The Southeast Asia data center market is one of the fastest-growing globally, driven by several key factors. The adoption of cloud-based services is expected to be a major growth driver in the coming years. Additionally, Singapore is set to become the first country in the region to implement 5G technology, with Thailand, Malaysia, and Vietnam also planning and investing in 5G network deployment in the next 5 years. This will further increase data generation, necessitating data centers to manage more complex network traffic. Moreover, the growing demand for generative AI, which requires substantial computational power and vast amounts of data storage, is expected to further drive the need for data center resources.
Graph1. Data Center Market Forecast in ASEAN[1]
The maturity of the data center market in ASEAN countries is as follows:
Table1. Number of Data Centers with Capacity and The Breakdown of Upcoming Projects by Stage[2]
Singapore is the most mature market in the region. In the APAC area, it ranks second only to Tokyo, with 1GW of operational capacity and a remarkably low vacancy rate of just 1%. In 2019, concerned about the increase in power consumption and the environmental impact caused by the rapid surge in data centers, the Singapore government imposed a moratorium on new data center construction. However, this moratorium was lifted in 2022, and in May 2024, the government announced the “Green Data Center (DC) Roadmap,” which includes goals such as providing at least an additional 300 megawatts (MW) of capacity in the near future and expanding capacity further through the adoption of green energy.
Indonesia and Malaysia are fast-growing markets with enormous supply potential, further driving data center growth in ASEAN. In Malaysia, data center investments are rapidly increasing, particularly in Kuala Lumpur and Johor, while in Indonesia, Jakarta is seeing a surge in investments. This growth is driven by the expansion of the digital economy, the rise of cloud adoption, and hyperscalers such as GAFAM and major Chinese tech players investing in the region. In Malaysia, the government is also working on implementing a regulatory framework focused on sustainability.
Most of the new data centers to be built in the near future will be hyperscale facilities. For instance, out of 18 upcoming projects in Malaysia, 11 are designed as hyperscale, similar to 6 out of 11 in Indonesia and all 9 upcoming projects in the Philippines. This trend towards larger, higher-performance data centers is fueled by advancements in AI technologies.
The increasing use of cloud computing in both the public and private sectors in Southeast Asia is a key factor driving the demand for data centers.
For example, the Singapore government set a target to migrate most of its less sensitive digital workloads to the commercial cloud by 2023 and successfully achieved it. Similarly, many large companies in Singapore’s private sector have begun adopting cloud services, utilizing these solutions to implement advanced technologies such as artificial intelligence and machine learning.
In 2021, the Malaysian government introduced a cloud-first strategy in the public sector to increase cloud adoption rates to 50% by 2024.
Meanwhile, Indonesia’s cloud computing market has experienced remarkable growth, with a CAGR of 48%, over the last 5 years, according to CNBC Cloud. This surpasses the global average, and currently, 90% of companies in Indonesia are moving towards cloud computing solutions.
Amid these trends, the cloud market in ASEAN is expected to grow at a 21% CAGR.
Graph2. Public Cloud Market Revenue in ASEAN by Segment[3]
Additionally, to meet the growing demand for data storage and processing, major cloud providers are expanding into the ASEAN region. For example, in 2024, Microsoft announced several significant investments. In April, the company committed $1.7 billion to build new cloud and AI infrastructure in Indonesia over the next four years. In May, Microsoft pledged $2.2 billion to further develop digital infrastructure in Malaysia and also announced its first regional data center, focused on providing AI training opportunities, although the investment amount was not disclosed.
Table2. Area Coverage of Major Cloud Provider in ASEAN[4]
The generative AI market is growing rapidly in Southeast Asia. Currently valued at $0.8 billion, it is expected to reach $13 billion with a 50% CAGR by 2030.
Graph3. Generative AI Revenue Forecast (ASEAN) as of Mar 2024[5]
Indonesia, ranked sixth globally for its number of startups, is experiencing significant growth in generative AI applications, such as chatbots. One example is Kata.ai, which focuses on natural language processing to provide AI-powered conversational chatbots, helping businesses engage with customers more effectively. Kata.ai has a proven track record with major telecommunications companies and state-owned banks. Mekari, a leading SaaS company, also entered the generative AI business in 2023, offering tailored advice on management strategies by analyzing clients’ financial and HR data.
Advances in generative AI are driving increased demand for new types of data centers. Generative AI models, particularly large-scale language models (LLMs) and image generation models, require immense computational resources for both training and inference. This necessitates specialized hardware, including large numbers of GPUs and TPUs (Tensor Processing Units), which are more expensive than conventional CPU-based systems. These specialized systems also require more power and cooling, and take up more physical space, fueling demand for higher-performance and larger data centers, such as hyperscale data centers. Over the next 6 years, the average data center capacity is expected to double, while total capacity is projected to triple.
As generative AI technologies become more widespread, the computational load will increase, leading to higher power consumption. To illustrate, generating a response from ChatGPT requires roughly ten times the energy of a traditional Google search. Based on 9 billion searches per day, this translates to an additional 10 terawatt-hours of energy consumed annually (according to a report by the International Energy Agency, IEA). Furthermore, as computational loads increase, so does the heat generated by servers, which in turn drives up the energy needed for cooling. It’s estimated that cooling accounts for about 30-40% of a data center’s total energy consumption. Overall, the IEA has announced that the power consumption of data centers could double by 2026 compared to 2024 levels.
As power consumption in data centers increases due to the use of generative AI and other technologies, several challenges arise. These include whether we can meet the new energy demands, what types of energy will be used to supply this demand, and how these needs can be balanced with decarbonization goals. However, these challenges present new business opportunities for those who can provide solutions.
[Increasing Energy Efficiency in Data Centers]
One approach is offering hardware and software services aimed at reducing power consumption and improving the efficiency of data centers. For example, the Singaporean startup KoolLogix provides thermal management solutions for data centers. KoolLogix reduces the power consumption of data centers by implementing an innovative cooling system that addresses the inefficiencies of traditional cooling methods. Their system focuses on removing the waste heat generated by servers using a passive heat exchange and phase change approach. Instead of relying on energy-intensive air conditioners, the KoolLogix system uses the servers’ waste heat to power a refrigerant-based cooling loop. This system operates without mechanical pumps or compressors, relying on natural convection, which significantly lowers energy consumption.
[Providing Green Energy to Data Centers]
Another approach is building infrastructure to supply clean energy to data centers. This could include constructing power plants that utilize renewable energy sources such as solar, wind, hydro, or geothermal power. These plants would then supply clean electricity to data centers through long-term contracts. In this model, power generation companies sign Power Purchase Agreements (PPA) with data center operators to provide predictable, long-term energy at stable prices.
One example is an initiative launched in Japan in April 2024. Green Power Investment Corporation (GPI) and Kyocera Communication Systems Co., Ltd. (KCCS) are collaborating on a local renewable energy production and consumption model aimed at supplying a zero-emission data center with clean energy. Specifically, GPI’s subsidiary, Green Power Retailing LLC (GPR), will procure electricity generated by the Ishikari Bay New Port Offshore Wind Farm through a specified wholesale supply of renewable energy. This power, along with FIT non-fossil certificates with tracking from the Ishikari Bay wind farm, will be supplied to KCCS’s Zero Emission Data Center (ZED), which is scheduled to open in autumn 2024 in Ishikari City, Hokkaido, and will be operated entirely on renewable energy.
Since its establishment in 2013, IGPI Singapore has supported many Japanese companies with market research, strategy planning, and execution support, including partner search and approach, ideation, and related training for new business creation in Southeast Asia.
Leveraging the extensive insights gained through involvement in the management of data center-related companies in Japan, along with its strong network of data center players in the ASEAN region, IGPI Singapore is well-positioned to offer consulting services. These services include market entry strategies and the development of partnerships with local players in the data center industry. Through on-the-ground research conducted by local staff in ASEAN, IGPI Singapore stays informed about real-time trends in the region’s data center market. This knowledge allows IGPI Singapore to craft effective market strategies and identify potential partners.
To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.
[1] Arizton
[2] Data Center Map, DC Byte (Apr 2024), Cushman & Wakefield (Apr 2024)
[3] Statista
[4] IGPI Research. As per public disclosure, Mar 2024
[5] Statista
Mr. Jongwoo Lee is the Manager of IGPI Singapore. He worked for a Japanese general IT consulting firm, where he was involved in numerous projects such as business planning and implementation support, new business planning, operational efficiency improvement, and business management enhancement support in a wide range of industries, including trading companies, energy, manufacturers, automobiles, and systems, etc. After joining IGPI, he has extensive experience in new business creation in Southeast Asia, including the development of new business models and strategies for expanding sales of new solutions in the Southeast Asian market and the study of new business entries for local companies in Southeast Asia. Graduated from the University of Tokyo, Faculty of Economics. Japanese Certified Public Accountant
Industrial Growth Platform Inc. (IGPI) is a Japan-rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turnaround projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation, to name a few. IGPI has vast experience supporting Fortune 500s, government. agencies, universities, SMEs, and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has approximately 7,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.
A key strategic thrust is renewable energy development, with a goal for renewables to contribute 75% of the country’s electricity capacity by 20401. Among these renewable resources, Indonesia’s geothermal potential stands out, with abundant resources located at 362 sites throughout Indonesia2. This potential is particularly promising for supporting the nation’s decarbonization goals, as geothermal energy offers a reliable and sustainable source of power.
This article will explore Indonesia’s geothermal potential, the challenges of greenfield development, opportunities for Mergers and Acquisitions (M&A) investment in the sector, and how IGPI can support private and public companies to capitalize on these opportunities.
Within ASEAN today, two countries lead in geothermal capacity: Indonesia and the Philippines. While both nations boast abundant potential, Indonesia’s geothermal potential has seen more rapid growth in this area over the last five years. However, despite this potential, the development of geothermal energy in Indonesia is fraught with significant challenges, especially during the exploration phase, which presents obstacles to sustained greenfield development.
In ASEAN, the total geothermal potential capacity amounts to 34 gigawatts (GW), concentrated primarily in Indonesia and the Philippines. Over the past five years, Indonesia has emerged as the leading developer of geothermal power in the region, achieving an annual growth rate of 4.6% compound annual growth rate (CAGR) from 2018 to 2023, while the Philippines has seen minimal growth at just 0.3% CAGR over the same period3.
As of 2023, Indonesia has installed about 2.28 GW of geothermal capacity, representing only around 8% of its total geothermal potential of 30 GW. According to the General Plan for National Energy (RUEN), Indonesia aims to achieve 7.24 gigawatts of geothermal power by 2025, requiring an investment of approximately US$15 billion, and to reach 9.3 gigawatts by 2035. This plan highlights significant opportunities for future development in Indonesia’s geothermal potential.
Yet, two key obstacles hinder the development of greenfield geothermal projects in the country: high exploration risks and challenges in securing licensing and land clearance.
1) High Exploration Risk
The primary challenge in developing new greenfield geothermal projects is the substantial risk associated with exploration, requiring substantial investments ranging from 3 to 5 million USD/MW4 and carrying considerable uncertainty in finding viable geothermal sources. The government has implemented measures to mitigate these risks, including support for drilling, soft loans, and exploration funding through initiatives such as the Geothermal Sector Infrastructure Financing Scheme (PISP) and Geothermal Resource Risk Mitigation (GREM)5. However, these incentives have seen limited uptake due to a combination of factors, including insufficient tariffs on electricity produced and high-interest rates that increase the required return on investment.
