Japan’s Hiraiwa offers customers a one-stop shop from design to construction and maintenance, priding itself on the safety provided by its innovative technology. Founded in 1946, Hiraiwa recognized the need for repair works in the industry before its rivals, establishing its renewal division some 20 years ago with a focus on eco-friendly methods. This renewal work includes the retrofitting of Hiraiwa’s tailor-made anti-seismic solutions, helping its customers meet Japan’s strict seismic regulations, as explained by president Toshikazu Hiraiwa in this interview.
Since the construction boom occurred more than 50 years ago, around the time of the 1964 Olympics, there has been a need for repair and maintenance more than new builds; at the same time, Japan has an ageing population, which is creating a need for new infrastructure. What is your assessment of Japan's infrastructure now?
We are actively engaged in the maintenance and repair of existing facilities built several decades ago during the period of high economic growth. It is a primary business for many construction companies, including us. Many may think that the market is saturated and there is a slight decline because of the demographic situation, but we do not see big drops in the market. In the old days, we have observed that many people from urban areas move and settle in suburban areas even though they need to commute by car. However, recently, frail elderly people tend to abandon their car and seek convenient lifestyles where they can be provided with all their essentials in a small living area. So there has been an influx of people moving back to urban areas such as in Toyama city changing to a compact city which involves remodelling or reconstructing existing facilities in many areas of Japan. Moreover, we are doing our best to maintain buildings and infrastructures that have been affected by disasters. The Japanese government is taking preventative measures against overflowing riverbanks and implementing the plan for National Resilience which opens a new prospect for us as demands for public civil engineering works will be growing steadily. We are also involved in the seismic retrofitting business.
We established the renewal construction works division ahead of our rivals about 20 years ago in which we aim to complete maintenance, repair, and major renovation through eco-friendly methods. We also play a role in protecting the valuable architectural heritage of many customers. Our services start from design to construction, then after we provide maintenance; it is like a one-stop service. There are times when we do more than maintenance for a new customer, and they want us for their new projects too. We have accumulated a great customer base for the past few decades that simultaneously generates new customers.
Japan has an ageing population and a declining birth rate; therefore, it is a tougher job market because there are fewer young graduates for companies to pull from. You employ technical interns from abroad, could you talk to us more about how you are ensuring the longevity of recruitment for your business?
The construction industry is experiencing hardships finding fresh graduates from universities and even mid-career workers. We are adopting the work-style reform that the Japanese government is promoting, which reduces working hours and improves the working environment. It is a revolutionary approach, especially for SMEs like Hiraiwa. We are carrying out these new standards, and we will be exerting more effort into this next year through adopting the system of taking a compensatory day off, half-day off and a No Overtime Day. Many construction workers usually work long hours, six days a week, but we are trying to change that. From January next year, we will be implementing a five-day weekly working policy. We are hoping that our attractive policies and better wages can draw more people to work for our company. As for women, we are planning to install a powder room, extend their maternity leave and expand their work fields. Along with Japan's government, our company is taking serious actions to attract more workers to the construction business through flexible and diversified working styles. The law permits employees to retire and receive their pension at 60; however, we are extending that to 65. We even have employees past 70 who are continuing to work in their post-retirement as employees for our company. We will be able to support social development by our active employment of women, the elderly, and foreigners, providing various opportunities to motivated people. It is a revolutionary approach, especially for SMEs like Hiraiwa.
Also, we believe that ensuring workers’ safety is a prerequisite for the continuation of employment. Recent occupational accidents hardly occur due to mechanical reasons but occur due to human error. To improve safety, I think experience-based safety training education is so important because workers will become older, and technical interns will also be on the rise.
When we spoke with the president of Pacific Consultants, he told us that construction and heavy industries are often misperceived for their slow DX transformation. They have not adopted Information and Communications Technology (ICT) as quickly as other industries; for this reason, a lot of young graduates are not so attracted to these industries. In your case, you are actively using technologies to make your construction safe, more efficient and quicker. What are these technologies that you use in your business and some of the benefits these bring for you?
