Meet the Government Official who can Save Startups in Japan

Meet the Government Official who can Save Startups in Japan
Comments Off, 30/06/2014, by , in Asia Startup News by Tech in Asia

Unless you live in Japan, finding the city of Fukuoka on a map might be a difficult task. The city of 1.5 million residents, located on Japan’s southwestern island of Kyushu, may not hold the same cache as Tokyo or Kyoto when it comes to business or sightseeing. If you’re thinking about founding a startup or investing in one, however, you might want to start paying attention to it. Fukuoka mayor Soichiro Takashima has plans to put his city on the map as a centrally-located tech hub for East Asia.

Mayor Takashima assumed his post in December 2010 at the age of 36 – a rare case in Japan, where people tend to enter politics in their mid-40s. Before entering government, he spent time working as a television personality – which shows both in his celebrity-like looks and casual demeanor. But despite his friendly appearance, Mr. Takashima is a no-nonsense politician – he once placed a month-long ban on alcohol consumption among Fukuoka’s public servants after a firefighter and a vice-principal were arrested on alcohol-related charges.

Last March, Japanese Prime Minister Shinzo Abe announced the establishment of special economic zones across Japan. Each zone has been assigned a specific purpose, and Fukuoka’s is attracting startups. In line with the prime minister’s so-called “third arrow” of Abenomics – which emphasizes deregulation – Fukuoka’s venture firms will be able to hire foreign talent with fewer bureaucratic hurdles and pay significantly lower corporate taxes.

In addition to the good news for startups, Fukuoka was recently ranked tenth in Monocle Magazine’s list of the world’s most livable cities (up from number 12 last year). Once known as a development center for semiconductors, Fukuoka is now famous for its pungent tonkotsu ramen and booming customer service industry. It also boasts Japan’s highest growth rate for young people (aged 15-29) – a statistic of particular interest in a country plagued by its rapidly aging and shrinking population.

Two of Japan’s most recognizable mobile entertainment brands have already taken note of the city’s potential. The incredibly popular chat app Line opened a satellite office there in 2009, which later spun off its own gaming company called PlayArt Fukuoka. Social gaming giant Gumi also set up a Fukuoka operation in 2011, with the goal of producing titles that appeal to a broader international audience.

Even Masayoshi Son, the robot-loving CEO of SoftBank, spent a portion of his childhood in Fukuoka. The baseball team he owns, the SoftBank Hawks, calls Fukuoka’s own Yahoo Auction Dome its home turf.

With the combination of reformist policies, a young labor force, and the piqued interest of established tech companies, Fukuoka may actually carve out a place for itself on the global tech stage.

Tech in Asia recently sat down with Mr. Takashima to discuss his plans for turning Fukuoka into a world-class startup city and how he will convince both local and foreign entrepreneurs to pass on Tokyo.

Japan has one of the highest corporate tax rates in the world, currently over 35 percent – second only to the US among OECD countries. The central government wants to lower that figure significantly, but Fukuoka wants to go as low as 15 percent for venture firms. Is such an ambitious goal possible? 

Mayor Takashima: Fukuoka City has been designated as one of the national economic special zones, for startups specifically, and that creates a lot of opportunities that I’d like to realize.

The corporate tax in Japan is over 30 percent, but the national government is trying to lower it to a level of 20 percent. When foreign companies want to invest in Japan, they compare the corporate tax rate to that of neighboring countries. Singapore charges only 17 percent, for example, so if there’s another choice, many will choose a more financially advantageous place than Japan. By 2020, the national government will try to double the total amount of foreign investment to Japan, and Fukuoka will also make every effort to follow the national government’s policy.

Another important issue at play is the low rate of startups in Japan – nationally, they make up only four percent of companies as a whole. In order to increase the rate of startups, we have to establish an adequate environment. They are trying to challenge themselves, taking up risks, and they’re in the stage of uncertain stability – of course, there are many challenges for startups. So, for the first five years after a startup is established, we want to decrease the corporate tax to 15 percent so that those companies are able to maintain their strength. It will also more gently lead them to the next challenge – capturing investment.

Japan as a whole has many hardships to overcome, and Fukuoka, as a special economic zone, will play the important role of a “drill” that will break down the bedrock of regulations in Japan. That is our vision.