2) Challenges in Licensing and Land Clearance Procedures
Despite the government’s introduction of a one-stop licensing system and the designation of geothermal projects as National Strategic Projects (PSN), practical challenges remain. Exploration and subsequent development often overlap with, and potentially conflict with, other environmental legislation, such as protected land/forest areas. Deconstructing and organizing these policies will take time; until then, many exploration permits will require long waiting periods for approval or may fail after multiple rounds of submission and clearance.
Given the challenges associated with greenfield projects, a brownfield approach—specifically via geothermal M&A—has become an attractive entry option for many developers and investors seeking to enter this sector. This strategy has particularly resonated with Japanese entities; to date, there are 7 Japanese entities involved in geothermal projects in Indonesia, with 5 of these entering via M&A. Between 2007 and 2023, there were approximately 15 M&A transactions in Indonesia’s geothermal industry6, 8 of which were executed by Japanese entities.
Among the 5 Japanese players in the market today, INPEX stands out. Since its entry in 2011, the company has primarily employed a brownfield strategy to rapidly expand its geothermal business in Indonesia. Through INPEX Geothermal Ltd., which primarily focuses on geothermal activities, the company has successfully completed four acquisitions7.
In 2015, INPEX made its inaugural brownfield investment by acquiring a 49% stake in Medco Power Indonesia, which in turn owns a 37.25% interest in the Sarulla Geothermal Project, joining a consortium that oversees one of the world’s largest single-contract geothermal power projects. To date, INPEX holds an 18% stake in the project.
In 2021, INPEX further expanded its portfolio by acquiring a 33.3% share from PT Supreme Energy Sumatera, which in turn owns a 30% interest in the Supreme Muara Laboh Geothermal Project, bringing the company’s ownership in this project to 10%. In 2022, INPEX further increased its stake from 10% to 30% by acquiring an additional 20% from another project shareholder, ENGIE SA. That same year, INPEX also completed an investment in the Supreme Energy Rantau Dedap Geothermal Project by acquiring a 27.4% stake from ENGIE SA.
Most recently, in 2023, INPEX joined the Supreme Energy Rajabasa Geothermal project in Lampung, acquiring a 31.45% stake from PT Supreme Energy Raja Basa. Through these strategic investments, INPEX is solidifying its position as a key player in Indonesia’s geothermal energy sector, contributing to the country’s efforts toward sustainable energy development.
Japanese entities have already begun their foray into the geothermal sector. The combination of a fragmented market landscape, characterized by numerous operating entities and relatively young geothermal facilities (with 60% being under 16 years old8), along with the apparent interest from local entities in seeking strategic partners to enhance technology and expand operations, highlights a market primed and ready for foreign private capital to spur growth.
IGPI Singapore specializes in supporting clients with M&A projects, conducting market research, and developing market entry strategies, particularly within the renewable energy sector.
To address these challenges, IGPI offers comprehensive M&A assessment services, including (not limited to):
◆ Target Screening (Pre-Due Diligence): We conduct thorough primary research to identify potential investments and shortlist viable targets.
◆ Due Diligence: Our team performs detailed commercial due diligence to gain a deeper understanding of potential targets, covering market analysis, business models, synergies, investment risks, and more.
These solutions are tailored to empower clients to make informed decisions and navigate complexities in their investment initiatives, ensuring strategic and successful market entries.
To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.
1. Business Plan for Electricity Supply (RUPTL) PLN 2024-20
2. Center for Mineral, Coal, and Geothermal Resources (PSDMBP)
3. IRENA, Geothermal Energy Data
4. API – Indonesia Geothermal Association
5. API – Indonesia Geothermal Association, Webinar – Geothermal Added Value Creation Strategy as a Supportive Measure for NZE 2060
6. Merger Market
7. INPEX Corporation
8. Global Geothermal Tracker
Mr. Febrizal is the Associate of IGPI Singapore. Prior to joining IGPI, Febrizal worked at YCP Solidiance and PwC Indonesia, where he successfully completed a range of consulting projects, including market entry strategy, growth strategy, and business model identification, across diverse industries such as Agriculture, Automotive, and Industrial. He has extensive experience in M&A activities, including conducting commercial due diligence, valuations, and providing deal advisory services (connecting buy-side and sell-side). Febrizal holds a degree in Economics from Binus University.
Industrial Growth Platform Inc. (IGPI) is a Japan-rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turnaround projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation, to name a few. IGPI has vast experience supporting Fortune 500s, government. agencies, universities, SMEs, and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has approximately 7,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.
The Indonesian telecommunication sector has undergone a series of “evolutions” predominantly caused by digitalization, driven largely by increasing data consumption. This has triggered a set of “assets reorganization” activities marked by consolidations, mergers and acquisitions (M&A) and divestments and the creation of infra-co.
Some of these activities are propelled by capital markets that have seen an increase in activity in the infrastructure private investment and higher cost of funds. More importantly, however, central to these is the convergence of telecommunication services that has now been largely driven by data connectivity and the demand for high-speed, high-quality and affordable communication.
The Indonesian telecommunication sector has long been “mobile-centric,” primarily driven by mobile use as a more affordable and practical connectivity option. Before the wave of consolidation that occurred nearly a decade ago (sometime in 2015-16), there were 7 mobile network operators (MNOs) in Indonesia, namely Hutchison 3, XL Axiata, Indosat Ooredoo Hutchison, Sampoerna, Telkomsel, SmartFren and Bakrie Telecom.
Today, due to this wave of consolidation among these players (as detailed out in the table below) we are left with four key major MNOs. Soon, the country may only have three MNOs, as there is a potential merger between SmartFren and XL Axiata.
In addition to the wave of M&As among the MNOs, the Indonesian telecommunication sector has also witnessed a rise in divestments of telecommunication infrastructure assets, including telecommunication towers, data centers to fiber optics assets.
This trend it highlighted by the recent announced divestment Telkom Sigma, a subsidiary of Telkom Indonesia (a state-owned enterprise telecommunication company), and the proposed divestment of Indosat Ooredoo’s Fiber Optic and Marine Cable businesses.
This shift further underscores the ongoing reorganization of the Indonesian telecom sector.
Amidst these ongoing consolidations and divestments, we have also observed key emerging trends (discussed in further details below), including the rise of fixed-mobile convergence (FMC) in the Indonesian telecommunication landscape. This trend is exemplified by XL Axiata’s acquisition of Link Net, a major Indonesian fixed broadband player (initially owned by First Media, a subsidiary controlled by the Lippo Group and has been invested by a global PE, CVC), and the recent merger of Telkom’s subsidiaries – IndiHome (a fixed broadband service provider) and Telkomsel (one of the major MNO operators).
Underlying these corporate actions, is the significant increase in data consumption driven by digitalization and consumers’ contents consumption. This has made it strategically imperative for Indonesian telecommunication players to provide better quality and high-speed internet connections to grow their market share.
Specifically, in Indonesia, the fixed broadband communication segment has ample room to grow. The country currently has the lowest fixed-broadband penetration at less than 20%, significantly below Southeast Asia’s average of 40%, highlighting a significant opportunity for expansion and fiber optics investment in Indonesia. (DBS, 2023)
Furthermore, the services provided today are sub-standard, with average speeds that users typically get from the current fixed broadband internet service providers (ISPs) being only 31.42 Mbps, a far cry from the SEA internet speed of about 77.5 to 284.93 Mbps. (Ookla, Q2 2024)
This underscores the pressing need for improved broadband infrastructure and services in Indonesia, which could further drive the adoption of fixed-mobile convergence and accelerate 5G development to meet the growing demands of its digital population.
From our research and analysis, the bouts of divestment and M&As that happen in the Indonesian telecommunication market are mainly driven by several external and internal factors including but not limited to the following:
<External Factors>
1. The end of the low interest-rate era, bringing about an increase in the cost of funds, has raised the bar for return on invested capital.
2. Heightened competition among the MNOs driving Average Rate per Users (ARPUs) downwards (shown by the decline in the ARPU/GDP Ratio in the chart below), while the number of subscribers remain stagnate.
3. Technological change, including the use of DWDM (Dense Wavelength Division Multiplexing) / WDM (Wavelength Division Multiplexing) which essentially allows for a single fiber optic to cater for various data signals use has expanded the bandwidth capacity of a single fiber optic, making fiber optic use capacity more efficient.
4. The entry of new players in the market, especially with the recent entry of Starlink (the satellite internet entity belonging to Elon Musk), has intensified competition in the Indonesian telecommunication sector. Starlink offers an alternative way for consumers to access the internet; adding pressure to the already competitive landscape, though its reach is currently limited.
<Internal Factors>
1. The need for MNO players to seek new avenues for growth including providing higher value-added services, has become increasingly important.
2. Adding to this is also the decline in legacy revenue streams (voice calls, SMS) for mobile companies, which now only provide a meager portion of the overall revenue (see below illustration on the proportion of legacy revenue to the total revenue of Telkomsel)
3. The high capital expenditure (capex) required to maintain competitiveness and/or to capture new markets has further driven the assets-reorganization. Combined with (1) and (2), this has triggered the slew of consolidation and divestment within the Indonesian telecommunication sector.
A confluence of these factors, coupled with the shift towards data-driven revenues, has resulted in the continuous shake up in the country’s telecommunications sector.
Driven by the rise of data consumptions and the strive for efficiency, the key trends in the telecommunication market in Indonesia will be mainly driven by the need to provide high quality communication more effectively i.e. higher quality and at lower price. Due to this reason, we likely to witness the key following trends:
1. Fiber optic investment in Indonesia will become crucial for the future of telecommunications, with FMC convergence and fiberization enabling high-quality, affordable internet
Driven by increasing need of data, fiber optic, with its ability to channel vast amounts of data efficiently and effectively and with its already proven technology, has been the clear winner. In addition, the use of DWDM and WDM technologies is a breakthrough that has increased the amount of bandwidth capacity that can be channeled by a single fiber optic network.
Adding to that, fiberization – which is basically connecting tower to the fiber optic cable becomes the key for 5G development in Indonesia. We have seen this done in major markets such as India and China. This also means there is a convergence whereby fixed broadband will generally empower the telecom tower. Hence Fiber optic is a clear winner of this transition and evolution.
2. EDGE Data Center will provide further content localization
With increased content consumption, placing content closer to users to reduce latency has become ever more important. Edge data centers (EDGE), which is essentially smaller sized data center closer to the population of end users and utilization of content delivery network (CDN), which is essentially network of servers with the goal of delivering content quickly, cheaply, reliably, and securely as possible, are crucial in this “localization” effort.
3. Telecommunication companies will evolve to become “techcos”, whereas infrastructure companies will focus on deepening their infrastructure play, creating a more scalable back-end sharing economy
With the creation of “infra-co” companies, separating infrastructure ownership from operations, is supported by the rise of infrastructure investors, particularly infrastructure private equity funds, seeking exposure to digital infrastructure.
Whilst operating-co will focus on providing more value-added, higher return and technological based servicing. We can already see this happening in developed markets such as Singapore, where Singtel and StarHub have made acquisitions in the enterprise services sector to expand their offerings in this area.
We in IGPI Singapore have been active in the telecommunication sector in the region, working with not only key telecommunication clients across various spectrums, but also with various infrastructure and non-infrastructure investors who are looking into investing and getting exposure into the SEA telecommunication market. We are happy to discuss and assist you on your strategy and investment matters.
