16
African countries were ranked as “discoverers”93.
The mobile connectivity index clearly shows that there is room for improvement regarding digitalconnectivity in Africa. The index also gives an idea about what foreign companies should expect
when entering a specific African market, both in terms of opportunities in the digital field and interms of availability of digital infrastructures, skills, contents and services.
The importance of infrastructures, affordability, consumer readiness and content & services
cannot be underestimated. Despite efficient and sustainable digital infrastructures and a phone andInternet coverage in some African countries, many African people still cannot afford digital services
and cannot access them due to a lack of digital literacy, often with gaps between men and women

92 Both in North Africa and Sub-Saharan Africa.
93 List of African “discoverers” with their Mobile Connectivity Index score in 2019: South Sudan 12.7, Chad 16.4, Central African Republic

17.2, Niger 18.3, Comoros 24.0, Guinea-Bissau 24.4, Burundi 26.2, Malawi 26.9, Democratic Republic of the Congo 26.2, Gambia 30.3,
Madagascar 31.3, Guinea 31.1, Mauritania 32.1, Burkina Faso 32.4, Mali 33.9 and Liberia 34.4. Source: GSMA Mobile Connectivity Index
2019.

59

as well as between rural and urban areas. Consequently, to reduce the digital gap in Africa,
technologies should be designed according to the reality of Africa and African people, be affordable
and proper training should be given to develop local people’s e-skills.
TABLE VI. Top 5 African Countries according to their Mobile Connectivity Index Score and Enabler
in 2019 (ranked in order according to their score)
MobileConnectivity
Index Score

Infrastructure

Affordability

Consumer
Readiness

Content andservices

Sub-Saharan Africa
Mauritius (65.8)

South Africa (61.3)

Mauritius (63.9)

South Africa (73.1)

Mauritius (71.8)

South Africa (60.1)

Lesotho (59.)5

Nigeria (55.0)

Mauritius (72.2)

South Africa (56.5)

Ghana (52.0)

Rwanda (58.8)

Botswana (52.5)

Namibia (71.7)

Cabo Verde (52.4)

Botswana (51.3)

Mauritius (56.4)

South Africa (51.7)

Botswana (71.5)

Ghana (51.8)

Kenya (49.6)

Kenya (54.2)

Ghana (48.4)

Cabo Verde (67.3)

Kenya (49.0)
Gabon (49.0)

North Africa
North African countries were inserted in the table only if their ranking was higher
than the lowest ranked Sub-Saharan countries mentioned above.

Tunisia (60.0)

Morocco (66.3)

Algeria (56.6)

Egypt (65.5)

Morocco (59.9)

Tunisia (64.1)

Morocco (56.3)

Tunisia (62.6)

Tunisia (51.1)

Morocco (62.0)

Egypt (55.7)
Algeria (53.2)

Libya (55.0)

Libya (50.9)
Source: GSMA (2019) GSMA Mobile Connectivity Index94.

Mobile coverage is one of the major component of the digital economy in Africa as mostdigital services are provided through mobile phones. Therefore, the above-mentioned information isnecessary to understand which African countries are currently the most connected and digitallydeveloped, and which African countries need further support to develop digital infrastructures, digitaltraining and more affordable services.
The Finnish study also shows that Europe and Japan are not the only ones involved in thedevelopment of African digital connectivity. On the one hand, China already has a comprehensive
collaboration with Africa on digital connectivity in order to extend its Belt and Road Initiative. On

94 GSMA (2019) GSMA Mobile Connectivity Index. Available at: https://www.mobileconnectivityindex.com/

60the other hand, the U.S. private sector has been providing Africa with more connections and accessto global data.
Chinese competition in Africa
The Chinese BRI has been particularly effective in Africa. Indeed, every year and for morethan 30 years, the first official visit overseas by China has taken place in Africa, which shows that
China has considered Africa as a key partner for a long time. The visit of the Chinese Foreign Ministry
to Africa is an opportunity to promote bilateral cooperation as well as the BRI. Indeed, during theJanuary 2021 visit, Botswana and the Democratic Republic of Congo (DRC) signed MoUs with China
and became the 45th and 46th African signatories of the BRI95. Finally, the triennial Forum on ChinaAfrica Cooperation (FOCAC) is expected to take place in 2021 in Senegal with a focus on “health,agricultural, digital, environmental, and military and security cooperation; regional connectivity andfree trade; and Africa’s industrial capacity”96.
China’s increasing presence in Africa, in particular in providing loans97 and in contributing tolarge infrastructure projects, and the well-established French business community in Africa have also
led to business alliances between large Chinese and French companies in Africa, such as the MayaMaya Airport in Congo, the Great Mosque of Algiers in Algeria, and the Soubré Dam in Ivory Coast.98
3.2.4. Eastern Europe / Western Balkans
In the survey launched by the author, Eastern Europe and the Western Balkans werementioned by both EU and Japanese SMEs as promising regions for the digital economy. Additional
interviews conducted with Japanese companies showed that their interest is due to the low cost ofsetting up operations and in hiring skilled staff in these regions, compared to EU Member States.
However, opinions on the topic were divided. After carefully considering both options, some Japanesecompanies would finally choose to set up operations in the EU despite higher costs, as the companies
prioritised more skilled staff and better English knowledge. The region spanning from Central Europe
to Eastern Europe remains an increasingly active digital hub, with the creation of ecosystems
specialising in specific sub-sectors of the digital economy.

