TT-750 -- Anti-corruption Challenges in Asia, e-biz news from Japan

An Insider's comments on Japan's high tech business world
* * * * * * * * * T E R R I E 'S T A K E * * * * * * *
A weekly roundup of news & information from Terrie Lloyd.
(http://www.terrie.com)

General Edition Sunday, Mar 30, 2014, Issue No. 750

+++ INDEX

- What's New -- Anti-corruption challenges in Asia
- News -- Ring-ring: "In-bound missile on its way..."
- Web Content/Tech Job Vacancies -- Sales Manager-cum-Country Manager
- Upcoming Events
- Corrections/Feedback
- Travel Picks -- Cat cafe in Tokyo, Killer sword techniques in Fukui
- News Credits

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+++ WHAT'S NEW

Interesting case going on in Vietnam at present. It involves the
bribery of at least 4 and possibly as many as 14 Vietnam Railways
Corporation (VRC) officials by a Japanese contracting firm called JTC.
The case is interesting because it involves Japanese Overseas
Development Aid (ODA) and JTC has been involved in at least four other
ODA-funded projects, so this could be the tip of a rather large
problem. Further, with over 14 projects under its belt since 1993, JTC
is no newbie to the Vietnam public works scene, and therefore for them
to get caught like this probably means they thought it was business as
usual -- you have to bribe to get contracts in Vietnam.

Well that's the consensus anyway, but given the seriousness with which
this case is being treated by the authorities, despite the relatively
small amount of money involved (JPY80m or so), it seems that the
leadership in both Vietnam and Japan have decided that things must
change. With the flood of Japanese ODA money going to the region, and
Vietnam in particular, the temptation for public officials to ask for
some of it must be huge. Out of the US$1.3bn in ODA grants and loans
aid (outstanding) to Asia in 2011, most of it, about US$1bn, went to
Vietnam. The authorities both in Japan and in Vietnam are making this
a landmark case, and cooperation by the Japanese side is being headed
by the Japanese Ambassador in Vietnam personally, while for the
Vietnamese side it is by the Transport Minister.

This case is not to say that Japanese companies are corrupt by nature,
although they certainly were until the mid-70's. After the
high-profile bribery scandals of the 70's (Lockheed and PM Tanaka) and
80's (Recruit's Ezoe), Japan has made a lot of progress in
anti-corruption, especially over the last 20 years. According to NPO
Transparency International, in its 2011 Bribe Payers index
(http://bpi.transparency.org/bpi2011/results/), companies from Japan
are the fourth LEAST likely group to pay bribes to get business. This
puts Japan behind Holland, Switzerland, and Belgium, and ahead of
Australia and Canada. The USA was in tenth place.

[Continued below...]

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---------------------------------------------------------------

[...Article continues]

Unfortunately, the reality of doing business in emerging economies is
having to deal with government officials asking for under-the-table
payments and it's a habit that is hard to break, especially when you
have to compete against the Chinese and South Koreans and their
proxies. We imagine that fierce competition makes it difficult to win
business when your competitors have less scruples or are working
through locals with little concern about the corruption laws in
far-off USA. Japan's trading companies in particular, have a hard time
of it, and one company has now been labeled a repeat transgressor by
the U.S. authorities -- trading giant Marubeni.

Marubeni was found guilty recently of breaching the USA's Foreign
Corrupt Practices Act (FCPA) over a power plant project in
Indonesia. Marubeni and France's Alstom apparently retained two
consultants to pay US$350k to three Indonesian officials, one of whom
was a Member of Parliament. After being found out, Marubeni was fined
US$88m. Unfortunately for them, this case came not so long after a
similar fine for bribery in Nigeria, and so a law firm following the
case said that there were two major reasons the DOJ came down so hard
on the Japanese trader: i) the company acted guiltily, by not
contesting the prosecution, and ii) Marubeni is a repeat offender and
obviously doesn't have an effective FCPA compliance program.

What about their partner in crime, Alstrom? Well there are rumors that
Alstom, which did not come clean, is going to face a blockbuster fine
when the DOJ finally takes them to court.

