Unlocking the Potential of Cultivated Meat: Overcoming Key Barriers

This article outlines the potential of the cultivated meat industry, discusses the primary barriers, and how IGPI’s business consulting services can help clients in Singapore and beyond.

The Potential of Cultivated Meat and their Benefits

Figure 1; Market Size Projection of Cultivated Meat Industry[1]

Experts from various research firms have reached a consensus on the promising trajectory of the cultivated meat industry, anticipating substantial growth between 2022 and 2030. Projections indicate a remarkable increase from an average of $185 million in 2022 to an impressive $3,905 million in 2030[2], reflecting a significant compound annual growth rate (CAGR) of 46.4%. The rapid expansion in the market is attributed to the advantages offered by cultivated meat, such as promoting a healthier diet, environmental sustainability, and animal welfare[3]. The potential of cultivated meat to address key problems in the conventional meat industry provides it with the opportunity to become an alternative in a space that is worth USD 1.4 trillion in market size in 2023.

In an era where health awareness is increasing, consumers opt for healthier diets, and cultivated meat is poised to stand out. The nature of cultivated meat allows producers to select healthier animal cell variations for cultivation, offering more nourishing options, such as with lower saturated fat content and other health benefits, in their cultivated meat over conventional meat.

Figure 2; CO2 Emission of Conventional and Cultivated Meat[4]

Meat is a staple in most diets and a key source of protein, but conventional meat contributes 16.5%-19.4% of GHG emissions[4], making animal production the largest source of GHG emissions in the food ecosystem. One of the key benefits of cultivated meat is its potential to have a lower carbon footprint. A life cycle analysis by Sinke et al. shows that CO2 emissions can be reduced by 95.9% in Beef (Cattle) and 55.6% in Chicken for cultivated meat (Renewable energy scenario).

Another key benefit of cultivated meat is its potential to address concerns related to animal welfare. Traditional meat production involves raising and slaughtering animals on an industrial scale, often leading to ethical issues. Cultivated meat eliminates the need to raise and kill entire animals as it only involves cultivating a sample of the animal’s cell.

Pivotal Barriers for Widespread Adoption of Cultivated Meat

Cultivating meat leverages novel technologies and hence faces key barriers that need to be resolved prior to widespread adoption — cost parity, taste parity, and adherence to safety and regulatory standards are some of the key obstacles faced.

1. Cost Parity for Cultivated Meat

Figure 3: Comparison of Cost of Cultivated Meat[5] and Conventional Beef[6]

Note: Others include electricity, transportation, repairs and maintenance, cold storage construction, building and property lease, IT infrastructure and Insurance. Cost of Ground Beef based on the gross farm value of ground beef in the United States, calculated from retail price of uncooked ground beef and accounting for the retail to gross farm value margin for beef in the United States. Average of 2022-2023 used due to higher inflation in 2023 that is expected to ease based on FAO’s projection.

In the quest for achieving cost parity, there is no silver bullet solution, but a suite of technological advancements will be required to complement each other and bring costs down (by ~91%) to reach a price-competitive level with conventional beef. The current key cost drivers of cultivated meat are the culture media (30.9%) — of which basal media form a crucial foundation by providing the essential nutrients for cell growth — and bioreactors and processing equipment (28.0%).

Among many initiatives, key efforts aimed at reducing culture media costs for cultivated meat production involve advancements in serum-free and food-grade culture media.

Culture media, traditionally developed for the pharmaceutical industry, largely rely on fetal bovine serum (FBS) and animal-derived components for the necessary factors for animal cells to proliferate; this leads to high cost of materials and animal welfare concerns. Many players in the cultivated meat field, aiming to reduce cost and address ethical concerns surrounding the use of FBS, have pursued advancements in serum-free culture media. Additionally, given the traditional use of culture media in the pharmaceutical industry, culture media are of pharmaceutical grade. Limitations of pharmaceutical-grade culture media include high cost and limited scalability for use in cultivated meat. The transition of pharmaceutical-grade to food-grade culture media will be critical to reducing costs and improving the scalability of cultivated meat during the mass production stage.

Enhancing innovation in bioreactor technologies tailored specifically for food production and larger-scale cultivation is imperative for the continued progress of the cultivated meat industry. At present, the industry heavily depends on pharmaceutical-grade bioreactors, which are not only expensive but also have limitations in scalability. The development of advanced bioreactors designed explicitly for the unique requirements of cultivated meat will facilitate more cost-effective and efficient large-scale production.

2. Taste Parity of Cultivated Meat

Taste emerges as a key criterion for cultivated meat consumption: it is the number one factor in the US, the UK, and Germany[7]. Plant-based meat has yet to achieve the taste and texture level that exactly replicates the taste and mouthfeel of conventional meat, but as cultivated meat is derived from actual animal cells, it has the technical feasibility to be able to achieve a closer resemblance to conventional meat in this aspect.

One such solution to improve taste parity is the innovation in the space of cultivated fats. While most startups have focused on cultivated muscle, as it constitutes 90% of meat, startups such as ImpacFat, Hoxton Farms, and CUBIQ Foods have taken a different approach and focus on cultivated fats, with the aim to provide their fats to plant-based and cultivated meat players to improve the taste and texture of their products. Studies have shown that fats are essential to improve the sensory profile of meat and contain fat-soluble vitamins such as Vitamins A, D, and E for a healthier diet.

3. Safety and Regulations

As a novel and nascent industry, ensuring the safety and regulatory compliance of cultivated meat products is paramount. Yet, it needs to be improved as most countries have taken a careful approach to regulatory approval in cultivated meat. As of January 2024, Singapore (in 2020), the United States (in 2023), and Israel (in 2024) are the only countries to approve the sales of cultivated meat by select approved startups.

Consumers often look to the regulations established by governments to determine if the food is safe for consumption. The lack of regulations may affect the availability of cultivated meat to consumers and deter their acceptance of switching to cultivated meat.

We believe that more regulatory and subsidy support will be required across regulatory bodies to envision a scenario where cultivated meat can be produced, sold, and consumed across different countries.

Singapore as a Development Hub for Cultivated Meat Startups

Singapore has a supportive startup ecosystem for cultivated meat startups with the following three factors: 1. supportive regulatory framework; 2. financial incentives; and 3. alignment of cultivated meat with the nation’s focus on food security challenges.

First, Singapore is the first country to embrace the commercialization of cultivated meat, issuing approval for the sale of cultivated meat to Eat Just Inc. and Good Meat within the country. It has also approved a cultivated meat food-processing license to Esco Aster to manufacture foods using cell-cultivated technologies.

Secondly, the government encourages cultivated meat startups to establish presence in Singapore by offering supportive financial incentives. Grants were provided through the Singapore Food Agency (Singapore Food Story 2.0 R&D Programme) and Enterprise Singapore on a case-by-case basis.

Lastly, cultivated meat aligns with Singapore’s ’30 by 30’ plan, where the country will work towards producing 30% of the nation’s food domestically by the Year 2030. As of 2022, Singapore still imports more than 90% of its food from over 160 other countries. As a land-scarce country with limited land area for livestock and crop agriculture, cultivated meat is one of the key solutions that can alleviate Singapore’s food security problems, and we believe that, given this, the government will continue to take a supportive stance on the industry.

How can IGPI add value to your pursuit in the cultivated meat space?

As technology advances rapidly in the field of cultivated meat, we believe that a carefully crafted and risk-mitigated approach to entering the market will be essential to navigate the current nascent industry. Private companies have many business opportunities, so it is important to seize the appropriate ones and take a proper approach. IGPI’s consulting services can help identify such opportunities in Singapore. In such an environment, it is important to:
        1.           Build and select an appropriate business model; and
        2.           Select appropriate partners and connect them to the business

IGPI’s Singapore office was established in 2013. Since then, we have supported many Japanese companies in their activities in ASEAN. To deal with the above issues, IGPI can provide a variety of business consulting services. Some of our consulting solutions include, but are not limited to:

1.    Building and selecting appropriate business models

 

◆    Market prioritization study: Analyze the industry and competitive landscape in selected countries and the value chain through research and interviews to assess market potential.
◆       Develop the concept of ideation: Create a business model from the shortlisted ideas to allow for our clients to enter a new space in the technology-driven businesses in Southeast Asia, including Singapore.

2.    Selecting appropriate partners and connecting them to different business

 

◆    Potential target/partners search: Identify and shortlist certain companies in Southeast Asia based on the unique needs and requirements of our clients
◆   Mergers and Acquisitions (M&A) advisory: Including project management, data room, due diligence, Q&A assistance, and closing with associated investors.

To find out more about how IGPI can provide Japanese consulting support for businesses in Singapore and the region, browse through our insight articles or get in contact with us.  


[1] Grand View Research, Polaris Market Research, Allied Market Research and Zion Market Research

[2] Average of Grand View Research, Polaris Market Research, Allied Market Research and Zion Market Research

[3] Food for Thought: The Protein Transformation (2022)

[4] Ex-ante life cycle assessment of commercial-scale cultivated meat production in 2030 (2023)

[5] How much will large-scale production of cell-cultured meat cost? (2022)

[6] USDA (2024)

[7] Food for Thought: The Protein Transformation (2022)


About the author

Mr. Tatsushi Sasakura is a Senior Manager of IGPI Singapore. Tatsushi has worked at Mizuho Bank and Deloitte Tohmatsu Financial Advisory (DTFA) in Japan. At DTFA, he belonged to the Corporate Strategy team, specializing in business strategy planning, M&A advisory, and business due diligence. He was also engaged in crisis management, supporting clients to tackle emergencies. He has profound experience in the energy, consumer, and financial industries. He covered a wide range of clients, including Private Equity Funds and large-sized companies. Tatsushi graduated from Waseda University with a B.A. in International Political Science and Economy.

Mr. Matthias Lim is an Associate of IGPI Singapore. Matthias has previously worked as an Investment Associate in Real Estate Investment at Belt Road Capital, a real estate private equity firm. During this time, he was responsible for the deal origination, financial analysis, due diligence and fund structuring for the firm’s real estate investments. During his stint at IGPI, he covered sustainability industry topics such as cultivated meat, de-carbonization and renewable energy. Matthias graduated from National University of Singapore with a B.Eng and is a CFA chartered holder.

 About IGPI

Industrial Growth Platform Inc. (IGPI)  is a premier Japanese business consulting firm with a presence and coverage across Asian markets. IGPI was established by former members of the Industrial Revitalization Corporation of Japan (IRCJ) in 2007. IRCJ, a US $100 billion Japanese sovereign wealth fund, is known as one of the most successful turn-around funds supported by the Japanese government.

In 2017, IGPI collaborated with the Japan Bank for International Cooperation (JBIC) to form JBIC IG, providing investment advisory services and supporting overseas investment. In 2019, JBIC, along with BaltCap, jointly established Nordic Ninja, a €100 million venture capital fund to focus on deep tech sectors such as autonomous mobility, digital health, AR/VR/MR, artificial intelligence, robotics and IoT in the Nordic and Baltic region. In 2019, IGPI established IGPI Technology to focus on the area of science and technology. The company invests in technological ventures and provides hands-on management support. The company also provides business development support towards commercialization and monetization of technologies.

* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

The market has entered a down cycle with fundraising across all stages hit

October 2023 findings from Deal Street Asia (DSA) reveal a notable shift in market dynamics, with Southeast Asian (SEA) startups navigating through the lowest quarterly deal volume in nearly three years. The third quarter, spanning July to September, witnessed only 151 deals being closed, representing a significant 27% quarter-on-quarter decline. Yearly, this translates to a substantial 34% year-on-year reduction in total deal volume and a noteworthy 52% year-on-year decrease in total deal value.

Quarterly Deal Volume per Funding Round

This market shift extends across early-to-later stage funding rounds. Seed-stage deals, in particular, hit a three-year low in Q3 2022, experiencing a volume drop of 44% compared to the same period the previous year. Additionally, the median value of seed rounds softened, falling by 22% over the last nine months. Similarly, Series A to Series D rounds have also encountered significant reductions. Series A deal volume faced a particularly challenging scenario in the initial nine months, while Series C witnessed the deepest correction in median value, plummeting by 59% from the same period the previous year.

This phenomenon has varying impacts on different sectors

A sector-wise comparison by quarter in Southeast Asia (SEA) reveals the following trends:

  • Declining sectors: The Retail, Enterprise Application, and FinTech sectors suffered the most, declining by 81%, 40%, and 60%, respectively.
  • Resilient sectors: In contrast, the Food/Agri Tech, Energy, and Transportation/Logistics sectors were resilient, securing the highest funding.

