Since its foundation as a railway operating company, Nishi-Nippon Railroad, also known as Nishitetsu, has grown to encompass many other diversified business lines, including real-estate and logistics. With Fukuoka slowly becoming a key city for Japan, in addition to a global logistics sector slowly becoming less reliant on China, Nishitetsu finds itself in a very unique position. In this interview, President and CEO, Koichi Hayashida, discusses the company’s strengths and future plans, stemming from its desire to help make Fukuoka Asia’s next financial hub.
In the past fiscal year, we've seen major supply chain disruptions leading to ships being stranded in ports all over the world. Why do you believe this has happened, and how do you see global logistics?
There were already many structurally embedded issues that were inherent, even before the COVID-19 outbreak, but the pandemic revealed some other issues, such as problems with human resources, which were originally due to low wages, but were made worse by the pandemic.
The increase in fuel prices has also had an effect, although all the issues that we are experiencing now aren't necessarily driven by the pandemic. The world will have to accept and work alongside the virus. Things need to settle down first in order to see what we can do to mitigate the issues that we are experiencing currently.
In terms of logistics, Japan is often seen as the gateway to Asia for European or American exporters. How do you foresee the future of Japan's role in the global logistics market?
Reflecting back to the pre-COVID era, Japan had been largely left out of international logistics in favor of China. For example. Chinese cities like Shanghai and Shenzhen, as well as Busan in South Korea, are ports which invested heavily in the development of local airports, so these areas became hubs of Asian transportation.
However, with COVID-19, there have been discussions about economic security and having everything centered around China would pose a certain risk. Thus, European and American companies are now diversifying Asian trade routes, and there's a high possibility that Japan will come back as a major port in Asian logistics. As for the Atlantic route, it is not yet fully utilized, so once we have more transportation and usage of that route, the strategic strength of Japan, as well as South Korean ports, would increase.
NNR Global Logistics
Can you please share with us what Nishitetsu is doing when it comes to sustainable development and how you're trying to make your logistics business greener to minimize environmental impacts?
Nishitetsu uses ships, but the environmental friendliness of that transportation would be the responsibility of the ship operators. There is of course a shift from fossil fuel to other sorts of renewable energy to make the transportation more environmentally friendly, but what Nishitetsu is doing is trying to make the transportation more efficient.
So rather than distributing products in a grid type structure, we're focusing on building a mainstream, and then building branches from that in order to make the necessary transportation more economical and efficient.
Once the container arrives at the port, it proceeds on to land transportation, so we are also focusing on utilizing the railway system as a means of transporting goods on land. At the same time, it's important not to carry empty containers, but make sure they have a full load to all destinations.
You also have a real estate business in Fukuoka. Why should we consider Fukuoka one of Japan’s prime real estate destinations outside of Tokyo, and how is your company contributing to the increased attractiveness of the Fukuoka region?
The attractiveness of Fukuoka’s real estate is equivalent to the charm of Fukuoka City itself. First of all, the infrastructure is very well established within the city and to the airport. In fact, the airport is very close to the downtown area - only 5 minutes by subway. It’s one of those very rare airports that has close proximity to the city center - and at the same time, the airport is planning to have more runways to accommodate more international flights. In the near future, it will certainly become a key hub as an Asian gateway, with many international flights in and out of Fukuoka.
With COVID-19, the Japanese government is focusing on dispersing risk, with Tokyo and Osaka being the two major cities and Fukuoka being the third. Also, Fukuoka is a very good place with a great, comfortable living environment that has mountains and the ocean, so it is an attractive city to live in.
Another attraction of Fukuoka is in terms of BCP (Business Continuity Planning), the area is considered to be less risky in terms of earthquakes and other natural disasters, which has been a big issue concerning city management.
Furthermore, Fukuoka is traditionally a compact town, and there's been collaboration between the government, academia, industry and people, who have come together to make this city better. There is an intrinsic atmosphere that fosters improvement through collaboration, which brings an advantage to city development. Moreover, the Fukuoka city mayor is aggressive and media-savvy, with forward thinking ideas. He introduced incubation facilities to attract startups to the area.