95 Ministry of Foreign Affairs of the People’s Republic of China (2021). Foreign Ministry Spokesperson Zhao Lijian’s regular press

conference on January 11, 2021. Available at: https://www.fmprc.gov.cn/mfa_eng/xwfw_665399/s2510_665401/t1845634.shtml
96 Albert E. (2020) “China’s Foreign Minister revives Belt and Road on 5-Country Africa Tour” in The Diplomat. Available at:https://thediplomat.com/2021/01/chinas-foreign-minister-revives-belt-and-road-on-5-country-africa-tour/
97
Brautigam, D., Hwang, J. (2019). China-Africa Loan Database research Guidebook. Available at:https://static1.squarespace.com/static/5652847de4b033f56d2bdc29/t/5efd04572cbaa4329d32be1e/1593640026011/SAISCARI+Research+Guidebook+2020.07.01.pdf
98
Pairault,
T.
(2020).
FrenchandChineseBusiness
CooperationinAfrica.
Availableat:https://static1.squarespace.com/static/5652847de4b033f56d2bdc29/t/5fa956eef6d3991188800be2/1604933359644/PB+50+Pairaul
t+French+Chinese+Business+Cooperation+Africa.pdf

61

Figure 18. Non-EU countries in the Western Balkans (in yellow):
Albania, Bosnia and Herzegovina, Kosovo, Montenegro, North
Macedonia, Serbia. Because of its unique position spanning from
Europe to the Middle-East, some might, or might not, include
Turkey in the Western Balkans.

Figure 19. Non-EU Eastern European countries and countries of
the Eastern Partnership 99 (in yellow): Armenia, Azerbaijan,
Belarus, Georgia, Moldova and Ukraine.

SMEs from EU Member States in Central and Eastern Europe already have a strong presencein the Western Balkans and Eastern Europe. Their expertise and network in these countries, which
are usually not well-known by Japanese companies, is a strong competitive advantage making themprivileged partners for Japanese companies.
3.2.5. Other third markets
Past case studies have shown that the Japanese and EU private sectors have also undertaken
EU-Japan business alliances in Latin America and the Middle East.100 Public information shows thatthese business alliances were mainly agreed between large EU and Japanese companies in industries
like energy, desalination and transport infrastructures. Nonetheless, among the EU tech SMEs
interviewed for the present study, some of them mentioned past or ongoing discussions withJapanese companies for joint projects in these markets.
MoU between NEXI and the EBRD for Central Asia, Eastern Europe and the Western Balkans
On 21 October 2020, NEXI and the European Bank for Reconstruction and Development(EBRD) concluded an MoU101 that aims to create a framework for cooperation between both entities,

99

European Neighbourhood Policy and Enlargement Negotiations (2020). Eastern Partnership. Available at:https://ec.europa.eu/neighbourhood-enlargement/neighbourhood/eastern-partnership_en
100 Marbot, M. (2020). Analysis of EU-Japan business cooperation in third countries, p.17-19, p.129-130.
101
Nippon Export Investment Insurant (2020). MOU on Cooperation between NEXI and EBRD. Available at:https://www.nexi.go.jp/en/topics/newsrelease/2020102001.html

62

combine their financial expertise and resources, and support Japanese companies in going overseas
by creating new business opportunities. The development of sustainable infrastructures would be apriority.
The MoU could support EU-Japan business cooperation in third markets covered by the EBRD
which are Central Asia, Eastern Europe, the Caucasus, Russia, the Western Balkans, Turkey andSouthern and Eastern Mediterranean countries.

63

4. TYPES OF BUSINESS MODELS
4.1.

SHORT-TERM AND LONG-TERM APPROACHES

4.1.1. Short-term approach
The short-term approach is a project-based approach. In other words, EU SMEs and Japanesecompanies decide that they will cooperate for the duration of a specific project. The cooperation cantake place from the start to the end of the project, or only take place for a specific part of the project.
The short-term approach does not necessarily exclude future cooperation. Nonetheless, theinitial aim is generally to build a project together, or to achieve the specific part of the project incollaboration with other members of the consortium, and to deliver it in time. As Japanese companies
tend to prefer building trust and a solid relationship with a potential partner before agreeing on along-term cooperation, starting with a short-term project can be a good way to test the collaboration
between the EU and the Japanese side before considering further cooperation.
4.1.2. Long-term approach
The long-term approach implies that the EU and Japanese companies intend to cooperate in
the long term on several projects in third markets. Discussions with EU companies showed that theinitial cooperation can start in various ways:
 Long-time bilateral partnership replicated overseas as showed in Figure 10.
 Partnership aiming directly at third markets as showed in Figure 11.
 Buyer/Seller as showed in Figure 20, which is a model that is relatively accessible to EU SMEs.
Figure 20. Buyer/Seller model
An EU SME sells a productto a Japanese partner
which

has

distribution

channels in Asia. The
distribution

partnershipgenerates more sales for
the EU SME.

64

4.2.

TYPES OF PROJECTS

EU-Japan business cooperation in third markets can take several forms of cooperation asshown in Figure 21.
Figure 21. Possible forms of cooperation
Form

Capitalof cooperation

relationship

Place an order

Contractor /EU SME

supplier

EU SMEEU SMEEU SME

Joint Venture

EU SME

Partners

No

Consortium

Joint activity as agreed by both parties

JP company

without legal biding
Joint activity as agreed by both parties withJP company

Pooling legal
personnel
biding& expertisefrom multiple organisations to operate as required JP company
Capital &personnel

JV

Dividends

Capital &personnel

EU SMEJP company

Profit share from business development

Yes

Source: © 2020 QUNIE CORPORATION102

JP company

Dividends

Investment for the use of networks and know-how

Investment
Acquisition

JP company
Supply the partner

Collaboration
Partnership

Eventual
Third-market
partner

Full acquisition of management resources

EU SMEJP company

Assets, dividends

In addition to the stakeholders mentioned in Figure 21, multilateral development banks (MDBs), suchas the African Development Bank (AfDB) or the Asian Development Bank (ADB), can also play a rolein EU-Japan business cooperation in third markets by providing financial instruments for large andexpensive projects in emerging markets. Beneficiaries are usually large companies.

4.3.