In Q3 2023, the Food and Agriculture Tech sector secured funding amounting to $254 million, reflecting a growth of 638% from the $34 million raised in Q2 2023. However, this still represents a drop of 40% compared to Q3 2022. The Energy sector, on the other hand, experienced growth with funding amounting to $89 million in Q3 2023—an increase of 482% and 1014% from Q2 2023 and Q3 2022, respectively.

Key Segment Comparison, YOY, QOQ  

Down rounds for startups – what is the situation?

In 2021, there was a notable surge in startups securing funding at inflated valuations, driven by a pursuit of rapid growth and increased cash burn. However, the trajectory shifted in 2022, signaling a return to normalcy. The market experienced a decline in deal frequency, a moderation in valuations, and a rise in flat and down rounds.

While specific statistics for Southeast Asia (SEA) regarding the proportion of up, flat, and down rounds are unavailable, insights from the U.S. market provide a glimpse into this trend. Carta’s Q3 2023 report revealed that nearly one in five investments in the U.S. was characterized as a down round. The Coller Capital Global Private Equity Barometer for Summer 2023 noted that 59% of Asia-Pacific (APAC) Limited Partners (LPs) anticipate more down rounds in the next 12 months, contrasting with 24% of APAC LPs expecting fewer down rounds.

Highlighting this shift, notable instances of down rounds in SEA in 2023 include Bitkub. As reported by Asia Tech Review, Bitkub, a Thailand-based crypto exchange, attracted a $500 million investment from Siam Commercial Bank (SCB) in 2022 for a 51% stake at a valuation exceeding $1 billion. However, in July 2023, Bitkub agreed to sell a 9.22% share to Asphere for approximately $17 million, valuing the company at $184 million. This case exemplifies the recalibration in valuation dynamics and investor sentiments that have become prevalent in the evolving landscape of startup funding in the region.

What are the reasons that have contributed to the current downcycle?

Through discussions with investors, industry practitioners, and startup founders, several key reasons have been identified as contributing to the current fundraising downcycle. These include:

Uncertainty in macro-economic conditions
The recovery in economic performance post-pandemic has been patchy, and geopolitical tensions, such as the Ukrainian-Russian war, the ongoing trade war between the US and China, and the Israel-Gaza War, have brought uncertainty to the overall economy. This has led to supply chain issues that partly contribute to the inflation we see today.

Higher cost of funds
As a corollary to the prevailing inflation, the US Central Bank, commonly known as “The Fed,” has undertaken a series of 11 interest rate hikes since March 2022. Presently, the Fed Funds rate stands within a range of 5.25-5.5%, while the 10-year Treasury has reached its zenith at above 5%. This upswing in the cost of funds plays a pivotal role in shaping asset allocation strategies.

The escalation in the cost of funds brings forth numerous implications, among others:

  • The alteration in investors’ asset allocation strategies is driven by the heightened requirement for returns.
  • Additionally, this surge in the cost of funds contributes to increased volatility in the capital market, resulting in a less favorable environment for Initial Public Offerings (IPOs).

The recent lackluster performance of stock markets in October, coupled with the anticipation of prolonged higher interest rates and subdued after-market showings of recent IPOs from the summer, has created a challenging landscape. The potential for significantly reduced valuations is prompting many IPO aspirants to reconsider or delay their market debuts. The continuous rise in the 10-year Treasury yield is especially discouraging for potential deals. Those still contemplating an IPO may face the necessity of accepting substantial reductions in valuation.

– Startup performance not meeting investors’ expectations
Amidst the pandemic, a notable surge in deals at impressive valuations occurred. However, this optimistic trend did not translate universally for startups, as a substantial number faced challenges meeting these elevated expectations. Some even resorted to returning investors’ funds, while others succumbed to bankruptcy and had to implement cost rationalization measures.

One example is Zume, backed by Softbank, which ceased operations in June 2023 after an eight-year run. Initially, the startup embarked on ambitious plans to revolutionize the pizza industry by investing $446 million in equipping delivery trucks with robotic pizza-makers and smart ovens, aiming to freshly cook pizzas en route to customers. However, Zume encountered various technological challenges, including issues with cheese sliding off pizzas. These challenges resulted in increased expenses and faster depletion of funds compared to revenue generation, ultimately leading to the cessation of operations.

Another case is IRL, an event discovery and planning app. Despite raising approximately $200 million across various funding rounds and achieving unicorn status in 2021, the startup faced numerous challenges. A significant expansion in its headcount was followed by a 25% workforce reduction in 2022, indicating deeper underlying issues. The situation worsened when both an SEC probe and an internal investigation revealed that a staggering 95% of the app’s reported 20 million active users were fake accounts. This unsettling truth dealt a fatal blow to the company, resulting in its permanent shutdown. These instances underscore the intricate challenges faced by startups, even amid a backdrop of prolific deal-making during the pandemic.

– Recent IPOs of well-known startups have been disappointing
The recent post-IPOs performance of a handful of startups has been disappointing.

– VC funds have faced difficulties in raising monies, with some having to downsize aspirations
The first quarter of the year has witnessed a notable shift in the venture capital landscape, as reported by Preqin’s latest venture capital report. In a departure from the quarterly average of 460 over the past five years, only 144 venture capital funds successfully closed during this period.

Moreover, the fundraising market is displaying a growing concentration of larger funds. As larger funds have demonstrated an ability to leverage their brand, track record, and scale to secure more capital, especially during turbulent market conditions. Preqin’s findings reveal that a significant half of the capital raised by venture capitalists in the first quarter flowed into the coffers of just five funds. This trend underscores a notable shift in investor confidence and strategy amid a bear market for technology.

It is also reported that funds with a focus on the Asia-Pacific region appear to be in a more favorable position to attract capital compared to their counterparts in North America and Europe. The first quarter saw the closure of the largest fund, Primavera, an Asia-focused venture capital firm renowned for backing industry giants such as Alibaba and Bytedance, which managed to secure a $4 billion commitment, accounting for a noteworthy 15% of the total value of funds closed in the past quarter.

As the venture capital landscape continues to evolve, these trends shed light on the strategies and preferences of both investors and fund managers in navigating the current market conditions.

What should startups do amidst this challenging climate?

Given the challenging fundraising environment, it is foreseeable that there will be higher pressure from potential investors pushing for a lower valuation – a “down-round” – whereby the subsequent round of funds raised is valued lower than the preceding round. Such a down-round carries both legal and economic implications.

Understand the legal implications of a potential down-round

Often, startup founders may not have a good inventory of terms that they have agreed with in their prior funding rounds; unfortunately, some of these may come to bite them back during difficult times. One of the things that all founders need to pay careful attention to is the anti-dilution provision and specifically how this provision is worded – whether it is full-ratchet or on a narrow/wide-based weighted-average. The full ratchet provision is generally the most onerous one for the founders.

While it is a little too late to modify the provisions of the already agreed anti-dilution terms, knowing, and having a good understanding of these terms will at least let founders plan in terms of potential dilution and how this may impact different stakeholders and guide them in pursuing their future fundraising.

‘Back to reality’ – squeezing every bit of cash

As the old saying goes, “Internally generated cash is always the cheapest source of capital,” so it is very important that founders adopt a “thrifty” attitude. Some of the things that we have come across during such times are for founders to focus on extending the cash runway above all else. To do so, we often see founders re-focusing on their core business. Doing so may necessitate founders closing down pilot/pet projects and non-profitable business segments. An example would be Grab, which has closed its Autoinvest and Earn+ products recently.

At the same time, one tip we have for founders to execute cost restructuring before even considering fundraising. The sooner this is done, the more confident investors are that founders can undertake tough decisions during necessary times. The ability to retain selective key staff and to let go of others is very important in such times. As to profitability, we generally see that many are not yet profitable today, unfortunately. From our feedback and experience dealing with investors and founders of such startups, we strongly advise that founders have a clear idea of how to chart for profitability. Also, some have cut back on spending, and hence growth, just to show profitability. Unfortunately, such a strategy does not work. Clearly, investors, especially VCs, understand that such businesses will not be attractive for funding as well.

Consider extending their latest round of investment

We also advise founders to reach out to the investors in their cap table and consider a follow-on/extension round to raise money under the same terms. Investors who have already invested in your company should be rightfully aware and have a better understanding of your company’s situation. Hence, they are in a better position to help during a downturn. Such a round typically allows the business some room for survival to tide through difficult periods.

Besides this, investors may also seek bridge financing from current investors. The key to successfully executing this is to be very clear on the proceeds of this fund and ensure that the amount raised through this extension leads to a meaningful milestone that will allow them to get through this difficult period.

Seek alternative ways to gain funding

We also advise investors to look for alternative ways to gain funding – one of which has gained popularity these days is to raise debt funding (popularly known as Venture Debt or Private Credit). However, this strategy may work best for startups that have collaterals – such as receivables backed by credible paymasters or have assets that have visible liquidation value – such as land/property.

Many venture debt funders we spoke to have also mentioned that having a good VC name in the cap table and having these VC personnel heavily involved in the startup’s management team, such as being part of the board or having an oversight of the startup’s management, helps in their underwriting. These VC involvements provide some assurance in terms of follow-on funding and governance, respectively.

That said, founders need to be fully aware that the venture debt’s cost of funding today can go as high as 15% in USD term. We also advise that it is important to negotiate credit terms that work best for both parties – not only on the interest rate but also on the repayment schedules. In addition, some venture debts may consider lower interest rates in place of having an option to purchase shares in the startup in the future (Warrants) if they see the startup as promising.

We also see some banks extending a program to financestartups – in Indonesia, for example, recently we saw Superbank – a digital bank supported by Grab and Singtel secure a partnership with Genesis Venture to provide debt-funding solutions to innovative Indonesian startups. This can also be an alternative source of funding that founders need to look into. Other than this, crowdfunding platforms and government grants (where the startups can have access to such funding lines) may also be useful in this difficult time.

Avoiding down rounds by structuring key clauses within the term sheet

Other than sourcing for alternative sources of funding, startups may take away the conversation on valuation this round by having it structured as convertible debt or SAFE (Simple Agreement for Future Equity). Doing so is essentially kicking valuation further down the road.

Another alternative is to perform a structured preferred equity round – for instance, agreeing on friendlier terms for investors during this funding round like a higher liquidity preference – such as a 1.5-2.0x liquidity preference in combination with participation rights or to sweeten things up, you may also include guaranteed terms. Again, founders need to strike a balance between giving out too much and “dirtying up” the investor terms – which will save them in terms of valuation but will haunt them later if things do not go as planned.

Illustration on Spectrum of Options

Down rounds are not the end of the world

At the end of the day, a down round may not be all too bad. Founders need to realize that it is not the end of the world when such things happen. The key is to understand that there are options to mitigate this and if all goes well, while not perfect, allow founders to keep their startups safe through the funding winter.

About IGPI Singapore’s involvement in SEA startup fundraising

IGPI Singapore has worked and collaborated with players in the startup ecosystem, including the founders of startups from various stages and sectors, VCs/ PEs, fellow advisors, and strategic regional and global investors as both strategic and M&A advisors.  Through our vast experience in negotiating and dealing with both up and down cycles, we offer tailored, suitable advisory solutions in different funding environments. We understand the difficulty of today’s fundraising environment and provide our independent, professional solutions suited to your startup’s funding needs.


IGPI Singapore can support your company in its business development and maximize its chances of success – Get in touch with us here!   


About the author

Mr. Erwin Thio is the Senior Manager of IGPI Singapore. His areas of expertise are in M&A deal management (both buy-side and sell-side), deal structuring, valuation and commercial due diligence, market analysis, and project management. He has also spent several years working within the investment and fund management (particularly for Real Estate Private Equity Funds) division of major developers such as Mapletree, Lendlease, Savills IM, and CFLD, where he helped with deal execution and origination, capital raising, fund creation/ development, and management.

Mr. Marcus Tan is an Associate of IGPI Singapore. He has started his career with IGPI. He graduated from Singapore Management University with a Bachelor of Business Management, majoring in Finance. During his time in university, he has gained overseas internship experiences in the chartering and offshore industry.

 About IGPI

Industrial Growth Platform Inc. (IGPI)  is a premium Japanese management consulting and M&A advisory firm headquartered in Tokyo with offices in Singapore, Hanoi, Shanghai, and Melbourne. IGPI has 14 institutional investors, including prominent Japanese mega-corporations such as Nomura Holdings, SMBC, KDDI, Recruit, and Sumitomo Corporation to name a few.

IGPI has vast experience in supporting Fortune 500s, Govt. agencies, universities, SMEs, and startups across Asia and beyond for their strategic business needs such as market entry and growth strategies, various aspects of M&A, innovation advisory, new business creation, etc. IGPI is consciously an industry agnostic firm (work in 10+ industries) and this coupled with its making its venture investments (30+ till date) adds to its uniqueness. IGPI has a JV with the Japan Bank of International Cooperation (JBIC) – one of JV’s initiatives is a VC fund in Europe (EUR 100mn fund) with participation from Honda, Panasonic, and Omron.

* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

The Startup Ecosystem in Southeast Asia Moves to the Next Stage

In Southeast Asia, the rapid proliferation of the Internet and smartphones in the 2010s, combined with the emergence of a middle class that has accompanied sustained economic growth, has spawned numerous startups that provide digital services that take advantage of the internet and mobile devices. Some of these ASEAN startups, such as Grab and Gojek, have become major regional platform companies, and some Japanese companies have been trying to create innovation in the region through strategic alliances with such platform companies.

In particular, the startup ecosystem in Southeast Asia is becoming more mature in the 2020s, and the assumptions have changed from those of the 2010s.

First, from a macroeconomic perspective, the attractiveness of the region is increasing due to the demographic dividend and the rise of the middle class, and the size of the Internet economy is growing more than fivefold, from $32 billion in 2015 to $174 billion in 2021.  

Moreover, investments in startups have seen a significant increase. The market, which had $0.5 billion in investments and 98 deals in 2013, skyrocketed within less than a decade to $10.4 billion and 929 deals in 2022 (Graph 1). The number of unicorns also increased to 30 as of September 2023 (Table 1).

Graph 1. SE Asia capital invested by year, $B and deals done #[1]

Table 1. The list of unicorns in Southeast Asia Region (as of September 2023)[2]

With the rise in investment amounts, deal counts, and the number of unicorns, both entrepreneurs and investors have gained substantial experience. This has resulted in a substantial support network for startups, including incubators and accelerators, with a wealth of experience to offer.

The business areas in which startups operate are also gradually shifting from the previous B2C focus on solving individual problems to B2B services such as fintech, logistics, and business efficiency, although still for SMEs. Of course, the majority of companies are still engaged in B2C businesses, but the number of companies engaging in B2B businesses is increasing.

In summary, the growth of the startup ecosystem in Southeast Asia is transitioning to the next stage. Within this transformation, Singapore, functioning as an innovation hub in Southeast Asia, has ascended from 18th place in the latest Global Startup Ecosystem Ranking by Startup Genome (2022) to 8th place (2023), further solidifying its presence.

Three Opportunities for Japanese Companies

For Japanese companies, Southeast Asia is becoming not only attractive as a “manufacturing base” but also as a “consumer market” and even as an “innovation base”. We believe there are three opportunities for Japanese companies in Southeast Asia as a base for innovation.

First, Japanese companies can leverage their technology and the local ecosystem to create business opportunities that will help solve issues in Southeast Asia.

For example, Santen Pharmaceutical provided new products and services through joint development with local research institutions and collaboration with local startups to solve the Southeast Asian issue of high myopia rates. Despite the high prevalence of myopia in Southeast Asia, there is an overwhelming shortage of ophthalmologists relative to the population, and people suffering from eye problems do not have enough access to the diagnosis and treatment they need. Santen Pharmaceutical therefore established a local R&D base and conducted joint research with the Singapore Eye Research Institute (SERI). By combining SERI’s myopia-related research results with Santen Pharmaceutical’s medicine development know-how, a new medicine was developed to suppress the progression of myopia. In addition, the company has formed a strategic alliance with Plano, a Singapore-based startup that has developed a smartphone application to prevent myopia in children, to provide a comprehensive management application to solve the issue of myopia.

Secondly, Japanese companies can utilize Southeast Asia as a testing ground for their technologies, accelerating innovation.

The strictness of Japan’s regulations and the slowness of the approval process for new business ventures is frequently highlighted. One notable benchmark to consider is the Doing Business 2020 ranking[3]. According to this ranking, Japan is placed 29th. In contrast, Singapore holds the 2nd position, Malaysia the 12th, and Thailand the 21st. This suggests that in certain aspects, Southeast Asia may offer a more favorable environment for conducting proof-of-concept projects for new businesses.

In fact, foreign startups with innovative technologies face barriers in the form of regulations when attempting to enter Japan. For instance, CarbonCure, a Canadian startup with technology to produce concrete that absorbs CO2, highlighted the challenges in business expansion in Japan during an interview with Japanese media. Compared to countries like Singapore, they mentioned that regulations in Japan, especially in terms of approvals, are notably stringent and time-consuming.

In this regard, it makes sense to conduct verification and experimentation of one’s own technology in Southeast Asia, where regulations are relatively more relaxed compared to Japan. There are also some programs that Japanese companies can make use of in conducting PoC projects in the region. Through the “Asia Digital Transformation (ADX) Project in Japan-ASEAN” supported by JETRO, which IGPI helped establish, Japanese companies collaborate with ASEAN companies and institutions, aiming to address economic and social challenges in Japan and ASEAN by leveraging digital technologies and other innovations. In the recent third call for proposals in 2022, 28 projects were selected for support (Table 2).

Table 2. The result of the call of Asia Digital Transformation (ADX) Projects in 2022[4]  

Third, Japanese companies can address societal challenges within Japan by extending the approach used to tackle social issues with digital technology in Southeast Asia.

For example, Singaporean startup SWAT Mobility, founded in 2016, has been providing innovative transportation solutions primarily in Southeast Asia. Since its expansion into Japan in 2020, the company has been promoting innovation in public transportation in rural areas to address the issue of insufficient mobility options for elderly residents. Starting with a verification project in Kitakyushu City, they have continued verification experiments across various locations in Japan, including Nagano Prefecture and Osaka Prefecture. Their new mobility solution, enabling on-demand vehicle services using algorithms and technology, contributes to Japan’s efforts in promoting DX in regional cities.

The Key to Success in Partnering with Local Startups Is to Clarify Your Company’s Issues

In order to seize such opportunities, forming partnerships with promising local startups is an effective strategy. Initiatives such as organizing pitch events locally or investing in local funds as limited partners are seen as entry points for this. It’s important to note that we’re not discrediting the effectiveness of these initiatives themselves, but we should be mindful of not losing sight of the ultimate goal and turning these means into ends. To drive successful innovation through partnerships with promising startups, it’s essential to begin by clearly defining your company’s challenges. This entails formulating hypotheses for viable business models and identifying the necessary technologies that are lacking within your organization to realize these hypotheses.

An illustrative example of successful collaboration between a Japanese corporation and a local startup, facilitated by IGPI, involves the enhancement of the corporation’s display solution through the integration of pedestrian traffic data analysis technology of the startup. This enhancement led to a solution that generated revenue expansion ideas based on the analysis results. The Japanese corporation had initial hypotheses to improve their in-house solution. Consequently, upon discovering a startup with the requisite technology to realize their hypotheses, they promptly made decisions and advanced toward detailed partnership discussions.

Certainly, during exploration activities, there are cases where discussions about partnering with local startups begin without clearly defining your company’s challenges. Even in such cases, it’s important to formulate hypotheses as soon as possible about what your company wants to achieve using the technology of the startup. One Japanese construction giant, for instance, initiated an approach with a local startup without hypotheses about the business model. However, with support from IGPI, they managed to formulate a hypothesis of a joint venture scheme to bid on construction projects in Southeast Asia together, leveraging the strengths of both companies (the Japanese company’s brand and the local company’s license). As a result, they made progress in partnership discussions with the startup.

How can IGPI Singapore help?

Since its establishment in 2013, IGPI Singapore has been supporting many Japanese companies for market research, strategy planning, execution support including partner search and approach, ideation, and related training for new business creation in Southeast Asia.

IGPI Singapore has a wealth of experience in selecting and partnering with local partners, and can lead your company to a successful alliance with a local partner through an approach that has the following characteristics:

◆ Comprehensive partnership considerations that envision the desired outcome through collaboration, based on a thorough understanding of the market and your company’s objectives/issues
◆ Selection of potential partners with a focus on achieving partnership objectives and eliminating subjectivity
◆ Involvement of local staff to conduct in-depth research on real trends in each country’s market and potential partners


Get in touch with us here  on internationalization, strategic planning, and fundraising-related topics!   


[1] Source: CENTO VENTURES:Southeast Asia Tech Investment – 2022

[2] Source: CB Insights – The complete list of unicorn companies

[3] Doing Business captures several important dimensions of the regulatory environment affecting domestic firms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, and resolving insolvency

[4] Source: ADX Projects Briefing Materials, August 2022, JETRO


About the author

Mr. Jongwoo Lee worked for a Japanese general IT consulting firm, where he was involved in numerous projects such as business planning and implementation support, new business planning, operational efficiency improvement, and business management enhancement support in a wide range of industries including trading companies, energy, manufacturers, automobiles, and systems, etc. After joining IGPI, he has extensive experience in new business creation in Southeast Asia, including the development of new business models and strategies for expanding sales of new solutions in the Southeast Asian market, and the study of new business entries for local companies in Southeast Asia.

Graduated from the University of Tokyo, Faculty of Economics. Japanese Certified Public Accountant

 About IGPI

Industrial Growth Platform Inc. (IGPI)  is a premium Japanese management consulting and M&A advisory firm headquartered in Tokyo with offices in Singapore, Hanoi, Shanghai, and Melbourne. IGPI has 14 institutional investors, including prominent Japanese mega-corporations such as Nomura Holdings, SMBC, KDDI, Recruit, and Sumitomo Corporation to name a few.

IGPI has vast experience in supporting Fortune 500s, Govt. agencies, universities, SMEs, and startups across Asia and beyond for their strategic business needs such as market entry and growth strategies, various aspects of M&A, innovation advisory, new business creation, etc. IGPI is consciously an industry agnostic firm (work in 10+ industries) and this coupled with its making its venture investments (30+ till date) adds to its uniqueness. IGPI has a JV with the Japan Bank of International Cooperation (JBIC) – one of JV’s initiatives is a VC fund in Europe (EUR 100mn fund) with participation from Honda, Panasonic, and Omron.

* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

This article aims not to delve into these technicalities but rather to provide insights on high-level topics, such as the “sophistication of business activities”, “transformation in the workstyle of business professionals”, and “societal shifts and business opportunities” due to the advent and proliferation of generative AI.

The Overall Picture of Generative AI in Business

There are several conceivable patterns for utilizing generative AI in business. The following chart illustrates the broad overview.

As shown on the left, while there are four layers to the value proposition of generative AI, most businesses will likely engage primarily with the topmost “Application Layer”.

The diagram on the right breaks down this Application Layer further, emphasizing that, depending on the target area of operation and level of customization, there are a plethora of use cases.

It is anticipated that there will be a surge in use cases related to “Fine Tuning”. Notable strides by OpenAI and its partner companies to offer AI services for businesses mean that enterprises can soon develop AI services optimized for their own tasks and operations without security concerns by training on their own data.

Value Proposition of Business Professionals in the “With Generative AI” Era

i) Delivering Value as a Business Professional with AI

Every business professional’s job can essentially be defined as “problem-solving”, which can be broken down into a five-step process:
1.   Identifying the problem.
2.   Formulating a solution hypothesis.
3.   Testing the hypothesis.
4.   Updating the hypothesis.
5.   Making decisions.

Generative AI excels at steps 2 and 3 and can manage step 4, though with limitations when it comes to ChatGPT due to outdated or inaccurate data. Nevertheless, using metrics like plug-ins can ameliorate these limitations to some extent.

In the “With generative AI” era, two major takeaways emerge for business professionals. Firstly, the value of AI-non-compliant steps 1 and 5 will rise. Secondly, for 2 to 4, rather than AI entirely replacing human tasks, humans will collaborate with AI to dramatically boost productivity—a point often overlooked.

Many people often debate statements like “Job A will be replaced by AI, but Job B will remain.” However, every process requires judgment, and judgment inherently comes with responsibility. Given the current legal system, where AI cannot bear legal or economic responsibility, any task involving judgment will always necessitate human involvement. Therefore, the crucial question is not “Which jobs will be replaced by AI?” but rather “In which tasks, and how, can humans leverage AI to dramatically enhance their own productivity?”

ii) Message to Leadership

To be a valuable leader in the future, it’s essential to: define problems, decide what not to tackle and focus on high-impact areas, and be prepared to take responsibility.

As top talents become more productive with AI tools, they may be more inclined to go independent. To retain them, businesses will need to empower these individuals with unique assets.

The potential use cases for ChatGPT are still evolving. Companies may need to innovate in-house, and leaders should encourage bottom-up initiatives for finding use cases.

– Embrace a blacklist approach over a whitelist, defining what shouldn’t be done and letting departments decide on their best use cases.
– Foster inter-departmental competition and sharing of success stories, which can catalyze a DX (Digital Transformation) culture within the company.
– Some data suggests frontline staff may be more cautious about introducing ChatGPT than executives. Ensuring psychological safety for these employees is paramount.

iii) Message to Staff member

Everyone now essentially has an excellent AI assistant at their disposal. Work with them, and try to solve higher-level problems.

