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Japan’s water treatment and supply specialists

Interview - June 27, 2022

We sat down with Mr. Mutsuo Uchida, president of Kubota Construction to discuss the ongoing need for repair and seismic strengthening of Japan’s water infrastructure, the impact of COVID-19 and Japan’s aging society on the construction sector, and how digital technologies may be the catalyst to break the sector out of its current stagnation.

MUTSUO UCHIDA, PRESIDENT AND REPRESENTATIVE DIRECTOR OF KUBOTA CONSTRUCTION CO., LTD.
MUTSUO UCHIDA | PRESIDENT AND REPRESENTATIVE DIRECTOR OF KUBOTA CONSTRUCTION CO., LTD.

Could you give us your assessment of Japan’s need for renewal and rehabilitation when it comes to water pipelines and what Kubota Construction’s role in that process will be?

To give you an overview of the current situation regarding Japanese water pipelines, the renewal rate is only 0.67% of the total pipeline length per year, which is very low, so the aging of pipelines has become a grave issue here.

However, with a declining population and less taxable income, water and local authorities do not have enough budget to finance renewal projects. In addition, natural disasters have occurred frequently, and preventing and mitigating disasters and measures for  building up resilient country are urgently needed. Our parent company, KUBOTA Corporation, is a manufacturer of ductile iron pipe that developed hazard resilient pipes with durability of more than 100 years, and we have been adopting them in our pipeline business. Japan has a lot of earthquakes, so having  anti-seismic properties is a key component in rehabilitating the pipelines.

Traditionally, pipes were laid by the open cut method. However, it's very difficult to apply the same method in urban areas, where there’s a lot of traffic and congestion of existing pipeline. As a result, Kubota Construction has developed and been utilizing its  proprietary technology called the ”Kubota Mini Shield Tunneling Method”, as well as our “DXR method”, which does not require the excavation of roads.  This small and medium diameter trenchless shield tunneling method, which is ideal for projects in busy urban areas, is our proprietary technology, and that technology presents us with good business opportunities.



What is your view on the Japanese construction sector currently?

Due to the Tokyo Olympics and urban redevelopment plans, the construction industry in Japan was booming until about two years ago. This period has even been referred to as a "construction bubble”. However, with the end of the Olympics and the spread of COVID-19, the industry has entered a period of stagnation. On the other hand, the government has decided to implement “Basic Act for National Resilience Contributing to Preventing and Mitigating Disasters for Developing Resilience in the Lives of the Citizenry from 2021 to 2025” as a countermeasure against the many natural disasters that occur in Japan every year. The construction industry is also expected to take measures to address this issue.

 

For the past few years, the world has been enduring the COVID-19 pandemic, with countries closing off their borders off to each other. As a company with an overseas presence, can you tell us how you have adapted to the COVID situation?

During the COVID-19 pandemic, the number of opportunities to travel from Japan to overseas and meet directly with customers decreased significantly. We have been making efforts to communicate with local customers, subcontractors, and consultants by using online means and local employees.

In 2021, we were able to work on five new projects. As a result, we received four orders and are currently constructing six projects in Southeast Asia. We believe that our ability to communicate with local customers online is backed by the trust we have built with them over the years.

At the construction sites, COVID-19 countermeasures have been thoroughly implemented, and progress is being made without delaying the timeline. The fact that we are able to proceed with the construction work even under these conditions is due to the relationship with the local customers and the efforts of our employees working at the sites.

 

The Japanese population has the oldest average life expectancy in the world of 85 years. More than one third of it is over 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 challenge?

Due to the aging and declining population, the construction industry - including our company - is struggling to secure its human labor force. In construction, more than one third of the workforce is 55 years or older. In addition, the majority of these older workers are expected to retire in the next 10 years, so while 4.92 million people were working in the construction industry in 2020, there will be a shortage of 470,000 to 930,000 skilled workers by 2025.

