IHI Infrastructure Systems is a company that has been firmly combining history, technology, and human resources to support the world of infrastructure, pursuing new R&D and DX solutions. “We would like to have contributed to infrastructure construction all around the world,” says Susumu Ishihara, the former President of IHI Infrastructure Systems Co., Ltd. (now Vice President of Social Infrastructure & Offshore Facilities of IHI Corporation), when asked about plans for the next five years. And work on that expansion is already in motion.
Could you please elaborate for us how you plan to develop your overseas business in terms of strategy? Are there any particular markets or regions that you've considered key in developing your overseas business?
Our baseline for the expansion of our overseas business is ODA (official development assistance) provided by the Japanese government. Many of the ODA projects we were awarded were in Asia, but we are hoping to be awarded projects in Africa in the future.
Regarding bridges, the projects we were awarded were mainly EPC (engineering, procurement and construction) projects, but we'd like to expand our business into comprehensive transportation infrastructure services. This business will encompass not only the design and construction of infrastructure, but also the post construction management and maintenance of structures.
Our key markets remain in Asia and Europe, but in the future, we'd like to expand our business into Africa because there's a growing population there and there's definitely a need for transport infrastructure development. In addition, this year’s The Eighth Tokyo International Conference on African Development (TICAD8) will be held in Tunisia, and therefore we are expecting bigger opportunities and an increased number of projects in this region.
I also see big business opportunities in the United States. As you can imagine, President Biden is pushing for the infrastructure project budget. We also have been involved in the American infrastructure market for a long period of time, but we are now developing a new strategy for this market in order to meet the evolving needs.
An important thing we need to be careful about is the fact that infrastructure development is totally dependent on government policy, so when a government changes, there might be a change in policy. In China, they are still working on the Belt and Road project while in Europe they’ve started the Global Gateway project. Therefore, it’s important to take into account all the political considerations surrounding projects. The Japanese government has a policy of FOIP, and we are focusing this policy in the relevant regions.
One thing I'd like to highlight is that once we’ve decided on a country or area to focus on, we want to commit to that country for a long time. It's not about just hopping from one project to another solely for the purpose of seeking revenue. Japanese companies provide not only the infrastructure and equipment themselves, but they also work to transfer technologies or knowledge to local partners, and that's exactly what we have done so far and we will continue to do. As a matter of fact, in our Turkish and Vietnamese projects, we found that some engineers we worked with on projects in the past are still working on new projects with us.
Can you please elaborate on what other kind of strategies you might be employing for your overseas business?
Establishing a local corporation is one way of showing our commitment to the country we choose. In fact, we have established a company office and factory in Vietnam. That was our own initiative. In Turkey, we have an Istanbul Branch which functions as an engineering center, and its purpose is to expand our business to Turkey and European countries.
What role does collaboration or co-creation play in your business model and are you currently looking for partners either in Japan or overseas?
We are seeking two types of partners. Firstly, we need a business partner. Our main business is bridge construction, but if you look at European markets, there aren't many projects available involving bridges. Usually, the projects include the surrounding roads, or approach roads that are near the bridge, as well as tunnels. At this stage, we have vast experiences in the field of tunnel boring machines throughout the world, and our next goal is to change ourselves from manufacturer of machines to contractor in tunneling business fields. Acquiring tunnel construction technology will provide us with more opportunities, and therefore, we are seeking for partners on that front as soon as possible.
The other type of partner we are looking for is to help us speed up our processes and buy us some time in the areas of R&D and DX. We’ve started discussions with startups that could help us pursue new R&D and DX technology.
Among the many projects your company has been engaged in, do you have any particular project or role that you're especially proud of?
I'm proud of every single project, but one of the most impressive work was a bridge in Vietnam named “Nhat Tan Bridge (cầu Nhật Tan)” which we built as a result of technology transfer to the local engineers. We worked together with local engineers not only on construction but also to fabricate the blocks needed to build the bridge, and the bridge itself is now cherished by the locals. They are really happy about this bridge because it has given them good access from downtown Hanoi to airports and other places and it also blends in very well with the surrounding landscape.