Essential skills for this new landscape include: the ability to frame issues, proficiency in one’s native language (preferably English), and the courage to provide sharp insights.

AI can be the best mentor or coach. They’re always available, always patient, and customizable in their feedback style.

On the other hand, transitioning between industries or roles might become more challenging. The future might require investing in new experiences like internship programs and reaping the benefits once one climbs the ladder.

Societal Shifts and Business Opportunities with the Advent of Chat GPT

Throughout history, numerous cutting-edge technologies have tackled and resolved societal challenges. Conversely, reflecting upon the past, we realize that while these tech innovations emerged to solve existing issues, they sometimes inadvertently introduced new dilemmas. Most likely, people from the 2010s never anticipated that the then-innovative technologies of smartphones and social media platforms could lead to pervasive feelings of anxiety and stress due to excessive interconnectedness.

Lastly, I’d like to delve into the potential societal transformations stemming from the widespread adoption of Chat GPT, a particularly notable generative AI, and the resultant business opportunities that may arise.

i) It will become commonplace for humans to interact with each other through AI assistants.

In the foreseeable future, it might become common for individuals to relay their messages to a generative AI, which would then reformulate them into more polished communications before delivering them to the recipient. The recipient might then utilize another AI to craft a response. For instance, when sending an email in the local language to an overseas executive, many business professionals might rely on ChatGPT to ensure their messages remain courteous and error-free. Eventually, human involvement might merely entail approving, disapproving, or requesting modifications to AI-generated message drafts. There is a school of thought that suggests that human agency might become confined to something akin to the “free won’t” concept proposed by Benjamin Libet’s experiments on free will.

The following business opportunities might arise in this scenario:  
– Development of services to construct “person-specific” message/response via personal AI.
– Creation of applications allowing humans to manage and edit AI-generated content.

ii) Humanity’s linguistic ability (prompting skills) improves

Technology not only supplements human abilities but often reshapes them. As interfaces evolved, so did humanity’s skills in blind typing, keyword searching, and concise writing within 140/280 characters.

With the widespread use of ChatGPT’s interface, there might be an enhancement in humanity’s skills to pose low-context questions or make requests. Paradoxically, a “prompt divide” may arise between those with high and low prompting skills. As societal systems are generally designed for the majority, services in the future might be primarily tailored for those with elevated linguistic capabilities. For example, those who can’t engage in chat-centric communications, like the trending “Chat Commerce”, might find themselves unable to access a vast array of products and services.

Business opportunities in this domain might include:
– Development of new customer journeys starting with user prompts.
– Establishment of communities where individuals compete, share, and boast about their prompting skills.
– Offering training sessions for those with weaker prompting abilities.

iii) Talented professionals increasingly operate independently, utilizing AI as staff

As previously highlighted, the explosion in productivity potential due to generative AI hints at the likelihood of top-tier managers, who previously oversaw human subordinates, embracing this cost-effective tool and venturing independently.

Prospective business opportunities here might encompass:
– Developing generative AI platforms tailored to support the jobs of freelancers.

iv) The search & advertisement revenue model collapses, and writers refrain from public dissemination

Traditionally, a bulk of web content was monetized by integrating relevant ads, providing incentives for writers and creators.

However, the current landscape lacks a mechanism to compensate creators of blogs or web articles that have been incorporated into generative AI, leading to a situation where content providers aren’t duly rewarded.

Such circumstances might eventually cause the collapse of the ad-driven model based on search engines. Consequently, writers and creators might confine their publications to closed platforms (like online salons) that aren’t reached out to by web crawlers.

Emerging business opportunities could involve:
– Establishing platforms that manage and offer intellectual property rights and revenue-sharing incentives for writers.
– Innovating data security solutions for these enclosed spaces.

How can IGPI Singapore help?

IGPI has deep experience in strategizing, developing, analyzing, and implementing cutting-edge technology into your business. We have a team that focuses on AI/Analytics strategy: IGPI Digital Intelligence. We don’t just suggest the implementation of technologies into your operation, but co-develop your business by leveraging technologies hand in hand.

To find out more about how we can support your value-creation endeavors, get in touch with us.

IGPI Singapore offers a range of services to support Singapore businesses in their overseas expansion. Services can be broadly divided into:
◆ Management consulting, where we help companies identify growth opportunities, develop strategies to establish a presence in the target market. In the process, we often employ business matching techniques to find suitable local partners which could be crucial to successful market entry
◆ M&A advisory, where we guide companies through the end-to-end deal process, ensuring successful transactions


IGPI Singapore can support your company in its business development and maximize its chances of success – Get in touch with us here.      


About the author

Mr. Tadasuke Noguchi is a Manager at IGPI Singapore. Before joining IGPI, Tadasuke worked in an IT company and a think tank in Japan, where he engaged in consulting projects such as new business development in various industries: automotive, logistics, retail, finance, etc. He has experience in hands-on new business development while on loan to Toyota Motor Corporation’s R&D department. In IGPI, He mostly focuses on consulting projects such as market entry/expansion in the ASEAN market, M&A advisory, and the formulation of long-term visions. Tadasuke graduated from the University of Tokyo with a B.A. in Language and Culture and acquired a certification from the Graduate School of Public Policy of The National University of Singapore. He enjoys traveling and has visited around 50 countries.

 About IGPI

Industrial Growth Platform Inc. (IGPI) is a premier Japanese business consulting firm with presence and coverage across Asian markets. IGPI was established by former members of Industrial Revitalization Corporation of Japan (IRCJ) in 2007. IRCJ, a US $100 billion Japanese sovereign wealth fund, is known as one of the most successful turn-around funds supported by the Japanese government.

In 2017, IGPI collaborated with Japan Bank for International Cooperation (JBIC) to form JBIC IG, providing investment advisory services and supporting overseas investment. In 2019, JBIC along with BaltCap has jointly established Nordic Ninja, a €100 million venture capital fund to focus on deep tech sectors such as autonomous mobility, digital health, AR/VR/MR, artificial intelligence, robotics and IoT in the Nordic and Baltic region. In 2019, IGPI established IGPI Technology to focus in the area of science and technology. The company invests in technological ventures and provides hands-on management support. The company also provides business development support towards commercialisation and monetisation of technologies.

* This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

The arrival of the era of regionalization

The era of globalization threatened by GAFAM

In the era of globalization, global IT platforms such as GAFAM established themselves as the dominant forces of this era and are essential to our daily lives.

Business in this era is defined by “who” to sell “what” to. Based on basic business principles taught in business schools for many years, executives decided on the strategy of “who” to sell “what” to, and the operational teams focused on “how” to execute it.

Many management methods were developed during the era of globalization, such as PPM (Product Portfolio Matrix), Balanced Scorecards, and job-based management. However, since the early 2000s, it appears that these methods have become less effective in the U.S.

For instance, job-based management was criticized for lacking innovation, leading to the development of “agile management” and “ambidextrous management” that allows organizations to deepen existing businesses while exploring new areas.

The era of regionalization brought on by the digital revolution

Why did the management methods developed during the era of globalization become ineffective? This is largely due to the rules of the game changing as a result of the digital revolution, heralding the era of regionalization.

Businesses evolved from simply defining “who” to sell “what” to, to now focusing on “who” to sell “what” and “how” to sell. Let’s illustrate with an example from an ASEAN country.

A businessman in Jakarta is struggling to improve his or her means of commuting. Ten years ago, the only solution was to sell them a car or motorcycle. Now, one can propose ride-sharing or on-demand bus services. Remote work, popularized during the COVID-19 pandemic, can even eliminate the need for commuting. Digital transformation, particularly the smartphone revolution, has played a pivotal role in this shift in Southeast Asia and all around the world.

In the era of regionalization, it is not an exaggeration to say that digital technology is at the core of business. This is because digitization enables and expands upon the most crucial factor, the “How”, in addressing region-specific challenges.

There are people who call the global focus on increasing self-sufficiency in food and energy a regression from globalization, but this is incorrect. The reality is that the digital revolution has advanced globalization and ushered in the era of regionalization.

Titans of the age of regionalization in Southeast Asia

Super apps that reached consumers

Now, let’s look at the changes happening in Southeast Asia during the era of regionalization. Alongside the rise of super apps like Gojek and Grab, conglomerates in various countries are also becoming key players. Let us take a closer look at the evolution of super apps.

When I started my business in Southeast Asia in the early 2010s, smartphones were not yet widespread, and banks were one of the main institutions that were reaching out to consumers directly. To reach as many as possible, banks leveraged campaigns to promote opening bank accounts and selling prepaid cards. Convenience stores had five to six payment terminals from different banks, and restaurants often had bank promotions, sometimes offering 30% off.

Then came the rapid proliferation of smartphones. Players who successfully leveraged this to solve consumer-related challenges rapidly grew and dominated the market. For example, Gojek gained market share in big cities by offering bike taxi services to avoid traffic jams, and later diversified into e-commerce, food delivery, and payments, evolving into a super app.

Thriving through franchise support with smartphone apps

The unique transformation brought about by super apps like Gojek focuses on regional issues, or “solving problems within a 5-kilometer radius.” Gojek connects consumers with nearby motorbike taxis and small local stores (known as warungs) through smartphones, thereby addressing various social issues- this eases the burden on consumers and also helps to increase sales for these local businesses. The value of solving local issues is evident when such small business owners and drivers experience improved sales without having to expend significant resources to take active steps in promoting their business.

Moreover, these warungs serve as hubs for local communities, much like the neighborhood gathering spots of Japan’s Showa era.

Let’s consider the convenience store chains and supermarket chains that have become widespread in Japan since the 1970s, for the sake of comparison. The spread of convenience store and supermarket chains in Japan has marginalized traditional shopping streets, particularly in suburban areas. While these chains have provided convenience to consumers, they have also contributed to the decline of local community spaces.

The difference between Southeast Asia and Japan can be attributed to the rise of digital technology, which allows organic integration and innovation without destroying what already exists.

Breaking established interests

Innovations in Southeast Asia are moving into the next phase. For example, an Indonesian startup named Sinbad provides an app that helps warungs order inventory, aiming to disrupt the complex, inefficient supply chains that currently exist. Addressing these inefficiencies is not an easy task, as it challenges established interests and traditional systems, much like the seniority systems in Japanese corporations or subsidies for cedar planting in Japan.

Using smartphone technology and big data to break these established interests is the key for the ASEAN region to move forward.

Conclusion: Winning in the era of regionalization

The three points below are essential for corporations to win in Southeast Asia:

a) Clarify what not to do: Executives must be clear about what the company should not engage in to avoid confusing their operational teams.

 b) Secure necessary resources: In this era, it’s crucial for the regional offices in Southeast Asia to have easy access to resources, personnel, money, and information.

 c) Collaborate with other corporates and startups: Understanding local conditions and networks is vital. While it’s possible to build these capabilities internally, partnering with local stakeholders could offer a faster route to innovation.

    Through these key pointers, we hope to guide corporations in navigating, innovating and ultimately thriving in Southeast Asia during this era of regionalization.


    To find out more about how we can support your value creation endeavours, get in touch with us here.      


    About the author

    Mr. Kohki Sakata is CEO of IGPI Singapore. After joining Cap Gemini and Coca Cola, Kohki joined Revamp Corporation, where he managed projects on global expansion and turnaround in various sectors, including F&B, healthcare, retail, IT, etc. After joining IGPI, Kohki has managed projects mainly on global expansion and cross border M&A in various sectors such as logistics, IT, telecom, retail, etc. In addition to his broad experience in implementing solutions that have been developed in Western countries, he has developed multiple methods to turnaround Asian companies with a focus on setting a clear vision and employee empowerment. He has proven the practicality of these methods by turning around Asian companies not only as an advisor but also as senior management. He graduated from Waseda University Department of Political Science and Economics and IE Business School.

     About IGPI

    Industrial Growth Platform Inc. (IGPI) is a premier Japanese business consulting firm with presence and coverage across Asian markets. IGPI was established by former members of Industrial Revitalization Corporation of Japan (IRCJ) in 2007. IRCJ, a US $100 billion Japanese sovereign wealth fund, is known as one of the most successful turn-around funds supported by the Japanese government. In 2017, IGPI collaborated with Japan Bank for International Cooperation (JBIC) to form JBIC IG, providing investment advisory services and supporting overseas investment. In 2019, JBIC along with BaltCap has jointly established Nordic Ninja, a €100 million venture capital fund to focus on deep tech sectors such as autonomous mobility, digital health, AR/VR/MR, artificial intelligence, robotics and IoT in the Nordic and Baltic region. In 2019, IGPI established IGPI Technology to focus in the area of science and technology. The company invests in technological ventures and provides hands-on management support. The company also provides business development support towards commercialisation and monetisation of technologies.

