CEE Business Media operates the English-language BiznesPolska.pl, and is the organizer of several international award events, including the Japan – Central Eastern Europe Investment Awards, which will take place in Tokyo on April 23.
The Founder and Editorial Director of CEE Business Media, Thom Barnhardt tells Diplomacy&Trade that “our focus is on connecting international investors with the region of Central and Eastern Europe (CEE). And we do that with four Awards events: in the CEE region (Warsaw, Poland in February and October), in the United States (New York City in June) and in Japan. The Japan Awards event originated a few years ago during my conversations with the Japan External Trade Organization (JETRO) in Poland. We realized that despite Japan being the No. 3 foreign investor in CEE, the awareness and recognition of Japan as a major investment force was low. And while many CEE countries' top ministers have high-level missions to Tokyo, these are bilateral only. Our idea is to shine a spotlight on the whole CEE region, the importance of Japanese investment in the region, and to further connect businesses in Japan with businesses in CEE.”
During the day of the awards ceremony in Tokyo, there will be an investment summit. As the Editorial Director explains, in this second year, they will again provide a ‘bird's eye’ view of the CEE region with an opening panel on the economic and political outlook, before going into more details about specific areas of strategic opportunity between Japan and CEE (infrastructure, energy, and new technology shaping the automotive sector). They will also have case studies about recent mergers and acquisitions (M&A) deals and specific ‘Breakout’ sessions on how CEE IT/Tech companies can help large Japanese corporate entities with their Technology/Digital needs. In the afternoon, there will be three country-specific Break-out sessions, and – according to the expectations of the organizers – one of these will cover Hungary. As for possible Hungarian participation at this year’s Investment Summit, Thom Barnhardt recalls that “in 2019, we were pleased to have both the Hungarian Ambassador to Japan, Norbert Palanovics and the Commercial Counselor, Tekla Doktor attend. We hope to have even more attendance in 2020 of Japan-based firms who have already invested in Hungary (and the list is enviably long!) as well as new, mid-market Japanese companies considering expansion into Hungary via greenfield investments or M&A.”
Japanese investors in CEE
According to Thom Barnhardt, the CEE region has historically been viewed by Japanese investors as a lower-cost production and manufacturing base to support Western Europe. Japan is really the ‘strong, silent partner’ in CEE. In the Czech Republic, Japan is the 2nd largest foreign investor, in Hungary No. 3, and in Poland No. 3 or No. 4 – depending on how it is measured. He estimates there are about a thousand Japanese companies that have invested in CEE, so far. “Also, Japanese financial investment in CEE is largely behind the scenes but important. Hungarian ‘Samurai-bonds’ in Japan have been very successful, some Japanese pension/ investment funds have invested in CEE commercial real estate (usually via London vehicles), and even the low-cost airline Wizzair has found a very strong appetite among Japanese investors for its asset-backed, fleet-financing bonds,” he points out.
In recent years, a distinct interest from Japanese investors to expand their Business Services into CEE (such as Finance & Accounting, IT operations, etc.) could also be seen. During the last 2-3 years, these so-called ‘white-collar’ Shared Services operations have been opened by Ricoh and Fujifilm (Gdansk), Olympus (Wroclaw), Nissan (Budapest), Transcosmos (Poznan) as well as further expansion from Fujitsu and Hitachi. And the recent acquisition by NEC of KMD gives them an IT services footprint in the region. The Editorial Director strongly believes that 90% of Japanese corporate entities with back-office operations in Western Europe will sooner or later consider shifting those ‘services’ operations into CEE. “It's a natural ‘next step’ after the shift of manufacturing and automotive operations. Of course, the automotive, automotive suppliers and manufacturing sectors play a very prominent role. These sectors are growing and changing, driven by technologies such as batteries and hydrogen-powered fuel cells. While the consumer market for major Japanese brands in CEE has been limited so far, we see that's growing as consumer incomes in CEE continue to grow steadily,” he adds.
Competitors and opportunities
Japan’s main competitors on the CEE investment market are China and South Korea. The Editorial Director stresses that the Japanese investors are very much different from the other two. “First of all, the cumulative stock of Japanese investment in CEE dwarfs Chinese investment. I think the Hungarian-Japanese economic relationship has been cultivated for nearly 30 years (going way back to the Magyar Suzuki investment), and that the relationship is strong, built on trust and performance. Also, Japanese investment into Hungary is deservedly perceived as ‘high-quality’, underpinned by strong R&D investment both in Japan and Hungary, which means it is highly efficient. The long-term nature of Japanese investment is also appreciated.” He believes there are some under-appreciated or overlooked opportunities in CEE that Japanese investors may put more focus on in the future. Japanese portfolio investors (pension funds, insurance funds) have largely missed out on the opportunities in CEE commercial real estate. While American, British and German investors have piled into CEE's commercial real estate assets over the last 10-15 years, the Japanese have been largely absent. “There are some signs of that changing as shown by such examples as a recent deal by Kajima in student housing in Poland and some Japanese real estate investors exploring the market. CEE's very strong tech talent is also world-class and is an excellent opportunity for Japanese investors. This region's tech/digital companies will also find that they can add big-value to large Japanese corporates continuing their digital transformation,” Thom Barnhardt concludes.