COMPETITIVE CITIES FOR JOBS AND GROWTH CASE STUDY KOBE CREATIVE RECONSTRUCTION COMPETITIVE CITIES KNOWLEDGE BASE TOKYO DEVELOPMENT LEARNING CENTER March 2018 © 2018 The World Bank Group 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org All rights reserved. This volume is a product of the staff of the World Bank Group. The World Bank Group refers to the mem- ber institutions of the World Bank Group: The World Bank (International Bank for Reconstruction and Development); International Finance Corporation (IFC); and Multilateral Investment Guarantee Agency (MIGA), which are separate and distinct legal entities each organized under its respective Articles of Agreement. We encourage use for educational and non-commercial purposes. The findings, interpretations, and conclusions expressed in this volume do not necessarily reflect the views of the Directors or Executive Directors of the respective institutions of the World Bank Group or the governments they represent. The World Bank Group does not guarantee the accuracy of the data included in this work. Rights and Permissions This work is product of the staff of the World bank with external contributions. The findings, interpre- tations, and conclusions expressed in this work do not necessarily reflect the views of the World Bank, its Board of Executive Directors, or the governments they represent. Nothing herein shall constitute or be considered to be a limitation upon or waive of the privileges and immunities of the World Bank, all of which are specifically reserved. Contact: World Bank Group Social, Urban, Rural and Resilience Global Practice Tokyo Development Learning Center (TDLC) Program Fukoku Seimei Bldg. 10F, 2-2-2 Uchisaiwai-cho, Chiyoda-ku, Tokyo 100-0011 Japan Phone: +81(3)3597-1333 Fax: +81(3)3597-1311 Web: http://www.jointokyo.org About Tokyo Development Learning Center (TDLC) The Tokyo Development Learning Center (TDLC) program is a partnership of Japan and the World Bank. TDLC supports and facilitates strategic WBG and client country collaboration with select Japa- nese cities, agencies and partners for joint research, knowledge exchange, capacity building and other activities that develop opportunities to link Japanese and global expertise with specific project-level engagements in developing countries to maximize development impact. 2 BACKGROUND AND ACKNOWLEDGEMENTS T his research was prepared by the Tokyo Development Learning Center (TDLC) under the auspices of the Social, Urban, Rural, and Resilience Global of the World Bank Group. Its objective is to create a knowledge base on what makes cities competitive, understand job creation at the city level, and capture the unique development experience of Japan for broad dissemination to development practitioners, government officials, academia and the private sector. The team would like to gratefully acknowledge the Government of Japan and its continued support of the Tokyo Develop­ment Learning Center (TDLC) program. The research was led jointly by Daniel Levine and Megha Mukim. The research team was com- posed of Luke Jordan, Haruka Imoto, Juni Zhu, and Nozomi Murakami. The team gratefully acknowledges the peer reviews and inputs from the following World Bank Group colleagues: Yuko Okazawa, Peter Ellis, Austin Kilroy, Stefano Negri and Jon Kher Kaow. The team is especially grateful for feedback and inputs from Kobe City officials, the Kobe Institute for Urban Research (KIUR) and Kobe based private companies. © 2017 e World Bank Group 1818 H Street NW Washington, DC 20433 Telephone: 202-473-1000 Internet: www. worldbank.org All rights reserved. is volume is a product of the sta of the World Bank Group. e World Bank Group refers to the member institutions of the World Bank Group: e World Bank (International Bank for Reconstruction and Development); International Finance Corporation (IFC); and Multilater- al Investment Guarantee Agency (MIGA), which are separate and distinct legal entities each organized under its respective Articles of Agreement. We encourage use for educational and non- commercial purposes. e ndings, interpretations, and conclusions expressed in this volume do not necessarily re ect the views of the Directors or Executive Directors of the respective institutions of the World Bank Group or the governments they represent. e World Bank Group does not guaran- tee the accuracy of the data included in this work. Rights and Permissions is work is product of the sta of the World bank with external contributions. e ndings, interpretations, and conclusions expressed in this work do not necessarily re ect the views of the World Bank, its Board of Executive Directors, or the governments they represent. Nothing herein shall constitute or be considered to be a limitation upon or waive of the privileges and immunities of the World Bank, all of which are speci cally reserved. 