Tokyo Club for Global Studies Innovation and Promotion Policies for the Service Sector in Asia 20-21 February 2003 Copyright2002: Nomura Research Institute， LTD All Rights Reserved 0 Service Sector Innovation and Policy Issues in Japan February 21, 2003 Nobuaki Takada Nomura Research Institute, Ltd. Copyright2002: Nomura Research Institute， LTD All Rights Reserved 1 Introduction • The weight of service industries has been increasing. • Hopes are being pinned on the service industries to become a key player in the rehabilitation of the Japanese economy. • The service industries have failed to achieve demonstrative increases in productivity through innovation. “Service innovation” based on the development and adoption of technology and know-how Copyright2002: Nomura Research Institute， LTD All Rights Reserved 2 Growing Importance of Service Industries Change in Japan’s Industrial Structure (% of GDP) 1978 1988 Agriculture, forestry and fisheries 3.7 2.6 Mining 0.5 0.2 Manufacturing 24.9 26.2 Construction 11.1 9.3 Total for secondary industries 36.5 35.8 Electric power, city gas and water supply 2.4 2.5 Wholesale and retail 11.2 12.6 Finance and insurance 4.1 5.6 Real estate 10.8 10.8 Transportation and communications 6.4 6.2 Services 13.2 13.9 Government service providers 9.7 8.0 Private non-profit service providers to the household 2.0 sector 2.0 Total for tertiary industries 59.8 61.6 Copyright2002: Nomura Research Institute， LTD All Rights Reserved 1998 1.8 0.2 25.9 7.8 33.9 2.9 12.2 5.0 11.9 6.3 16.4 7.2 2.3 64.3 3 Sectoral Trends in Employment 1981-2001 (1981 = 100) Service Tertiary Manufacturing 180.0 160.0 140.0 120.0 100.0 80.0 Copyright2002: Nomura Research Institute， LTD All Rights Reserved 4 Business-opening and Business-closing Ratios in the Manufacturing and Service Industries Business-Opening Ratio M anufacturing 6% M anufacturing S ervice 4.7% 4.2% 1.9% 2% 1% 1% 1990 4.0% 2000 Copyright2002: Nomura Research Institute， LTD All Rights Reserved 2.9% 3% 2% 0% 4.8% 4% 2.8% 3% 5% S ervice 5.3% 6% 5% 4% Business-Closing Ratio 0% 1990 2000 5 Ratio of Business Services to the Total Economy in Selected Countries Percent of GDP 35 30.9 30 25 22.3 22.9 20.6 20 17.6 15 10 5 0 U.S. U.K. Copyright2002: Nomura Research Institute， LTD All Rights Reserved France South Korea Singapore 6 Growth Sectors of the Service Industry (1989-99) Amount of Number of Number of Business output employees establishment Laundry, barbers and public bath 82.5% 18.7% 2.8% Parking 96.0% 26.3% 3.1% Other services related to daily living (Note 1) 62.9% 35.5% 19.1% Inns and other accommodations 56.5% 18.2% -13.6% Entertainment (excluding movie and video production) 80.6% 49.4% 17.3% Automobile maintenance 45.5% 21.2% 11.3% Machinery and furniture repairs 150.7% 52.6% 11.9% Rental of goods 81.6% 33.6% 12.6% Movie and video production 81.2% 44.0% 51.3% Broadcasting 63.6% 19.6% 0.7% Information services and investigation 164.6% 42.3% 44.6% Advertising 42.0% 7.2% -3.5% Professional services 121.1% 44.3% 23.9% Other services for businesses (Note 2) 133.2% 64.3% 42.2% Waste disposal 162.3% 60.7% 45.3% Health care 207.3% 125.2% 29.1% Public health and hygiene 244.3% 162.9% 88.1% Social insurance and welfare 135.8% 103.7% 49.2% Education 44.1% 24.9% 36.6% Academic research institutions -5.6% 33.3% 45.0% Religion 66.0% 8.7% 2.3% Political, economic or cultural groups 57.0% 21.7% 11.6% Other services (Note 3 138.1% 95.0% 56.1% Copyright2002: Nomura Research Institute， LTD All Rights Reserved 7 Growth Potential of Service Industries Chart. Smile Curve Rate of return R&D R&D Produc 生産 tion Sales 販売 After-sale services Value chain Copyright2002: Nomura Research Institute， LTD All Rights Reserved 8 Smile Curves for the Computer Industry Value added ratio Structure of the Value Added in the PC Industry 10％ 1998 5％ 0％ Other electronic parts Semiconductor Computers elements and integrated circuits Liquid crystal Computer auxiliary equipment Family Family Software communications communications equipment equipment wholesale retailing Data Computer processing leasing and supply services elements 1988 10％ 5％ 0％ Other Semiconductor electronic elements parts and ICs Computer Family auxiliary Communications