SISTER-CITY PROJECTS

Sister cities are not limited to cultural exchanges. Policy and technical collaboration between
cities and regions can also be achieved through sister-city projects.
For example, under the FOIP vision and the Japan-U.S. Strategic Digital Economy Partnership(JUSDEP), the U.S. and Japan have established a “Smart Sisters Program” 103 to facilitate thedevelopment of smart cities in the Indo-Pacific region. The program aims to facilitate technicalcollaboration, exchange of knowledge and experience as well as joint projects, between American
102

Infographic based on an internal document produced by QUNIE Corporation in 2020.
United States Department of State (2019). Joint Statement by the United States and Japan on Furthering the Development of Smart
Cities in the Indo-Pacific. Available at: https://2017-2021.state.gov/joint-statement-by-the-united-states-and-japan-on-furthering-thedevelopment-of-smart-cities-in-the-indo-pacific//index.html
10365

and Japanese cities and the 26 cities of the ASEAN Smart Cities Network (ASCN). Sister-city projects
involve the public and private sectors and aim to solve common issues between sister cities and toopen opportunities for U.S.-Japan business cooperation in the Indo-Pacific region.
Following this example, the EU and Japan can aim at smart-sister projects in third markets
to complement the actions already undertaken by the U.S. and Japan in the Indo-Pacific region. The
EU and Japan can aim at smart-sister projects in other regions such as Africa, Latin America, theWestern Balkans or Central Asia. The EU-Japan Regional Cooperation Helpdesk would be a relevant
platform to support or even lead such initiatives.
Smart city projects are fully part of the digital economy as various digital technologies can beused to tackle issues encountered by cities as shown in Table VII.

TABLE VII: Three examples of smart city topics related to the digital economy

Common issues

Possible digital tools and solutions

Air pollution

Sensors; Space technology; Big Data analytics

Mobility(traffic jam, lack of connection
between different transportation
modes, paper tickets)

Surveillance cameras (including AI-equipped cameras); Mobile
application for e-tickets + cashless payment + real-time informationon all public transports within a city (bus, train, tram, boat);autonomous trains (AI-powered conductor, telecommunication andsignalling systems)

Tourism(lack of centralised information)

One-stop mobile applications to inform tourists about the city’stransports, attractions and hospitality services + e-tickets+ e-booking

66

5. INTEREST FROM COMPANIESThe existence of the EU-Japan Connectivity Partnership signed in 2019 might give theimpression of a top-down approach to EU-Japan business cooperation in third markets. However, thePartnership is a general framework which has not been fully operationalised yet, and many casestudies have shown that the EU and Japanese private sectors, and in particular large companies, havealready undertaken joint projects in third markets before the signature the Partnership. Indeed, theprevious study published by the EU-Japan Centre on the topic of EU-Japan business cooperation inthird markets shows 37 out of 44 case studies that were formalised before 2019.104 As the study is
not exhaustive, it is likely that more success stories have happened before 2019. Therefore, EU-Japanbusiness cooperation in third markets is originally a bottom-up approach, which has been put in the
spotlight in recent EU-Japan policies.
In the same study, 39 out of 44 case studies include partnerships between large EU andJapanese companies. Large companies seem to be the most active on the topic, which is certainly due
to the size of the projects.

5.1.

INTEREST FROM EU SMES

EU SMEs active in third markets outside Asia
EU SMEs seem to be involved to a lesser extent than large companies in EU-Japan business
partnerships in third markets. Indeed, they do not have the same resources and network as large
companies, and they often are not aware of the possibility and the benefits of partnering withJapanese companies in third markets. EU SMEs already present in third markets outside Asia inparticular do not automatically think about partnering with a Japanese company to expand theirbusiness. Local companies, European companies, American companies and Chinese companies
generally are a more obvious choices. Consequently, creating more awareness among EU SMEs
active in third markets and among Japanese companies on the possibility and the benefits of EUJapan business partnerships in third markets would be a way to foster the creation of partnerships
between EU SMEs and Japanese companies in third markets outside Asia..
EU SMEs active in Japan: focus on German companies
The annual study launched by AHK Japan, and which was mostly answered by German SMEs
in Japan, shows that in 2020, 63% of German companies in Japan were involved in projects andbusiness activities with Japanese partners outside Japan, and in particular in Asia (53% in ASEAN

104

Marbot, M. (2020). Analysis of EU-Japan business cooperation in third countries, p.17-19, p.129-130.

67

and 34% in Greater China).105 The number has remained above 60% for the past three years with
69% in 2019 and 64% in 2018. The reasons for such partnerships are provided in Table VIII.
TABLE VIII: Key reasons for EU SMEs to be involved in EU-Japan third-market projects

Source: AHK Japan (2020)106
Based on the results of their survey and their experience with German companies in Japan,
AHK Japan mentions digital connectivity as one of the key pillars of EU-Japan business collaborationin third markets, with an emphasis on the establishment of a regulatory and data security frameworkwith a focus on DFFT and international rules on e-commerce. AHK Japan also highlights 5 key sectors
which are fully part of the digital economy and which are highly promising for cooperation in third
markets: plant engineering, machinery and factory equipment, automotive supply,
chemical/pharmaceutical supply and IT/telecommunications. The information gathered by AHK Japan
corroborates that projects in the digital economy are highly promising for EU-Japan businesscooperation in third markets.
5.2.

INTEREST FROM JAPANESE COMPANIESJapanese companies are generally interested in partnering with EU companies in third markets
for two reasons: Use EU companies’ well-established presence in unfamiliar markets to set foot in new markets.

105

German Chamber of Commerce and Industry in Japan, KPMG (2020). Economic outlook – German Business in Japan 2020. Reportavailable at: https://japan.ahk.de/en/infothek/surveys-and-studies
106 German Chamber of Commerce and Industry in Japan (2020). EU-Japan Connectivity “The next great game”, p.13. Paper pamphlet
based on a survey launched in 2019.