    * This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

    Exploring new markets overseas is becoming a strategic imperative among Singapore companies.

    As business landscapes evolve, exploring new markets and expanding overseas have become a key priority for many Singapore companies. This is particularly evident among Small and Medium-sized Enterprises (SMEs), which are increasingly recognising the immense potential that lies beyond their domestic borders. The DBS annual SME Pulse Check survey conducted at the end of 2022 revealed that over 60% of SMEs in Singapore have indicated overseas expansion as a key business priority[1]. This is contributed by the reopening of borders along with support from government schemes such as the enhanced Enterprise Financing Scheme[2] announced in Budget 2023, which enables local companies to gain access to financing across all stages of growth.

    Among the array of enticing markets, Japan has emerged as a particularly alluring destination for Singaporean businesses. Apart from having a large consumer market backed by sizable economy, bilateral agreements were signed between both nations in May 2022 to boost the flow of entrepreneurs and enterprises by promoting greater access to start-up and innovation ecosystems[3]. Initiatives such as business matching sessions to connect Singapore and Japanese firms with accelerators, business partners and investors, are put in place to empower businesses to build market knowledge and tap into new opportunities, deepening their networks in the process.

    Japan has seen growing interest among Singapore companies from diverse industries, as exemplified by various market entries in the past year.

    Drawn by the influx of tourists into Japan in a post-pandemic era, five-star resort hotel operators from Singapore, Capella Hotels & Resorts and Banyan Tree Holdings, have announced plans to enter the Japanese market. Capella Hotels & Resorts intends to open its first Japanese hotel in Kyoto as early as the summer of 2025[4], located on Yamatooji-dori in the historic Miyagawa-chō district[5]. The office of renowned architect Kengo Kuma, which designed the Japan National Stadium for the 2020 Tokyo Olympics, is supervising the construction. On the other hand, Banyan Tree Holdings plans to open flagship hotels in Kyoto and Hakone from now through 2026. These hotels aim to provide signature standards of service that will serve as a benchmark for all future Banyan Tree locations in Japan[6]. The presence of Singapore hotel groups in Japan contributes to enhancing tourism infrastructure while attracting affluent visitors to experience premium accommodations.

    Shifting the focus to a more mass-market brand, Singapore design studio Beyond the Vines launched its first international pop-up store in Tokyo in March 2023 as it seeks to grow its international presence[7]. The brand, known for its minimalist and contemporary designs, has gained popularity in Singapore and other Southeast Asian markets. Its entry into Japan reflects its recognition of the country’s vibrant fashion scene, and the opening in Tokyo allows the brand to tap into the city’s fashion-conscious consumer base. While the initial pop-up store only lasted for a week, Beyond the Vines has since launched another pop-up at Miyashita Park North in Shibuya, which will remain at the location for a month until the end of July 2023. The expansion demonstrates Singapore’s fashion industry’s potential to resonate with the Japanese market.

    On the technology front, Singapore-headquartered Fintech company M-DAQ Global has announced the opening of its Japanese office in Fukuoka in September 2022[8]. The company specialises in providing currency conversion and payment solutions, enabling businesses to transact seamlessly across different currencies. It sees opening a subsidiary office in Fukuoka as a natural fit for a myriad of reasons, including its similarity to Singapore in terms of the active collaboration between private and public sectors to develop innovative solutions for business needs and quality of life improvements. M-DAQ has since commenced discussions with the Fukuoka City Government, Kyushu Railway Company and other entities to improve the foreign currency user experience when making retail and travel transactions. This expansion highlights Singapore’s ability to deliver advanced financial services on an international scale.

    In addition to Singapore companies that entered the Japan market recently, others are exploring pathways through trade exhibitions. The Franchising and Licensing Association (FLA) has led a delegation made up of popular Singapore brands including Crystal Jade, Five Star Chicken Rice, Playmade and iJooz, in forming the Singapore Pavilion exhibiting at the 40th Japan International Franchise Show in March 2023. Through this event, local companies sought potential business partners to carry their brand, while gaining an initial sense of their product acceptance in Japan.

    These activities underscore the increasing interest and capabilities of Singaporean companies in capturing opportunities in the Japanese market. With that being said, entering the Japanese market presents a set of unique challenges for Singaporean companies, ranging from language and communication barriers to cultural nuances and intense competition. Overcoming these obstacles is crucial for successful market entry.

    Public agencies such as Enterprise Singapore and JETRO offer a multitude of initiatives to provide support for Singaporean companies venturing into the Japanese market.

    Enterprise Singapore assists Singaporean companies in their internationalisation efforts by providing various support initiatives, including grants and market access programs, to facilitate market entry. For instance, the Market Readiness Assistance (MRA) Grant offers financial support to Singaporean companies to defray a significant portion of eligible costs associated with market entry activities, helping businesses assess market potential, establish networks and promote their products or services[9].

    Hailing from Japan, JETRO (Japan External Trade Organisation) operates in Singapore with the mission of promoting trade and investment between Japan and Singapore. ‘Invest Japan’ serves as a platform to attract and assist Singaporean companies interested in establishing a presence in Japan. Through this initiative, JETRO offers support services including consultation services on company incorporation, networking opportunities and temporary business office facilities in Japan among others to help Singapore companies make a more informed decision prior to market entry[10].

    In addition to support from the public sector, local companies can leverage the expertise and guidance by IGPI, a Singapore-based Japanese management consulting firm.

    IGPI Singapore offers a range of services to support Singapore businesses in their overseas expansion. Services can be broadly divided into:
    Management consulting, where we help companies identify growth opportunities, develop strategies to establish a presence in the target market. In the process, we often employ business matching techniques to find suitable local partners which could be crucial to successful market entry
    M&A advisory, where we guide companies through the end-to-end deal process, ensuring successful transactions

    Our past and current engagements include:
    ● Supporting a local F&B chain in its market entry into Japan, including performing a market study, identifying and selecting the most suitable strategic partner
    ● Supporting a local wholesaler and retailer in its market entry into Japan through business matching, by shortlisting promising partners and facilitating discussions towards the formation of the partnership
    ● Organising missions trips to Tokyo with various industry associations, where we led delegations made up of senior executives from Singapore companies to gain insight into doing business in Japan

    IGPI Singapore can support your company in its market entry into Japan and maximise its chances of success – Get in touch with us!


    [1] The Straits Times: Exploring new markets, expanding overseas key priorities for most Singapore SMEs: Survey (21 Mar 2023):  https://www.straitstimes.com/business/exploring-new-markets-and-expanding-overseas-are-top-priorities-for-most-s-pore-smes-survey

    [2] For more details, please visit: https://www.enterprisesg.gov.sg/financial-support/enterprise-financing-scheme

    [3] CNA: Singapore, Japan ink agreements on promoting start-ups, digital transformation for governments (26 May 2023): https://www.channelnewsasia.com/singapore/singapore-japan-ink-agreements-promoting-start-ups-digital-transformation-governments-2709716

    [4] Nikkei Asia: Thai, Singapore hotel groups target Japan’s tourism boom (26 Jun 2023): https://asia.nikkei.com/Business/Travel-Leisure/Thai-Singapore-hotel-groups-target-Japan-s-tourism-boom

    [5] Artist’s impression of the upcoming Capella Kyoto: https://capellahotels.com/en/capella-kyoto

    [6] Banyan Tree Group Press Release (Jun 2022): https://www.banyantree.com/assets/2022-06/220624-banyan-tree-group-debuts-japan.pdf

    [7] Inside Retail: Singapore’s Beyond The Vines to open first store in Japan (15 Mar 2023): https://insideretail.asia/2023/03/15/singapores-beyond-the-vines-opens-first-store-in-japan/

    [8] Technode Global: Singapore’s M-DAQ Global Opens Japan Office as part of international expansion (13 Sep 2022): https://technode.global/2022/09/13/singapores-m-daq-global-opens-japan-office-as-part-of-international-expansion/

    [9] For more details, please visit: https://www.enterprisesg.gov.sg/financial-support/market-readiness-assistance-grant

    [10] For more details, please visit: https://www.jetro.go.jp/singapore/investinjapan.html


    About the author

    Mr. Ryota Yamazaki is the Director of IGPI Singapore. Before joining IGPI, Ryota worked in Deloitte Consulting in Singapore, where he was a leader in the areas of Consumer Business and Supply Chain & Logistics in Southeast Asia. His areas of expertise are Strategy & Operations such as market entry, Route-to-Market (RTM) strategy, business due diligence, and PMI. He started his career with A.P. Moller-Maersk Group as a management trainee and also worked for Kurt Salmon, where he had vast project experiences especially in Supply Chain & Logistics for the retail and consumer goods clients. Ryota graduated from the Faculty of Economics at Keio University.

    Mr. Zhi Hao Thean is an Associate at IGPI Singapore. Zhi Hao started his career with IGPI. He graduated from Singapore Management University with a Bachelor of Business Management, majoring in Finance. During his time at IGPI, he is involved in multiple engagements pertaining to market entry, strategy development and benchmarking studies across diverse industries.


     About IGPI

    Industrial Growth Platform Inc. (IGPI) is one of Japan’s premium management consulting and investment firms headquartered in Tokyo with offices in Singapore, Hanoi, Shanghai and Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turn-around projects in Japan. IGPI has 14 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit and Sumitomo Corporation to name a few. IGPI has vast experience of supporting Fortune 500s, Govt. agencies, universities, SMEs and funded startups across Asia and beyond for their strategic business needs such as market entry and growth strategies, various aspects of M&A, innovation advisory, new business creation etc. IGPI is consciously an industry agnostic firm (work in 10+ industries) and this coupled with it making our own venture investments (30+ till date) adds to our uniqueness. One of our recent investment endeavours has been a VC fund in Europe (EUR 100mn fund) along with Honda, Panasonic, JBIC etc. (a couple of our investees are now unicorns). IGPI group has ~6,000 employees on a consolidated basis.

    * This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

    In this article, we highlight why it is imperative for CPG companies of all sizes across the value chain, now more than ever, to develop or refine their rationalisation framework in their product management toolbox, share key success factors in crafting a rationalisation strategy and shed light on common pitfalls.

    Macro trends depict a critical juncture for the CPG industry

    In 2021, facing rising input cost inflation and squeezed margins, Nestlé S.A. kicked-off Project TASTY as part of a wider value creation strategy, focusing on achieving cost savings, margin improvements and long-term growth via SKU rationalisation and recipe and packaging optimisation.

    Table 1: NIQ 2023 Consumer Outlook Report – Global CPG Price Inflation Rate

    One year on, CPG companies across the value chain faced persistent inflation, driving prices higher and negatively impacting sales volumes across categories. The pandemic also accelerated digital transformation across the entire value chain, with CPG companies of all sizes finding themselves at varying stages of implementing and leveraging newfound digital infrastructure, data pools and analytical capabilities. Changing consumer preferences stemming from rising prices and the pandemic include a rising preference for online shopping, variations in purchase frequency and a flight towards value, albeit varying across the different product categories.

    Such shifts warrant a reprioritization of multi-dimensional criteria in assessing an SKU’s historical financial and operational performance and strategic importance in the short and long-term. At a time of internal change and external shifts, CPG companies have been presented with a golden opportunity to revisit their product mix management strategy, spanning both SKU innovation and rationalisation.

    Performing a one-off innovation or rationalisation exercise will not suffice – corporations should capitalise by fundamentally redesigning their product mix management frameworks, leveraging new consumer touchpoints, access to big data and advanced analytics while revisiting and updating previous methodologies and key performance indicators (KPIs). In lieu of current cost-side pressures, SKU rationalisation remains a priority and a valuable first step in the SKU optimisation cycle.

    Key success factors to maximise value from SKU rationalisation

    Category managers and executives have long understood the need to consider the importance of considering multiple performance dimensions in addition to SKU-level financials and embracing product basket synergies, overall mix value contribution and long-term growth potential.

    In developing or refining existing frameworks, much emphasis is placed on analytical capabilities, data collection and execution agility. However, CPG companies today should also consider strategic elements that have significant bearing on the value unlocked from a rationalisation exercise, such as the following:

    1) Design Digital Infrastructure to Support Rationalisation Needs

    The push for digital transformation entails new infrastructure, workflows and data collection and analysis capabilities. In the midst of change, companies that capitalise on this opportunity to amalgamate existing SKU rationalisation workflows and data needs with new systems will be able to minimise resources spent on data interpretation and developing actionable insights.

    In migrating to new systems, optimization from the collection of data through to the visualisation and framing of key indicators is imperative and companies must actively drive the development of integrated workflows from the get-go. Executives and managers should also re-evaluate existing digital infrastructure and contrast this against rationalisation needs and the price and value of current market offerings.