You may ask why the U.S. DOJ is even involved in policing the actions
of a Japanese trading company in Indonesia. Perhaps it is because
although the U.S. has prosecuted a number of corruption cases in the
last couple of years, the Japanese government has actioned only two,
and the penalties were essentially a slap on the wrist. So perhaps the
Americans are sending a message to their Japanese counterparts that
it's time for them to tighten up. If so, then the current high-level
Vietnamese investigation into the JTC case is understandable. On the
other hand, one could also say cynically that it's a case of the
Americans expanding their sphere of influence, and thus fines revenue,
by enmeshing any company that is remotely related to U.S. interests --
much the same as they are doing with FATCA. Of course bribery is
wrong, but is the act of bribing worth a JPY9bn fine? It's hard to
say.

Whatever the morals of the case, Marubeni, and indeed most Japanese
exporters are now having to accept that one of the costs of being a
global citizen is in having to comply with U.S. laws such as FCPA. So
what is an "effective" compliance program that will satisfy the U.S.
authorities and reduce the likelihood of more fines in the future?
This is an important question, because as a 2012 Kroll report implies,
probably less than 60% of Japanese multinationals (and Asian companies
in general) have an FCPA compliance program at present, let alone an
effective one. Here is the prescription that the DOJ set for Marubeni

1. High level commitment by Marubeni's directors and senior management
to comply in the future with FCPA rules.
2. Visible policies and procedures.
3. Creation of a periodic risk assessment program that is relevant to
Marubeni's situation, i.e., foreign bribery risks.
4. The policies and procedures must apply equally to all directors
officers, and employees, as well as agents.
5. Comprehensive coverage of all at-risk actions, including gifts,
hospitality, customer travel, political contributions, charitable
donations, etc.
6. Financial and Accounting systems that provide internal controls
over the use of questionable expenses.
7. Appointment of an empowered and adequately resourced senior
executive who oversees the compliance activities, and who reports
directly to the board.
8. A minimum of annual reviews and updates of policies and procedures,
comparing with best practice globally.
9. Thorough implementation of FCPA rules, through periodic training,
certifications, and resources capable of consulting and advice.
10. Establishing and maintaining an effective Whistleblower program,
including a commitment to follow up on information coming from such
people.
11. Enforcing FCPA rules and disciplining employees who breach them.
12. Ensuring there is adequate risk-based due diligence before M&A.
13. Proper screening and management of third party consultants working
on company's behalf.
14. Periodic monitoring and testing of the FCPA compliance regime, to
ensure that it continues to evolve and meet global best practice.

Yup, there is a lot of heavy lifting in this list that goes right
against the grain of Japanese firms. Items that catch the eye include
the need to encourage whistleblowers, offering equal treatment of
managers and employees alike, and putting in tracking systems -- all
of which are "soft" skills that Japanese firms have until now found
hard to do. We think that the only way to get full compliance with
FCPA rules is for METI to start some really solid lobbying of Japan's
top managers to ensure that they adopt suitable systems and procedures
in a top-down approach. METI should also start bringing in foreign
best practice and IT consultants to help firms create the solutions
needed -- before another Marubeni situation occurs.

...The information janitors/

***------------------------****-------------------------***

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***------------------------****-------------------------***

+++ NEWS

- Death row inmate freed after 48 years
- Softbank shows how to do window dressing legally
- Ring-ring: "In-bound missile on its way..."
- Heat-resistant Li-ion batteries on the way
- "McDonald-fying" Benesse

=> Death row inmate freed after 48 years

An Amnesty International statement summed up the recent release of
death row inmate Iwao Hakamada, saying, "The Japanese authorities
should be ashamed of the barbaric treatment Hakamada has received."
Hakamada was released from prison after serving 48 years, the longest
incarceration by a death row inmate in the world. He was released
after his sister and lawyers managed to get a court review of his case
and presented fresh DNA evidence that shows blood found at the scene
of the crime in 1966 was not from Hakamada. The Defense say that
Hakamada's confession was coerced after 20 days of interrogation...
***Ed: Yet one more reason why Japan should suspend the death
penalty...** (Source: TT commentary from smh.com.au, Mar 28, 2014)