68

Use EU companies highly innovative and specific technologies to improve and grow theirbusiness in third markets in which they are already well-established, such as ASEAN. Indeed,Japanese companies are usually fairly confident in their strengths regarding the Asian market.
However, they are open to partnerships if an EU SME can provide a state-of-the-art technologythat can bring a strong added value to their business.

Japanese trading houses, or sogo shosha, are already very active in the development of
infrastructures in third markets and in particular in Asia. According to AHK Japan, sogo shosha are
driving Japan’s globalisation with the key functions shown in Figure 22. Depending on the project’s
needs, European companies partnering with sogo shosha in third markets can either be large
companies or SMEs with highly innovative technologies. Moreover, more than half of the case studies
presented in the previous Centre’s study on cooperation in third markets were undertaken by sogo
shosha, which shows their strong interest in finding European partners for joint projects in third
markets.
Figure 22. Four key functions of sogo shosha in EU-Japan business cooperation in third markets

Source: AHK Japan (2020)107

5.3.

INTEREST FROM THIRD MARKETSThird-market companies, end users and governments recognise the benefits of EU-Japanbusiness cooperation in third markets. Such cooperation can boost the local private sector andstimulate growth and development. The example of the French Japanese Business Summit 2020
107 German Chamber of Commerce and Industry in Japan (2020). EU-Japan Connectivity “The next great game”, p.7. Paper pamphlet

based on a survey launched in 2019.

69

which focused on business opportunities in Africa showed that African companies and African
people benefit from trilateral partnerships with EU and Japanese companies.108 Each side provides
a complementary strength, hence creating a win-win situation.
Emerging countries are shifting their policies to accelerate the transition toward a digital
economy by creating infrastructures and skills. In order to implement digital strategies, theinvolvement of the private sector is necessary and local companies often do not have enough humanand financial resources as well as enough skills and technologies to undertake large projects in thedigital economy. By partnering with EU and Japanese companies, third-market companies can not
only reinforce their capacity building, but also build expertise in new projects which will make themgrow. Indeed, trilateral projects are the opportunity to exchange best practices and promote digitalstandards, which can ultimately lead to a more harmonised global digital ecosystem.
Finally, emerging countries are more and more interested in switching from the traditional
development assistance framework provided by high-income countries to a new way of achieving
development as a direct impact of industrial projects 109 . Indeed, industrial projects in emerging
countries can benefit the local population and the local economy in many ways such as by creating
jobs, skills, income, taxes and added-value to products produced locally. Industrial projects can takevarious forms from small-scale to large-scale projects and cover various sectors such as agriculture,
infrastructure and energy.

108

CCI France Japon (2020). 2020 French Japanese Business Summit: Key Takeaways Videos. Available at:https://www.ccifj.or.jp/actus/n/news/2020-french-japanese-business-summit-key-takeaways-videos.html
109 This point was highlighted in several panel discussions during the Eurafrican Forum in 2020. Eurafrican Forum (2020). Available at:https://www.eurafricanforum.org/

706. RECOMMENDATIONS TO THE EU-JAPAN CENTRE FOR
INDUSTRIAL COOPERATION
The following recommendations aim to improve the support given to EU SMEs in being
involved in EU-Japan business cooperation in third markets. Some recommendations presented in aformer report were used as a basis,110 and more concrete details were added to match the existing
resources of the EU-Japan Centre for Industrial Cooperation (the Centre).

6.1.

HELPDESKThe Centre aims to launch new services and new activities on the topic of EU-Japan businesscooperation in third markets. A helpdesk dedicated to support such cooperation can complement theCentre’s existing services that aim to support matchmaking and partnerships between EU andJapanese companies, and in particular SMEs.
Table IX: Concrete activities of a Helpdesk
dedicated to support EU-Japan business cooperation in third markets
PurposeContact pointRespond to inquiries about EU-Japan business cooperation in third markets



Represent the Centre for questions related to the topic

PurposePromotional

Create awareness on the topic, in particular among SMEs



Promote the benefits of EU-Japan business alliances in third markets

Promote the competitive advantages of EU SMEs to Japanese companies

Promote business opportunities with Japanese partners to EU SMEs in third markets

Tools

activities

110

Webinars/Seminars

Website: articles, success stories, newsletter subscription + social media



Factsheets:○

About EU-Japan business cooperation in third markets○

About the Helpdesk, its role, its targets and its services

Marbot, M. (2020). Analysis of EU-Japan business cooperation in third countries, p.100.

71

Purpose

Facilitate networking between EU and Japanese companies for discussions about joint
projects in third-markets

Support the creation of business partnerships between EU and Japanese companies
in third markets

B2B

Tools

matchmaking
activitiesCase-by-case matchmaking

Include a third-market aspect to existing matchmaking activities undertaken by theCentre or by external stakeholders



Organise pitching sessions to promote EU SMEs, and foster networking between EU
SMEs and Japanese companies on the topic of business partnerships in third markets

6.2.

ANNUAL SURVEY

The present study was limited by the lack of available public data on the topic of EU-Japanbusiness cooperation in the digital economy in third markets and in particular the involvement of
SMEs. Despite a certain number of surveys launched by Chambers of Commerce and Industry and by
institutional stakeholders on the topic, few results are actually made publicly available.
The present report proposes a more systematic way to collect data with an annual survey
targeting EU SMEs. The survey would aim to collect information on EU SMEs’ opinions, ambitions,needs, experience, success stories and challenges regarding EU-Japan business cooperation in third
markets. The results of the survey would be anonymised and summarised in a public report.
As only two EU Member States have been surveying their companies on the topic,111 thisannual survey would help the Centre to cover SMEs from all EU Member States.