    2) Systemize Qualitative Insights and On-the-Ground Feedback

    In the pursuit of data-driven insights on SKU performance, companies must also recognise the value of consolidating, interpreting and transforming qualitative inputs from within the organisation (and in some instances, select third-parties involved in distribution, retail or day-to-day operations) into actionable items. More often than not, following rigorous quantitative analysis, qualitative assessments are performed at the executive level or within the steering committee as a final ‘check’ just before implementation to ensure alignment with leadership’s understanding. In doing so, a wealth of insights from the ground remain untapped and deep understanding of select categories or products are not fully leveraged.

    To capitalise, companies must embark on a path of systemizing qualitative inputs, designing existing SKU rationalisation frameworks to periodically collect, consolidate and transform feedback from the ground into actionable items.

    3) Supplement Targets with Sensitivity Analyses

    Forming the basis of a periodic rationalisation exercise is a set of clearly quantitative targets spanning different performance dimensions, such as a minimum improvement in gross margins or process cycle efficiency. Leveraging stronger analytical capabilities and big data, companies can supplement such targets with sensitivity analyses comprising multiple iterations and combinations to obtain a clearer picture of:
    (1)  The array of possible rationalisation solutions to achieve current targets
    (2)  The extent of marginal improvements by extending the number of SKUs reduced in different scenarios

    In doing so, companies shift from a target-focused mentality to one of value-maximisation, driving larger value gains in the long run. The steering committee and key decision makers should also note the interests of other stakeholders and evaluate the pros and cons of adopting a rationalisation strategy based on the company’s ultimate priorities.

    Case-in-Point: Trimming SKUs to drive margins in beverage distribution

    IGPI Singapore worked with a beverage distributor undergoing a major system migration to analyse their existing SKU portfolio and recommend candidates for rationalisation, which would improve:
    ●      Financial metrics by driving gross margins
    ●      Operational metrics by improving warehouse inventory turnover
    ●      Strategic metrics by aligning the SKU mix with the firm’s strategic direction

    We designed a framework detailing each step of our approach to the rationalisation, beginning with segmenting SKUs into analysis groups based on key criteria. We proceeded to develop and refine the KPI that determined each SKU’s performance. Next, we performed multi-dimensional analysis supplemented with sensitivity analyses for each KPI to identify potential candidate SKUs, while managing data coherence across legacy and new systems. Finally, we incorporated qualitative insights drawn from departments within the company and industrial best practices to develop our final rationalisation recommendations.

    Recognizing the importance of implementing a sustainable solution for our client rather than a one-off exercise, we developed a tailor-made rationalisation tool custom-fitted for the new system to allow managers to replicate our work steps, perform the rationalisation exercise and quantify the impact on KPIs independently going forward.

    The rationalisation led to a significant reduction in the number of SKUs, projected growth in gross margins and improved operational workflows.

    Common Pitfalls in the Rationalisation Process

    1) Misalignment across Department Silos and KPIs

    High-level company-wide strategic direction and goals underpin a rationalisation exercise, forming the basis of rationalisation targets and facilitating compromise across KPIs in pursuit of long-term value. Companies must beware of the formation of silos and internal misalignment on wider company goals between departments, which lead to tunnel vision, push-back and low quality implementation. A common example is the conflict of interest between sales and cost centres, leading to either topline targets or cost savings achieved at the detriment of the other. This can be addressed through a clear prioritisation process, facilitated conversations across key functions and dedicated resources to achieving compromise. Taking the middle ground will not be the indicator of successful alignment – a compromise in lieu of company objectives will.

    2) Suboptimal Allocation Methodologies

    Evaluating the financial performance of an SKU leverages heavily on allocating key components in the cost-to-serve equation to individual SKUs to obtain gross and contribution margins. Analysis quality is only as good as the quality of its input data – underlying assumptions such as allocation base have significant implications on the results of the rationalisation and if suboptimal, may result in the trimming of well-performing SKUs mistakenly classified as poor performers along select KPIs. Companies can mitigate this through comprehensive analysis of cost drivers and testing existing assumptions through iterations of rationalisation execution and review.

    3) Compromised Execution and Implementation

    The gap between actionable insights and executing on said insights is a major factor in determining the long-term benefits reaped from a rationalisation exercise, especially in the context of operations and workflows. Compared to insight derivation, this step involves more stakeholders and key process owners, requires more nuance in implementation and is far less straightforward. Companies must devote sufficient resources to support the transition following a rationalisation throughout the organisation, be it in terms of product portfolio, brand equity, sales strategy or people-related factors such as upskilling, managing workflow changes and resource allocation, etc. More often than not, such responsibilities fall to the decision makers in the rationalisation exercise – companies should recognise shared responsibilities and understand that a new pair of hands, more experienced or suited in implementing solutions, may be required to take over from the initial decision makers. A possible solution is the concept of segmenting and allocating scopes to different process owners, to make good executive decisions on what to rationalise and address the issue of how and when.

    4) Lack of Process Discipline

    SKU rationalisation has always been a continuous process, enabled now more than ever with the advent of analytical capabilities and round-the-clock data collection. A key component of the value in rationalisation lies in the future insights derived from acting on current actionable items and with each performance, product portfolios and existing frameworks are refined to maximise value. Opportunistic rationalisation exercises conducted in times of distress fail to leverage on this, resulting in superficial performance analysis and one-off improvements with minimal impact. Successful companies integrate rationalisation into workflows and continually improve analysis processes, implementation frameworks and strategies, developing self-sustaining engines over time.

    How can IGPI Singapore help?

    IGPI has deep experience in strategising, developing, analysing and implementing sustainable product optimisation solutions for companies across all parts of the value chain based on a proprietary approach, leveraging our expertise in multiple sectors in the wider CPG industry. To find out more about how we can support your value creation endeavours, get in touch with us here.      


    About the author

    Mr. Hoong Tian Jin is an Associate in IGPI Singapore. Before joining IGPI, Tian Jin started his career at Ernst and Young Singapore in the Assurance service line, where he led digital audits and reviewed operational controls of healthcare, pharmaceutical and manufacturing companies. During his time in university, he also worked at an e-commerce start-up performing business development, online marketing and search-engine optimisation. He graduated from the National University of Singapore with a Bachelor of Business Administration (Accountancy). Tian Jin is proficient in English and Mandarin. He is passionate about corporate and social responsibility and volunteers regularly with numerous non-profit organisations to give back to society. In his leisure time, he enjoys football, music and chess.

     About IGPI

    Industrial Growth Platform Inc. (IGPI) is one of Japan’s premium management consulting and investment firms headquartered in Tokyo with offices in Singapore, Hanoi, Shanghai and Melbourne. IGPI was established in 2007 by former members of Industrial Revitalization Corporation of Japan (IRCJ), a USD 100 billion sovereign wealth fund focusing on turn-around projects in Japan. IGPI has 14 institutional investors, including Nomura Holdings, SMBC, KDDI, Recruit and Sumitomo Corporation to name a few. IGPI has vast experience of supporting Fortune 500s, Govt. agencies, universities, SMEs and funded startups across Asia and beyond for their strategic business needs such as market entry and growth strategies, various aspects of M&A, innovation advisory, new business creation etc. IGPI is consciously an industry agnostic firm (work in 10+ industries) and this coupled with it making our own venture investments (30+ till date) adds to our uniqueness. One of our recent investment endeavours has been a VC fund in Europe (EUR 100mn fund) along with Honda, Panasonic, JBIC etc. (a couple of our investees are now unicorns). IGPI group has ~6,000 employees on a consolidated basis.

    * This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

    The motivation of this article is to capture select examples of the Australia-Japan innovation activity across diverse stakeholders and to draw attention towards keeping a closer eye on Australia’s innovation ecosystem where many opportunities exist and cut across business, technical and financial collaboration with startups, universities etc.

    Japan and innovation – setting the context

    Japan is an advanced nation that has historically enjoyed the reputation of being a tech front-runner. It has contributed many innovative companies to the world. This has been largely driven by the commitment to quality and a strong work ethic that propelled Japan to economic success in the post-world war II era. Japan went on to become the 2nd largest economy in the world after the United States. This was followed by the ‘lost decade’ when Japan’s economic bubble burst. Since then Japanese companies have been constantly redefining themselves in an ever-evolving world.

    At the same time, if we zoom out to the global stage across the past few decades – where the world was becoming smaller, closer and more global with every passing year, new companies (“startups”) were grabbing the limelight and opening their wings. These companies include the likes of Apple, Google, Amazon etc. which don’t require any introduction. Taking a closer look at the top 10 rankings by largest market capitalization between Japan and USA[1], one would immediately spot that some of the “new” companies that can be seen as torch-bearers of innovation actually became bigger than the conventionally large players such as auto manufacturers, financial institutions etc.

    Table 1: Top 10 rankings of the largest market cap companies in 1986 & 2016
    (*Companies in red font are 30 years old or less)

    The above table reaffirms a very clear message about the importance of innovation. Most corporations are built around a unique set of products or services. That’s why at a certain point, they reach a point of saturation, where their product line has been upgraded/extended to the maximum. The profit margins stop growing so dynamically. When they reach that moment (or are about to), they need to innovate to keep growing[2]. Harvard Business Review reports that since 2000, 52% of enterprises in the Fortune 500 “have either gone bankrupt, been acquired, or ceased to exist” due to digital transformation[3].

    In order to innovate, from a Corporate lens, the innovation can be simplistically be classified into two types:
    (1) Closed – E.g. Internal R&D, In-house innovation labs, Internal accelerators etc.
    (2) Open – E.g. Corporate VCs (CVCs), External accelerators, Innovation teams etc.

    In recent years, more and more Japanese companies have been actively promoting the idea of open innovation. With many Japanese companies operating beyond borders in search of new solutions, there are increasing opportunities for overseas companies as well[4]. The typical destinations for open innovation outside of Japan have been the USA, Europe, Israel, Singapore etc. This can be corroborated by a quick search of the destinations where Japanese CVCs mostly set their mandates. For e.g. Sony Innovation fund which has US$250m AUM has offices in US, EU, Israel, Japan and India[5].

    With this backdrop, the focus of this article is to draw attention to Australia’s startup ecosystem which sometimes gets overshadowed or under-appreciated amidst the global innovation ecosystems that many Japanese corporations turn towards for their open innovation initiatives.

    Australia’s startup ecosystem – stating the facts

    While to some, Australia is more popularly known for sandy beaches and ocean views, Australia’s startup ecosystem (with ~6,500 startups[6]) is promising with innovation across various sectors that is rapidly growing. A study by Startup Blink ranks Australia at 8th place globally and 2nd place within the APAC region for its startup ecosystem[7].

    Table 2: Startup Blink Global Ranking Index 2022 – Asia Pacific

    The above holistic scorings are based on the sub-scores measuring quantity score (including the number of startups, co-working spaces, accelerators, startup-related meetups, etc.), quality score (including traction of entities in all ecosystems, presence of strategic branches and R&D centers, presence of unicorns, exits, and pantheon companies, global startup events, number of startups backed by accelerators, etc.) and business environment score (including diversity index, internet freedom, R&D investment, number of patents per capita, top universities per location, etc.). Such rankings can help provide a good flavor of the relative prominence of Australia’s startup ecosystem in the region.

    When it comes to the sheer scale of startups, Australia has been performing well for its population size with 21 unicorns as of Oct’22 – many of which have been opening their wings on the global stage –

    • Pantheons include Canva, a website for design and publication that offers tools that non-designers can use, and Atlassian, a cloud-based enterprise collaboration suite solution that gives teams access to problem-tracking, development, and collaboration tools.
    • Some other famous unicorns include Fintech companies such as Airwallex, Judo Bank, blockchain based Immutable and HR-tech called Employment Hero to name a few.

    In terms of sector attractiveness from an investor’s perspective, Health, Fintech, and Energy are the top 3 industries that received funding in Australia in 2022. Health startups raised the most money in 2022 ($853 million), followed by Fintech ($839 million), and Energy ($404 million), according to Dealsroom.co. (see Figure 1)

    Figure 1: Australian startups’ fund raised by sector in 2022[8]

    The Australian innovation startup ecosystem has been growing and is further catalyzing. Australia venture capital Airtree, Blackbird and Square Peg raised a staggering amount of ~$2.5 billion in new funds in 2022 showing confidence to grow the Australian startup ecosystem further.

    Why should Japan consider Australia

    Japanese companies have been expanding overseas for decades – including Australia. Therefore, Australia is not ‘new’ for Japan but historically it is also true that Australia was largely being seen through the lens of conventional businesses (e.g. “digging the earth” etc.). This was in stark contrast to countries such as the USA that built a strong reputation for technology (e.g. Silicon Valley) during the same period and attracted Japanese corporates to explore innovation opportunities too. For example, many leading Japanese CVCs have strong activities in the USA while in an Australian context, the examples are far and few. This is because, for many Japanese corporations, Australia’s name and perception of innovation don’t come in the same breath as Silicon Valley, Singapore, Israel, etc.