To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.
Mr. Erwin Thio is the Senior Manager of IGPI Singapore. His areas of expertise are in M&A deal management (both buy-side and sell-side), deal structuring, valuation and commercial due diligence, market analysis, and project management. He has also spent several years working within the investment and fund management (particularly for Real Estate Private Equity Funds) division of major developers such as Mapletree, Lendlease, Savills IM, and CFLD, where he helped with deal execution and origination, capital raising, fund creation/ development, and management.
Mr. Nicholas Quek is an Associate of IGPI Singapore. He graduated from Singapore Management University with a Bachelor of Business Management, majoring in Finance. During his time in university, he gained internship experience at OCBC bank where he took on a compliance role responsible for AML. He was also a Teaching Assistant for Financial Markets and Investments, and a Research Assistant for Real Estate Investment Trusts (REITs). In his final year, he embarked on an experiential learning course where he formulated strategies to increase e-commerce sales for an MNC.
Mr. Darren Hardisurjo is an Intern at IGPI Singapore (August 2024 – October 2024).
Industrial Growth Platform Inc. (IGPI) is a Japan-rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turnaround projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation, to name a few. IGPI has vast experience supporting Fortune 500s, government. agencies, universities, SMEs, and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has approximately 7,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.
Australia has rich innovation capabilities and potential that could yield significant benefits for Australia-Japan (A-J) innovation and even beyond.
The key question is “How to enable Australia?”
This entails fully unlocking the innovation capability and potential that Australia holds. This article intends to put a spotlight on the rich capabilities and the missing link which Australia as a nation faces to spearhead their innovation efforts for Japan in particular.
The wider objective of this piece is to contribute to discussions on increasing successful A-J innovation cases within the Australia-Japan corridor. Specifically, IGPI shares some of its observations of the potential bottlenecks faced by the Australian side – these include challenges in gaining awareness and recognition from the Japanese side in a customized fashion, which by no means have easy fixes.
Australia-Japan relationship has been a longstanding and complementary relationship that started in the form of trading in traditional sectors such as energy, agriculture, and mining.
It was touched upon in part I how this relationship is now evolving in terms of “What” and “Who” in recent years. Examples touched upon were Japan transitioning from traditional fossil fuels to initiatives such as renewable energy generation and hydrogen; and widening the collaboration partners beyond mega corporations to include universities and startups in Australia. It also highlighted the bottlenecks Japanese corporations face, such as “Why Australia?” and their motivation to explore such opportunities, particularly addressing the alignment or misalignment between the HQ and local arm.
For the full article on part I: What are the bottlenecks being experienced on the Japanese side?
However, this does not mean there are no bottlenecks on the Australian side. Australia faces its own bottlenecks as the “Innovation supplier”, providing solutions to the Japanese “demand” side.
For decades, Australia has been a key partner for Japan. As previously discussed in part I, this relationship has now dramatically shifted towards sourcing innovative solutions in various forms from broader players in the Australian innovation ecosystem. Namely, these have been from (i) Startups / Spinoffs, (ii) Universities, and (iii) Research Institutes.
2.1. Startups and Spinoffs
Throughout the world, startups have played a pivotal role in driving innovation.
Australia, recognized as having one of the largest startup ecosystems in the world (9th in the world, 2nd in Asia-Pacific)1, is home to numerous unicorns such as Canva, Atlassian, and Airwallex, to name a few. But most recently, the B2B sector startups have been on the radar of Japanese corporations, showing notable progress in Japan and beyond:
| Collaboration | Brief Example |
|---|---|
| Macnica x icetana | Macnica has secured a strategic stake in icetana, a leading artificial intelligence software developer. As part of this deal, Macnica will assume the role of the exclusive distributor for icetana in the Japanese and Brazilian markets2. |
| JR East Water Business x Hivery | JR East Water Business in collaboration with Hivery, an Australian AI-driven retail tech company, will roll out AI-driven vending machine optimization solutions to 6,000 vending machines across the East Japan Railway’s train stations3. |
Both examples illustrate Japanese corporations leveraging solutions from Australian startups in Japan and beyond.
One unique fact to note is that both icetana and Hivery are startups but started off as spinoffs of an Australian university or a research institute. The term “spinoff” describes a new and separate entity created by the parent entity that holds all or partial shares4. In the context of an Australian university or a research institute, spinoffs are created with the aim to boost entrepreneurial activities to commercialize a certain innovative technology5. In the same line, icetana was spun off from Curtin University (Perth, Western Australia), and Hivery from the Commonwealth Scientific and Industrial Research Organization (in short CSIRO, Australia’s National scientific research agency).
As these startups and spinoffs aim to commercialize the innovative technology they possess, they represent the significant potential for collaboration with industry partners in technical, business, or financial forms to realize new business opportunities.
2.2. Universities
On the other hand, Australia is a rich source of innovation from numerous universities. Australian universities are recognized for their world-class capabilities, comparable to the institutions the USA and UK universities. Based on QS World University Rankings 2025, the composition for Australia, Japan, the UK, and the USA in total count and the count in the “Top 50s” are as follows:
Figure 1: QS World University Rankings 20256
Factually, Australia ranks 3rd in the Top 50 coverage, behind the USA and UK. The interesting fact here is that despite being 3rd, Australia has the highest “coverage ratio” relative to the country’s total university count within the ranking (6 in the top 50 out of a total 38 = 16%; compared to 8% for the USA and 9% for the UK). This highlights the exceptional quality of Australian universities despite being fewer in number.
This excellence is evident in the “International Research Network” metric introduced by the QS World University Ranking in 2024, which provides insights on how internationally connected an institution’s research is as well as recognizing the importance of collaborative research more broadly7.
Here’s how the top 3 Australian universities fare against their counterparts in the USA and UK in terms of international research connectivity:
| Country | International Research Network Score (Top 3 Average) | University | Individual Score | Overall Rank |
|---|---|---|---|---|
| Australia | 97.2 | The University of Melbourne | 97.4 | 13 |
| The University of Sydney | 95.8 | 18 | ||
| The University of New South Wales | 98.3 | 19 | ||
| USA | 97.5 | MIT | 96 | 1 |
| Harvard University | 99.6 | 4 | ||
| Stanford University | 96.8 | 6 | ||
| UK | 98.9 | Imperial College London | 97.4 | 2 |
| University of Oxford | 100 | 3 | ||
| University of Cambridge | 99.3 | 5 |
Figure 1: QS World UnivTable 1: QS World University Rankings International Research Network Scores8
Again, despite the overall ranking being lower, the research capabilities of the top 3 Australian universities are on par with, or even exceed, those of the leading institutions in the USA and UK. It should be noted that overall ranking includes metrics outside of research capabilities, such as international student ratio, and non-capability specifics.
In addition, Australian university’s research and development spending is notably high on a global scale. This is illustrated by the “HERD” or “Higher Education Expenditure on R&D” metric, which measures the R&D expenditure by higher education entities such as universities as a percentage of GDP. Below is a comparison of the USA, UK, Japan and Singapore:
Figure 2: OECD Stat Dataset – Main Science and Technology Indicators Higher-Education Expenditure on R&D as a percentage of GDP9
| Country | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|
| Australia | 0.62% | 0.61%* | 0.62% | 0.64%* | 0.61% |
| Singapore | 0.64% | 0.56% | 0.52% | 0.52% | 0.52% |
| Japan | 0.38% | 0.38% | 0.37% | 0.38% | 0.38% |
| UK | 0.39% | 0.39% | 0.65% | 0.63% | 0.66% |
| USA | 0.36%* | 0.37%* | 0.36%* | 0.36%* | 0.38%* |
Table 2: OECD Stat Dataset – Main Science and Technology Indicators Higher-Education Expenditure on R&D as a percentage of GDP10
* Note: Estimate (Australia case) or slight definition differs (USA case), Data based on full available data for all 5 listed country comparison
Apart from the UK, which has increased significantly since 2018, Australia is represented with a consistently high level of expenditure or investment into R&D from a GDP percentage basis, which is by contrast, much higher than the likes of the USA or Japan.
Australian universities offer world-class innovation potential, which can be nurtured as business opportunities. The key importance is to make that “critical step” to collaborate with industry partners to realize that capability outside of the lab and apply it to the real world.
2.3. Research Institutes
Separate from universities, Australia also has numerous research institutes. These can be categorized into individual organizations or “Cooperative Research Centers” (hereafter CRC).
Individual organizations can range from national science agencies such as the CSIRO to more niche specialized research institutes (e.g., Health – Melanoma Institute Australia, or even university spinoff R&D entities, etc.).
Most notably, CSIRO is the largest research institute in Australia and one of the significant globally, is often compared to the Australian version of Japan’s “AIST” (産業技術総合研究所) or “RIKEN” (理化学研究所). Typically budgeted with approximately $1.6B AUD annually, it is ranked as the 6th or 7th against selected international applied research organization over the past 10 years and with over 4,000 industry and government partners11. For reference, AIST’s annual expenditure in FY22 was around $1.1B AUD12**. CSIRO’s R&D ranges in 9 fields (further split into subcategories) and works in a collaborative manner with the universities and industries to bring innovation to the real world13.
Figure 3: CSIRO Research fields14
With its broad coverage and extensive network of connections, CSIRO represents the diverse capabilities of Australia’s national science agency.
The other important research institute category is the CRCs. CRCs are Australian government programs since 1990 with the government providing funding support for industry-led collaborations. CRC themes vary depending on each CRC but are all aimed at addressing industry identified problems and key issues. Typically, CRC are mid to long-term programs that can range from 5 to 10 years, but shorter programs (CRC-P) up to 3 years also exist15. CRCs require at least one Australian industry organization and one Australian research organization, but they are not limited in total numbers, and can include non-Australian corporations as partners as well. Below are examples of CRCs that interacted with Japanese corporations:
| CRC x JP Cos | Focus of CRC | Grant size | Collaboration form |
|---|---|---|---|
| Food Agility CRC x NTT, Yamaha Motor | Support Australian agrifood industry to be profitable and sustainable16 | $50M | Official CRC Partner |
| Future Energy Exports CRC x Impex | Energy export decarbonization17 | $40M | Official CRC Partner |
| Future Energy Exports CRC x JX NOEX, Mitsui O.S. K. Lines, Osaka Gas | Collaboration Conduct research and development to demonstrate the technical feasibility and operability of low-pressure and low temperature solutions for bulk CO2 shipping transport18. | ||
| Heavy Industries Low-carbon Transition (HILT) CRC x Mitsubishi Heavy Industries | De-risk decarbonisation pathways for heavy industry19 | $39M | Official CRC Partner |
Note that entities can be part of the CRC itself (official CRC partner) or engage in a collaborative form, such as the Future Energy Exports CRC with companies like JX NOEX. It is also important to highlight that government grants require the applicants (i.e. CRC lead and partners) to at least match the amount of government grant / funding either through cash and / or in-kind contributions. With both long-term support and commitment, CRCs are unique research initiatives that bring like-minded partners together 20.
While each Australian startup / spinoff, university or research institute faces unique challenges, a common issue is the limited “Awareness” of Australian innovation capabilities. Despite the high quality and rich sources of innovation, Australia’s recognition by Japan lags behind that of global innovation hubs likes of Silicon Valley or Europe.
