This year, Romania and Japan celebrate 100 years of diplomatic relations, a perfect moment for a stronger strategic bilateral partnership between the two countries. In Romania operate more than 100 Japanese companies that have created 40,000 jobs – not so many in the energy sector per se. However, the Japanese technology in various fields might prove to be useful for new, green and efficient projects in Romania. We talked with H.E. Mr. Hiroshi Ueda, Ambassador Extraordinary and Plenipotentiary of Japan in Romania about these topics.
Y.E., I suggest we should start from a broader perspective on the economic cooperation between Romania and Japan. How did the commercial exchanges between the two countries evolve in the last decade?
Japan started its economic cooperation activity, such as the Technical Cooperation and Cultural Grant Aid, in 1991, in order to support Romania’s transition efforts toward democracy and the market economy. On the occasion of the visit of H. E. Mr. Emil Constantinescu, President of Romania, in 1996, the Government of Japan decided to provide Yen Loan credit and General Grant Aid for Romania. Japanese Yen Loan projects in Romania include “Port of Constanta-South Development Project”, “Road Improvement Project”, “Railway Rehabilitation Project of Bucharest-Constanta Line”, and “Turceni Thermal Power Plant Pollution Abatement Project”.
But it was discontinued at the end of the fiscal year 2011, taking into consideration the economic progress of Romania after it became a member of the European Union.
Bilateral trade is on an upward trend despite COVID-19. In 2020, the total trade amount was about 1.14 billion euros (+1.5% compared to 2019), of which the amount of export from Romania to Japan was about 819 million euros (+5.3%) and the amount of import from Japan to Romania was about 325 million euros (-7%). Among the export from Romania to Japan, 35% is tabacco, 14% is wood-related products, and 12% is clothes. In import from Japan, 69% of it is machine or transportation Equipment.
How many and how relevant are the Japanese companies operating in Romania from the point of view of their global footprint and local market share in their specific fields of activity?
There are over 100 Japanese affiliated companies in Romania, that have created 40,000 jobs. In the early 2000s, the labor-intensive industry was attracted because of relatively low costs, and access to other European countries. The locations of those companies are in West Romania where is well connected to neighboring countries by highways, or near Bucharest where is close to the Constanta Port. In addition, the support by local governments in Romania needs to be highlighted. Looking at the last 10 years, more and more high-value-added industries, such as Software Development, Games, R&D, logistics have been witnessed.
There have been two different major Japanese investments in Romania. The first group is the manufacturing sector. There are over 50 factories, and 30 of them are related to the automobile sector, such as wire harnesses, air filters, bearings, heat exchangers. Others are motors, electronic tools, and dental tools. The second group is IT. NTT Data, which has over 119,000 employees in the world, acquired Romanian company EBS, and employs more than 1900 Romanian specialists and provide IT services throughout the entire software lifecycle.
One ongoing project should be highlighted. The Japanese company, IHI Infrastructure Systems in a joint venture with the Italian construction company Astaldi, has been constructing the Braila suspension bridge. This bridge will be the third-largest suspension bridge in the EU area. The contractors are targeting to open traffic in 2022.
Is there any particular lesson from Japan you find useful for Romania for its energy transition approach?
The self-sufficiency ratio in the primary energy supply of Japan is pretty low, 11.8% in 2018. And Japan is dependent on imports for the majority of its energy resources (The ratio of dependence on imported fossil fuel is very high, that 99.7% of crude oil, 97.7% of LNG, 99.5% of coal were imported from abroad in 2019.). Thus, on the one hand, ensuring stable supplies of energy is of paramount importance. Nevertheless, pushing forward with energy diplomacy grounded on the monolithic perspective of only ensuring a source of energy supplies for Japan could not accommodate the reality of this new era. Given the increasingly complex international mutual dependence concerning energy, we should strengthen legal and cooperative frameworks bilaterally and multilaterally, and both in ordinary times and in emergencies.
On the other hand, structural change of energy policy is pursued. In October 2020, Prime Minister Suga declared Japan’s intention to aim for carbon neutrality by 2025. In order to achieve carbon neutrality by 2050, the Japanese government presented Green Growth Strategy, which aims to create a positive cycle of economic growth and environmental protection, together with the business community. Upholding high goals for each of the 14 priority fields, the Green Growth Strategy makes explicit current challenges and future actions by priority field and formulates action plans covering comprehensive policies in areas such as budgets, taxes, regulation reforms and standardization, and international collaboration.