3 4 TABLE OF CONTENTS Executive summary  6 Before the Quake: 1865-1995  9 A spirit of seeking new challenges  9 Repeated redevelopment, the city as a “public developer”  9 The Earthquake and its Aftermath: 1995-  13 Vast damage is met by mobilizing a response, more than directing a response  13 Dealing with land markets and residents during reconstruction  15 From creativity to austerity, and the “80% recovery”  18 The Biomedical Cluster: 1995-  21 Multiple processes converge  21 Institutional foundations and anchor tenants  22 Companies have crowded in, but two big questions remain  25 Risks, Definite and Uncertain: 2017-  27 A demographic crisis  27 A combination of enduring strengths  28 Conclusion  31 5 EXECUTIVE SUMMARY K obe’s modern history started with the opening of Ja- Kobe’s catalytic crisis arrived in the early morning of January pan in 1865-70. Built between the mountains and the 17, 1995, with the Great Hanshin earthquake. The city was sea, by the last decades of the 19th century Kobe had struck by one of the largest earthquakes on record, which established a reputation and self-image as a place of “firsts”. It killed 4,600 Kobe residents, displaced hundreds of thousands was, with Yokohama, one of the first cities in Japan to build of people and caused an estimated $100 billion in damage. modern public goods, such as suburban commuter railways The city’s rapid response moved in three phases. In the first and first gas then electric street lights. It was an early center days and weeks, it triggered and then put to work pre-exist- of heavy industry, and had an early consumer culture, noted ing instruments—regulations drafting public servants as re- for its jazz and fashion. lief workers, or authorizing national officials to deploy to the city and make decisions with local counterparts on the spot. After World War II, Kobe’s recovery was rapid. Some of its A council of executives met twice-daily to make decisions. A previously dominant companies returned to growth and then “headquarters” was supported by a secretariat formed around rapidly moved up the value chain, as Japan nationally pur- the pre-existing disaster recovery bureau, complemented by sued an industrial policy focused on high-quality materials team-members from line departments. Only decisions that and capital goods. For example, Kawasaki Heavy Industries, could not be solved by those in the field were referred to the which had produced aircraft before the War, produced Japan’s secretariat and council—the latter’s role being less to micro- first industrial robot after it, and then entered consumer-fac- manage than to mobilize. ing industries with the development of Kawasaki Motorcy- cles. Within two to three months, much of the city had been able to recover and return to a level of normal daily activi- In the same decades, the shoe industry grew rapidly. The ty, through the tremendous recovery efforts. The city then city’s Nagata district became the center of shoe production pursued a course of “creative reconstruction”. It sought to use in Japan. It was in Kobe that Kihachiro Onitsuka founded the earthquake as an opportunity not just to rebuild, but to the shoe company that would become ASICS. In the 1960s, redress long-term challenges, capitalize on emergent oppor- Phil Knight travelled to Kobe to meet him, and was inspired tunities, and build back better. first to sell his shoes in the US, then to found Nike. In later decades, the city attracted the Japan headquarters and R&D In the built environment, it devised ambitious new designs offices of several multi-national companies, including P&G, for devastated areas. In doing so, city officials drew deeply Nestle and Eli Lilly, the city’s name also became globally rec- on their decades of experience in urban redevelopment. They ognized through the branding successes of “Kobe beef”, and created real, substantive forums for consultation and attend- other campaigns. By the late 1980s the city’s economy had ed hundreds of meetings in just a few years. They held firm diversified significantly. The enormous shipyards of Kawasaki where they believed it necessary, as in the creation of a big and Mitsubishi, however, remained downtown. central space for disaster resilience, while yielding elsewhere, as in having more and smaller buildings instead of a few gi- From the 1960s onwards, Kobe built deep expertise in ant ones. Once underway, the rebuilding itself used the city’s redeveloping existing urban areas. It was particularly skilled balance sheet to provide flexibility, such as to avoid forcing at navigating local land markets, harnessing national laws residents to engage in one kind of mandatory prior-land for once passed to widen roads for the 1964 Tokyo Olympics. It new-apartment swap. Ultimately, the housing project was created and managed a sprawling network of public-private completed on schedule, in under a decade, at a modest net institutions, known as “Kobe, Inc.”. During the period howev- cost to the city, after much initial expenditure was recouped. er, the great shipyards remained downtown and agricultural interests continued to constrain outward growth. To finance Creative reconstruction also led, from 2000 onwards, to the land reclamation activities, the city raised debt at a large scale building of a life sciences cluster in Kobe. Many reasons con- over the course of this period. verged to make this viable. The broader Osaka-Kobe-Kyoto 6 region had enormous strengths in medical research and phar- However, the city’s economy overall has struggled since 2000. maceuticals. Eminent researchers, university administrators, When the quake struck in 1995, city debt was already high; private companies and national officials had all noted Japan it then borrowed heavily to frontload spending on recon- lacked a place to bridge its medical research and commercial- struction. The wave of capital and demand from 1995-2000 ization. Through previous land reclamation activities, the city buoyed up growth and kept alive almost all firms, both had the land and capacity to build such a life sciences cluster. efficient and inefficient. From 2000 onwards, the city had to Beginning in 1997 the city developed plans for a globally implement