TOKYO – One of the lessons the coronavirus pandemic has highlighted is the need for contingency plans. Whether it’s over-reliance on a single country for crucial medical supplies, a sudden closure of borders and shipping routes, or an impromptu trade war, businesses need to be able to adapt quickly.
This hasn’t been one of Japan’s strong points, as it has remained mired in the tradition of red tape – and a lot of it, costing businesses precious time and hundreds of billions of yen.
Today, Japan and six other Asia-Pacific economies are moving closer to establishing a cross-border trade network that could potentially grant 5,000 companies online access to suppliers in the region at any time and reduce costs. headaches caused by supply chain disruptions.
In Japan, companies will connect to the network through TradeWaltz, a blockchain-based trade data sharing platform. There, businesses will be able to share digitized documents and office work involving commerce will be made paperless.
TradeWaltz will connect to peer systems established in the seven nations and territories. Test operations have been launched in Vietnam with companies in the Southeast Asian nation equipped with TradeWaltz technology.
The network is expected to later connect to public and private systems operated in Thailand, Singapore, Taiwan, Australia and New Zealand.
TradeWaltz launched a test last year with around 20 Japanese participants. The number is expected to climb to 450 Japanese companies by 2025. The entire network of the seven economies is expected to include 5,000 companies by the middle of the decade.
Companies using the cross-border platform will register goods, distribution routes and records of import and export transactions. Other participants will be able to browse through this data, streamlining the search for the right product.
In the event of an unforeseen supply disruption, a participating company can quickly seek out replacement sources. If imports of Chinese masks were to dry up, for example, a company can decide whether there are alternative suppliers available in real time.
If a seaway is blocked – like this year’s fiasco in the Suez Canal – participating companies can use the platform to easily explore alternative routes. In the past, companies spent a lot of time approaching other vendors on an individual basis.
The cross-border trade platform could potentially allow participants to source automotive components that are currently dependent on China. The other six economies to be connected to the grid account for nearly 20% of Japanese trade. This share could increase with the full implementation of the platform.
The fact that the network is digitizing trade documents should help revitalize trade for Japanese companies.
These transactions involve order forms and receipt of shipments, letters of credit from banks, and documents from insurance companies, logistics companies and customs offices.
Because Japan in particular had maintained the practice of using physical documents, office work had turned into a complicated affair. It was only last year that new legislation allowed businesses to store tax documents electronically.
Japanese companies spend 300 billion yen ($ 2.7 billion) a year to process trade documents, according to one estimate. An online system can reduce these expenses.
It takes 36 times longer to complete paperwork in Japan than to perform the same tasks in France or Italy, according to a World Bank study. TradeWaltz aims to truncate this time by up to 60%.
A joint venture of the same name will operate TradeWaltz. Seven Japanese companies have invested in the company, including NTT Data, Mitsubishi Corp., MUFG Bank and Tokio Marine & Nichido Fire Insurance.
The joint venture will collect user fees from the participating companies. The company is considering a merger with an American platform. China does not yet have a continent-wide e-commerce system, according to Mitsubishi, but collaboration will be on the table once a Chinese platform is developed.
It remains to be seen whether companies will join the expected number. Use of the system requires disclosure of transaction records and other internal data that some companies prefer to keep confidential. Cyber security will also be imperative.