Unlike the USA or European countries, Japan is a unique country that requires a very different approach culturally or communication wise. Hence from an Australia point of view, applying a global strategy may not necessarily be most effective approach.
IGPI has seen many cases on both the Australian and Japanese sides having basic misunderstandings due to certain cultural differences or communication methods. In particular, the cultural differences can at time cause unnecessary friction unintentionally.
For example, due to the size and organizational structure, Japanese corporations may cause mass communication delays to get to the “Right” person. Even after making contact, an “unwritten” authorization or approval process, known as “Nemawashi”, might be required. This process of consulting stakeholders informally can significantly extend timelines and might be seen as a loss of momentum from a non-Japanese perspective. However, these processes are often integral to Japanese culture, intended to show respect and give courtesy updates to the people who may be impacted by a certain decision, just that it took a bit of time, which may have been out of their control.
To address this type of barrier, it is important for the Australian side to consider a dedicated and specific Japan strategy. This strategy should focus on deepening engagement and forming partnerships with Japan and Japanese corporates. Elements could include prioritizing capabilities that are particularly relevant to Japan, appointing an internal advocate for Japan-related initiatives, and establishing dedicated channels for promotion and interaction with Japanese entities.
It is important to be clear on the details of “what is requested” and “what can be offered as an exchange” from the Australian side to the Japanese side.
Unless there is a clear ambition and direction set for Japan, it could be difficult for both Australian and Japanese side to understand “what is the aim or goal”.
By addressing these bottlenecks with a targeted approach, Australia-Japan collaboration can improve, leading to more successful innovation partnerships across the Australia-Japan corridor.
IGPI Group has developed a deep-rooted understanding of Japanese Corporations and has been a part of the global expansion and ambitions of many prominent companies across the APAC and beyond. If you are an Australian startup, university or research institute, and believe in the potential of Australia-Japan on the pillars of innovation and keen to enhance your approach to Japan / Japanese corporations, we will be glad to have a confidential conversation. IGPI provides highly customized business advisory to its diverse range of clients, including but not limited to:
To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.
1 StartupBlink – Global Startup Ecosystem Ranking
2 icetana – https://www.icetana.ai/investor-updates/global-technology-giant-macnica-takes-strategic-investment-in-icetana
3 Hivery – https://www.csiro.au/en/news/All/Articles/2019/November/hivery-exports-ai-solutions-to-the-world
4 investopedia – https://www.investopedia.com/terms/s/spinoff.asp
5 Taylor & Francis Online – https://www.tandfonline.com/doi/full/10.1080/1331677X.2022.2086148
6 QS World University Rankings 2025 – https://www.topuniversities.com/world-university-rankings
7 QS World University rankings Methodology – https://www.topuniversities.com/qs-world-university-rankings/methodology
8 QS World University Rankings 2025 – https://www.topuniversities.com/world-university-rankings
9 OECD. Stat – https://data-explorer.oecd.org/
10 OECD. Stat – https://data-explorer.oecd.org/
11 CSIRO Annual report FY22-23 – https://www.csiro.au/en/about/Corporate-governance/annual-reports/22-23-annual-report
12 AIST: Employees and Budget – https://www.aist.go.jp/aist_e/about_aist/facts_figures/fact_figures.html
** RBA Exchange rate at $1 AUD = ¥97 JPY as of 12/08/24
13 CSIRO Research – https://www.csiro.au/en/research
14 CSIRO Research – https://www.csiro.au/en/research
15 Business.gov.au – https://business.gov.au/grants-and-programs/cooperative-research-centres-crc-grants
16 Food Agility CRC – https://www.foodagility.com/about
17 Future Energy Exports CRC – https://www.fenex.org.au/about/
18 Future Energy Exports CRC news – https://www.fenex.org.au/australian-japanese-partners-execute-rd-project-agreement-to-develop-safe-and-efficient-solutions-for-industrial-scale-shipping-of-co2/
19 HILT CRC – https://hiltcrc.com.au/about/
20 Business.gov.au – https://business.gov.au/grants-and-programs/cooperative-research-centres-crc-grants
Mr. Rachit Khosla is the Country Manager of IGPI Australia. Rachit is a seasoned strategy consulting professional with over 14 years’ experience of leading and executing market entry and growth strategy (both organic and inorganic) and open innovation engagements for Fortune 500 businesses and large MNCs across Asia Pacific. He has advised clients in a diverse range of industries including automotive, fin-tech, industrial and manufacturing, med-tech & healthcare, smart cities, construction materials, travel, IT & telecommunications to name a few. Rachit was the
former Country Manager and Director for YCP Solidiance (Japanese owned) and Founder and CEO of an online B2B marketplace startup for professional advisory services focused on Emerging Markets.
Mr. Kaoru Shingae is a Consultant at IGPI Australia. Prior joining IGPI, Kaoru has worked at Toyota, BMW and Boston Consulting Group, primarily specializing in the Automotive and Mobility sector and with exposure to wider industrial sectors. Kaoru has both internal and external strategy experience with deep understanding on ‘What’ is most important for all stakeholder’s future. He has end-to-end experience from corporate and enterprise level planning to all the way down to the operational planning. Kaoru is a holistic all-rounder in engaging with both strategical and operational stakeholders throughout the company. Past achievements include crisis turnaround plans, long and mid-term vision plans, CEO’s company goal plans and sales & market operational plan plus delivery to name a few. Kaoru has graduated from The University of Melbourne with a Bachelor of Commerce.
Ms. Devina Hashifah is an Intern at IGPI Australia (Nov 2023 – Feb 2024). Devina graduated with a Bachelor of Commerce from the University of Melbourne, majoring in Marketing and Management. She has previously worked in the financial advisory sector and student consulting organizations, conducting research for clients from the agriculture, renewable energy, microfinance, and media industry.
Industrial Growth Platform Inc. (IGPI) is a Japan rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turn-around projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation to name a few. IGPI has vast experience of supporting Fortune 500s, Govt. agencies, Universities, SMEs and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has ~7,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.
In the financial business market of Southeast Asia, B2B financial services integrated with operational DX for SMEs will be the key.
This article delves into the author’s perspective that the frontier of Fintech in the Southeast Asian market is shifting from the B2C domain to the B2B domain based on the latest Fintech trends.
So, what exactly is Fintech? While Fintech can be defined in various ways across different media sources, this article defines it as ‘financial solutions’ that meet at least one of the following two conditions:
1. Using digital technology to provide financial services to a broader user base than previously possible.
2. Using digital technology to increase the value of financial services provided to users.
One fundamental aspect to understand is that “financial services rarely stand alone.” This is because financial services typically involve the movement of money, which is accompanied by the movement of related information, such as the product or service being paid for, collateral assets, or credit involved in a loan. Since “money isn’t free,” the evolution of Fintech services is inevitably influenced by the degree of digitization of peripheral services. Thus, it is safe to say that advancements in Southeast Asia FinTech are closely linked to how digital transformation impacts the broader financial ecosystem.
Since the 2010s, the digital transformation in Southeast Asia has rapidly advanced in the B2C domain, reaching levels of convenience that surpass those in some advanced countries like Japan and Europe, particularly in sectors such as mobility, education, and healthcare. Examples of this Southeast Asian Fintech evolution include lifestyle support platforms like Grab (Singapore) and Gojek (Indonesia), which initially began as ride-hailing services. Additionally, personalized online education solutions like Geniebook (Indonesia), and online medical consultation solutions through platforms like Alodokter (Indonesia) highlight the advancements in ASEAN Fintech.
In the ASEAN Fintech landscape, digital services such as C2B/C2C payments and budget management have emerged alongside these innovations. Additionally, the data obtained from these services is used to assess consumer credit scores and lending needs, leading to the provision of consumer finance services like BNPL (Buy Now, Pay Later).
However, consumer financial services, particularly payments and BNPL, often face intense competition, resulting in persistently high customer acquisition costs. For example, Atome, a BNPL service provider based in Singapore, announced in May 2023 that it would cease all operations in Vietnam more than a year after entering the market.
Conversely, the digitization of operations for SMEs, which are the backbone of the Southeast Asian economy, remains sluggish, and productivity continues to be low. For instance, the situation in Thailand, a relatively advanced region in Southeast Asia, is as follows:
Agriculture:
| ✓ | Despite 47% of Thailand’s land and 33% of its labor force being engaged in agriculture, agricultural production accounts for only 8-11% of GDP. | |
| ✓ | 30% of agricultural households carry debt exceeding the average annual agricultural income per capita, with 10% carrying debt three times that amount. | |
| ✓ | Total rice production has decreased from 38 million tons in 2012 to 22 million tons in 2022. | |
| ✓ | Only 23% of farmers use ICT-related tools in their operations. |
Logistics:
| ✓ | B2B deliveries from region to region often use point-to-point routes, resulting in low loading efficiency for LTL (less than truckload) shipments. | |
| ✓ | 46% of annual freight transport involves empty backhauls. | |
| ✓ | In 2020, Thailand’s domestic logistics costs accounted for 14% of GDP, higher than the Asia-Pacific average (12.9%) and many other regions worldwide. |
Given this situation, some financial solution providers focus not solely on financial issues but also on supporting the productivity enhancement of SME operations. They capture financial needs and monetize by providing tailored financial solutions. For example:
| ✓ | CrediBook (Indonesia) assists MSMEs and mom & pop stores with digitizing operations and securing financing by offering a bookkeeping and reporting SaaS tool, which simplifies the process of applying for micro-financing from financial institutions easily. | |
| ✓ | Kilimo Finance (Vietnam) operates through a digital marketplace, allowing Vietnamese farmers to purchase farm inputs (e.g., seeds, crop protection, and equipment) through a wide network of suppliers. It also seeks to connect small and medium-scale agriculture players to commercial banks to enable access to formal credit through its automated credit scoring and loan origination software. |
In the future, Fintech players who contribute to improving SME productivity using digital technology and, through this process, meet customers’ financial needs while leveraging credit score-related data to provide financial solutions will occupy an essential position in the Southeast Asian market.
Considering this Southeast Asian Fintech trend, B2B operation DX technology companies might use the data they acquire to offer additional financial services, either directly through earning interest income or through partnerships with financial institutions. Conversely, existing financial institutions can acquire new customers by partnering with, investing in, or acquiring technology startups that drive digital transformation in adjacent areas of finance in Southeast Asia. They can also improve credit scoring accuracy by utilizing income statement-related information such as sales and balance sheet-related information such as accounts payable obtained through operational support, enabling risk-mitigated financing.
Particularly in emerging markets, SME financing is a significant revenue expansion opportunity for both parties due to its higher risk and higher interest rates.
IGPI offers business model hypothesis construction and verification, partnering support, and M&A support during the execution phase, not only for financial institutions but also for technology companies. If IGPI can be of assistance, please contact us through our website.
Mr. Tadasuke Noguchi is a Manager at IGPI Singapore. Before joining IGPI, Tadasuke worked in an IT company and a think tank in Japan, where he engaged in consulting projects such as new business development in various industries: automotive, logistics, retail, finance, etc. He has experience in hands-on new business development while on loan to Toyota Motor Corporation’s R&D department. In IGPI, He mostly focuses on consulting projects such as market entry/expansion in the ASEAN market, M&A advisory, and the formulation of long-term visions. Tadasuke graduated from the University of Tokyo with a B.A. in Language and Culture and acquired a certification from the Graduate School of Public Policy of The National University of Singapore. He enjoys traveling and has visited around 50 countries.