New technologies are requisite to our business which is thought to be traditional. We think that ICT is crucial in making the construction of roads, bridges and other public and private facilities more efficient and cost-effective. Before construction, we design moving images and 3D architectural perspectives to eliminate the gap in understanding between the image of customer and our proposal using the system called Building Information Modelling (BIM) which produces images through CG animation and VR. It is a new initiative, and we spend ¥15 million annually for this service because we receive special instruction from experts. Building Information Modelling (BIM) and Civil Information Modelling (CIM) are run by a technician who is originally from China. We are trying to employ more overseas workers who have the technical skills. Over 100 talented foreign workers from Vietnam, Indonesia, Philippines, and Myanmar are at our construction site every day. More than the hardware and software, we need capable technical staff and engineers who understand the project in its entirety and competently run the machinery. We are trying to create an ICT environment by actively promoting internal digital transformation. These efforts will enable us to participate in more fields of bids. We have introduced COHSMS, Construction Occupational Health and Safety Management System, ahead of our rivals, following the ISO9001, and 14001. The action of disaster prevention which can predict the point of danger at a construction site in advance and inform construction participants was highly evaluated by The Japan Construction Occupational Safety and Health Association. The implementation of ICT construction at excavation allows us to work without extra workers except for the operator of heavy machines. It greatly contributes to reducing occupational accidents with heavy equipment, which is one of the serious accidents in the construction industry.
How do BIM and CIM data feed into your R&D? How do these help you in your research and development?
BIM allows us to present our proposals using perspective and CG; our customers can visualise and understand the information about the land, building or location. This technology makes it easier to present the execution of the proposed plan for the customers, making the project run smoothly and faster and be more profitable. The flow of construction has become more straightforward because both parties have a good understanding of how the project will be accomplished. Without BIM, it is a long process of frequent correspondence and less efficient implementation. The perfect blend of our affiliated companies that structure, electrical wiring, equipment and other services produce a satisfactory project for our customers; however, our ultimate goal is to have all operations done in-house instead of outsourcing them.
In your message, you said that you aim to be a close partner for landowners, major general contractors and corporations and create a tailored service. Which type of construction project is synonymous with Hiraiwa? What are you well-known for in the industry, and what has made you get this reputation that we see you have today?
Our company boasts a variety of customers from local residents, government offices, major general contractors and many others. About 10 years ago, we started to build nursing homes for the elderly. We want to be known for serving the needs of the ageing society, and our effort thus far comes out true. From this successful branching out, we are continuing to receive orders from these clients; it has become the main part of our business. We had put great effort into rebuilding and extending the hospital in Saitama prefecture. In addition, we have started supporting the management of a social welfare corporation in Ageo city in Saitama. The after-services we give our clients include maintaining the buildings and making sure everything works well. The opening of the Ken-O Expressway throughout the Saitama region offers better accessibility, so we are currently developing an original brand of construction for factories and warehouses.
Japan is a disaster-prone country, and companies such as OYO are working to predict when natural disasters will occur. Kirii Construction has created anti-seismic ceilings, and Abe Nikko has developed anti-seismic tsunami tanks. Can you talk to us more about your anti-seismic retrofitting technology and how it contributes to disaster prevention?
We are capable of providing tailor-made anti-seismic retrofitting solutions to our customers. Due to the seismic regulations in Japan becoming stricter each time an earthquake occurs, we get a wave of inquiries. Clients come to us and ask us to inspect their buildings that were built several years ago if they still adhere to the most recent seismic regulations. In cases where their buildings do not meet the criteria, we do our best to help them meet those standards. This segment of our business is thriving. Needless to say, new buildings have to be constructed according to safety regulations and seismic retrofitting. Public facilities such as hospitals or universities with spacious and wide areas like canteens or gymnasiums request our assistance to ensure the safety of their roofs and facilities. It is not only making certain that buildings can withstand high-magnitude earthquakes but also paying attention to the surrounding infrastructures. For example, we are promoting disaster prevention planning including a storehouse for emergency supplies and an electric supply system in case of a blackout and securing enough space for evacuation. We believe that we can also support our society in disaster prevention and recovery through our agreement with the central government of Tokorozawa city and Saitama prefecture.
You have been established in Vietnam since 2018; therefore, you are now competing with a lot of cross border construction companies. What are your competitive advantages over those companies as you look to win contracts and continue your expansion abroad?