Traditionally in Japan, the construction industry is considered as being ‘3K’, which means it is dangerous (Kiken), requires hard work (Kitsui) and it's in a dirty environment (Kitanai). What we need to do is transform this into a new type of 3K, which means high paying salaries (Kyuyo) , holidays (Kyujitsu) and hopeful (Kibou). In order to change the mindset and the environment of the construction industry, it’s important to utilize  DX (digital transformation). DX can be a big weapon to raise labor productivity and attract more people to the industry by workload optimization.

 

Your midterm plan emphasizes the need for increased automation using AI and ICT based technologies. Could you highlight some of the key technologies that you foresee as part of this digital transformation for your business and the benefits they’ll bring?

Our goal with AI and ICT is to introduce a system where anyone can operate easily in terms of construction. Our proprietary technology called the “Kubota Mini Shield Tunneling Method” involves segment construction and pipeline accuracy check in the tunnel by operators, after shield machine excavation.

Currently, we are trying to automate these tasks using ICT, and develop an automated driving system that utilizes all our experiences and know-how with an AI system.

In our business, it's important for us to provide value to our customers, and when you think of what the best value for the customer is, the result and outcome of the construction is most important. However, process value, which means how the construction was carried out through its completion, is also important. The introduction of AI, DX (digital transformation), ICT and automation will be critical to realize more economically efficient construction methods that do not interfere with residents' lives and economic activities.

We need to consider carbon neutrality and how we can contribute to it as well as to our customers through providing our services. The basis of our business principle is to make sure all three stakeholders are satisfied –the seller, the customer and society at large.

 

What is your forecast for the next big earthquake? How prepared is Japan for it, and how can your company and its retrofitting service prevent any disasters?

To give you an overview of the rehabilitation of water pipelines, earthquake safe pipelines constitute 48.0% of the trunk main. If you include water distribution pipelines, 37.4 % is earthquake safe.

As Kubota group, we are trying to reduce the overall cost of hazard resilient pipeline.

Most of the ductile iron pipes for the domestic water supply market manufactured by KUBOTA Corporation are hazard resilient pipes. In order to increase the renewal rate, we are developing inexpensive hazard resilient pipes and new types of hazard resilient joints that can be easily constructed without skilled techniques.

The water authority does not have a lot of budget dedicated to the refurbishment of pipelines and to make them earthquake resistant, so within that budget, we are trying to cater to Japanese society by providing a solution that is more cost effective.

Kubota Construction not only deals with hazard resilient pipelines, but also earthquake-proof enhancement on existing buildings. Recently, there's been an update to the law on earthquake-resistant structures, and in order to comply with the new regulations, buildings are going through refurbishment for earthquake resistance.

 

Today, Kubota Construction operates under three business lines. The first and main division is your water business, where you are involved from water treatment to water supply, distribution and sewerage treatment. Second is building and civil engineering, where you construct private production, residential and public facilities. Last is your water pipe construction equipment division, where you sell and rent out equipment related to ductile iron pipe laying. What synergies are you able to create between these three business lines?

The building, civil engineering, and water pipe construction equipment business are peripheral businesses to the related water segment, which is the core of the company.

The building and civil engineering business is necessary for the construction of waterworks-related facilities. By providing services for a wide range of properties, including not only public facilities, but also those of private companies, we are able to develop human resources and improve technology for the construction of waterworks-related facilities.

In the third area, the water pipe construction equipment business, we sell and rent equipment and materials to contractors, including joint work, in order to ensure the safe and accurate installation of ductile iron pipes and polyethylene pipes. By selling and renting materials and equipment, any contractor can safely and smoothly carry out construction work on ductile iron pipes and other products. In addition, if the use of materials and equipment further enhances the ease of construction of ductile iron pipeline, the trust of customers in our company in waterworks construction will increase.

I am convinced that the synergy of the three businesses will lead to a rise in the volume of construction work related to the company's main water business.

 

Your company supplies water distribution systems, as well as filtration technologies such as the “ENVICO Water Purifying System”. Could you tell us more about those technologies and how you're contributing to provide a solution to the water shortages that we're seeing around the world?