How can Fukuoka use geography to its advantage when appealing to startups? 

Mayor Takashima: The other day, I went to London to attend an investment seminar with Prime Minister Abe and after the seminar we had several discussions about global investments. There are so many people who want to invest in the Asian market, including China, and they think of Fukuoka as a business hub within Asia for their companies.

Compared to Tokyo, Singapore, and Hong Kong, Fukuoka is regarded as a more livable city because its business cost is reasonable, the cost of living is cheaper, and because the city provides the perfect environment for children to grow up and receive a great education. Fukuoka is proud of its strong record of safety, security, and cleanliness. In Tokyo or other major Asian cities, the business cost is not only higher, but there are just too many people to be considered comfortably livable.

Additionally, Fukuoka is located in the middle of Asia – about the same distance from both Tokyo and Shanghai – with direct flights to 19 international cities.

How important is attracting foreign startups and does Fukuoka provide any specific assistance or incentives for them, specifically?

Mayor Takashima: There are so many things that Fukuoka can provide to startups and foreign investors. In the past, we have provided many incentives, and from now on, as Fukuoka has been designated as Japan’s special zone for startups and job creation, we’d like to provide as much assistance as possible to foreign investors. It is very important to attract domestic startups, but of course we’re concerned about the international ones as well.

Fukuoka’s history dates back more than 2,000 years – longer than Kyoto – so the driving force of Fukuoka is communication and cultural exchange. That attracts people to our city. I mentioned that we have flight services to many international cities, but as a port city we also have an advantage when it comes to distribution services. Actually, for the past 24 years, Hakata Port has been the number one port in terms of the number of the passenger arrivals, so we have a very strong foundation for accepting foreigners. We want to welcome people who are willing to challenge themselves, and we’re ready to accept multinational companies and many foreign workers.

Actually, I think that we have a stronger foundation for accepting foreigners than Tokyo. For example, we have multi-language signs around the city in Japanese, Chinese, Korean, and English, and we offer the same languages for announcements in the train stations and on the trains themselves. We also have 210 medical institutions that can provide health care services in English. We even have free wifi, which was established by the city government, and we’ve also distributed a DVD regarding international rules and manners and how to prepare for natural disasters. These things make Fukuoka more advanced than other cities.

Tokyo has a lot of startup infrastructure in place – including VCs and seed accelerator programs – that Fukuoka currently lacks. How can you convince both Japanese and foreign startups to set up their businesses in Fukuoka rather than Tokyo?

Mayor Takashima: The lower business cost and the geographical proximity to the rest of Asia are major strengths of Fukuoka, but the main point is that our city provides a stress-free environment – it’s just more livable than Tokyo.

Startups do more than just create a new company – they often create new value that we haven’t seen before. Fukuoka is a city of artists and musicians, so it is equipped with a good environment for culture and the arts. There’s also an invisible pulse from nature that flows through the city. In Tokyo, people feel the beat of the subway or the traffic, but Fukuoka has a very unique environmental situation because its so close to nature.

If you drive for just a short time, you can go to hot springs, to the beach, and into the mountains. You can enjoy all of these activities at a very low cost. Fukuoka boasts modern urban functions, but also a natural environment filled with rich culture and a history that involves many interactions with foreign cultures. Such an environment can easily create new values – that’s the most important thing that Fukuoka can offer.

What is your growth target for Fukuoka’s startup ecosystem? How many new companies would you like to attract and by when? 

Mayor Takashima: The rate of startup establishment in Fukuoka was 6.2 percent of all companies in 2012. We would like to raise that to 13 percent by 2018. As far as the actual number of individual startups that we’d like to see, our target is to progress from an annual average of 43 new firms in 2012 to 55 in 2018.

Are there any cities in particular that you hope to model Fukuoka after? 

Mayor Takashima: We naturally do want for Fukuoka to form the heart of an ecosystem analogous to Silicon Valley, and to do so in Fukuoka’s own unique style. We regard Seattle as one kind of model city, as it’s given rise to one global company after another – Boeing, Microsoft, Starbucks, Amazon – while leveraging its livability as an asset and projecting an image of firmly established growth.

This article originally appeared in Techinasia



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