The bridge represents the friendship and goodwill between Vietnam and Japan. It also showcases our great technology, and the fact that we were able to deliver the bridge through cooperation with local engineers.
As a firm that specializes in the construction and renovation of major infrastructure projects, such as bridges, how do you see the current state of the Japanese construction sector, and how do you expect it to evolve or grow, looking forward?
We are expecting new demand for construction, but we still cannot expect any large growth as we have seen in the past. Aging infrastructure is becoming widespread as many of these structures have been around for over 50 years. The maintenance or retrofitting of such structures needs to be done and the demand on that front will remain high.
On top of that, we have to deal with climate change and global warming. Because of global warming, torrential rain happens more often than before, and the intensity of the rain is much more than we have seen before. That highlights the relevance of flood control, which is becoming ever more important.
The government has set up policies and strategies for flood control, particularly near rivers, but other areas also need to be considered as part of these efforts. That's where we see some business opportunities, and by coming up with the innovative flood control method, we believe that we can seize these opportunities.
The Japanese population has the oldest average life expectancy in the world of 85 years. More than one third of the population is over the age of 65, which means a reduced labor force and less demand for products in general. How has this declining demographic affected your company, and how are you reacting to this particular challenge?
The aging population is posing both risks and opportunities. First of all, the risks. As the population - and particularly the working population - decreases, the tax revenue will decrease, and government funds for investing in large construction projects will also decrease. Furthermore, this will result in the need for cost efficiency savings when it comes to repair work or even construction.
The aging of the workforce is a challenge for us, but it also poses opportunities for us. Firstly, as the entire population is aging there's also a shortage of personnel in managerial and administrative positions. We could provide some technologies so that a small number of administrators could efficiently manage infrastructure using tools or technology that are powered by artificial intelligence (AI), or some other digital technologies. We could also be commissioned to manage such infrastructure, so we are considering building a new business model to cater to that.
Secondly, the number of workers on construction sites is also decreasing, so we are focusing on developing technologies for saving labor by automating some of the work. In that way we can maintain the construction work with fewer employees.
Can you please elaborate on some of the techniques and technologies that your firm is developing for the sake of preventing or mitigating natural disasters such as flooding?
This is still under development, but there is an IHI group-wide initiative to increase the accuracy of weather forecasts. All the decisions taken for flood control start with a weather forecast using satellite data and so on. But with all the data collected, if we can accurately forecast where the torrential rain would fall and how much volume would fall in advance, we could then contact dam operators to control water levels - not just one dam but the coordination of multiple dams - so that upstream areas will be freed up to accommodate the torrential rain.
What are your ESG/SDGs efforts?
As an IHI group, our goal is to make our value chain carbon neutral by 2050. In order to achieve this commitment, we have distinguished carbon emissions from our main supply chain, Sakai Works, into three different scopes (scope 1 ~ 3) . We are currently preparing the detailed plans for reducing carbon emissions in all 3 scopes.
Scope 2, especially, accounts critically for our carbon emissions since the main function for Sakai Works is to fabricate and produce steel structures. Therefore, we will reduce CO2 emissions from Sakai Works by applying the carbon neutral technology, which also has been a growing business for IHI Group.
For scope 3, the activity of producing steel itself emits large amounts of CO2, and for this reason we are seeking for technologies on reducing the steel materials in the design stage. We also try to reduce CO2 by cooperating with steel manufacturers.
During the actual construction stage, we believe that shortening the construction period and limiting the traffic restriction will alleviate the traffic congestion, and as a result, CO2 released from passing vehicles might decrease.
Our management philosophies are “Contribute to the development of society through technology” and “Human resources are our single most valuable asset”, and these statements clearly represent the ESG efforts of IHI Group.
What goals and dreams do you have for the company in the next five years?
We would like to have contributed to infrastructure construction all around the world.