IAP2M Seminar Report: Mr. Koji Ohta on "Securitization of Real Estate Development" and Prof. Toshinori Nemoto on "Intermodal Transportation Across National Borders"

Takahiro MIYAO (Professor, Head, Japanese Institute of Global Communications, International University of Japan)

This report is written based on recordings of the presentations by Mr. Ohta and Prof. Nemoto at the P2M seminar on July 1, 2006. Prof. Nemoto's commens on an earlier version of this report are gratefully acknowledged.

A special P2M seminar on international management, organized by Prof. Toshihiko Kinoshita, was held at Waseda University on July 1. There were two speakers; Mr. Koji Ohta of Kajima Co., and Prof. Toshinori Nemoto of Hitotsubashi University. Summaries of their presentations are as follows:

1. Summary of Mr Ohta's Presentation on "Securitization of Real Estate Development"

First, it should be pointed out that we need to take account of more engineering aspects in our P2M approach, especially in the field of contracting business than in the areas of project developments or IT management. This is because design and execution tend to be separate processes in contracting business unlike in other fields, and there are so many different kinds of engineers, workers and other specialists involved in various processes, often without exchanging their tacit knowledge for construction. So, explicit formalization of knowledge including finance and securitization is urgently needed, especially for engineers, in this field.

Such a new P2M approach seems essential in today's contracting business, where corporate organizations are no longer functional, but rather "flat" in that there are quite a large number of project groups directly managed by each branch manager. In this situation, a new type of project managers are desired in order to oversee various processes, from design to building and even maintenance to manage the total cost, not just the construction cost, of their contracted work from the owner's viewpoint. MOT/P2M education should be useful in training such personnel.

As for real estate securitization, the market has now grown to about 4 trillion yen, thanks to the development of finance engineering. However, finance engineering does not necessarily take account of maximization of real estate value, especially in Japan, where famous Japanese designers tend to ignore the commercial value aspect of their designs. As a result, more and more foreign designers, especially American and British designers, are being adopted in order to maximize the commercial values of real estate developments in Japan. This requires a new approach in management for developers.

In summary, changes are needed and are actually taking place in the following key areas: (1) Organization - human resources are essential in dealing with various processes, from design to construction, and working with domestic and foreign consultants, partners, affiliates, etc., for real estate value maximization. (2) Procurement - care should be taken of global supply chain arrangements. (3) Design - application of IT such as auto CAD and GPS is crucial to make 3-dimentional "construction art" effective and successful. (4) Execution - knowledge management, logistics and prefabrication are the key words to execute such construction art in the real world. The P2M approach should be introduced into these processes for better performance and evaluation.

2. Summary of Prof. Nemoto's Presentation on "Intermodal Transportation Across National Borders"

"Intermodal transportation" means distribution using various transportation modes such as train, ship, plane, etc. in an integrated way with containers to serve customers door to door, or port to port. Japan has adopted a policy to help build a seamless distribution system across national borders in East Asia, based on the "Comprehensive Program of Logistics Policies" formulated in 1997 and revised in 2005. There is much room for improvement regarding intermodal transportation arrangements in the Asian region as a whole, comparing to the EU, where serious efforts are being made regarding not only intermodal transportation arrangements but also unification and standardization of other procedures to cross national borders.

One of the focal points in Asia is how to build an efficient intermodal transportation system in and around China, where more and more products are manufactured and consumed within China, especially in the inland regions. In a huge country like China, trains tend to be more efficient than trucks in long-haul transportation, and intermodal arrangements become crucial to build a country-wide distribution system. China knows this and has recently rebuilt the seaport in Shanghai to make it a major intermodal hub in the greater Asian region.

Japan is now trying to help build a speedy, seamless, cost-effective intermodal distribution system in the whole Asian region, rather than focusing only on the domestic distribution system to compete with other Asian countries. This is needed in order for Japanese industry to make use of international supply chain arrangements and their scale merit to compete with other regions, namely the EU and NAFTA. In this regard, Japan should make more efforts to simplify and unify various procedures for trade, customs, quarantine, etc. and reduce costs by introducing more competition in the shipping-related industries, which are still protected by regulations. We can learn from current efforts made by the EU and NAFTA for Japan to help build an efficient intermodal transportation system across national borders in the Asian region as a whole.