The Journal The Authority on Global Business in Japan

The seventh-largest city in Japan, Kobe has a long history of global trade and was one of the first cities to open up to the West in the mid-19th century. Its many charms draw tourists from around the world—both to the city and the scenic areas around it.

Kobe was once an economic powerhouse. Within the Kansai region, it was dubbed Kobe Kabushiki Kaisha (or Joint-Stock Corporation City), partially in reference to the success of ambitious city projects undertaken from the 1970s to 1990s. Such projects included the creation of two artificial isles—Port Island and Rokko Island—which house harbor facilities, museums, and residential neighborhoods. From 1973 to 1978, Kobe was home to the world’s busiest container port.

But in recent decades, the city has faced significant challenges that have drastically affected its economic and social prospects. The Great Hanshin-Awaji Earthquake of 1995 killed some 4,600 people in Kobe, left more than one-fifth of the office buildings in the central business district unusable, destroyed road and rail bridges, and demolished 80 percent of the quays at the city’s port.

While the city has rebuilt and recovered, a return to the its economic heyday seems elusive. Although as of 2017 Kobe has the second-busiest container port in Japan and traffic from cruise ships is driving business to the dock, it has not reclaimed its status as a global port city—and doesn’t seem likely to do so in the near future.

Some of the seeds of Kobe’s economic decline were planted even before the earthquake, according to Steve Iwamura, co-chair of the External Affairs Committee at the American Chamber of Commerce in Japan (ACCJ) Kansai chapter and partner at the Deloitte Touche Tohmatsu LLC Osaka office. “Kobe’s economy was already losing momentum—for example, the Port of Kobe was already being challenged by competition from South Korea and other countries prior to the Hanshin quake. The quake itself was not the only reason for the subsequent economic decline of Kobe.”

Iwamura says Kobe’s long history of cosmopolitan culture and foreign investment was disrupted by market forces. “When I became head of the ACCJ-Kansai in 1996, six of the top 24 corporate taxpayers in Hyogo Prefecture were foreign companies. Some of these companies were pharma related, and later moved to Tokyo due to mergers spurred by industry consolidation. I think that Kobe did not see this coming and had to play catch-up.”

The city has had to confront other challenges as well. Since 2012, Kobe’s population has been decreasing, and the city is aging at a rapid pace. Another alarming demographic trend is that students who graduate from local universities are faced with a lackluster job market in the city. As a result, they end up moving to Tokyo.

These factors threaten to deprive Kobe of its dynamism, which, coupled with its international flair, are part of the city’s historical DNA. However, Kobe is confronting its challenges head on. The city has formulated an action plan known as the Kobe 2020 Vision, which aims to address the city’s most significant problems.

As the project’s website explains, Kobe 2020 Vision seeks to “improve the quality of the city and the quality of life, as well as to overcome the issue of population decline” through a plan based on six pillars:

  • Providing attractive jobs for young people
  • Improving the city’s culture, arts, and sports offerings to draw in young people
  • Creating a social system that enables the young generations to prioritize marriage, childbirth, raising children, and education
  • Building a promising environment for the next generation
  • Offering a comfortable lifestyle
  • Developing cooperation with surrounding municipalities and prefectures

Ken Fujioka, section manager in Kobe City’s Industry-Academia Collaboration Division, explained that there are a number of ways in which the city has been bringing these pillars to life. To encourage Kobe’s citizens to start their own businesses, two projects have been implemented.

The first is Urban Innovation Kobe, which tackles social issues by facilitating collaboration between high-tech, innovative startups and city officers who have an in-depth understanding of social and regional concerns. As part of the program—the first in Japan to facilitate collaboration between startups and city officials—public offices announce what kind of issues they have and publicly call for startups that can provide a solution. The selected companies then work with the city for four months to develop an app or system and conduct demonstration tests, receiving mento­ring throughout the process.

The other project has been developed in collaboration with the well-known Silicon Valley–based accelerator 500 Startups, which was welcomed to Kobe in 2016. The city partnered with the accelerator to launch 500 Kobe Accelerator, an entrepreneur training program that features mentoring by entrepreneurs who have experience working in Silicon Valley, lectures by a variety of industry experts, and opportunities for community building among startups. In 2018, there were 237 applicants and 22 teams participated in the program.

Fujioka explained that, along with the support for startups in a wide variety of fields, Kobe is putting its weight behind four key industries:

  • Aerospace
  • Medical, health, and welfare
  • Environment and energy
  • Agriculture and food

In general, the city provides support in the form of facility investments, product development, and sales expansion. For example, in the area of environment and energy, Kobe is working with Kawasaki Heavy Industries Ltd., Iwatani Corporation, and the Electric Power Development Co., Ltd.—commonly known as J-POWER—to develop transport supply chains for hydrogen generated from coal.

To address the issue of local graduates leaving Kobe to work in Tokyo, the Hyogo-Kobe University Consortium has established a local employment project. This program organizes events at which students can talk to local business owners in person and experience group discussions and job interviews in a realistic environment. There is also a scholarship program for Kobe University students who intend to start their own businesses in the city after graduation.