equipment equipment wholesale Computers Copyright2002: Nomura Research Institute， LTD All Rights Reserved Family Information communications services Equipment retailing Computer leasing Production value 9 Smile Curve of the Automobile Industry Value added ratio Chart. Smile Curve of the Automobile Industry 10％ 1998 5％ Production value 0％ Auto parts Engines and their parts Auto assembly Automobile wholesale Automobile retailing Auto repairs Leasing and rental Autos for hire and taxis Chassis 10％ 1988 5％ 0％ Auto parts Engines and their parts Auto assembly Copyright2002: Nomura Research Institute， LTD All Rights Chassis Reserved Automobile wholesale Automobile retailing Auto repairs Leasing and rental Production value Autos for hire and taxis 10 Implications from the Smile Curve • The smile curve varies from industry to industry. • Power relations among sectors make up the value chains of industries. • Value added as a whole fell between 1988 and 1998. • It is possible to change the value chain through innovation. Copyright2002: Nomura Research Institute， LTD All Rights Reserved 11 Evolution toward a Service Economy Factors on the users’ side: Individuals: •Graying of the population. •Participation of housewives in the labor force. •Increasing need for continuing education. Businesses: • Core competency and outsourcing. Government: •Fiscal rehabilitation Copyright2002: Nomura Research Institute， LTD All Rights Reserved 12 Evolution toward a Service Economy Factors on the suppliers’ side: • Manufacturers focusing on after-sale services, such as maintenance and leasing • Companies spinning off head office administration departments to create shared-service companies Copyright2002: Nomura Research Institute， LTD All Rights Reserved 13 Rising hopes pinned on the service industries To create employment opportunities To realize a desirable international production network with other Asian countries. To contribute to strengthening the competitiveness of industries To realize a rich and worry-free life Copyright2002: Nomura Research Institute， LTD All Rights Reserved 14 Policy measures by the Japanese government The Cabinet Office: •Council on Economic and Fiscal Policy •Industrial Structure Council Ministry of Economy, Trade and Industry: •Service Forum Japan Tourism Advisory Council Copyright2002: Nomura Research Institute， LTD All Rights Reserved 15 TFP and the Rate of Increase in Employment Average annual growth rate in employment 1997-2000 •Manufacturing •Transportation, communications •Mining •Finance and insurance •Services Employment, •(Workers, %) % •Electricity, city gas, water supply •Construction •Wholesale, retailing •Real estate Copyright2002: Nomura Research Institute， LTD All Rights Reserved 16 Copyright2002: Nomura Research Institute， LTD All Rights Reserved 17 • Combining crime-prevention sensors and telecommunications technology. • Based on the information and communications infrastructure. • Developed technologies in such areas as: remote sensing, image processing, geographical information system (GIS), and the application of information technology to finance Copyright2002: Nomura Research Institute， LTD All Rights Reserved 18 • Based on the combination of a physical distribution and delivery system and an information system. “cool home delivery” “time designation delivery” “cash-on-delivery” • Challenging the government-run postal business Copyright2002: Nomura Research Institute， LTD All Rights Reserved 19 • Convenience stores supported by sophisticated physical distribution and information systems. • Offering a various services in addition to selling merchandise. Services Available at SEJ Outlets •Copying •Fax transmission •Photo developing •Parcel delivery •Sale of postage stamps, post cards, and revenue stamps •Sale of waste disposal stamps •Sale of ski lift tickets •Printing of New Year’s cards •Sale of automobile third party liability insurance •Magazine subscriptions •Pick-up of merchandise ordered via the Internet, etc. •Sale of catalog gifts •Sale of various prepaid cards Copyright2002: Nomura Research Institute， LTD All Rights Reserved 20 • Barbershop chain operator. • Based on the concept of \1,000 and 10 minutes. • Eliminate shampoos, face