http://bit.ly/1hmIIX3

=> Softbank shows how to do window dressing legally

Window dressing, the act of doctoring one's financials with in-house
or fake transactions to make the company look more financially healthy
than it really is, is illegal. Horie of Livedoor Holdings and Tsutsumi
of Seibu both learned this the hard way. Interesting, then to see
Softbank do pretty much the same thing, but legally, in its recent
transaction with Yahoo Japan. It is common knowledge that eAccess was
in a mess when Masayoshi Son bought it for JPY180bn in 2012. Now Son
has pushed those assets on to Yahoo Japan for JPY324bn, creating a
nice little profit of JPY144bn (about US$1.5bn). Trouble is, since
Softbank is the largest single shareholder of Yahoo Japan, this
transaction is definitely not being done at arm's length. Further,
Yahoo Japan doesn't need the eAccess business, doing perfectly well in
the digital space. ***Ed: We'd be surprised if some Yahoo Japan
shareholders didn't decide to take this transaction to court. It's a
clear conflict of interest and if Son is not careful he could be
starting a serious fire in his own back yard. As it is, Yahoo Japan's
market cap fell by JPY175bn on Friday, more than the amount of profit
that Softbank will book because of the transaction. We guess that Son
is hoping shareholders have short memories... and lots of patience for
such shenanigans.** (Source: TT commentary from bloomberg.com, Mar 28,
2014)

http://bloom.bg/Qt6pnb

=> Ring-ring: "In-bound missile on its way..."

It is surely a sign of the times when the Japanese national earthquake
cell phone warning system is upgraded to include alerts of incoming
missiles...! Sounds like an April Fools prank, but apparently it's
true. Next Tuesday (April 1st) the Fire and Disaster Management Agency
(FDMA) will include missile alerts in its line-up of warnings to be
sent out to cell phone users. Presumably the warnings are related to
North Korea's recent activity with missile launches. ***Ed: Actually,
when we first saw this news item and the date the service was supposed
to start, we thought it was an early April Fool's hoax. However, if
you go to the FDMA website and to page 2 of this following PDF
document, sure enough, you can see a mention of missiles and a cute
little image of an incoming missile on their system diagram...
http://bit.ly/1f9fryq. (Source: TT commentary from theverge.com, Mar
28, 2014)

http://bit.ly/1ocFquO

=> Heat-resistant Li-ion batteries on the way

One of the biggest obstacles to the wider adoption of Lithium-ion
battery technology in automobiles and other consumer applications is
their tendency to catch fire when they overheat. If the reason for the
overheating is a short-circuit, there isn't much you can do to stop
it, other than including cut-out electronics in every cell pack.
However, if the problem is environmental overheating, such as under
car bonnets on a hot summer day, then manufacturers would like to have
a fix. Currently Li-ion batteries are reliable up to about 45 degrees
and above that need to be cooled to stop performance deterioration and
possible cell ignition. The need for cooling reduces the effective
power available from a Li-ion battery by about 30%, so many companies
are working on getting heat-resistance up to at least 65 degrees.
Among the recent developments are a new electrolyte from Daikin (the
air conditioning people), and new electrodes and separators from
Nippon Kodoshi. Interestingly, the Nippon Kodoshi technology uses
finely processed plant fibers instead of conventional resins to create
the separation film. The company says the plant fibers are more heat
stable. ***Ed: Yet another example of Japanese processing technology
being applied to natural materials rather than just cooking up more
complex chemistry.** (Source: TT commentary from asia.nikkei.com, Mar
28, 2014)

http://s.nikkei.com/1jliOnr

=> "McDonald-fying" Benesse

Very interesting senior appointment this week, in the selection of
Eiko Harada, Chairman of McDonald's Holdings, as the incoming Chairman
and President of Benesse Holdings. Harada is noted for his largely
successful helmsmanship of McDonald's in Japan, and is a strong
operations and marketing guy. Benesse has fallen on hard times of
late, largely due to "inbreeding" of its management layer and aging of
its target consumers, and it needs some outside blood to turn its
potentially lucrative operations around. The company is still the
largest private provider of after-school education to Japan's school
kids, as well as being in the call center and nursing care businesses.
Harada is just 65, young by Japanese standards, and is expected to
take up his new role after election at Benesse's June AGM. (Source: TT
commentary from the-japan-news.com, Mar 28, 2014)

http://bit.ly/1jliSmY

NOTE: Broken links
Some online news sources remove their articles after just a few days
of posting them, thus breaking our links -- we apologize for the
inconvenience.

***------------------------****-------------------------***

+++ WEB CONTENT/TECH VACANCIES

=> Are you in web content, sales, or engineering? If so, this section
is for you.