111

Germany: German Chamber of Commerce and Industry in Japan, KPMG (2020). Economic outlook – German Business in Japan 2020.
France: Ministere de l’Economie, des Finances et de la Relance, Direction generale du Tresor, SER de Tokyo (2020) Energy Transition
andSustainable
Cities:
Mapping
Franco-Japanesecooperationin
third
countries.
Availableat:https://www.tresor.economie.gouv.fr/Articles/2020/04/15/energy-transition-and-sustainable-cities-mapping-franco-japanesecooperation-in-third-countries

72

Table X: Annual survey: publication of results and purpose
Results of the survey to be promoted

Purposein an annual reportof an annual reportQuantitative and qualitative data
about EU-Japan business cooperationin third markets involving EU SMEs
Details on trends and opportunities byindustries, including the digital
economy, by EU Member States andby third markets/regions
Key numbers
Success stories






6.3.






Monitor the evolution of the trend of
EU-Japan business cooperation in third
markets
Show the challenges faced by EU SMEs
on the topic
Support the helpdesk’s promotional
activities
Better understand the private sector’s
needs, in particular from SMEs
Better target promising industries andregions for future activities

PARTNERS AND INSTITUTIONAL COOPERATIONThe Centre intends to launch new activities on the topic of EU-Japan business cooperation inthird markets and therefore needs to grow a new network of partners. Indeed, these new services
would target EU SMEs in Europe, EU SMEs in Japan and EU SMEs already present in third markets,and in particular emerging countries, the latter being a new target for the Centre.
In addition to the Centre’s existing network, the channels below can be used to reach EU SMEs
already active in third markets, and which could be potential partners for Japanese companies
looking to enter third markets:
 EU Member States’ trade promotion organisations in third markets, which can also be reachedthrough their counterparts in Japan.
 Enterprise Europe Network (EEN) which has several offices in Africa, Southeast Asia, Latin




112

America, the Western Balkans and Eastern Europe.
European Chambers of Commerce active in third markets (EBO WWN).112
Networking platforms and business associations aiming to bring together EU SMEs and thirdmarket companies.
For projects in the digital economy:○ Sectoral business associations in Europe promoting digital solutions for third markets, and inparticular emerging markets.
○ Sectoral business associations in third markets in which EU SMEs are already active.
○ Matchmaking and pitching events related to the digital economy in third markets.
European Business Organisation Worldwide Network (2021). Homepage. Available at: https://eboworldwide.eu/

73Organisations that support the international expansion of Japanese companies to third
markets, and in particular emerging countries in which EU SMEs are already active, can also be
relevant partners for the Centre.
Interinstitutional cooperation
A regular and structured dialogue between the EU and Japan on business cooperation in third
markets has not been implemented yet. Instead, the topic of EU-Japan business cooperation in third
markets has been mentioned in sectoral dialogues such as on energy and transport. A structured
dialogue would be essential to gather all necessary parties covering all industries, and to discuss
concrete joint projects in third markets. Existing dialogues and projects between Japan, the U.S. andAustralia in third markets (see Section 1.5) show that establishing a dialogue on business cooperationin third markets is possible, and that there is currently a window of opportunity that the EU should
not miss.
Without the existence of the above-mentioned dialogue, other initiatives can be undertaken
to support EU-Japan business cooperation in third markets in the digital economy. The launch of the
global multi-stakeholder platform “Digital4Development Hub” (D4D Hub) in 2020 113 and theupcoming opening of the first branch in Africa could open business opportunities for EU and Japanesecompanies in digital projects in Africa. When the present report was finalised, no further informationon the African branch and the concrete involvement of the private sector on this initiative waspublished. Therefore, a follow-up with DG INTPA would be relevant to see if the platform can be used
for networking and discussions on joint projects in Africa between EU SMEs and Japanese companies.
Moreover, twice a year the EU and Japan hold two major events to follow up on theircooperation in the digital field:
 The Digital Policy Dialogues between DG CONNECT, METI and MIC;
 The Digital Strategy Workshop between DG CONNECT, ETSI, the EU business community in Japan,
METI, MIC and Keidanren.
The Centre can liaise with the EU and Japanese organisers to add the topic of EU-Japan businesscooperation in third markets as an item for discussion on the agenda, illustrated by case studies. The
aim would be to create awareness about the business opportunities, their benefits and standard
setting in third markets among policy-makers and the business community and to initiate discussions
about concrete projects.

113 Digital4Development Hub (2020). D4D Hub, EU International partnerships. Available at: https://www.d4dlaunch.eu/

74Cooperation between EU and Japanese funding bodies is essential to fund joint projects inthird markets. The MoUs signed by the EIB with JBIC and JICA have not resulted into concrete
developments after more than two years. The new EU multiannual financial framework for 2021-2027
includes a new financial instrument for the EU’s external action, the Neighbourhood, Development
and International Cooperation Instrument (NDICI)114. This instrument will open opportunities forjoint projects between the EU and like-minded countries and would therefore be one of the mostappropriate tools for the EU to fund EU-Japan joint projects in third markets.
Finally, the EU-Japan Centre for Industrial Cooperation has been the only organisation toactively promote and support EU-Japan business cooperation in third markets. A small number of EU
Member States like France and Germany have been active on the topic, but not necessarily with an
EU perspective. Institutional support is essential from the EU Commission, the EEAS the EIB, the
EBRD and Japanese ministries and funding agencies on the EU-Japan Centre’ initiatives to support EU
and Japanese companies, and in particular SMEs, for joint projects in third markets.