Decarbonization of the power sector is the major premise. Renewable energy will to be introduced as much as possible. An electric power system will be established, the cost will be reduced, and storage batteries will be utilized to accommodate output fluctuations while maintaining harmony with the surroundings. Accordingly, offshore wind power generation industries and storage battery industries need to be nurtured as a growth strategy.
Regarding thermal power, the government will pursue its use as an option, presupposing recovery of carbon dioxides (CO2). Technology will be established, suitable sites will be developed, and the cost will be reduced. Globally, thermal power will remain necessary, especially in Asia, although the extent of use should be as minimal as possible. Considering that, the government shall pursue the use of hydrogen power generation where possible, as an option. Both supply and demand quantities will be increased, infrastructure will be established, and the cost will be reduced. To achieve them, the creation of a hydrogen industry will be required. At the same time, carbon recycling industries and fuel ammonia industries will have to be developed.
In addition, what upholds the Green Growth Strategy is resilient digital infrastructures; green and digital are the two inseparable wheels of a car. Digital infrastructures are required to be reinforced, and the Japanese government definitely needs to cultivate the semiconductor/information and communication industries as growing industrial fields.
Buds of technology to realize such a society has already come to the surface through research and development (R&D) conducted to date. In January 2020, the government formulated the Environment Innovation Strategy, aiming to establish innovative technologies for achieving the “Beyond-Zero” initiative to reduce CO2 that has accumulated since the Industrial Revolution, under which the Japanese government exhibited the issues to overcome and has been making relevant deliberations.
Are you aware of any particular Romanian energy sectors of interest for Japanese companies?
The shift towards decarbonisation has been accelerating since the Paris Agreement became effective in 2015, and Prime Minister Suga declared in his Policy Speech to the 203rd Session of the Diet in October 2020 that by 2050 Japan would aim to reduce greenhouse gas emissions to net-zero, that is, to realize a carbon-neutral society. At the same time, with the spread of COVID-19, a stable supply of energy and mineral resources became more important due to the increasing instability in the market.
Under such circumstances, Romania, which has abundant resources, is one of the important partners for Japan. I understand that Romania is currently working on Romania’s Energy Strategy 2019-2030, with the perspective of 2050, based on the EU policies. The Japanese government and companies are paying close attention to such movements in Romania. However, sudden policy or legislative changes may be a source of concern for Japanese companies that are currently doing business in Romania or are considering expanding into Romania. In this regard, transparent and stable administration is expected.
How can the administrations in the two countries support strengthened partnerships in the energy field?
Both countries could cooperate in the field of industrial reform, digitalization and R&D to transform energy-related sectors toward a more sustainable and competitive one.
The industrial sector will require reform of existing manufacturing processes, such as hydrogen reduction steelmaking. The transportation sector has to use biofuel and hydrogen fuel while promoting motorization. The business and household sectors anticipate net-zero energy houses/buildings, electrification, hydrogen-powered systems, and the use of storage batteries. Accordingly, the hydrogen industry, EV/storage battery industries, transportation-related industries, and housing- and building-related industries have to be bolstered as growing industrial fields. Japanese experiences in that field must be useful for Romania to reform diverse industries.
In line with EU Green policies, Japanese companies could contribute to the reform of the energy sector in Romania to improve energy efficiency and Decarbonization. For example, Cogeneration or combined heat and power generation system, gas turbine combined cycle, reduction of non-revenue water, improvement of efficiency for the thermoelectric generation of buildings can be introduced to improve energy efficiency in existing facilities in Romania. Also Air Quality Control System can be introduced to clean the flue gases emitted from existing thermal power plants in Romania.
Resilient digital infrastructures are needed in Romania, since green and digital are the 2 inseparable wheels of a car. Digital infrastructures are required to be reinforced, and to achieve that, the cultivation of semiconductor/information and communication industries is needed. The growth of these industrial fields can be achieved with help of Japanese companies.
Lastly, since both Japan and Romania have nuclear power plants, I would like to draw your attention to the accident at the Fukushima Daiichi Nuclear Power Plant in Japan on 11 March 2011. The accident caused serious damage but from a crisis management perspective, its experiences and lessons should be shared around the world.
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This interview firstly appeared in the printed edition of Energynomics Magazine, issued in June 2021.
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