When it comes to employment figures, there has been some encouraging—if not dramatic—progress. In 2012, there were 719,200 people employed in Kobe, and the employment ratio, which compares the number of emplo­yed people with the number of people who are 15 years or older, was 53.5 percent. In 2017, there were 760,200 people employed and the employment ratio was 56.3 percent—an increase of 2.8 percent since 2012.

To address another of the Kobe 2020 Vision pillars, the city is making it easier for families to find childcare and for mothers to return to the workforce. To increase staffing at preschools, Kobe is offering new hires a ¥1.4 million bonus. And, in April 2017, the city opened a working parents support center designed to help mothers find jobs and get training that will help them return to work.

Finally, Fujioka explained that the city was looking to harmonize its efforts and initiatives with those of neighboring municipalities and the government of Hyogo Prefecture. Some of these efforts include setting up opportunities for prefecture–city cooperation, such as by co-relocating related organizations to improve the services that Kobe and Hyogo can offer citizens. As part of these initiatives, the Hyogo-Kobe Business Consulting Center was opened to conso­lidate consultation services for small and medium-sized enterprises (SMEs). The center makes it possible for businesses to receive guidance and suggestions about support schemes from Kobe City, Hyogo Prefecture, and the Kobe Chamber of Commerce.

Stephen Zurcher, ACCJ vice president–Kansai and a Kobe resident, is optimistic about the city’s ability to make itself an attractive place for younger Japanese people to live. “As a resident of Kobe, I know that the quality of life in the city is very high. You can find interesting things to do and places to eat—some quite remarkable. On that basis, I think if Kobe can create the infrastructure that supports young people and young families, then it can continue to thrive. Our apartment building on Port Island is now filled with young families, as our location is safe, there are parks close by, childcare is available—which we used—and there is a strong sense of community in the building.”

Assessing the pillars that support Kobe 2020 Vision, Iwamura thinks it is important to lead by example. “I think the best way for cities to increase their attractiveness is to implement strategic smart-city concepts which reflect their vision, and actually show a greater understanding of their employees, residents, and businesses. For example, I understand that Kobe is moving toward digitalizing medical records and other documents. This should increase the quality of patients’ experiences, make the operations of hospitals more efficient, and enable better care for tourists needing sudden medical attention during their visits to Japan. I think that, by starting with themselves first, cities will create credibility and a new culture of results-driven collaboration that both residents and companies will find attractive. If local government can lead the culture change of their city, residents and the private sector will follow.”

From his own experience, Zurcher feels that Kobe has an edge over Tokyo when it comes to lifestyle, but believes that creating jobs that will make new graduates want to stay is crucial. “Our family had a choice of living in Tokyo again or living in Kobe. We chose Kobe. Frankly, the quality of life is better in Kobe than in Tokyo. But there are more jobs in Tokyo. So, to keep our graduates here, we need to provide sufficient jobs that are equivalent in interest and benefits to the jobs available in other areas of Japan.”

One place where he sees an opportunity for new jobs is with innovative SMEs, which he believes can find success if they look overseas for customers. “In my opinion, you have to teach SMEs from the beginning to think beyond Japan for their markets. This is not easy to do, but if a startup can target customers on the larger stage their chances of success will improve.”

When it comes to supporting working mothers and members of the workforce with young families, MaryAnne Jorgensen, chair of the ACCJ–Kansai Women in Business Committee and director of MAJ Global, a provider of leadership training, believes that cities such as Kobe should be able to offer not just nursery schools and daycare, but also means of support that can help working families deal with matters that fall between the cracks.

“At the city level, I think cities can continue to build the range of services they offer to working families—not only daycare, but related services such as the family support system that is found in many municipalities,” she said. “For example, when both parents need to leave early for a business trip, what kind of childcare options are available in the hours before daycare opens? I remember scrambling at times like that.”

Iwamura also believes that Kobe has the opportunity to set standards in this difficult area of work–life balance. “Again, I think that Kobe must, itself, begin by leading the change with its own employees. It can ask its suppliers and service providers to change with them, and make childcare services and career training a cornerstone of their business attraction initiatives. I think the direction of these initiatives begins with listening directly to the needs of the people struggling with these issues, done in a practical manner by truly independent service providers, who will deliver research results with accuracy, no matter how inconvenient the issues may be to fix. Common recognition of the facts can lay the foundation for public–private collaboration.”

Lastly, though one of the pillars of Kobe 2020 Vision is developing cooperation between Kobe’s neighboring munici­palities and the prefectures beyond Hyogo, Iwamura believes that Kobe needs to look well beyond its own shores to truly put itself in a position to rebound. “Kansai is going to make up for lost time and grow again. I would like to see Kobe both grow with Kansai and re-energize its global business attraction and collaboration. Kobe has a fantastic cosmopolitan heritage. Projecting this cosmopolitanism overseas should be a major part of Kobe’s vision.”

Alec Jordan is a staff writer at Custom Media for The ACCJ Journal.
Kobe has a fantastic cosmopolitan heritage. Projecting this cosmopolitanism overseas should be a major part of Kobe’s vision.