    Unfortunately, these perceptions can’t evolve overnight but there are reasons why Japan should look more closely at Australia with a dual objective – (i) Scouting innovation to solve Japan’s challenges and (ii) New business creation opportunities for Japanese Corporates in Japan and beyond.

    Some of the various sectors in Australia that can be considered and are not limited to

    1. Clean Tech – Australia’s strategic location provides them with an opportunity to become a renewable energy superpower with the world’s largest rooftop solar penetration, sophisticated grid systems, strong winds, etc., giving them an edge in this field. Their unique location also led to the birth plethora of promising green startups that can help to tackle climate change which can be important for Japan due to their energy security needs as well as slow progression towards net-zero emissions.
    2. Smart City – Australia’s startups are shaping the future of smart cities. Companies within the private sector are innovating with technologies including video analytics and IoT, building a digital “bridge” to support traditional engineering demands in transport and utilities[9], etc. These innovations can help Japan strengthen its future of smart cities since Japan has a declining population and is particularly vulnerable to natural disasters due to its topography.
    3. Health Tech – Australia is home to many cloud technologies that are helping to accelerate research and innovation for complex healthcare issues – from mapping the brain, predicting seizures to improving rehabilitation for elderly patients, etc.[10] The sector is especially useful for given their aging society.
    4. Agriculture Tech – Agriculture is a critical part of the Australian economy, with the country’s agricultural, fisheries, and forestry sectors valued at $69 billion and growing[11].  Australia is home to numerous AgriTech startups in Australia who are providing livestock management software, developing sensor probes and software for soil moisture monitoring, using SaaS-enabled hardware and system for precision aquaculture, robotic packing solution for food supply chain, etc. These advancements can come in handy for Japan in view of Japan’s shortage of farm workforce while also ensuring that Japanese consumers’ high expectations for quality of food products are met.

    From a Japanese lens, apart from the facts stated above, some of the reasons why Japan should consider Australia more closely are: 

    1. Good test market – Australia can serve as a good test market for Japanese companies looking at foraying into USA and Europe. The developed world characteristics, technology adaption, regulatory aspects, high GDP/capita and diverse population are some of the reasons that Australia can not only provide a market ‘close to home’ but market feedback and learnings that can help tackle other western world markets more effectively.
    2. Strong bilateral relationship – Both Japan and Australia share a deep relationship that can act as a catalyst to exploring innovation collaborations more closely. The relationship has only gotten even stronger over the past couple of years as a result of developments in the global geopolitical landscape. There is currently more cooperation and government and industry collaboration than ever before in this closely connected partnership.
    3. Proactiveness of universities – Australian universities, which are one of the best in the world with 7 universities ranking in the top 100 world university rank 2023 act as an active stakeholder in the development of the innovation ecosystems that helps to create an entrepreneurial culture and build connections to improve funding and opportunities for startups.
    4. Other factors – There are other factors that contribute to Australia’s attractiveness that include (i) Stable economy, (ii) Government’s support for startups, (iii) Educated population & migration (brings talent), (iv) Time zone convenience etc.

    Examples of Australia-Japan collaborations

    The good news is that in recent years, Japanese Corporates have been getting relatively more active in the Australia-Japan innovation corridors. But don’t take our word for it – let us look at some examples that encompass a variety of ecosystem players, including startups, universities, and financial institutions / venture funds. These various collaborations can be in the form of business, technical or financial collaboration.

    1) Japanese Corporation and Australia Startups Collaboration

    Collaborations between Japanese enterprises and Australian startups are growing as Japanese organizations are becoming more receptive to “open innovation” with Australian companies. The spectrum of partnerships in these sectors includes energy, smart cities, mobility, etc. and examples include:

    Table 3: Examples of collaborations between Japanese corporation and Australia startups

    2) Japanese Corporations and Australia Universities Collaboration

    Japan has a great appreciation for the educational and scientific institutes of Australia and new relationships are increasingly being established between Australian universities and Japanese companies. Some examples of collaborations include:

    Table 4: Examples of collaboration between Japanese corporation and Australia Universities

    3) Japanese and Australia Financial Institutions / VCs Collaboration

    Japanese investors, both new and established, are increasingly trying to focus on the innovation prowess of Australia. Some examples include:

    Table 5: Examples of collaborations between Japanese and Australia Financial Institutions / VCs

    Collaboration between Australia and Japan can be seen in many different angles and different stakeholders are playing their part to increase awareness and provide support to foster cross-border innovation between both countries. For example, JETRO launched J-Bridge (Australia) in 2021, a platform for exploring various prospective partnerships between Japanese corporations and Australian startups that strives to create a bridge of innovation between the countries.

    In summary…

    To conclude, Australia is an exciting region to consider and has been overshadowed by other prominent startup ecosystems in the US and Europe, etc. However, the growing number of collaboration examples in Australia-Japan’s innovation corridors can potentially turn more Japanese Corporates’ attention to this innovation hub down under too – and if you have preconceived notions, you may well be in for a (pleasant) surprise!

    How can IGPI Australia help?

    IGPI is well networked with most Japanese mega corporations as well as Australian startups – be it Japan (HQ), ASEAN (RHQ in many cases) and Oceania offices and support them for a number of initiatives. If you are an Australian startup, we can assist you find the right potential partner for your market expansion plans beyond Australia. IGPI provides highly customized APAC business advisory to its diverse range of clients including but not limited to:

    • Open innovation roadmap
    • New business creation support
    • Market assessment for business opportunities
    • Strategic partner / capabilities search
    • Commercial negotiations support
    • Other custom hands-on support (in-market)

            


    [1] S&P Capital IQ, Diamond Company Ranking
    [2] Iterators, Corporate Innovation Guide: Problems, Solutions & Real Life Use Cases (2023)
    [3] Harvard Business Review, Digital Transformation Is Racing Ahead and No Industry Is Immune (2017)
    [4] JETRO, The current situation of open innovation in Japan: The points that overseas companies should bear in mind (2021)
    [5] Sony Innovation Fund, About Sony Innovation Fund (n.d.)
    [6] TechCouncil of Australia, Turning Australia into a regional tech hub, https://techcouncil.com.au/newsroom/turning-australia-into-a-regional-tech-hub/
    [7] StartupBlink – Global Startup Ecosystem Index 2022 (2022)
    [8] Dealroom.co, Update on Australia’s startup ecosystem in 2022 (2022)
    [9] Innovation Intelligence – The future of Australia’s smart cities (2022)
    [10] All Things Distributed, Is Australia the new epicenter for healthtech startups? (2023)
    [11] AgFunder News, Innovation hub AgriFutures growAG. plans to make Australia the agtech capital of the Southern Hemisphere (2022)
    [12] FuelCellWorks, LAVO and ITOCHU Corporation Collaboration to help industries achieve SDG (2022)
    [13] Hivery, Australian AI startup, HIVERY, partners with JR East Water Business to optimize vending machines in Japan (2020)
    [14] Powerledger, P2P renewable energy trading in Japan (2018)
    [15] Icetena, Construction of next gen surveillance system (2021)
    [16] Business News Australia, E-bike innovator Zoomo goes full throttle with extra $28m in Series B (2022)
    [17] Startupdaily, Suzuki drives $21 million raise for electric vehicle software startup Applied EV (2022)
    [18] NTT, University of Technology Sydney and NTT Group partner to promote smarter, safer and more secure cities (2021)
    [19] Herbert Smith Freehills, Japan-Australia Investment Report 2022: Decarbonisation (2022)
    [20] Ashurt, Landmark business alliance formed between Artesian and MUFG Bank (2023)
    [21] AFR, Japanese institutions turn their eyes towards Aussie tech start-ups (2021)


    About authors

    Mr. Rachit Khosla is the Country Manager of IGPI Australia. Rachit is a seasoned strategy consulting professional with over 14 years’ experience of leading and executing market entry and growth strategy (both organic and inorganic) and open innovation engagements for Fortune 500 businesses and large MNCs across Asia Pacific. He has advised clients in a diverse range of industries including automotive, fin-tech, industrial and manufacturing, med-tech & healthcare, smart cities, construction materials, travel, IT & telecommunications to name a few. Rachit was the former Country Manager and Director for YCP Solidiance (Japanese owned) and Founder and CEO of an online B2B marketplace startup for professional advisory services focused on Emerging Markets.


    Mr. Nicholas Quek is an Analyst in IGPI Singapore. Nicholas graduated from Singapore Management University with a Bachelor of Business Management, majoring in Finance. During his time in university, he gained internship experience at OCBC bank where he took on a compliance role responsible for AML. He was also a Teaching Assistant for Financial Markets and Investments, and a Research Assistant for Real Estate Investment Trusts (REITs). In his final year, Nicholas embarked on an experiential learning course where he formulated strategies to increase e-commerce sales for an MNC. He also analyzes and identifies innovative Australian companies in the space of carbon neutral, smart city (incl. energy SaaS), mobility, etc. to help foster collaboration with Japanese corporations in ecosystem-level engagements.

     About IGPI

    Industrial Growth Platform Inc. (IGPI) is a premier Japanese business consulting firm with presence and coverage across Asian markets. IGPI was established by former members of Industrial Revitalization Corporation of Japan (IRCJ) in 2007. IRCJ, a US $100 billion Japanese sovereign wealth fund, is known as one of the most successful turn-around fund supported by the Japanese government.
    IGPI has vast experience of supporting Fortune 500s, Govt. agencies, universities, SMEs and startups across Asia and beyond for their strategic business needs such as market entry and growth strategies, various aspects of M&A, innovation advisory, new business creation etc. IGPI is consciously an industry agnostic firm (work in 10+ industries) and this coupled with it making its own venture investments (30+ till date) adds to its uniqueness. IGPI has a JV with Japan Bank of International Cooperation (JBIC) – one of JV’s initiative is a VC fund in Europe (EUR 100mn fund) with participation from Honda, Panasonic and Omron.

    * This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

    Development progress of Iskandar Malaysia

    Iskandar Malaysia is the main southern development corridor in Johor, Malaysia. It is one of five priority regional development projects promoted by the Malaysian government since 2006. Iskandar Malaysia’s plan aims to develop the economy of the southern part of the state with a population of 3 million and a nominal GDP of RM120.4 billion by 2025. However, as of 2020, the population had only increased to 1.93 million while the nominal GDP had grown to 83,225 million, according to Iskandar Regional Development Authority (IRDA). [Refer to chart 1]

    (Chart 1: Key KPIs and Results of Iskandar Development)

    One of the reasons for the stagnation of growth is the impact from the coronavirus disease (COVID-19). The border closure as well as the inter-state movement control order have halted the flow of foreigners and Malaysians into the region, impacting industries including retail and tourism. The real estate market has also been hit hard by declining demand for luxury condominiums and land. However, since the restrictions have been lifted, the flow of people has recovered, signs of economic recovery have begun to appear, and progress has begun to be made in the plan.

    Johor’s major investment sectors

    The investment sector in Johor is divided into three sector categories, namely the primary sector (i.e. agricultural and plantation & commodities), the manufacturing sector (i.e. chemicals, electronics, etc.) and the service sector (i.e. information & communication, real estate, etc.).

    The top two investors in Iskandar Malaysia from 2006 to 2021 are China and Singapore, with inflows of RM54.9 billion and RM25.1 billion, respectively, followed by US and Japan, according to IRDA.

    Johor received RM70.6 billion worth of investments in 2022, the highest amount recorded in the past decade and the highest among all of the states in Malaysia in 2022. These investments are primarily from multinational companies seeking to diversify their operations to other countries as they adopt a China-plus-one strategy amid the trade war, according to the Johor’s State Investment, Trade and Consumer Affairs Committee chairman.

    The majority of the recent investments in Johor have been in the service industry, including technology-intensive projects like hyper-scale data centers (HDCs). The reason for this focus is attributed to Johor’s availability of land and utilities capacity, which makes it suitable for supporting the funding and infrastructure requirements of such projects. The state is a hot spot for large tech players with operations in Singapore to set up data centers in the Johor for a couple of reasons – lower construction cost for data centers, affordable access to large-capacity energy, wholesale high-speed data connections and their close proximity with Singapore to support their business, all without compromising the time lag in data transmission. As such, the state’s favorable conditions demonstrate the region’s potential for new business creation in Southeast Asia (SEA). With the right management consulting support and strategic planning, Johor can leverage these advantages to attract even more investments and foster new business growth in the area.