114

European Commission (2020). European Commission welcomes political agreement on future €79.5 billion for a new instrument tofinance the EU external action and lead the global recovery through international partnerships. Available at:https://ec.europa.eu/commission/presscorner/detail/en/IP_20_2453

75

7. RECOMMENDATIONS TO EU SMES
Section 7 provides recommendations to EU SMEs interested in EU-Japan business cooperationin third markets, in order to help them prepare future projects and to anticipate eventual challenges.
These recommendations mainly target the types of EU SMEs shown in Figure 23, which are EU SMEs
most likely to be involved in EU-Japan business cooperation in third markets.
Figure 23. Types of EU SMEs most likely to be involvedin EU-Japan business cooperation in third markets

Third market No.1

Third
marketThird
marketNo.2

Third
marketType 1

Type 2Type 3

EU SMEs already partneringwith a Japanese company, inJapan or in the EU, andwishing to replicate the

EU SMEs already present in athird market (in yellow) andlooking for a Japanese partner
to start new projects or to scale

EU SMEs seeking a Japanese
partner for the first time tocooperate in Japan, and in third
markets (in yellow).

partnership to third markets.

up their business in the same
third market and/or othercountries (in green).

76

7.1.

KEY PREREQUISITES

A certain number of key prerequisites are useful for a successful EU-Japan business alliance inthe digital economy in third markets.
Table XI: Key prerequisites for EU SMEs
Highly innovative digital technology
A technology that is not be available in Japan or among other foreign partners will
have a competitive advantage. Otherwise, a technology that an EU SME has madeavailable locally and has successfully adapted to the target third market will also
attract potential Japanese partners. The technology should be interoperable andcustomised in order to either integrate or complement the products or services
provided by the Japanese partner.
○

1○

Example 1: a large Japanese company aims to develop healthcare solutions inan emerging country by combining several digital and medical tools. The
company searches a system integrator already present in the target third
market (e.g. an EU SME) which can bring together the different components
into one solution, and which can adapt the solution to the local environment
and the local people (e.g. language, lack of Internet, use of mobile phones
rather than computers).
Example 2: a large Japanese company opens a power plant in a third market
and searches a company already present in the target market (e.g. an EU SME)
to provide cybersecurity services and therefore to complement the Japanesecompany’s project.
Digital solutions applicable to industries outside the traditional IT sector

Digital solutions that can be applied to industries such as agriculture, healthcare

2and energy are increasingly sought-after, in particular in emerging countries, whichenables EU tech SMEs to take advantage of the many possibilities offered by thedigital economy.
Expertise in third markets

3

An expertise with third markets will make EU SMEs more attractive to Japanesecompanies. Expertise can be described by a substantial business activity in a third
market, the existence of a subsidiary, knowledge of local legislations, tariffs,
insurance and business culture, a network of local partners, suppliers and local
agencies, and knowledge of the local environment and lifestyle to adapt the
product/service/technology to the local end-users.
77Expertise in Japan or with Japanese partners in Europe

4

If an EU SME does not have expertise in a third market, an existing partnership withJapanese partners is also helpful to replicate this partnership overseas. A presence
in Japan with a local subsidiary is likely to foster business cooperation in Japan andin neighbouring countries, where Japanese companies are often well-established.
A partnership with a Japanese company taking place in Europe will be easier toreplicate in regions like Eastern Europe, the Western Balkans, Africa or Central
Asia. Indeed, Japanese companies’ European headquarters will usually be thecontact points for projects in these markets.
Plan to expand an existing business5

Ideally, an SME’s expertise in a third market is combined to a project to expand an
existing business within the same third market or to cover several third markets.
Indeed, after developing a network of local partners and doing business in a third
market for a while, some EU SMEs intend to scale up their business with a large
project (e.g. factory, infrastructure). As such projects are expensive, EU SMEs lookfor investors that can bring capital. On the Japanese side, many large companies
already have this capital and look for concrete projects in emerging markets that
require investors and off takers. In this model, the Japanese company brings
capital and takes advantage of the EU company’s expertise and network in thetarget third market.
Ability to speak English and more languages

6

7.2.

While speaking Japanese is often a prerequisite to do business in Japan, speaking
English is crucial to be able to work with Japanese partners in third markets. In
addition, the ability to speak the local language of a third market is also a strength.
The diversity of languages within the EU makes EU companies able to do businessmore easily in Africa, Latin America, Central Asia, Eastern Europe and the Western
Balkans.

MINDSET TO ADOPTEU SMEs which intend to undertake EU-Japan business cooperation in third markets should
shape their mindset with the elements provided in this section.
7.2.1. Complementarity
When interviewed on the topic of EU-Japan business cooperation in third markets, a certain
number of EU companies already established in third markets did not see the benefits of partneringwith a Japanese company.
78

Some companies answered that they saw the arrival of Japanese companies as the arrival of acompetitor.
 The present report, and in particular Section 3.1., aims to show that Japanese companies canbe seen as partners with complementary strengths, rather than competitors.
Complementary strengths can be regional or strategic. Projects in the digital economy are
generally based on complementarity between the digital field and other industries such asenergy, manufacturing and agriculture. On the one side, a company will provide a specificdigital technology while on the other side, the other company will provide capital,engineering, equipment and project management.
Other companies answered that they were already successful in third markets and did not see
the benefits of a partnership with Japanese companies.
 Each business case is unique and indeed, some EU SMEs might not need to partner with aJapanese company in order to expand their business in third markets. Other partners andinvestors like large EU companies, large American companies or large Chinese companies
might have better offers than Japanese companies depending on the target industry and thetarget third market. Nonetheless, Japanese companies, and in particular sogo shosha, often
have a large capital, an expertise in infrastructure projects, a good acceptance in third
markets and a professionalism that make them excellent partners for projects in third
markets, compared to other foreign companies.
7.2.2. Trilateral approach
The present report covers the topic of EU-Japan business alliances in third markets. In reality,
such cooperation generally involves an additional party to the two EU-Japan partners: third-market
partners. Third-market partners are crucial for the success of an EU-Japan joint project overseas.
Figure 24. Trilateral partnership