shaves, and massages. • Designed a shop system, including utensils and barber’s chairs, that allows efficient and inexpensive service. • Opened shops in Singapore. Copyright2002: Nomura Research Institute， LTD All Rights Reserved 21 Copyright2002: Nomura Research Institute， LTD All Rights Reserved 22 Application of Toyota-model production system • Dry cleaning and laundry industry: Adopting the “kanban” method to process small lots of various types of clothing resulted in improved finishing, fewer delivery errors, and less damage to clothing. • Hospitals: Reforming operations based on the concept of eliminating waste, which is the core of the Toyota model, sharply reduced waiting time for patients. Copyright2002: Nomura Research Institute， LTD All Rights Reserved 23 Need for Japanese-model service innovation • It is essential for service industries to raise labor productivity. • The development of markets and the creation of demand through innovation should expand the markets for services. • Service industries need to do business abroad. Copyright2002: Nomura Research Institute， LTD All Rights Reserved 24 The direction of service innovation Product innovation • Creating new service content. • Requires developing technology to create new services or developing technologies and know-how to offer services more efficiently. Process innovation • Building systems that can meet diverse needs and be efficient. • Chain Operation is such a system. Copyright2002: Nomura Research Institute， LTD All Rights Reserved 25 Future policies for the development of service industries (1) Develop service technologies (2) Improve the market environment for service industries (3) Develop service industry professionals (4) Promote the internationalization of the service industries Copyright2002: Nomura Research Institute， LTD All Rights Reserved 26 Develop service technologies Adapt technologies and know-how used in the manufacturing industries. Develop original technologies for the service industries. • Ubiquitous network technologies -IC cards, RFID, etc. • Data mining • Other information processing technology • Sensor technology Copyright2002: Nomura Research Institute， LTD All Rights Reserved 27 Improve the market environment for the service industries Increase competition by eliminating monopoly and removing entry barriers. Open markets that have been monopolized or heavily regulated by the public sector Copyright2002: Nomura Research Institute， LTD All Rights Reserved 28 Develop service industry professionals Securing and nurturing manpower with professional capabilities are essential for the development of these industries. Enhance higher education in the field of services Develop vocational schools for re-training and reeducation of workers. Copyright2002: Nomura Research Institute， LTD All Rights Reserved 29 Promote the internationalization of the service industries Provide information to help businesses go abroad. Harmonize systems that affect the business environment in various countries. Actively promote foreign direct investment in Japan. Copyright2002: Nomura Research Institute， LTD All Rights Reserved 30 Country（Regional) Differences Sectoral Share of GDP at Current Market Prices, 1980, 1990, 2000 (Percent) China Hong Kong Indonesia Korea Malaysia Philippines Singapore Taiwan Thailand Japan Agriculture 1980 1990 2000 Industry All Industry Manufacturing only Services 1980 1990 2000 1980 1990 2000 1980 1990 2000 30.1 0.8 24.8 14.9 … 25.1 1.3 7.7 23.2 48.5 31.7 43.4 41.3 … 38.8 38.1 45.7 28.7 27.0 0.3 19.4 8.5 15.2 21.9 0.4 4.2 12.5 15.9 0.1 16.9 4.6 8.6 15.9 0.1 2.1 9.1 3.0 2.0 41.6 25.3 39.1 43.1 42.2 34.5 34.4 41.2 37.2 50.9 14.6 47.3 42.7 51.7 31.1 34.3 32.4 41.7 41.0 36.0 Source: ADB, Asian Development Outlook 2001. Copyright2002: Nomura Research Institute， LTD All Rights Reserved 44.2 23.7 11.6 29.7 … 25.7 29.1 36.0 21.5 37.0 17.6 20.7 28.8 24.2 24.8 27.1 33.3 27.2 44.3 5.8 26.0 31.5 34.3 22.6 26.5 26.3 33.4 28.0 24.0 21.4 67.5 31.8 43.7 … 36.1 60.6 46.6 48.1 31.3 74.5 41.5 48.4 42.6 43.6 65.3 54.6 50.3 33.2 85.3 35.8 52.7 39.7 52.9 65.6 65.6 49.2 56.0 62.0 World Bank, World Development Indicators 2001. 31
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