** HIGHLIGHTED POSITION

- Web marketing/technology Sales Manager-cum-Country Manager position

If you are working in a web marketing or web technology company, and
have a strong sales record and excellent Japanese and English (this is
compulsory), we have a client looking for a person to manage their
Japan start-up operation and who on showing reasonable performance
will become the country manager of a team of professionals here.
Unlike most start-ups entering Japan, this one already has clients and
is winning recognition in the market for their technology. The
position requires a strong knowledge of who the main market players
are, and thus a strong personal network, and if not a native Japanese
speaker, then you will need to demonstrate a strong track record of
previous successful appointments. This is not a Country Manager role
right out of the box, and so a flexible, sales-oriented personality is
essential. Salary is JPY10m base and JPY3-4m on achievement of very
reasonable sales targets. Please send your resume to
info@japaninc.com.

** OTHER MEDIA POSITIONS VACANT

- Bilingual account manager for major tourism portal
(www.japantourist.jp), JPY3M - JPY5M
- Bilingual sales trainee for web media properties, JPY2.5M-JPY3M +
10% commission
- Senior experienced PHP Zend software developer, 5 years experience,
JPY3.5M - JPY5M

Interested individuals may e-mail resumes to: jobs@metroworks.co.jp.

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***------------------------****-------------------------***

+++ UPCOMING EVENTS/ANNOUNCEMENTS

------------------ ICA Event - April 17th -----------------

Speaker: James Santagata, Founder and Managing Director of Career
OverDrive! and SiliconEdge.
Title: "Sick & Tired of Resume-Collecting Recruiters? Fire Your
Recruiter & Take Control"

Details: Complete event details at http://www.icajapan.jp/

Date: Thursday, April 17th, 2014
Time: 6:30 Doors open, Buffet Dinner included and cash bar
Cost: 4,000 yen (members), 6,000 yen (non-members) Open to all. No
sign ups at the door!!!!!!!
RSVP: By 4pm on Friday 11th April 2014. Venue is The Foreign
Correspondents' Club of Japan.

http://www.fccj.or.jp/about/access.html
-----------------------------------------------------------

-------- Business Start-up Seminar by Terrie Lloyd --------

Have you ever thought about setting up your own company in Japan? Or,
are you already running one and wondering how to move up to the next
level?

Local Australian/Kiwi entrepreneur Terrie Lloyd, is running a seminar
for people who want to form their own companies, on May 10th, 2014.
Terrie has established 17 companies in Japan over the last 30 years,
and has a lot of experience to share about how to structure and run
your business when first starting up.

Details: http://www.japaninc.com/entrepreneur_handbook_seminar
***********************************************************

***------------------------****-------------------------***

+++ CORRECTIONS/FEEDBACK

=> No corrections or feedback this week.

***------------------------****-------------------------***

+++ TRAVEL DESTINATIONS PICKS

=> Nekorobi: Best Cat Cafe in Tokyo
Relax at this Ikebukuro cat cafe

Hesitation will be a familiar feeling for anyone venturing into a cat
cafe for the first time -- do these places actually exist? Is this
actually normal? Curiosity may have hindered the fortunes of one
proverbial cat, but you would do well to let your curiosity guide you
to Nekorobi, a relaxing Ikebukuro getaway for cat lovers and non-cat
lovers alike.

Curious? Venture up to the third floor where this cafe is based and
there's likely no escape anyway! The cats will quickly notice you
through the double glass doors, pondering who their new visitor is.
Some may even be asleep on the slippers stand as you enter. Yes,
slippers. Just like at any ryokan or onsen, you'll need to switch to
approved footwear, not to mention abide by a number of quirky, but
logical, rules. This preliminary ritual involves washing/disinfecting
your hands and putting away your belongings and shoes in one of the
lockers (after all, you wouldn't want to walk out with a Scottish Fold
hiding in your bag).

Then, the cat cafe experience begins proper....

http://bit.ly/1jL8wj8

=> Fukui: Kojiro Falls
The place Swordsman Kojiro hatched out Swallow Counter

Did you know that Sasaki Kojiro, the famous Japanese swordsman who
dueled against Miyamoto Musashi on Ganryu-jima (Ganryu island), gave
birth to his well-known lethal technique 'Swallow Counter' here in
Fukui? This is the location of a famous historical ruin called,
'Ichijodani Asakura', and 3 km ahead toward the forest from the ruin
is Ichijo Falls, aka, 'Kojiro Falls'. It's said that Kojiro came up
with his fighting ideas here. To get there you can either walk or
drive. For those of you who don't have a car or might not have the
passion to walk 40 to 50 min., here are some photos to give you an
idea of the place... and to entice you to go!

http://bit.ly/1lw4rPI

***------------------------****-------------------------***

***********************************************************
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+++ ABOUT US

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