Before we decided to go to Vietnam, we did a great deal of market research about many places to identify where the next construction boom will be to introduce our technologies; we found that Vietnam is the best place for expansion. The comprehensive research that we conducted took many things into consideration. We spoke to manufacturing companies who already had a factory in Vietnam about the quality and cost of construction in Vietnam in order to gain more insight. Also, we reached out to local general contracting companies that play a key role in the Vietnamese market. Japanese general construction companies receive 30 to 40 percent higher prices than local contracting companies, but not many Japanese manufacturing companies were willing to pay them because they were too expensive. Another downside is that there are not enough Japanese expats who will be there to assist the construction process. Meanwhile, Vietnamese general contracting companies are cheap, but the quality is not guaranteed. In many Japanese general construction companies, Japanese engineers seldom stay at the site except for a huge construction project. We stationed Japanese engineers at all the sites in Vietnam, and that is how we can ensure the same quality of our services in Japan and Vietnam.
Now it is stopped temporarily because of COVID-19, but we send our inspectors from Japan headquarters for the final inspection of quality. We select the appropriate materials for a high-temperature and humid environment, which enables us to provide the same after-services and a 10-year warranty. Furthermore, we made a manual in Vietnamese that teaches local workers about Japanese construction methods and cautionary principles.
Hiraiwa can cater to the market expectations and reduce the running cost. How can we differentiate our company from Kajima Corporation and Shimizu Corporation who are key players in Southeast Asian countries? We are taking a totally unique approach by providing Japan quality service, by stationed Japanese engineers, and a reasonable service which is stemming from the advantage of our small-scale operation. I feel that many clients tend to choose the plan that reduces the initial investment rather than the one from the viewpoint of the life-cycle cost. Not focusing only on the initial cost but thinking about life-cycle cost with a long view helps reduce the repairing expenses and utility. I think it is important to note that emphasizing the life-cycle cost means the reduction of carbon dioxide emissions more proactively. Our relationship with our cooperating companies should become comparably stronger, and continue to offer the best suggestions to our clients to realize a carbon-neutral society.
What sales targets have you set for your Vietnamese operation moving forward? Are you looking to replicate that business model elsewhere in Southeast Asia, perhaps Indonesia or Thailand?
We decided to expand our business to Vietnam to procure a new market and secure another stage for our employees in view of Japan’s declining birth rate and aging society. On the other hand, I hope that employees develop global awareness and the ability to respond unflinchingly to globalization by the overseas business. Whether we like it or not, a company that cannot adjust to globalization will be overwhelmed. This new age will be coming soon, so we set the overseas business as a part of strengthening the foundation for further development of our company.
We have been in Vietnam for the past five years; we want to continue to explore the possibilities in this market. Now, our client base is purely Japanese companies that expanded to Vietnam; we build their factories and warehouses. We discovered that there are those who are willing to spend on luxury houses and construction facilities with better conditions. Currently, local construction companies cannot provide these services for this group. On the other hand, Japanese high-quality technologies can be used to construct residential areas that meet the needs of these potential customers.
There is an industrial park close to the airport in Ho Chi Minh which is attracting many investors and localising their businesses. Beyond introducing our construction business, we are matching our business with the investors who want to settle in Vietnam and run a business. Vietnam is widely known for their interest in Japanese culture, and some may request the construction of authentic Japanese gardens. We are trying everything as people want to see more high quality and reliable construction-related solutions. The attitude of doing business abroad must not be just pursuing profit. We have to always keep in mind to contribute to the country with our cultivated technique, information, and network of acquaintances. We hope that people in that country would learn more about Japan and its culture through our contribution and be a part of international goodwill. We must have a sense of responsibility as if we are representing Japan. Furthermore, we have to thank them with a humble attitude for the opportunity to operate a business in their country.
Are you also looking to diversify your client portfolio and find foreign customers? And to strengthen your presence in Vietnam, are you looking to find local partners?
We are open. The industrial park I have mentioned counts local and foreign companies that would like to take the opportunity to expand to Vietnam. Customers who want to construct a factory also refer to other nationalities who do business in Vietnam. We welcome affiliate companies that would like to join us, like a design company with new technologies to help us develop and supply better products.
Next year will be Hiraiwa's 76th anniversary. Imagine we come back for your 80th anniversary to have this interview all over again; what would you like to tell us? What are your dreams for this company, and what goals would you like to have accomplished as the president?
As the president, I would like to have better financial results. We are closing the fiscal year with ¥12 billion, and we want to increase to ¥15 billion in our midterm strategy plan for the next four years. I want to expand to the food industry. Three years ago, I opened a restaurant in Taiwan that became famous; we aim to acquire one Michelin star for that restaurant next year. I want to open another restaurant in Singapore. Challenging these new businesses with our employees strengthens our ability to read the trends and become a solid company with a strong imagination and problem-solving abilities.