    The investments in Johor could also have a positive ripple effect that can help mitigate the issue of unsold residential properties due to an increase in employment opportunities. In April 2023, the Prime Minister announced that Malaysia received an investment return of RM170 billion from Chinese investors, witnessing the highest investment in history. Of China’s total commitment, an estimated RM80 billion will be invested for the petrochemical refinery in Pengerang, Johor. Further investment inflows in Johor are also likely to soar in 2023 as the state government is in active discussions with more companies involved in petrochemicals, pharmaceuticals and data centers to move their operations there.

    Brain drain and connectivity problem

    To fully capitalize on the potential for new business creation in SEA, Malaysia must address two key issues affecting the progress of further economic development in Johor, which are brain drain to Singapore and connectivity with Singapore.

    One key factor impeding growth in Johor is the outflow of talent to Singapore. In fact, a total of 1.13 million out of 1.86 million Malaysians who have migrated overseas are residing in Singapore as of 2022, according to the Malaysian Human Resources Minister. The demand for skilled labor will increase in tandem with the inflow of tech-intensive investments in Johor, thus the state government would need to address the issues of talent retention and attraction back into Malaysia, including nudging local industries to offer higher wages to entice Malaysians currently employed in Singapore.

    Secondly, making progress with the longstanding connectivity challenges in Singapore, especially in terms of traffic congestion at the Woodlands Causeway and Tuas Second Link (the two land crossings across the Straits of Johor connecting Singapore and Malaysia), is another key aspect that can aid Iskandar Malaysia’s growth. Massive traffic jams are norms at one of the busiest land borders in the world which could often make a usual 30-minute journey an agonizing 3 hours or even longer. Reducing congestion is a key priority for the state government since it would have a “multiplier effect” on investment, jobs and the economy.

    New Rapid Transit System (RTS) Link as a double-edged sword

    To improve connectivity, foster people-to-people ties and generate shared economic and social benefits between Johor, Malaysia and Singapore, the two governments are working on Johor Bahru – Singapore Rapid Transit System (RTS) Link. The RTS Link will cross the Straits of Johor via a 25m-high bridge from Woodlands North Station in Singapore to the Bukit Chagar Station in Johor Bahru. When commencing passenger service by end-2026, the RTS Link will be a standalone Light Rail Transit (LRT) System with the capacity to serve up to 10,000 commuters during peak periods, for every hour and in each direction, and it is anticipated to help lessen traffic congestion as well as the stress associated with cross-border travel.

    When fully operational, the faster and easier commute between the two countries will benefit the local economy in Johor. One industry expected to benefit from the RTS Link is real estate. During the height of the property boom in Iskandar Malaysia from 2010 to 2013, many Singaporeans bought residential properties in the hopes of flipping them for investment gains or even using them as a second home. The RTS Link will be seen as a major boost for these property owners, who can now expect a stress-free cross-border journey, as well as for new owners looking to find reasonable housing options in Johor and commute back and forth for work and study in Singapore. Other than the real estate industry, tourism, retail, education, medical industries in Johor are also expected to benefit from the RTS Link.

    While the RTS Link certainly benefits the local economy in Johor, the game-changing transport system will potentially accelerate the issue of brain drain to Singapore. There are reportedly over 300,000 Malaysians commuting daily for work in Singapore. Currently a large number of them travel by chartered bus or private motor vehicle but as the journey between the two countries is made more convenient, more Johoreans might look for employment in Singapore commuting via the RTS Link.

    There is a delicate line between increased connectivity to Singapore and brain drain, and Iskandar Malaysia will need to find the balance and tackle these issues in tandem. That being said, the state government, in collaboration with management consulting experts, should develop comprehensive strategies to maximize the benefits of the RTS Link while ensuring that Johor retains its skilled workforce and nurtures a conducive environment for new business creation in SEA.

    Media reports in the past referred to Johor as potentially the next Shenzhen of Malaysia and as a possible New Jersey to Singapore’s Manhattan. With a strong focus on innovation, strategic partnerships, emerging sectors, and talent development, Johor has the potential to establish itself as a leading hub for new business creation in SEA, enhancing its economic growth and integration with Singapore. And as connectivity is one of the key factors to economically integrate people in these cities for reasons including trade, investment, and tourism, we will pay close attention to the new RTS Link and its impact on future developments between Johor and Singapore.

    *This article is based on the lecture IGPI Singapore gave to the Japanese business community in Johor Bahru in April 2023. IGPI Singapore provides management consulting services to companies including new business development, talent acquisition and retention, and restructuring of offices, factories, and logistics facilities which appear to be urgent problems to tackle in companies based in Johor, Malaysia. As a premier management consulting firm, IGPI Singapore can help businesses identify lucrative opportunities and develop tailored strategies to enter Asian markets, make structural improvements and more. To find out more about us, browse through our insight articles or get in contact with us.


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    About the author

    Mr. Ryota Yamazaki is the Director of IGPI Singapore. Before joining IGPI, Ryota worked in Deloitte Consulting in Singapore, where he was a leader in the areas of Consumer Business and Supply Chain & Logistics in Southeast Asia. His areas of expertise are Strategy & Operations such as market entry, Route-to-Market (RTM) strategy, business due diligence, and PMI. He started his career with A.P. Moller-Maersk Group as a management trainee and also worked for Kurt Salmon, where he had vast project experiences especially in Supply Chain & Logistics for the retail and consumer goods clients. Ryota graduated from the Faculty of Economics at Keio University.

     About IGPI

    Industrial Growth Platform Inc. (IGPI) is a premier Japanese business consulting firm with presence and coverage across Asian markets. IGPI was established by former members of Industrial Revitalization Corporation of Japan (IRCJ) in 2007. IRCJ, a US $100 billion Japanese sovereign wealth fund, is known as one of the most successful turn-around fund supported by the Japanese government.
    IGPI has vast experience of supporting Fortune 500s, Govt. agencies, universities, SMEs and startups across Asia and beyond for their strategic business needs such as market entry and growth strategies, various aspects of M&A, innovation advisory, new business creation etc. IGPI is consciously an industry agnostic firm (work in 10+ industries) and this coupled with it making its own venture investments (30+ till date) adds to its uniqueness. IGPI has a JV with Japan Bank of International Cooperation (JBIC) – one of JV’s initiative is a VC fund in Europe (EUR 100mn fund) with participation from Honda, Panasonic and Omron.

    * This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.

    Increasing global attention is being paid towards CCUS technology

    The International Energy Agency’s Sustainable Development Scenario (SDS), with the premise that we will achieve the 2°C target in the Paris Agreement, assumes that CCUS will account for about 15% of emission reductions in 2070, and CCUS is considered an indispensable technology for achieving net zero emissions in the future (Figure 1). One reason for the emphasis on CCUS is that there are unique values in CCUS that are difficult to achieve it with other CO2 reduction methods. Specifically, according to the IEA, there are mainly four strategic values of CCUS:
    • Tackling emissions from existing energy assets
      • CCUS is one of the few technologies that can remove CO2 emissions from thermal power plants.
    • Solution for sectors with hard-to-abate emissions
      • The industrial sectors such as cement, iron and steel, chemicals, or long-distance transport are said to be the most difficult to reduce CO2 emissions due to the nature of the their processes. In this context, CCS is currently one of the most cost-effective options.
    • Platform for low-carbon hydrogen production
      • Hydrogen (green hydrogen) is needed to be produced by water electrolysis with electricity derived from renewable energy. Depending on the cost of renewable energy, blue hydrogen is considered cost-competitive for the time being.
    • Removing carbon from the atmosphere
      • In case emissions remain in sectors where CO2 reduction is difficult to achieve for zero emissions, they need to be compensated by CDR. Biomass power generation with CCS (BECCS: bio-energy and CCS) and DAC+CCS (DACCS) are positioned as important options as CDR technologies in the long term.²
    Each country aims to increase the number of CCS projects in the future due to the factors above. CCS projects in operation are 38 Mtpa in scale currently, but they are expected to reach to 650 Mtpa (around 17 times compared to present) by 2030 and 9,533 Mtpa (around 250 times compared to present) by 2070 (Figure 2). Most of the current CCS development projects in operation are mainly in Europe and the U.S., whereas in Southeast Asia region, there are no commercialized CCS projects that are in operation phase at present. Major reason for this situation is that the legal system related to CCS is still underdeveloped in Southeast Asia, while Europe and the U.S. have incentivized initiatives such as the Emission Trading System and Tax Credit (45Q). As a result, it is difficult for project developers to invest in PJ development because they have no prospect of its profitability at this point.  

    High potential demand and potential supply capacity of CCUS in ASEAN are gradually attracting more attentions from investors

    While the issues for the commercialization of CCS in Southeast Asia have been indicated above, the CCS potential in Southeast Asia, especially in Indonesia and Malaysia, is considered to be very high. Generally, the size of the storage potential is considered important when assessing the potential of each country for the development of CCS projects. As shown in the figure below, there are many countries in Southeast Asia that have huge storage potential (Figure 3). For example, in Indonesia, there are old oil fields and deep saline aquifers near Java where CO2 emission sources are concentrated. Also, there are depleted oil fields and a number of gas fields. Japanese government and companies have started to promote the development of CCS projects in Southeast Asia against this high potential. For example, in the Gundhi CCS Project in Indonesia, JGC HOLDINGS CORPORATION and Electric Power Development Co., Ltd. are collaborating with Pertamina and the Bandung Institute of Technology to develop the first large-scale CCS project in ASEAN, and the number of similar projects is expected to increase in the future.  

    Collaboration with the local governmental entities is the key to penetrate ASEAN

    Currently, most of the CCUS projects in Southeast Asia are in the prefeasibility or feasibility study stage and are just starting to explore the project developments in the area. By entering the early CCUS market, it is highly likely that the new entrants will be able to benefit from the expected future expansion of the market itself in the area. An analysis of actual CCS development projects in Southeast Asia reveals that most of them are joint demonstrations by state-owned O&G companies (Pertamina in Indonesia and Petronas in Malaysia) and non-local companies (Japanese trading companies, O&G companies, and European and U.S. O&G companies). This may be due to the fact that the cooperation of the local government is indispensable in securing reservoir sites and conducting field surveys for project development, and also because the capital cost of CCS is so large that some type of government subsidy is indispensable for improving profitability of the project. Therefore, relationships with state-owned O&G players are the key to the market entry in the region, and it may be necessary to secure government connections or partner with other companies that have connections with the government to enter the market.  

    Recently, IGPI Singapore has supported multiple clients with regards to CCUS Projects

    Against the backdrop of growing interest in CCUS as mentioned above, IGPI Singapore has been supporting multiple clients with their global CCUS market entry studies, and has extensive knowledge in this area. To find out more about how IGPI can provide Japanese consulting support for business in Singapore and the region, browse through our insight articles or get in contact with us.     **************************************************************************************************** [1] IEA (2020) [2] IEA (2020) [3] IEA (2022) [4] Global CCS Institute (2019) ****************************************************************************************************

    About the author

    Mr. Tatsushi Sasakura is a Senior Manager of IGPI Singapore. Tatsushi has worked in Mizuho Bank and Deloitte Tohmatsu Financial Advisory (DTFA) in Japan. At DTFA, he belonged to the Corporate Strategy team specializing in business strategy planning, M&A advisory, and business due diligence. He was also engaged in crisis management, supporting clients to tackle emergencies. He has profound experience in the energy, consumer, and financial industries. He covered a wide range of clients including Private Equity Funds and large-sized companies. Tatsushi graduated from Waseda University with a B.A. in International Political Science and Economy.      

    About IGPI

    Industrial Growth Platform Inc. (IGPI) is a premier Japanese business consulting firm with presence and coverage across Asian markets. IGPI was established by former members of Industrial Revitalization Corporation of Japan (IRCJ) in 2007. IRCJ, a US $100 billion Japanese sovereign wealth fund, is known as one of the most successful turn-around fund supported by the Japanese government. In 2017, IGPI collaborated with Japan Bank for International Cooperation (JBIC) to form JBIC IG, providing investment advisory services and supporting overseas investment. In 2019, JBIC along with BaltCap has jointly established Nordic Ninja, a €100 million venture capital fund to focus on deep tech sectors such as autonomous mobility, digital health, AR/VR/MR, artificial intelligence, robotics and IoT in the Nordic and Baltic region. In 2019, IGPI established IGPI Technology to focus in the area of science and technology. The company invests in technological ventures and provides hands-on management support. The company also provides business development support towards commercialization and monetization of technologies.   * This material is intended merely for reference purposes based on our experience and is not intended to be comprehensive and does not constitute as advice. Information contained in this material has been obtained from sources believed to be reliable, but IGPI does not represent or warrant the quality, completeness and accuracy of such information. All rights reserved by IGPI.