Since 2016, Mongolia has been able to export 5,700 kinds of goods to Japan, while Japan can supply 9,300 kinds of products to Mongolia without taxes under the Economic Partnership Agreement (EPA).
Professor Koji Tomita, a teacher of the Japan University of Economics, gave an interview to our magazine to talk about some suggestions for Mongolian businessmen to get more benefits from the EPA and explain the challenges they might face. Having abundant job experience in management, he has worked as an expert on export and sales affairs at a North American branch of Panasonic, as an international management adviser to Panasonic Excel International Co., Ltd and as an adviser to the Japan External Trade Organization’s (JETRO) branch in Osaka.
- Over a year passed since Mongolia and Japan established the EPA. I was informed that you had visited Mongolia on the second year in order to give some advice to Mongolian businessmen on how to benefit from the EPA. First of all, what is your view about reasons of the EPA establishment and its purpose?
- Key purposes of the EPA are to increase the trade between Mongolia and Japan and to attract investments. In order to ensure these goals, the two countries agreed to exempt some categories of goods from taxes and a legal landscape has been formed for it. This document will augment the bilateral trade and investments.
- Japan has established economic partnership agreements with 15 countries. What are the differences with the Mongolia EPA?
- Mongolia has vast mineral resources, while Japan is not rich of natural minerals, yet it requires big amount of raw materials. Thus, I assume Mongolia could be a long-time partner of mineral resources with Japan, and there is need for Mongolia to take investments from Japan. That’s why the EPA was established.
- Since the EPA establishment, some 20 companies have received over 9,000 certificate of origin, and exported products to Japan. About 30 percent of the exported products were cashmere goods, and 10 percent--were frozen horse offal. What advice would you give to Mongolian businessmen in order to augment the kinds of exporting goods?
- I think Mongolian companies are exporting products that might succeed at the Japanese market. This is a natural thing. On the other side, it is a chance for Japanese consumers to buy imported goods from Mongolia with cheaper price. The kinds of products will increase further.
- We still have not seen any growth in the bilateral trade since the EPA establishment almost two years ago. What is your opinion about it?
- The EPA is the very first trade agreement signed between our countries. In the beginning, any countries face challenges when they established contracts. The most important thing is that businesspeople and companies need to learn clauses of the agreement, methods of taking the certificate of origin and standard and guarantee labels and documentation. I observed Mongolian businessmen were usually overwhelmed by such a long list of the goods included in the tax exemption. Due to lack of understanding, it might be confusing to them, but every country faces such problems. Once they overcome the challenge, the EPA will start to produce its benefits.
- How long time will it take to fulfill the agreement requirements and enjoy the benefits of the EPA?
- First EPAs of Japan were established with Mexico and Malaysia. These countries did not have any benefit from the agreement in first three years. There are also some challenges. A company of any country must set up a partnership with a Japanese company in order to penetrate into the market. It is impossible for them to enter the Japanese market independently or without a partner. Those companies importing goods without tax can succeed in sales at the Japanese market when the price is the lowest possible level. It seems there is no profit to the export companies in the beginning, or they tend to suspiciously think that only Japanese companies can make profits, buying low-price goods imported without tax. However, it is vital for them to get their products recognized at the Japanese market. This is long time strategy.
- In your opinion, what kind of products should Mongolian companies sell at the Japanese market? What criteria imposed from the Japanese side?
- It is important to learn a population, a market and their preferences in order to sell goods in a country’s market. Products on the sales market of Mongolia apparently could not be sold directly in Japan. There are a lot of things to learn the Japanese market and consumers’ interests, their favorite colors.
- As you are Japanese, what advice would you give us? For example, what things do Japanese people mostly like?
- Mongolia has beautiful natural landscapes, and Mongolians consume ecologically-fresh products. For Japanese people, health-beneficial products are highly demanded. Thus, naturally-fresh products with fewer chemicals could earn profit from Japan.
- Last question. What advice would you give to Mongolian businessmen and governmental authorities so as to make the EPA more profitable?
- Making the first step is always the most difficult thing. Once the documentation is solved, it will become easier and beneficial. So, Mongolians should start just now. Today, Mongolia established the EPA with Japan, but I am confident it could continue with China, Russia or USA. So, the EPA with Japan will definitely become a precious experience.
In Japan, when such agreement is established with a county, the national chamber of commerce and industry releases a textbook for the agreement and conducts workshops. As such, the Mongolian National Chamber of Commerce and Industry has an important role in realization of the EPA.
- Thank you for the interview.
Source: Invest Pro Mongolia #1 (2018)