Japan airport project: getting contracts will be tough for US firms

American and other foreign companies will be allowed to bid on 30 percent of a $6.5 billion airport to be built in Osaka Bay. This was the word from Yoshio Takeuchi, President of Kansai International Airport company (KIA), in a recent Monitor interview.

So far, he has not considered giving a fixed percentage of the orders to American, South Korean, Chinese, or any other foreign companies, he said.

The airport project has become an urgent symbol of American dissatisfaction with Japan's huge trade surplus, and some American companies have suggested that 20 percent of the work on the project be awarded to them.

In private, some Japanese construction firms doing well in the United States are said to have asked their American counterparts to settle for 10 percent. There have been hints that the two sides may compromise on a figure in between. This would enmesh American companies in the illegal but widespread Japanese practice of backroom deals -- dango. A KIA source said that Dr. Takeuchi would firmly oppose such a deal.

``In very broad terms,'' Takeuchi said,``the airport will cost 1 trillion yen [about $6.5 billion]. Seventy percent of that will be spent on making the island [on which the airport will be built]. That leaves 30 percent for the airport itself'' -- or about $2 billion.

Washington says US companies have been routinely frozen out of the Japanese construction market, despite the fact that Japanese construction companies did nearly $2 billion worth of business in the US last year.

KIA is under strong US pressure to allow American participation in the airport project. Early this month, nearly a hundred American businessmen attended a ``seminar'' in Osaka organized by KIA to explain bidding procedures and how they might hope to win orders.

In the interview, Takeuchi stressed that the 1,200 acres of land on which the airport is to be built will be reclaimed by the Japanese themselves. He has been consistent in this stand since the the question of foreign participation was first raised a couple years ago.

``KIA has a mandate to complete the airport by 1993,'' he said. ``To meet this deadline, we have to use folk who have been studying the soft, squishy mud of Osaka Bay for the past 10 years and who have had actual experience reclaiming land from this bay. I don't say that the Japanese are the only ones capable of doing this work . . . [but just] that we do have a timetable.''

It might still be possible for US companies to supply some of the equipment -- not to KIA but to companies that will be selling sand, gravel, and crushed rock for the island, Takeuchi said. Milwaukee-based Allis-Chalmers, for instance, wants to sell huge gyratory rock crushers to the quarries from which rock will be extracted.

Takeuchi touched on two practices in the Japanese construction industry that have made it nearly impossible for non-Japanese firms to do business here.

The first is dango -- construction companies getting together among themselves to decide who will bid on a particular project and how the work will be shared.

``Japan has 600,000 construction companies,'' Takeuchi said. ``They have about 6 million workers all told. . . . Quite a percentage of Japan's population depends on this industry for their livelihood. A big national company will work on national projects, and local companies will work on local projects,'' Takeuchi continued. ``That's been the practice, and it has helped to alleviate unemployment and keep Japanese society stable. The problem is how to fit a foreign company into this cozy picture.''

The second practice Takeuchi described is the hiring of subcontractors. If a non-Japanese company does land a contract, it must find workers to do the job. It is not allowed to bring in cheap labor from another country and must therefore rely on Japanese subcontractors.

Meanwhile, it is essential for Americans who wanted to compete in this market to set up branch offices here, cultivate clients, establish relations of trust, and assure potential customers that they are committed to the long haul.