significant austerity measures. The local economy competitive large scale life sciences cluster. The Chair of the struggled with a demand deficient, and the city administra- project team and then of the cluster itself, Dr Hiroo Imura, tion was fiscally constrained in its ability to undertake new commanded wide respect—he had been President of Kyoto projects. Compounding economic challenges the city’s age University, and won numerous awards in medical research— profile, like most of Japan, was also shifting towards a greater and supplied drive to the vision for the cluster. percentage of elderly, In the last few years it has regained its fiscal headroom, but, like all of Japan, aging demographics The city first laid its institutional foundations. It created challenges present significant challenges to the cities compet- multiple public-private institutions and agencies, each with itiveness. different tasks, connected in a dense network. The first break- through was when Riken, Japan’s largest research institute, The city retains many strengths with which to combat that decided to establish a campus in Kobe. The city then built looming crisis. At present, it is attempting multiple approach- a research foundation next to the first Riken center, and es to harness or complement those strengths. Some of its worked to persuade the institute to add more functions. attempts are locally generated, as responses to problems it has identified and analyzed. Others are undertaken to seek Further research facilities followed, while the city focused to capitalize on available national programs. Still others are less on a traditional approach of hunting a handful of big routine active labor market interventions, such as job fairs, names with bigger and bigger incentives, and more on demand-supply matching, and accelerator and incubator crowding in a mass of companies. It offered deeply discount- programs. ed rent lab space for three years as the primal instrument. Over fifteen years it has attracted over 500 companies, of It may, though, still need to build processes or institutions to which 344 companies and organizations (as of September provide space for and learn from problem-driven iteration. 2017), continue to operate, attrition has shown the cluster’s The city has a quite remarkable set of capabilities, from de- discipline in fact as well as in theory. All the time, the cluster sign through robotics to biotechnology, and a reputation for a organization was adding institutional muscle. Years later highly attractive lifestyle that attracts high-end technical tal- the cluster was designated as a “National Strategic Special ent. Overcoming defensiveness, learning to learn, and being Zone” with researchers and doctors conducting cutting-edge ambitious enough and inclusive enough in its vision for youth biomedical research and therapeutic developments here. On development, may then be the key challenges ahead of it. job creation, the cluster has created just under ten thousand, but those are high-value and at the technological frontier. The cluster has also outperformed that in Singapore, a city of roughly six times the population and with all the levers of a nation state available to it. Importantly, the cluster today – with a strong focus on research, a critical mass of companies, and endogenous growth – differs markedly from original plans that focused on attracting big multi-national compa- nies. Such adaptation has been a strength, and likely accounts for the vitality of the cluster today. 7 8 BEFORE THE QUAKE: 1865-1995 A spirit of seeking new challenges Kawasaki Heavy Industries, which produced aircraft before the War, produced Japan’s first industrial robot after it. In the Kobe’s modern history started with the opening of 1960s, Kawasaki entered consumer-facing industries with Japan in 1865-70. A town had stood where Kobe is today the development of Kawasaki Motorcycles. In the same de- for some time prior to the 19th century, but it had remained cades, the chemical shoe (i.e. non-leather shoe) industry grew quite small and entirely dwarfed by Osaka nearby. Then in rapidly, with Nagata district of Kobe becoming the center of 1865, just as Japan was entering the political turbulence shoe production in Japan. It was also in Kobe that Kihachiro that would give birth to the Meiji restoration, one of the Onitsuka founded the shoe company that would become future Meiji leaders established one of Japan’s early naval ASICS. It was also in the 1960s that Phil Knight travelled training schools.1 It was then established as an open port in to Kobe to meet Onitsuka, and was inspired first to sell his 1868, at the same time as Yokohama, and grew rapidly. The shoes in the US, and then to found Nike. In later decades, the first Meiji-era governor of the prefecture surrounding Kobe, city’s name became globally recognized through the branding Hyogo, later became the first Prime Minister of Japan. In success of “Kobe beef”, and it attracted the Japan headquar- its first decades as a port, Kobe attracted an influx of capital ters and R&D offices of several multi-national companies, in- and foreign investment and grew rapidly. Large European cluding P&G, Nestle and Eli Lilly. In all, by the late 1980s the firms established branches around its port, such as HSBC and city’s economy had diversified significantly. The enormous Jardine Matheson, and a range of domestic industrial activity shipyards of Kawasaki and Mitsubishi, however, remained began, including shipbuilding. downtown. “The first in Japan to