Industrial Growth Platform Inc. (IGPI) is a Japan-rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turnaround projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation, to name a few. IGPI has vast experience supporting Fortune 500s, government. agencies, universities, SMEs, and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has approximately 7,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.
There is an increasing momentum for promoting decarbonization in ASEAN, which was originally said to be lagging compared with other regions.
Regarding the systems to promote the development of decarbonization projects, the study and implementation of carbon pricing are in full swing. In enforcing enforceable carbon pricing, Singapore was ahead of other ASEAN countries in implementing a carbon tax system in 2019. Indonesia has followed suit with an intensity-based Emissions Trading System (ETS) targeting coal-fired power generation. Many other ASEAN countries have also announced their consideration of the introduction of carbon taxes and ETS.
Regarding project development, large-scale project development is accelerating. For example, in Malaysia, the Final Investment Decision (FID) of a large Carbon Capture and Storage (CCS) project (Kasawari) has been completed, and the project has moved into the construction phase. The scale of the project is expected to reach 3 million tons of CO2 per year. Considering that the size of one of the largest existing CCS projects in Japan, the Tomakomai CCS Demonstration Project, is equivalent to 200,000 tons per year, it could be said that the size of the Kasawari CCS Project is quite remarkable.
The background for the acceleration of decarbonization projects in ASEAN stems from international community pressure, driving both the public and private sectors of ASEAN to commit to achieving decarbonization targets.
In the public sector, this commitment is exemplified by a series of net-zero declarations by ASEAN countries, starting with Indonesia’s net-zero declaration by 2060 in June 2021, complemented by initiatives such as Repsol SA’s 2020 Sustainability Plan for Indonesia.
In the private sector, it is also due to the increasing pressure from large global companies to achieve decarbonization of their global supply chains.
Beyond these factors, it is also important to note that in terms of project development resources, ASEAN boasts abundant natural resources. For example, forests account for the majority of voluntary credit issuance in ASEAN. This is backed by abundant forest resources, led by Indonesia, which has the third-largest forested land in the world[1].
In addition, offshore wind power, which has been attracting attention in recent years as a trump card for the diffusion of renewable energy, shows promising potential in Vietnam and the Philippines despite the limited number of countries and areas where it can be developed. Notably, there is a high potential for “bottom-fixed” type wind energy in the two countries, which is superior to “floating” type in terms of feasibility, and many foreign companies are exploring opportunities in Vietnam for upcoming large-scale projects.
As mentioned above, ASEAN is a region where the development of decarbonization projects is progressing, with a background of abundant natural resources.
One of the characteristics of project development in ASEAN is the deep involvement of foreign companies in the consortium. The background to this is the need for foreign companies to fill a role that cannot be filled by their own countries, both in terms of funding and technology. Notably, the contribution of Japanese companies is extremely high.
In fact, the Joint Crediting Mechanism (JCM), which began operating in 2015, and the AZEC initiative, which was proposed in January 2022, positions ASEAN to be the core partner and aim to share the fruits of decarbonization by providing Japan’s excellent decarbonization technologies with ASEAN companies. Against the backdrop, it is expected that “decarbonization” will be an opportunity to strengthen ties between Japan and ASEAN.
IGPI Singapore has experience supporting clients with market research and developing market entry strategies in a wide range of decarbonization-related topics in ASEAN.
Below is a sample of areas where we have assisted in the past.
◆ Renewable energy (solar, wind (including offshore), biomass, geothermal, hydro)
◆ Hydrogen and ammonia
◆ Carbon Capture, Utilization, and Storage (CCUS)
◆ VPP/DR
◆ Carbon credits
◆ Green finance
To find out more about how IGPI can provide Japanese consulting support for businesses in Singapore and the region, browse through our insight articles or get in contact with us.
[1] Renature “Insights on Indonesia” (2020)
Mr. Tatsushi Sasakura is a Senior Manager of IGPI Singapore. Tatsushi has worked at Mizuho Bank and Deloitte Tohmatsu Financial Advisory (DTFA) in Japan. At DTFA, he belonged to the Corporate Strategy team, specializing in business strategy planning, M&A advisory, and business due diligence. He was also engaged in crisis management, supporting clients to tackle emergencies. He has profound experience in the energy, consumer, and financial industries. He covered a wide range of clients, including Private Equity Funds and large-sized companies. Tatsushi graduated from Waseda University with a B.A. in International Political Science and Economy.
Industrial Growth Platform Inc. (IGPI) is a Japan-rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turnaround projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation, to name a few. IGPI has vast experience supporting Fortune 500s, government. agencies, universities, SMEs, and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has approximately 7,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.
Although the EV penetration rate (EV share of new car sales) in the U.S. in 2023 grew year-on-year to approximately 7.6% due to incentives such as tax credits and regulations, it fell significantly short of expectations. Amid slowing demand growth, the EV market leader Tesla revealed a 55% y-o-y decline in final profits in its January-March 2024 financial results, due in part to increased competition and lower sales in key markets.
The Chinese EV industry, which grew rapidly owing to government subsidies, has witnessed a drop in the number of registered EV manufacturers from about 500 in 2019 to less than half that number today due to the economic slowdown and intensified competition. The number of manufacturers discontinuing EV production is expected to increase in the future, with a growing trend of “EV graveyards” in China as large numbers of EVs are left abandoned by those who have withdrawn from the market.
Market oversaturation and declining purchasing interest — stemming from concerns about driving distance limitations, unaffordable prices, and insufficient recharging infrastructure — have contributed to these situations.
Enthusiasm for ESG is also waning globally. Particularly in Europe, there is growing criticism surrounding the quality of ESG reporting by companies, marking a trend towards more formal initiatives. A 2021 survey raised concerns that many companies are overstating their ESG activities, making it difficult for investors to discern true commitment to sustainability. Additionally, the credibility of ESG investments may face growing scrutiny if there are no tangible improvements in environmental protection.
This evolving landscape presents ASEAN as a beacon of innovation and adaptability, distinguishing it from global trends and highlighting its unique position on the world stage.
In Southeast Asia, however, there are no signs of such stagnation.
In Vietnam, several of VinHomes’ smart cities are promoting green projects to transition entirely to electric vehicles. From the expansion of electric bus routes by VinBus to the provision of EV cab services by Green and Smart Mobility (GSM), Vingroup has adopted a strategy of not only selling EVs to consumers, but also replacing low-quality public transportation and cabs with EVs to rapidly increase EV penetration. As a result of these efforts, Vingroup was awarded the AIBP 2023 ASEAN Tech for ESG Award, which recognizes sustainable initiatives with the use of digital tools and innovative technologies.
In Laos, where approximately 1,300 EVs were registered as of 2022, government support and international partnerships contributed to the sale of approximately 2,600 EVs in 2023 alone. In November of the same year, the aforementioned Vietnam GSM launched an EV cab service in the capital city of Vientiane as a first step in planned business-led strategic EV rollouts. The low prevalence of automobiles, severe gasoline shortages due to global oil price surges and low electricity costs through the utilization of abundant renewable energy resources have become major driving forces behind these initiatives.
EVs are also becoming more modular and require far fewer parts than gasoline-powered vehicles. In expanding EV sales, meeting local needs is more critical than pursuing global growth, and whether a country is suitable for EVs depends largely on its energy mix.
Innovation is often referred to as “creative destruction” and is considered to involve the destruction of what existed before and the creation of something new. In fact, in Japan’s regional cities, privately owned stores are disappearing, being replaced by restaurant chains and convenience store chains, which has resulted in the loss of the local communities that once thrived.
Yet advances in digital technology have, for example, revitalized rather than destroyed traditional, privately owned mom-and-pop stores in Southeast Asia. Consumers can order products via a smartphone app and a rider will deliver these from stores to homes within 30 minutes. Similarly, stores can replenish stocks through B2B e-commerce when necessary at the touch of a screen. Without destructive disruption, smartphone application technology has organically connected retailers and consumers.
Innovation in these ASEAN countries is driven by attempts to create new frameworks rather than being constrained by existing ones. New technologies and strategies are actively employed to solve region-specific challenges without relying on existing approaches.
This digital revolution has significantly expanded the range of what can be accomplished by individuals. Anyone can distribute video content around the world, and startups can manufacture electric cars. In such an era, it is imperative to provide optimal services to the localized market based on localized needs and context rather than to the entire world. Innovation, achieved through the utilization of existing technologies and services to expand the capabilities of people and organizations, represents “creative integration” rather than “creative destruction” and holds the key to achieving a sustainable society.
In an era where providing services tailored to the specific needs of each region proves more effective than offering generic global solutions, success or failure will hinge on how quickly a company adapts to changes in the environment and how flexibly it responds — while fundamental structural changes may be necessary at times, much can be accomplished even with simple tweaks in policies. A flexible response to the changing environment is enabled by management setting an abstract, conceptual direction, such as a Purpose, while frontline personnel consider the concrete specifics of “to whom,” “what,” and “how” before executing their actions. In doing so, agility will also be achieved by empowering the frontline with the requisite authority and resources to execute and deliver.
Furthermore, understanding regional circumstances and maintaining local networks, including partnerships with local conglomerates and startups, is crucial to swiftly detecting environmental changes, particularly in the ASEAN region. The development of digital technology has indeed greatly expanded the scope of what individuals can achieve. However, challenges that cannot be tackled alone or by a single company remain, and partnerships are a crucial driving force to overcome these barriers and propel innovation forward. Companies have to understand their strengths, utilize available resources to secure the capabilities necessary to maximize the value of said strengths and create new value through collaborations around the world.
IGPI assists global companies, local conglomerates, and governments in fostering innovation across Southeast Asia, creating business models that harness each region’s unique potential, and developing new markets through management consulting and strategic investments. By continuing to support sustainable development and innovative initiatives in the regions, we provide valuable insights for companies and investors around the world.
To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.
Mr. Kohki Sakata is CEO of IGPI Singapore. After joining Cap Gemini and Coca-Cola, Kohki joined Revamp Corporation, where he managed projects on global expansion and turnaround in various sectors, including F&B, healthcare, retail, IT, etc. Since joining IGPI, Kohki has managed projects mainly on global expansion and cross-border M&A in various sectors such as logistics, IT, telecom, retail, etc. In addition to his broad experience in implementing solutions developed in Western countries, he has developed multiple methods to turn around Asian companies with a focus on setting a clear vision and employee empowerment. He has proven the practicality of these methods by turning around Asian companies not only as an advisor but also as senior management. He graduated from Waseda University Department of Political Science and Economics and IE Business School.
Industrial Growth Platform Inc. (IGPI) is a Japan-rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turnaround projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation, to name a few. IGPI has vast experience supporting Fortune 500s, government. agencies, universities, SMEs, and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has approximately 7,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.
Within the Australia-Japan realm, the “energy-heavy” relationship has evolved across two related dimensions — “what?” and “who?” — with more stakeholders such as universities and startups garnering the limelight. This article intends to put the spotlight on such examples.
The wider objective of this piece is our contribution to a conversation about increasing the A-J innovation success cases in the Australia-Japan corridor. Specifically, IGPI shares some of its observations of the potential bottlenecks faced by the Japanese side between the HQs and local arms of Japanese corporations. These are internal and complex matters that by no means have easy fixes.