Trilateral
partnership
betweenEU, Japaneseand third-market
partners

79

EU SMEs already established in third markets usually have a strong network of local partners.
From their point of view, the third-market partner is actually the Japanese side. Therefore, anotherway to present the business cooperation described in this report would be to focus on existing
partnerships between EU and foreign partners (e.g. EU-Africa, EU-Asia, EU-Latin America) and topresent Japanese companies as third-market partners that can support the expansion of thepartnership. From this point of view, the role of the local partner (from Africa, Asia, Latin America)
becomes clearer and appears as intrinsic to EU-Japan business cooperation in third markets.
Likewise, Japanese companies already established in Asia already have a strong network of
local partners. The arrival of an EU partner, seen as a third-market partner, to boost the Japan-Asia
partnership with a digital technology for example, shows the strong trilateral aspect of the businesscooperation.
Each party provides a complementary strengths to the trilateral partnership. One of the mainstrengths of local partners is to support the localisation of the project as shown in the point below.
7.2.3. Localisation
EU-Japan joint projects in third markets have to be localised, which means that they have tobe adapted to local users and their lifestyle, the local environment and the local culture. Thirdmarket partners are the experts of their own country and know which language should be used, which
payment methods are the most common and what kind of design are the most popular.
In emerging markets in particular, localisation supported by local people is crucial as a businessmodel that has worked in Europe or in Japan might not work in emerging markets where resources
are different and sometimes scarce. Indeed, access to infrastructure, electricity and the Internet is
not always ensured. Business models have to be adapted and EU and Japanese companies need to
be flexible and open-minded.
For an efficient localisation, companies have to address the needs of end users, theaffordability of their products and services, the way they deliver them, and the way they promote
their business in third markets. Localisation is closely related to the digital economy. If the products
and services provided by the EU-Japan business alliance involve digital tools (e.g. mobile application),
the design, user interface and user experience have to be adapted to the local context. Moreover, themarketing strategy also has to be adapted as advertisement is increasingly taking place online.
7.2.4. Sustainability
As mentioned in Section 2.3.3., companies involved in EU-Japan business cooperation in third
markets have to address sustainability and the SDGs. Companies need to adopt a mindset oriented
80

toward sustainable projects that will last in the long term and that will encompass sustainability interms of economic, social, environmental and regulatory impact.
7.2.5. Standards
Standards are closely related to the digital economy. Indeed, international discussions aretaking place to regulate digital technology in order for companies and users to develop and use digital
tools that are secure, human-centred, and that respect privacy, human rights and democracy. Japanand the EU are like-minded in the digital field which makes Japanese and EU companies morecompatible for business partnerships in the digital economy. Projects addressing the topic of “digitalfor development” will be the opportunity for like-minded third markets to adopt digital standards
promoted by the EU and Japan, and therefore to join a community of countries with compatible
technologies and legislation which will ultimately facilitate trade and technology transfer, as well as
the exchange of best practices.

7.3.

CHALLENGES TO EXPECT

Companies involved in EU-Japan business cooperation in third markets are likely to encounterthe following challenges:
Communication: as trilateral partnerships involve three or more parties from different
countries with sometimes different languages and cultures, communication can be achallenge. A good preparation ahead of the project is useful to avoid cultural faux pas and agood knowledge of English is necessary for all parties.



Lack of visibility of EU SMEs: in the digital field, Japanese companies are often more familiar
with Japanese, American, Asian and Israeli companies, rather than EU companies. The
concept of the EU in general is often not well known, and some Member States are usuallymore familiar than others. Some EU Member States which are not well-known in Japan often
have highly innovative SMEs that provide state-of-the-art technologies, and the challenge forthese SMEs and EU trade promotion organisations is to not only promote the technologies,
but also the country as a whole to create awareness and trust on the Japanese side.

Time: partnerships between EU and Japanese companies often take time to be formalised,from a few months to a few years. Japanese companies in general tend to need time to build
trust and a relationship with a company before agreeing on a partnership, whether thepartnership takes place in Japan or in third markets. In addition, during the French-JapaneseBusiness Summit 2020 organised on the topic of opportunities in Africa, Oussouby Sacko,
president of Kyoto Seika University described Japanese companies as less risk-oriented than81other foreign companies, such as Chinese companies, when considering doing business inunfamiliar markets like Africa.115 According to Sacko, Japan tends to provide development
aid as a first step in order to contribute to the development of the country and theimprovement of the business environment, with the aim to bring Japanese businesses inthese markets at a later stage. However, it is often too late as foreign companies like Chinesecompanies do not wait to start doing business in these “high-risk” markets. They are readyto deal with the risks little by little and are therefore far more present than Japan in Africa
and other “high-risk” markets. Consequently, Japanese companies have been falling behindin terms of presence in some third markets as they usually require more information, more
preparation and more insurance before agreeing on a project in unfamiliar third markets,
which is often time-consuming.

7.4.

HOW CAN EU SMES START BEING MORE INVOLVED?

EU SMEs interested in partnering with Japanese companies in third markets can make a firststep in several ways as presented below.
7.4.1. Get in touch with relevant SME-support offices
EU SMEs can benefit from various services that support their international ambitions. Indeed,
the EU has specific programmes and agencies in charge of supporting SMEs, such as the Enterprise
Europe Network (EEN) which supports EU SMEs in finding partners and doing business abroad.116
EEN contact points are present in every EU Member States and are a first step toward
internationalisation. The EU-Japan Centre for Industrial Cooperation is the EEN’s Japanese contact
point and is therefore a relevant organisation to contact for EU SMEs looking for Japanese partners.
In addition to bilateral business cooperation between EU and Japanese companies, the EU-Japan
Centre intends to launch activities dedicated to EU-Japan business cooperation in third markets,
which remains a topic that is not covered by most EU Member States. EU SMEs present in third
markets and looking for investors and business partners, such as Japanese companies for example,
for concrete projects can therefore contact the EU-Japan Centre for support in this regard.
EU trade promotion organisations in Japan and in third markets such as chambers ofcommerce and embassies also support EU companies in finding partners and are therefore relevant
entities that can support EU SMEs. Few of them are currently working on connecting EU companies
with Japanese partners in their respective third country, but being in touch with these entities is a
first step to be involved in relevant events and to be introduced to big players in these third markets.