try new things”. By the last decades of the 19th and first decades of the 20th century, Kobe had established a reputation and self-image as a place of Repeated redevelopment, the “firsts”. It was, with Yokohama, one of the first cities in Japan city as a “public developer” to build modern public goods, such as suburban commuter The development of “Kobe Co., Ltd”. From the post-war railways and first gas then electric street lights. It was an period onwards, Kobe built deep expertise in urban devel- early center of heavy industry. The Kawasaki and Mitsubishi opment projects. Many of these were executed at a profit, shipyards, which still exist, employed tens of thousands of through affiliated organizations. These affiliates, including a workers by the 1920s. In that decade, it was also the first dozen wholly owned entities and many more with partial city center of radical politics and labor organizing, including a investment, spanned the gamut from railway companies to massive strike of tens of thousands of shipyard and dockyard hotel developers. In the post-War period, the city purchased workers in 1920-21. There was also, early, a consumer culture, the land parcel of an abandoned factory using a national land with the city noted for its music, such as jazz, and fashion. adjustment program for post-war recovery, raising the money through intricate financial engineering involving national Postwar entrepreneurialism, from turbines to shoes. and prefectural subsidies and a discount offer on local public Kobe’s recovery after World War II was rapid. Some of its bonds. Such development accelerated after the first major previously dominant companies both returned to growth reclamation project in1966, and the city came to be known as and, as Japan nationally pursued an industrial policy focused a “public developer”.2 on high-quality steel production and capital goods, rapidly moved up the value chain. Kobe Steel (KOBELCO) began Land readjustment, harnessing the national space integrated steel production, later expanding into the research opened by Tokyo’s Olympics. In the lead up to the 1964 and production of alloys, and then further into machinery, in Olympics, Japan’s national government passed the “Land Re- particular through its subsidiary in construction machinery. Tatsuo Miyazaki, Watashi no Rirekisho [My personal histo- 2 1 (Jansen, 2002) p. 305 ry], 1989, Kobe Institute of Urban Research 9 adjustment Act of 1954”. The law enabled local governments of the city following the Great Hanshin-Awaji earthquake of to slice portions off existing land owners’ plots and swap the 1995, these surplus funds would eventually become com- plots if this were deemed necessary to upgrade or build new pletely depleted. infrastructure. The prototypical case was the widening of Running out of land, except all the other land. In the roads through dense urban areas. For example, landowners mid-1960s, heavy industry and the shipyards booming, but give up and reserve percentages of each plot to make space containerization was on the horizon, requiring deep sea for the additional road width or land sales for public invest- berths. In contrast to Yokohama, which used this techno- ment. In return, the landowners benefit from an increase in logical change to move the port and heavy industry away values of their land by the infrastructure development. The from the city center, Kobe decided to reclaim a new “port reduction rates and land sale prices are assessed by licensed island” that was connected by a narrow land bridge directly land appraisers.3 Though the law was motivated by Tokyo’s to the heart of the city. The administration had not sought needs for the Olympics, it was passed with general applica- to remake the city’s relationship with the port, shipyards, bility. Kobe became a particularly active user of such “land heavy industry, or other entrenched interests. The Kawasaki readjustment”, given its rapid growth and structural change, and Mitsubishi works continued to occupy 103 ha in the concentrated in the narrow strip of land between mountains land-constrained city.5 At the same time, city did not build and the sea (Figure 1). outwards onto adjoining agricultural land.6 Naturally, it might be argued that having some of the old heavy industry FIGURE 1: MAP OF KOBE remain downtown had long-term benefits in maintaining connective tissue, and uncontrolled sprawl or the elimina- tion of agriculture would have been far from desirable. But these are simplistic and unrealistic options, and avoiding them would not preclude some balance, for example with some parts of the heavy industry works relocating and some modest portion of agricultural land developed. There is no evidence that such balance was pursued. The decision to build a new island, and then make it larger. By the mid-1980s, Kobe had a thriving economy and a repeatedly remodeled and upgraded built environment, at least in residential and some commercial areas. But it was also competing intensively in “kigyo yuchi”, a Japanese term for the act of “competing for companies”. The 1980s overall are sometimes referred to by officials as “the era of kigyo yuchi”. Land was needed for this competition, land which was scarce in Kobe, constrained by geography, the vast industri- al works, and agricultural land. By 1985, with asset prices starting to boom, the city triggered a massive expansion of Source: Produced by authors based on data from National Land Numerical reclaimed land as “phase two” of the “Port Island”, which had Information download