It is no secret that Japan and Australia have cultivated a longstanding and complementary trading relationship, underscored by traditional sectors such as energy, agriculture, and mining. In 2022, Australia contributed to Japan’s resources by supplying Japan with 43% of its liquefied natural gas (LNG) and 66% of its coal, with a predominant share of 75% in thermal coal[1]. On the other side, 7% of total Australian imports comes from Japan, including vehicles, machineries, and electronics (as of Dec 2023)[2]. Japan and Australia have built their relationship on comparative advantages, with Australia serving as a raw materials supplier and Japan as a manufactured goods producer[3].
The nature of the “energy-heavy” partnership between Australia and Japan is evolving in two related dimensions — these are “what?” and “who?” referring to needs and players, respectively.
2.1. Evolving Needs (“What”?)
Japan is a highly developed nation but lacking in natural resources, and Australia possesses abundant natural resources that can complement Japan’s requirements. Japan drew up a national strategy to achieve net-zero carbon emissions by 2050[4], which encompasses a systematic transition from traditional fossil fuels to initiatives such as renewable energy generation and hydrogen transportation. While traditional energy sources will continue to play a role in Japan’s energy strategy in the mid-term, the trend towards a long-term transition to decarbonization is steadfast. In this global trend towards decarbonization and a sustainability focus, collaborations between two nations are widening. Some examples:
| “What?” | Brief Example |
|---|---|
| From Energy to Technology | Although energy remains a high focal point for now, the collaboration paradigm has evolved from traditional resources like coal to a shift towards cutting-edge technologies such as hydrogen transportation. One notable example is LAVO, an Australian energy storage and technology startup that integrated Artificial Intelligence (AI)-enabled digital solutions, which supplied its metal hydride storage technology to the leading Japanese trading house Marubeni Corporation. This will lead to the export of Australian green hydrogen. This collaboration established a precedent as the first of its kind to demonstrate the profitability and safety of exporting Australian renewable hydrogen stored in metal hydride to international market[5]. |
| From Procurement to Co-development | The goal of decarbonization also drives Japan’s investment from procurement to business or technical collaboration for co-developing innovative technologies. Japanese corporations such as JX Nippon Oil & Gas Exploration Corporation, Mitsui O.S.K. Lines, and Osaka Gas have partnered with Australian corporations, including Future Energy Exports CRC, deepC Store, and Low Emission Technology Australia, along with Australian universities such as the University of Western Australia and Curtin University. Together, they have formalized a Project Agreement aimed at collaborative research and development on low-pressure and low-temperature solutions for the bulk transport shipment of CO2. This is to showcase the technical feasibility and operational viability of the solutions and ultimately advancing technologies for the secure and efficient shipment of substantial quantities of CO2[6]. |
2.2. Evolving Partnerships (“Who”?)
The transition of “what” is marked by widening of the players. While mega corporations once held a dominant position, the Australia-Japan collaboration is now witnessing increased participation from innovative participants such as universities and startups.
Australia’s innovation network is characterized by a highly complex yet proactive landscape, where collaborations and partnerships evolve to meet the demands of a rapidly advancing technological era. The collaborative partners between Japan and Australia are in a state of transition from (i) “Corporations x Corporations” to also include (ii) “Corporations x Universities”, (iii) “Corporations x Startups” and (iv) “Universities x Universities”. It symbolizes the growing realization of the strengths of Australian universities and startups, which Japanese corporations can leverage upon for mutual benefit. Some examples:
| “Who?” | Brief Example |
|---|---|
| Corporations x Universities | Macquarie University, a world-leading AI research powerhouse, and Fujitsu, a leading Japanese information and communication technology corporation, have together announced their establishment of AI Research Laboratory at Macquarie University. By utilizing the strengths of each other — the university’s research capabilities and Fujitsu’s generative AI and human sensing technologies — the focus is on researching and developing promising AI applications and related technologies for the society[7]. |
| Corporations x Startups | Morse Micro, an Australian fabless semiconductor startup reinventing Wi-Fi for IoT, secured Series B funding from a consortium of investors led by the Japanese ASIC and system-on-a-chip (SoC) developer MegaChips. Following this investment, MegaChips entered a partnership with Morse Micro to produce compliant semiconductors and modules, offering assurance, sales support, and new distribution channels. This came about because both Morse Micro and MegaChips share a common goal of revolutionizing IoT connectivity by innovating connectivity and establishing robust Wi-Fi HaLow solutions for the future[8]. |
| Universities x Universities | UTS (University of Technology Sydney), with pioneering food tracking technology, has shared the technology to the Wagyu beef farmers in both Australia and Japan. As part of the project Hokkaido University, the partner in the project supported the relationship between Australia and Japan on technology promotion. The project aimed to provide IoT and blockchain-enabled capabilities to the food supply chain market[9]. |
These select examples corroborate the fact that Japanese corporations are increasingly taking note of Australia’s innovation potential. The complementing strengths and common goal synergies can lead to collaboration not only limited to Australia or Japan but in the wider region/world. For this to happen at scale, a long-term view of investment and nurturing is critical. Corporations and stakeholders must actively address these aspects to incubate and support the growth of innovative ideas and technologies.
It is also noteworthy to share that these collaborations take place across diverse sectors and typically are in some combination of business, technical, and financial partnership. Apart from the well-known and time tested (i) “Corporations to Corporations”, some more examples occur across (ii) “Corporations x Universities”, (iii) “Corporations x Startups” and (iv) “Universities x Universities”.
3.1. Corporations x Universities – Examples
| Date | Type | Sector | Japanese Entity | Australian Entity | State | Quick Overview |
|---|---|---|---|---|---|---|
| Sep-23 | Technical | Data Security | NTT | UTS | NSW | NTT and UTS are collaborating to address data security risks collectively, integrating state-of-the-art encryption technology[10]. |
| Jun-23 | Technical | Smart City | NEC Australia | University of Wollongong | NSW | A strategic alliance aimed at jointly spearheading smart city initiatives within the Illawarra region[11]. |
| Apr-23 | Technical | Smart Automotive | IDOM | RMIT | VIC | Collaboration on multiple specialized initiatives dedicated to the advancement of intelligent automotive solutions through the utilization of emerging technologies[12]. |
| Jul-22 | Technical | Carbon Neutrality | Nippon Steel | University of QLD | QLD | Joint research proposal between Nippon Steel and University of QLD aiming to transform CO2 into valuable chemicals through synergistic application of microbial and electrochemical processes[13]. |
| Nov-21 | Technical | Hydrogen | Chiyoda Corporation, ENEOS | QUT | QLD | Jointly announced a ground-breaking achievement of the first-ever successful technological verifications for CO2-free hydrogen to a practical level at scale[14]. |
Table 1. Collaboration between Japanese Corporations and Australian Universities
3.2. Corporations x Startups – Examples
| Date | Type | Sector | Japanese Entity | Australian Entity | State | Quick Overview |
|---|---|---|---|---|---|---|
| Mar-23 | Financial | Automated Driving | Suzuki Motors | Applied Electric Vehicles | VIC | Suzuki Motors and Applied Electric Motors Electric Vehicles have signed an MoU to develop an autonomous electric vehicle platform[15]. |
| Oct-22 | Business | AI | Macnica Inc. | icetana | WA | Macnica has secured a strategic stake in icetana, a leading artificial intelligence software developer. As part of this deal, Macnica will assume the role of the exclusive distributor for icetana in the Japanese and Brazilian markets[16]. |
| May-22 | Technical | Engineering Design | Sumitomo Mitsui Construction (SMCC), IHI | Roborigger | WA | SMCC and IHI are collaborating with Roborigger to design and develop the first autonomous tower crane[17]. |
| Dec-21 | Business | Medical | Terumo Corporation | Q-Sera | QLD | Q-Sera, a University of QLD startup, specializing in the development of rapid serum blood collection tube technology, is set to manufacture and deploy its innovation in Japan. This comes after forming a partnership with Terumo Corporation, Japan’s leading medical device company[18]. |
| Dec-19 | Technical | Blockchain | Kansai Electric Power Co Inc. (KEPCO) | Powerledger | WA | Powerledger has expanded its trial in collaboration with KEPCO to facilitate the creation and tracking of Renewable Energy Certificates (RECs) as well as solar energy trading[19]. |
Table 2. Collaboration between Japanese Corporations and Australian Startups
3.3. Universities x Universities – Examples
| Date | Type | Sector | Japanese Entity | Australian Entity | State | Quick Overview |
|---|---|---|---|---|---|---|
| Oct-23 | Technical | Laser Tech | EX-Fusion, Osaka University | University of Adelaide | SA | The University of Adelaide has partnered with EX-Fusion, a leading Japanese laser fusion startup, and the Institute of Laser Engineering at Osaka University to advance laser technology for clean fusion energy[20]. |
| Nov-22 | Technical | Photovoltaic | Kyoto University, Osaka University | RMIT University | VIC | This project aims to enhance an existing collaborative research network between Australia and Japan to develop next generation solar cells known as perovskite solar cells[21]. |
| Feb-22 | Technical | Telecommun-ications (6G) | Osaka University, Kyushu University | University of Adelaide, RMIT University | SA, VIC | These universities synergize essential capacities to advance 6G telecommunications, addressing the anticipated surge in data traffic by 2030[22]. |
| Jul-21 | Technical | Robotic | University of Tokyo | University of Sydney | NSW | This forum aims to discuss the use of urban robots in public spaces, inviting scholars from Australia and Japan to exchange the latest smart technologies. It also aims to promote ongoing collaboration among researchers in innovation and technology from both countries[23]. |
| May-20 | Technical | Carbon Neutrality | University of Tokyo | University of Queensland | QLD | Realize the goal of “Nanoarchitectured Functional Porous Materials as Adsorbents and Catalysts” to reduce greenhouse gas levels, mitigating global warming and converting them into valuable chemicals[24]. |
Table 3. Collaboration between Japanese Universities and Australian Universities
The nature of Japanese corporation’s associations varies significantly. Regardless of size, corporations may have had extensive length of association with Australia (over multiple decades) or extremely short time. However, the key issue faced in boardrooms is the depth of “Why Australia?” within that corporation and “how motivated” they are to explore such opportunities. IGPI has seen in many cases that the local arm understands the potential on one side but is challenged to convince HQ/RHQ to take any further action (e.g., strategic alignment, etc.). On the other hand, the RHQ/HQ looks at various countries and is not always clear on “Why Australia?” etc., and doesn’t offer much support to the local arm (e.g., funding, human capital dispatch, etc.).
So, the key is addressing these complex and layered internal issues to get the ball rolling. Based on IGPI’s diverse experiences of working with Japanese corporations’ HQs and various in-market offices, as well as supporting JETRO for a case study, there are eight key elements that need to be addressed for smoothly exploring innovation opportunities in a cross-country setting. It usually begins with alignment on strategy, mission, vision, and values (MVVs).
Image: JETRO Case Study Summary Report[25]
Regardless of the Japan or Australia side, unless the counter-country element is identified as part of the future, there will be misalignments, lack of actions, and/or insufficient implementation.
There are notable companies that have already overcome such challenges. For example, companies like NTT and Fujitsu have defined Australia as a “Testbed” market. In NTT’s case, Australia’s unique geographic landscape was perfect for developing next-gen agricultural sensing and communication technologies — with proactive consumers to test new technologies[26]. And in Fujitsu’s case, setting up a “Digital Transformation Center” within Macquarie University in Sydney was to take advantage of the university’s capabilities directly for ideation and co-creation of new solutions for customers — exemplifying the benefits from the diversity of talents[27].