One way Kubota Construction is currently helping to solve water shortage issues is through ODA projects, especially in the Southeast Asian countries. We do pipeline construction in addition to establishing water treatment facilities there to provide clean and safe water.

Our overseas projects began in Cambodia by providing water pipelines and water treatment facilities. We then moved on to Bangladesh, Myanmar, Laos and many other countries that are trying to mitigate the water shortage issue.

Our overseas projects started by using KUBOTA Corporation’s ductile iron pipe and polyethylene pipes. However, now we feel that in order to survive in the highly competitive market, adoption of the other brands manufactured near the market will be an option.

We consider ourselves as providers of high quality construction work. This ‘quality’ refers not only to the materials used in piping but to the quality of the constructed water pipelines, so as Kubota Construction, we focus on providing high quality, complete services to local areas.

Eventually Southeast Asian countries will be developed and urbanized like developed nations currently are, and our unique “Kubota Mini Shield Tunneling Method” and “DXR method” are technologies that we foresee being used in projects there.

If developing countries take the same path as Japan and other developed nations, then there will certainly be demand for trenchless constructing pipes in areas of heavy traffic. In those scenarios, we can apply our DXR method for water supplies, and our Kubota Mini Shield Tunneling Method for sewage systems. We are currently preparing ourselves to provide these construction services whenever the need for them arises.

Our overseas projects have begun with the laying of water pipes, the construction of water treatment plants, and the construction of sewage treatment plants as well as water supply facility. Currently, as a new challenge, we have expanded our efforts to include operation and maintenance, and have established an SPC to operate and maintain water treatment plants.

We will continue to aggressively expand our overseas business.


Karnaphuli Water Supply Project (Bangladesh)


Kampong Cham Water Treatment Plant (Cambodia)


In your long history, you’ve been involved in many overseas projects; the flood protection, drainage system development and water supply system in Phnom Penh, Cambodia, and the water supply improvement plan in Karnafuri Bangladesh. Is there one particular project you are most proud of?

The project that we are most proud of is the Phnom Penh City Waterworks Project in Cambodia, our first overseas project.

We took the lead in surveying, designing, and construction, and in just seven months from December 1959 to June 1960, we constructed the intake tower, water purification plant, and completed about 36 km of piping work, a task that would have been impossible to complete even with today's construction capabilities. The project was the first of its kind in Japan to be awarded the highest gold medal in Cambodia.

 

The financing of your overseas projects can be accomplished both through PPP (public private partnerships) and the ODA model, which is tax based. Which form of finance do you believe is the ideal way, especially for waterworks, construction and infrastructure?

Traditionally, Japanese people have considered the water business as something that the government should take care. In terms of PPPs, in Japan, we are in the process of starting a trial operation. Overseas, some countries tried to privatize water companies, but some have returned to public service.

The reason for this is that water is indispensable for people and supports everyday life and as such, directly influences the health and the safety of the people. If you privatize the sector, it becomes more of a profit-making exercise, which may not be appropriate to a water provision system. I believe that combination of public presence and certain degree of privatization will be an appropriate solution.

We are currently focusing on working through ODA projects, however simultaneously, we are cooperating with local governments too. In any occasions, our primary goal is to provide high quality water systems to local areas. With that in mind, we will try to expand our approach around the globe.

 

Let's say we come back to interview you again on the last day of your presidency. What would you like to tell us about your goals and dreams for the company? What would you like to have achieved by then?

Kubota Construction is a construction company that focuses on water supply and sewerage. In addition to aiming for higher presence in this field, we will also focus on the construction and civil engineering fields and aim to become a \100 billion company in the future.

 I also would like to apply our company's new "3K" (high paying salaries “Kyuyo”, holidays “Kyujitsu” and hopeful “Kibou”) concept to the company and make Kubota Construction a company that every employee can be proud of. That would be what I would like to achieve throughout my tenure as a president.

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