U.S. Firms Still Skeptical Over Japan Prospects : Trade: Despite a policy shift, they say, informal barriers could continue to block them from construction and engineering jobs.
If Japan follows through on its surprising announcement that it will open up its massive public works projects to bidding by U.S. construction firms, California stands to benefit greatly because some of the nation’s largest firms are headquartered here.
But that’s a big if. Construction company executives remain skeptical about the prospect of U.S. companies actually winning a good piece of Japan’s huge market, by some accounts the richest in the world.
“Let’s see what the change really amounts to specifically,” said Leonard J. Pieroni, chairman and chief executive of Parsons Corp. of Pasadena, the nation’s third-largest engineering and construction firm. “Whether that market ever opens to the point where it produces a significant number of jobs for U.S. firms is very much in question.”
California is home to three of the nation’s largest engineering and construction firms: Bechtel Group Inc. of San Francisco, Fluor Corp. of Irvine and Parsons.
Despite strong international business elsewhere, these firms and others have failed to win a significant portion of Japan’s estimated $640-billion construction market, where another $1 trillion in projects is expected over the next decade.
Bechtel, with more than $15 billion in foreign contracts, was listed as the top international contractor in the May issue of Engineering News-Record, a weekly trade newspaper. Of that, less than 1% is attributable to work in Japan, Bechtel spokesman Larry Miller said.
The reason: a closed bidding system that virtually shuts foreign companies out. It is that system that Japanese officials promised to change Tuesday.
U.S. trade officials estimate that Japanese companies won $13 billion worth of public and private contracts in the United States in 1991, while U.S. companies won only $299 million--a figure that dropped 37% in 1992.
Even if Japan opens its formal bidding system to U.S. firms, they won’t automatically be in line for the plum contracts, observers said.
“All of our experience tells us, in many markets, that after we’ve gotten rid of all the formal barriers, there remain numerous informal barriers that are invisible,” said Clyde Prestowitz, a former Commerce Department trade official and now president of the Economic Strategy Institute in Washington. “You are talking about a system that’s . . . sort of like the Mafia.”
Corruption scandals have rocked Japan recently, including allegations that Japanese construction firms have bribed public officials or illegally rigged bids.
“I don’t think that it’s so much the stated restrictions as it is the whole system, which just simply makes it very difficult to break through the barrier of the ‘good ol’ boy’ network that’s been in place there forever,” Pieroni said. Before even bidding on something, Parsons people have been told, “directly or indirectly, this particular opportunity is probably one we’ll not be successful on,” he said.
Some firms doubt Japan will amount to much even if restrictions vanish. “The total potential in Japan is far less than we see in a number of other areas, particular in the Asia-Pacific area,” said Gerald Glenn, group president at Fluor Daniel Inc., the principal subsidiary of Fluor Corp. “We’ve done 70 projects in China, and we see a great deal of growth there. And we’re not having to fight someone for that.”
Engineering News-Record listed only eight U.S. firms currently active in Japan, compared to 12 in Indonesia and 14 in China.
Still, executives view the Japanese move--interpreted as an effort to avoid U.S. trade sanctions--as a first step.
“We generally support free trade and open markets everywhere, and in context of that . . . this appears to be encouraging news,” said Larry Miller, a spokesman for Bechtel.
Major California firms such as Bechtel and Fluor are no strangers to Japan, having entered the country more than 25 years ago--at first with procurement offices to buy materials for use in construction projects elsewhere in Asia.
Later, they expanded into engineering, consulting or construction management jobs, usually in joint ventures with Japanese firms or on contracts awarded by private companies.
For example, Bechtel and a team including Taisei Corp. of Tokyo won a contract in 1992 to build a $250-million, 30-story office building for Nippon Telegraph & Telephone Corp.
For its part, Parsons has had a modest presence in Japan in joint ventures and, since July, 1991, a license to perform construction work on its own.
Starting in the 1970s, Parsons worked on a number of energy projects in oil refining and sulfur recovery.
What few public works contracts U.S. firms can win are typically for minor projects or small pieces of major ones.
Bechtel has contracts to provide construction management on an $800-million terminal building at Tokyo International Airport in Haneda, and played a similar role in the $425-million passenger terminal building at Kansai International Airport in Osaka and the $1.2-billion Asia and Pacific Trade Center in Osaka.
Fluor is also a contractor acting as a project manager on part of the Kansai project.
Parsons, meanwhile, was part of a joint venture with Kajima Corp. and Taisei that won a piece of the $18-million contract from the government-funded Japan Atomic Energy Research Institute to build a linear accelerator at Harima Science Park in Hyogo Prefecture east of Osaka.