These are examples of “Defining a clear role for Australia”, but high in impact to enable HQ/RHQ and local arm alignment.
IGPI Group has developed a deep-rooted understanding of Japanese corporations and has been a part of the global expansion and ambitions of many prominent companies across APAC and beyond. If you are a Japanese HQ or a local arm and believe in the potential of Australia-Japan based on the pillars of innovation but feel constrained due to any or all of the eight elements in this article, we will be glad to have a confidential conversation. IGPI provides highly customized business advisory to its diverse range of clients, including but not limited to:
To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.
[1] https://japan.embassy.gov.au/tkyo/resources.html
[2] https://tradingeconomics.com/australia/imports
[3] https://www.aph.gov.au/Parliamentary_Business/Committees/Senate/Foreign_Affairs_Defence_and_Trade/Completed_inquiries/1999-02/japan/report/c05
[4] https://www.meti.go.jp/english/policy/energy_environment/global_warming/roadmap/
[5] https://www.lavo.com.au/blog/marubeni-lavo-exporting-hydrogen
[6] https://www.fenex.org.au/australian-japanese-partners-execute-rd-project-agreement-to-develop-safe-and-efficient-solutions-for-industrial-scale-shipping-of-co2/
[7] https://www.fujitsu.com/au/about/resources/news/press-releases/2023/fujitsu-and-macquarie-university-establish-new-research-lab-to-accelerate-development-of-human-sensing-and-generative-ai-technologies.html
[8] https://www.morsemicro.com/2022/09/06/morse-micro-raises-140m-in-series-b-funding-to-accelerate-iot-connectivity-and-revolutionize-our-digital-future/
[9] https://www.uts.edu.au/about/faculty-engineering-and-information-technology/global-engagement/international-news/tracking-technology-wagyu-beef
[10] https://www.uts.edu.au/about/faculty-engineering-and-information-technology/news/ntt-data-uts-partner-enhance-data-security-research
[11] https://www.uow.edu.au/media/2023/uow-and-nec-australia-join-forces-to-drive-smart-city-innovations-in-the-illawarra-.php
[12] https://idomi.com.au/2023/04/20/idom_rmit_partnership/
[13] https://www.nipponsteel.com/en/news/20220722_100.html
[14] https://www.eneos.co.jp/english/newsrelease/2021/pdf/20211102_01.pdf
[15] https://www.appliedev.com/suzuki-press-release-30-march-2023
[16] https://www.icetana.ai/investor-updates/global-technology-giant-macnica-takes-strategic-investment-in-icetana
[17] https://www.roborigger.com.au/sumitomo-mitsui-construction-teams-with-roborigger/
[18] https://uniquest.com.au/rapid-serum-blood-collection-technology-developed-by-uq-startup-q-sera-to-be-made-in-japan/
[19] https://www.powerledger.io/media/power-ledger-kepco-extend-trial-to-create-and-track-renewable-energy-credits
[20] https://www.adelaide.edu.au/newsroom/news/list/2022/12/14/fusion-of-expertise-aims-to-develop-sovereign-capability.
[21] https://www.dfat.gov.au/people-to-people/foundations-councils-institutes/australia-japan-foundation/grants/2021-22-grantees
[22] https://www.dfat.gov.au/people-to-people/foundations-councils-institutes/australia-japan-foundation/grants/2021-22-grantees
[23] https://www.dfat.gov.au/people-to-people/foundations-councils-institutes/australia-japan-foundation/grants/meet-our-2020-21-grantees
[24] https://japantoday.com/category/tech/first-grant-awarded-under-rio-tinto-australia-japan-collaboration-program
[25] JETRO “Case Study on Management Innovation of Japanese Companies in Southeast Asian Markets and Identification of Key Points” Summary Report
[26] https://www.foodagility.com/posts/australia-the-testbed-for-new-green-iot-technologies
[27] https://corporate-blog.global.fujitsu.com/apac/2019-12-20/digital-transformation-centre-brings-co-creation-to-life-in-australia/
Mr. Rachit Khosla is a seasoned strategy consulting professional with rich experience in leading and executing market entry, growth strategy and open innovation/new business creation engagements for Fortune 500 businesses, large MNCs and Govt. bodies across the Asia Pacific. He has advised clients in diverse industries including green and digital areas. Before joining IGPI, Rachit was the Country Manager at YCP Solidiance, and after that, a co-founder of Conquerem — an online B2B e-bidding platform for boutique consulting firms. Rachit is an avid traveler who has set foot in 40+ countries and lived in 4 countries.
Mr. Kaoru Shingae is a Consultant at IGPI Australia. Prior to joining IGPI, Kaoru worked at Toyota, BMW, and Boston Consulting Group, primarily specializing in the automotive and mobility sector and having exposure to wider industrial sectors. Kaoru has both internal and external strategy experience with a deep understanding of ‘What’ is most important for all stakeholders’ future. He has end-to-end experience in corporate and enterprise-level planning, all the way down to operational planning. Kaoru is a holistic all-rounder who engages with both strategic and operational stakeholders throughout the company. Past achievements include crisis turnaround plans, long and mid-term vision plans, CEO’s company goal plans, and sales & market operational plan plus delivery, to name a few. Kaoru graduated from The University of Melbourne with a Bachelor of Commerce.
Mr. Jiachen Wang is an Intern at IGPI Australia (Nov 2023 – Feb 2024). Jiachen is currently pursuing his Master’s Degree in Finance from the University of Melbourne. Prior to this, he completed an Honours Bachelor of Science from the University of Toronto, majoring in Statistics and Geographic Information Systems. He has had previous internship experiences in the financial sector, spanning equity research, investment banking, and corporate venture capital.
Industrial Growth Platform Inc. (IGPI) is a Japan-rooted premium management consulting & investment firm headquartered in Tokyo with offices in Osaka, Singapore, Hanoi, Shanghai & Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turnaround projects in Japan. IGPI has 13 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit & Sumitomo Corporation, to name a few. IGPI has vast experience supporting Fortune 500s, government. agencies, universities, SMEs, and funded startups across Asia and beyond for their strategic business needs and hands-on support across a wide variety of industries. IGPI group has approximately 7,500 employees on a consolidated basis.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness, and accuracy of such information. All rights reserved by IGPI.
In 2023, M&A by Japanese companies in Singapore reached USD 3 billion, four times the level of the previous year and the highest level since 2020. Specifically, various M&A deals of various sizes were announced in a wide range of industries, from Sumitomo Life Insurance making SingLife a subsidiary with an additional investment of approximately JPY 170 billion to Watami, a major restaurant company, acquiring an approximately 80% stake in a local food company and two affiliated companies for approximately JPY 1 billion.
One of the major reasons for Japanese companies to conduct M&A overseas is the expected contraction of the domestic market against the backdrop of a declining birthrate, aging population, and shrinking population. In particular, Singapore is positioned by many Japanese companies as a core market for their Asian strategies, and in fact, Singapore accounts for the largest share of M&A by Japanese companies in Southeast Asia, at 45% of all announced M&A in 2023. In addition, 99% of Singapore companies are SMEs with less than 200 employees or sales of less than SGD 100 million, and the number of companies considering sale due to lack of successors is expected to increase, which may also be a factor in the increase in M&A.
The success or failure of an M&A depends on the post-merger integration process, or PMI, between the two companies, and careful planning and execution are essential to realize the strategies and synergies that have been drawn. However, even at the stage of M&A closing, there are still some problems that may cause the M&A to be abandoned. In my experience, there have been cases where an overseas M&A that was being examined was scrapped due to a change in the director in charge of overseas operations, where the growth strategy after the deal was unclear and the M&A itself was close to the objective, and where a lack of communication skills, including language skills, caused anxiety in the target company.
IGPI Singapore provides assistance not only to Japanese companies but also to companies in Southeast Asian countries in developing overseas expansion and expansion strategies, as well as alliances with local partners in overseas markets. With an awareness of the issues mentioned above as a backdrop, we are committed to making M&A successful, while at the same time working closely with our clients to build relationships with the top management of the target companies. We would be happy to hear from you if you are considering M&A in the Southeast Asian region.
To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.
Mr. Ryota Yamazaki is the Director of IGPI Singapore. Before joining IGPI, Ryota worked in Deloitte Consulting in Singapore, where he was a leader in the areas of Consumer Business and Supply Chain & Logistics in Southeast Asia. His areas of expertise are Strategy & Operations such as market entry, Route-to-Market (RTM) strategy, business due diligence, and PMI. He started his career with A.P. Moller-Maersk Group as a management trainee and also worked for Kurt Salmon, where he had vast project experiences especially in Supply Chain & Logistics for the retail and consumer goods clients. Ryota graduated from the Faculty of Economics at Keio University.
Industrial Growth Platform Inc. (IGPI) is a premier Japanese business consulting firm with a presence and coverage across Asian markets. IGPI was established by former members of the Industrial Revitalization Corporation of Japan (IRCJ) in 2007. IRCJ, a US $100 billion Japanese sovereign wealth fund, is known as one of the most successful turn-around funds supported by the Japanese government.
In 2017, IGPI collaborated with the Japan Bank for International Cooperation (JBIC) to form JBIC IG, providing investment advisory services and supporting overseas investment. In 2019, JBIC, along with BaltCap, jointly established Nordic Ninja, a €100 million venture capital fund to focus on deep tech sectors such as autonomous mobility, digital health, AR/VR/MR, artificial intelligence, robotics and IoT in the Nordic and Baltic region. In 2019, IGPI established IGPI Technology to focus on the area of science and technology. The company invests in technological ventures and provides hands-on management support. The company also provides business development support towards commercialization and monetization of technologies.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.
In recent times, the escalating geopolitical rivalry between the United States and China has revived bipolar dynamics reminiscent of the Cold War, when much of the world became pawns in a superpower competition. Moscow’s aggression against Ukraine has only intensified pressure on developing nations to pick a side between the democratic West and authoritarian China and Russia — a choice that many resist. Meanwhile, a succession of systemic shocks — including the coronavirus pandemic, economic fallout from Ukraine, and deepening climate emergency — have underscored the gross inequities at the core of the world economy and the vulnerability of lower- and middle-income nations to political, economic, and ecological crises not of their own making.[1] Within this, there stands a nation that is uniquely positioned because of its ties to ‘both camps’ that can help bridge the divide potentially like no other — but easier said than done!
The Global South is a multifaceted concept encompassing geographical, geopolitical, historical, and developmental aspects, with certain exceptions.[2] Used since the late 20th century, the term has seen increased application as we moved into the 21st century. Carl Oglesby, a political activist, is credited with first using “Global South” in 1969. In an article for the liberal Catholic magazine Commonweal, Oglesby discussed how the Vietnam war represented a peak in the North’s dominance over the South. But it was only after the 1991 breakup of the Soviet Union — which marked the dissolution of the so-called “Second World” — that the term gained momentum.