Another focus of Fukuoka City is making it an international financial hub. Learning from the examples of Singapore and Hong Kong, Fukuoka is now trying to attract finance-related companies, as well as developing more residential housing and improving the economic environment. The government and private companies are collaborating to achieve this. Whilst Fukuoka real estate is becoming more attractive, it is in a sense, saturated, and we are not able to acquire enough land for fresh, new development, so we are more focused on the redevelopment of existing areas now.
Fukuoka Building Block Development Project
Nishitetsu’s role in the development of Fukuoka city is to be responsible for providing mobility in the city, in addition to providing development for residential and commercial buildings, including hotels. With Fukuoka also affected by the aging population, we can secure stable transportation throughout the downtown area. However, if we look at suburban areas, we cannot secure enough usage of the available daily transportation. We have to collaborate with other businesses and service providers to offer the digital means of securing and providing mobility that would be appropriate to the area. If we cannot secure mobility, the attractiveness of the city would deteriorate, so that is our focus right now.
AI-Driven On-Demand Bus “Know Route”
As part of your development vision for the future, you planned on opening or purchasing facilities overseas. This is both for logistics, as well as housing in Asia and the United States. Can you tell us a little bit more about these possible investments that the Nishitetsu group may make in overseas markets in terms of real estate?
Regarding our international strategy for real estate, we are currently focusing on investing in the Asian and US residential markets. We have worked together with local developers in Vietnam, and we have been working on nine projects. Also in Indonesia, Thailand and the US, we have worked with local developers and provided capital investment. In the near future, our focus is to increase our investment and position ourselves as the main developer of real estate in the area.
Urban Development in Vietnam “WATERPOINT”
Apart from residential properties, we also want to focus on logistics. In fact, we are investing in a US logistics company. Our vision is to provide total solutions for real estate development across overseas countries using the experience we have in city-building and development.
Apart from logistics and real estate, your company also operates several other businesses, including a leisure business with hotels and restaurants. What are some of the synergies and advantages of having such a diverse portfolio for your company?
As you mentioned, we have a very diverse portfolio of businesses, but our common theme, as shown in our corporate message, is “connecting your dreams”. Fundamentally, we are in the city-creating business, we provide city development services to raise the value of the locality and vitalize the area. Real estate prices will go up and the attractiveness of the town will be enhanced, and that’s why we are able to maintain the sustainable development of our company.
Many of the private railway companies in Japan are using a similar business model in contributing to the development of towns or the cities themselves. Our idea is to take this business model and apply it overseas to contribute to local areas globally. Having said that, it's very difficult to compete with specialized companies, such as restaurants and supermarkets. Therefore, in terms of adding value to the city, it’s crucial that we partner with companies which specialize in specific things. We need to work together with them to build new facilities.
Our ideal position in such projects would be as the main manager of city development or city creation. There would be many specialized companies, and we’d be there to manage the overall progress.
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 by that time, and what would you like to have achieved by then?
I feel it is my dream and my mission to actually establish a sustainable transportation system within this area. With the declining demographics and aging population, maintaining a sustainable transportation is a critical.
As I have mentioned before, it is our target to collaborate with local specialized mobility service providers and make alliances with them to achieve sustainable transportation means in the area. At the same time, I'd like to take the knowledge and experience we have acquired in city building and creation in Fukuoka, and help out several other Asian cities in terms of urban development. By the time I retire, hopefully we’ll have several cities that we are helping out.
In terms of logistics, the world is becoming more digitalized and we may have seen the rise of the virtual world over the real world, but product transportation happens in the real world. Thus, we continue to focus on the domestic last mile, and that’s how Nishitetsu can contribute to logistics going forward.
As president, I would like to take the lead in showing an established direction for how we can contribute to the last one-mile logistics in Japan. Also, in terms of carbon neutrality this year, we have issued our vision which includes removing fossil fuels from bus transportation in favor of more environmentally sound fuels. Carbon neutrality will continue to be an important theme, and how much we can contribute to that will be a critical part of my time as a president.