115

CCI France Japon (2020). 2020 French Japanese Business Summit: Key Takeaway Videos. Interview of Oussouby Sacko in Frenchlanguage. Available at: https://www.ccifj.or.jp/actus/n/news/2020-french-japanese-business-summit-key-takeaways-videos.html
116 Enterprise Europe Network (2020). Enterprise Europe Network. Available at: https://een.ec.europa.eu/

82

7.4.2. Show your strengths
In order to acquire more visibility and to promote their strengths and technologies, EU SMEs
can attend matchmaking and pitching events, organised either by private organisers or by SMEsupport offices like the Centre and EU embassies. Physical events are ideal as Japanese companies
generally prefer physical meetings with potential partners in order to build trust and a relationship.
Indeed, the relationship developed with a Japanese company is extremely important, often more
important than the technology itself.
Thanks to the increase in virtual events during the COVID-19 pandemic, EU SMEs have beenable to meet Japanese companies more easily by attending virtual networking events. Virtual
meetings do not replace physical meetings, but it remains a first step toward a potential partner thatcan be followed by email exchanges and physical meetings once international business trips are
possible again. Originally, the concept of virtual matchmaking and virtual pitching events is not widely
known in Japan which makes the COVID-19 pandemic a delicate situation for EU SMEs looking forJapanese partners. Although Japanese companies have been adapting to the use of digital tools andmore and more companies attend such virtual events, Japan in general has been lagging behind in
the use of digital tools and the transition to virtual events. By combining support from organisations
like the Centre and individual attendance to networking events, EU SMEs can increase their chances
to find Japanese partners.
Finally, EU SMEs that are already successful in third markets can show their strengths by giving
visibility to their actions and future ambitions. Promotion in press articles, in particular online, andparticipation to initiatives undertaken by international organisations and multilateral developmentbanks (MDBs) will make it easier for Japanese companies to find and trust an EU SME in a third
market if information is available online and if large international organisations have supported
previous projects.

83CONCLUSION: KEY TAKEAWAYSTABLE XII: Strengths and complementarities of the Japanese and the EU sides



Capital to invest

Expertise in the management of large projects (e.g.

EU SMEs already active in third markets and looking to

infrastructure)

expand their business look for an investor to support their

Currently looking at emerging markets

project.

Well accepted in most third markets

Gateway to Asia, in particular ASEAN, and the PacificGateway to Eastern Europe, Western Balkans, Africa,
Latin America and Central Asia

Japan lagging behind in the digital fieldEU SMEs are more advanced than Japanese companies inthe development of innovative digital solutions

Figure 25. Key requirements for third-market partnerships

Highlyinnovative
Already
active inthirdmarkets

Interoperable
technology

EU SME
Customised
service
Integrates orcomplements
the partner's
product/service

Have a projectto expand abusiness within
the same 3rd
market or in
the region

84

TABLE XIII: Key takeaways
Digital economy

Trilateral partnerships



Digital solutions applied to other industries: cross-sectoral.



Not only the traditional IT / ICT sector.

Growing economy: businesses have to adapt.



Digital connectivity between countries.



Trilateral approach with EU, Japanese and third-market partners.

Consider Japanese companies as partners, not as competitors.

In the digital economy, there is often complementarity between one
partner with a digital solution and one partner with anComplementarity

agricultural/medical/mobility solution.
Regional complementarity: Japanese companies well established in
Asia-Pacific, EU companies well established in Eastern Europe,
Western Balkans, Central Asia, Africa and Latin America.



EU SMEs already well-established in a third market might want toscale up their business in the same third market or in neighbouring
countries

bylaunching

a

large

project

that

needs

investors/buyers/technology partners/off-takers: large Japanesecompanies such as sogo shosha are relevant partners to consider.


Fit the local environment and the local lifestyle/people.



E.g. the case study of Simprints, NEC and GAVI shows that if there is
not enough infrastructures to vaccinate all children under five years

Localisation

old, one must think out of the box. Instead of waiting for identificationand medical infrastructures similar to Europe or Japan to be set up,
the consortium created a new customised digital system that can help
immunise children living in remote areas and in impoverishedcommunities.

Address sustainability
Digital standards



Sustainable Development Goals (SDGs).



Industry + Development = Compatible.

EU and Japan are like-minded partners.

Work on digital standards with like-minded third markets to create a
global harmonised digital ecosystem that will facilitate trade andexchange of information.

Importance of relationships



Build trust and a relationship is often a priority for Japanese partners.

with Japanese partners

85

ACKNOWLEDGEMENTS
I would like to express my sincere gratitude to the EU-Japan Centre for Industrial Cooperation
for giving me the opportunity to undertake this research work through the MINERVA Policy & Market
Intelligence programme. I am particularly grateful to Mr. Philippe de Taxis du Poët, EU-side General
Manager, and Mr. Fabrizio Mura for their guidance, trust and patience throughout this research. I
would like to address special thanks to the colleagues at the EU-Japan Centre who have given theirtime to support this study and have shown great teamwork and kindness.
I am extremely grateful for all the government officials, company executives, academics andorganisations interviewed who kindly accepted to give their time and share their experiences andthoughts on this research topic. Writing this report would have never been possible without theircontribution.

Tokyo, March 2021
Florence ARNU

86

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ANNEXESANNEX 1: MAP OF AFRICA
The map shows the five African regions according to the data provided by the United Nations
Statistical Commission.117

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United Nations Statistical Commission (n.d.). Methodology – Standard country or area codes for statistical use (M49) – Geographic Regions. Available at:https://unstats.un.org/unsd/methodology/m49/ (Accessed: 30 June 2020).

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