The Brandt line, a definition from the 1980s dividing the world into the wealthy north and the poor south.
https://handwiki.org/wiki/index.php?curid=1098296 [3]
In a global context, “the North” and “the South” serve as alternative terms for “developed” and “developing” countries, respectively, based on the Brandt line. Together, these terms constitute nearly the entire global population.[4] The two groups are often differentiated by their levels of wealth, economic development, income inequality, democracy, and political and economic freedom, as measured by freedom indices. States that are seen as part of the Global North tend to be wealthier, less unequal, and considered more democratic and developed countries. Southern states are generally poorer, developing countries with younger, more fragile democracies, often reliant on primary sector exports and frequently share a history of colonialism by Northern states.[5] After colonialism, the North continued to maintain unequal trade relationships with the South, which further perpetuated the economic disparities between the regions.[6]
Nevertheless, the divide between the North and the South is often challenged and said to be increasingly incompatible with reality. For example, the differences in the political, economic, and demographic makeup of countries tend to complicate the idea of a monolithic South.[7] How can countries like China and India, each with about 1.4 billion people and GDPs of about $18 trillion and $3.4 trillion, respectively, be lumped together with the Pacific island nation of Vanuatu, with a population of a little over 300,000 and a GDP of $984 million, or the southern African country of Zambia with 19 million people and a GDP of $30 billion?[8] Furthermore, globalization has also contested the notion of two distinct economic spheres.
In 2023, many newspaper articles and reports have increasingly referenced the “North-South divide”, predominantly in the context of the war-struck era our planet is experiencing. Illustrating this point, Russia’s invasion of Ukraine sparked unity among Western democracies not seen since the first Gulf War. However, the Global South did not meet the Western expectation of global, unified condemnation and action against Russia.[9] As such, the unwillingness of many leading countries in Africa, Asia, and Latin America to stand with NATO over the war in Ukraine has brought the term to prominence once again. Global South leaders have been demanding an end to the “plundering international order,” calling for a more representative and responsive global system that caters to the needs of developing economies.[10]
Apart from this, not long ago, the pandemic also posed many challenges for the Global South. The challenges were daunting for a myriad of reasons varying across the diverse countries. They include weak public health systems, lower living standards, and a lack of services in densely concentrated cities or widely dispersed rural populations. Even amongst middle-income countries, whose economies tend to be export-oriented and commodity-dependent, the collapse of global demand puts significant pressure on their national accounts. For some, dependency on tourism and foreign remittances makes up a substantial portion of their GDP, and any losses in these sectors exacerbate unemployment and revenue losses.[11]
From a Japanese lens, the term “Global South” has become such a buzzword that it graces the daily news.[12] Japan has been actively engaging with the Global South, pursuing this engagement through various means such as frequent visits, dialogues, and regional forums, including the G20. Japan’s approach is characterized by its desire to foster a free and open international order, ensure global peace, and address global inequalities.[13]
The North-South divide remains relevant today, as global inequality continues to pose a significant challenge. This divide surrounds economic, social, and environmental disparities.[14] While some countries in the Global South have achieved considerable economic and social progress, others still grapple with poverty and underdevelopment. The divide also influences vulnerability to climate change, with developing countries in the South often facing a disproportionate share of the impacts. Factors such as limited resources for adaptation and mitigation, widespread poverty, and exposure to natural disasters contribute to this vulnerability.[15]
Addressing the North-South divide thus requires a comprehensive and coordinated approach that includes policies to promote sustainable economic development, improve governance and political stability, increase access to education and healthcare, and reduce inequality within and between countries. International cooperation and partnership are also essential for addressing global challenges and promoting equitable development. Although easier said than done, some of the ways to address the North-South divide can include:
To that end, Japan is setting a five-year investment target of more than $13 billion to support developing countries in the Global South, a move that aims to deepen ties with growing, resource-rich economies. The 2 trillion yen ($13.3 billion) in funding would come from investments by Japanese companies backed with government aid, Japan’s Minister of Economy, Trade and Industry (METI) stated.[16] As per the then METI Minister Nishimura, “We will strengthen collaboration through support and investments that lead to solutions to societal challenges facing emerging markets, such as carbon reduction and digitalization; Japan aims for ‘win-win’ relationships with the Global South, in which aid leads to economic expansion, local investments by Japanese companies, and export growth.”[17]
Japan’s focus on the Global South brings a ray of light amid an increasingly chaotic global situation.[18] As an example of the themes mentioned above, such as climate change and investment, an initiative that was recently announced is India-Japan Fund (IJF). IJF is a $600 million fund launched by the Japan Bank for International Cooperation (JBIC) and India’s National Investment and Infrastructure Fund (NIIF). The fund will be supported by JBIC-IG Partners (a JV of JBIC and IGPI) and aims to invest in environmental sustainability and low-carbon emission strategies, focusing on areas such as renewable energy, e-mobility, and waste management.[19] Interestingly, the fund will have almost equal financial contribution from the Japanese and Indian sides, which is significant in the North-South discussion as it brings in connotations of equality — one of the root issues of this historical divide.
From a global North-South lens, Australia’s role in this divide is complex due to its unique position. Geographically located in the Global South, Australia is considered part of the Global North due to its economic and political ties. If we examine Australia further, it is a regional superpower and one of the richest nations in the world,[20] situated in an important and strategic position for Global North allies with Asia-Pacific interests. Its Western-influenced political economy, combined with its relations with many Asian countries provide a unique geopolitical context.[21]
The above makes Australia’s role in the Global North-South divide crucial, and based on Australia’s worldview, including the growing importance of the Global South, Australia can contribute to the world order in a way that matches its interests. Some of the dimensions along which Australia is/can further play a role include economic, environmental, and security aspects, acting as a bridge in the divide:
1. Economic Partnerships and Aid for Development
2. Environmental & Innovation Cooperation
3. Regional Stability, Security & Cooperation
4. Education, Knowledge & Cultural Exchange
It is essential to note that the role of any individual country, including Australia, is complex and multifaceted. Furthermore, we have established that all Global South countries can’t have a ‘one-size-fits-all’ strategy due to their diverse global views and progress.
IGPI established its Australian operations in 2020 as we recognized the increasingly prominent role that Australia is playing and can play in APAC and the wider world. Although Australia is not new to corporate Japan, since business relationships go back several decades, the nature of the relationship has been evolving quickly. There are many untapped opportunities waiting to be introduced to the world — based on the fact that Australia has a relatively high quality of innovation,[22] but commercialization of those innovations hasn’t been its strong point. This is one area where Japanese expertise in globalizing businesses can complement Australia in solving global issues. On that note, IGPI supports JETRO’s J-Bridge program, which encompasses open-innovation-driven collaborations between Japanese corporations and Australian companies in their strength areas of “Green” and “Digital”.
Several Australian innovations can potentially solve issues in the Global South. As a public example of the above point with regards to innovation cooperation — Australian insurance company, Hillridge Technology helps farmers lessen the financial impact of adverse weather events by using blockchain technology to immediately and automatically pay out insurance claims as soon as a weather event occurs within a certain distance from a farmer’s operations.[23] Also, Hillridge Co is co-operating with Mitsui Sumitomo Insurance Group (MSIG) in Vietnam to launch a new agricultural insurance product that protects farmers in Vietnam from the risks of drought.[24]
In future, IGPI Australia will endeavor to continuously focus on joining more dots between Japan, Australia and the rest of the world through its business pillars of advisory and investments to play its part in making this planet a more cohesive place.
To find out more about how IGPI can provide consulting support for businesses, browse through our insight articles or get in contact with us.
[1] https://carnegieendowment.org/2023/08/15/term-global-south-is-surging.-it-should-be-retired-pub-90376
[2] https://economictimes.indiatimes.com/news/international/world-news/everyones-talking-about-the-global-south-but-what-is-it/articleshow/103453914.cms?from=mdr
[3] https://encyclopedia.pub/entry/37558
[4] https://www.encyclopedia.com/social-sciences/applied-and-social-sciences-magazines/north-and-south-global#:~:text=As%20terms%2C%20the%20North%20(also,were%20increasingly%20seen%20as%20pejorative
[5] https://encyclopedia.pub/entry/37558
[6] https://tourismteacher.com/north-south-divide/
[7] https://apnews.com/article/what-is-global-south-19fa68cf8c60061e88d69f6f2270d98b
[8] https://economictimes.indiatimes.com/news/international/world-news/everyones-talking-about-the-global-south-but-what-is-it/articleshow/103453914.cms?from=mdr
[9] https://ppr.lse.ac.uk/articles/10.31389/lseppr.88
[10] https://theconversation.com/the-global-south-is-on-the-rise-but-what-exactly-is-the-global-south-207959
[11] https://www.lse.ac.uk/international-relations/centres-and-units/global-south-unit/COVID-19-regional-responses/COVID-19-and-the-Global-South
[12] https://asia.nikkei.com/Opinion/Japan-must-take-its-Global-South-vision-forward-in-2024
[13] https://ecfr.eu/article/what-europe-can-learn-from-japans-approach-to-the-global-south/
[14] https://tourismteacher.com/north-south-divide/
[15] https://tourismteacher.com/north-south-divide/
[16] https://asia.nikkei.com/Politics/International-relations/Japan-aims-for-13bn-in-Global-South-investments-economic-minister
[17] https://asia.nikkei.com/Politics/International-relations/Japan-aims-for-13bn-in-Global-South-investments-economic-minister
[18] https://asia.nikkei.com/Opinion/Japan-must-take-its-Global-South-vision-forward-in-2024
[19] https://www.jbic.go.jp/en/information/press/press-2023/press_00102.html
[20] https://www.primecapital.com/insights/australians-are-the-richest-in-the-world/#:~:text=In%20terms%20of%20mean%20wealth,United%20States%20and%20Hong%20Kong.
[21] https://eprints.qut.edu.au/123774/1/North-In-South.pdf
[22] https://www.linkedin.com/pulse/why-isnt-australia-moving-up-ranks-global-innovation/
[23] https://research.csiro.au/aus4innovation/australian-insurer-helps-vietnamese-farmers-though-new-technology/
[24] http://bizhub.vn/corporate-news/hillridge-msig-team-up-to-protect-farmers-in-vn_344956.html
Mr. Rachit Khosla is a seasoned strategy consulting professional with rich experience in leading and executing market entry, growth strategy and open innovation/new business creation engagements for Fortune 500 businesses, large MNCs and Govt. bodies across the Asia Pacific. He has advised clients in diverse industries including green and digital areas. Before joining IGPI, Rachit was the Country Manager at YCP Solidiance, and after that, a co-founder of Conquerem — an online B2B e-bidding platform for boutique consulting firms. Rachit is an avid traveler who has set foot in 40+ countries and lived in 4 countries.
Industrial Growth Platform Inc. (IGPI) is a premier Japanese business consulting firm with a presence and coverage across Asian markets. IGPI was established by former members of the Industrial Revitalization Corporation of Japan (IRCJ) in 2007. IRCJ, a US $100 billion Japanese sovereign wealth fund, is known as one of the most successful turn-around funds supported by the Japanese government.
In 2017, IGPI collaborated with the Japan Bank for International Cooperation (JBIC) to form JBIC IG, providing investment advisory services and supporting overseas investment. In 2019, JBIC, along with BaltCap, jointly established Nordic Ninja, a €100 million venture capital fund to focus on deep tech sectors such as autonomous mobility, digital health, AR/VR/MR, artificial intelligence, robotics and IoT in the Nordic and Baltic region. In 2019, IGPI established IGPI Technology to focus on the area of science and technology. The company invests in technological ventures and provides hands-on management support. The company also provides business development support towards commercialization and monetization of technologies.
* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.
Copyright© 2024 Industrial Growth Platform Pte. Ltd. All rights reserved. Web Excellence by Verz