service. opened in 1981. A slow and steady accumulation of expertise and Foreign borrowing puts mountains on conveyor belts some surplus. Over the subsequent decades, the city built into the sea. Since its initial reclamation projects, the city up a successful urban development department with more had used soil gathered from cutting Mount Rokko (Figure than a hundred officials, with extensive tacit knowledge in 1, above). To transfer the vast quantities from the mountain how to negotiate with landholders to execute adjustment. As to the sea, the city constructed underground belt conveyers. well as land readjustment, the city also orchestrated the pur- The tunnels built for these conveyor belts were later used for chase of as many land parcels as possible, as the then Mayor sewage pipes. The eventual size of reclaimed land for phase believed strongly in public development that returned profits two of Port Island was 390 Ha, in addition to 443 Ha in the to the city budget. In 1965, the city even developed a large first phase, so that new port island was eventually four and underground shopping center, called Sanchika, because it be- a half times larger even than Minato Mirai in Yokohama lieved there was no land left around the city center (although (833 vs 186 Ha). So much mountain was removed that an many large above-ground malls would later be built in the industrial park, the Seishin area, could be built in the newly area). The city was so successful in public development that it was able to accumulate a public surplus of JPY 122 billion (roughly USD 1 billion) by 19934. During the reconstruction 5 Mitsubishi: 669,100m2, Kawasaki: 360,000m2. Sourc- es: Mitsubishi: https://www.jstage.jst.go.jp/article/ 3 Land Readjustment Act of 1955 jime/47/2/47_141/_pdf; Kawasaki: Company brochure 4 “Han-shin Awaji Great Earthquake and Finance of Kobe 6 Reportedly because of the weight of agricultural interests City”, April 28, 2017 in the city. 10 flattened area. Since the national government at the time was On the other hand, the city had (like most cities) entrenched unwilling to subsidize this project, Kobe engaged in foreign interests, and a tendency to opt first for large-scale capital borrowing (including in German Marks and Swiss Francs). projects rather than risk confrontation. The shoe cluster faced Although the island would one day provide a home for Kobe’s a rising threat from low-cost production, and overall the city’s biomedical cluster, large expanses of it remain unused today, economic structure looked much the same as it had several in 2017.7 decades earlier. With the bursting of the asset price bubble in 1991-1992, and the subsequent years of depressed demand, In all, a great deal of expertise, but also a significant the city entered the mid-1990s with JPY 800 billion (~ USD amount of debt. By the mid-1990s then, the city had built 8 billion) in city bonds outstanding. Against this, it had institutions with deep expertise in handling the intricacies municipal tax income of JPY 295 billion, and total expenses of land markets and executing development projects at small, (including transfers) of JPY 930 billion. The debt burden was medium and large scale. Its private sector had several firms at small compared to what it would become, but already several the global technology frontier, with especially strong clusters times the city’s tax revenues. 1) in capital goods and footwear. Through the city’s affiliated de- velopment organizations, and the many urban development projects, the public and private sector had experience working together, and the city administration had long experience in building and managing developmental coalitions. 11 7 Direct observation. 12 THE EARTHQUAKE AND ITS AFTERMATH: 1995- Vast damage is met by disaster of extreme severity. 12 National officials could also mobilizing a response, more be deployed to affected areas, not only increasing manpower but also enabling decisions that would have needed national than directing a response approval to be made on the ground. As described in inter- All the buildings were gone. The earthquake struck Kobe views, a local disaster prevention plan had also been formu- in the early morning of January 17, 1995. It was among the lated that authorized the immediate and automatic drafting most damaging natural disasters in history. Economic dam- of public servants, including schoolteachers—who are closely age was estimated at JPY 10 trillion ($100 billion).8 Approx- involved with the local community—as relief workers in the imately 6,400 people died, with 237,000 displaced.9 Within event of an earthquake with an intensity of 5.0 or greater.13 Kobe itself, one fifth of firms were destroyed, and more than A mobilization plan, specifying by district where the teachers two thirds suffered damage and disruption.10 The damage would gather for instruction, had been drawn up in advance, was particularly severe on the seaward side of the city,11 and so that it was not necessary to decide and communicate this even more so around the port, and the Rokomichi and Shin on the day of the quake. On the morning itself the teachers Nagata areas. Outside the city, arterial infrastructure such gathered and were ready to be deployed for relief. A notable as highways and gas lines were damaged, interrupted or even feature of these instruments is that they did not predeter- collapsed. Some people received water from rationing trucks, mine what the leaders of the response would do, but rather while other had to use washing facilities in relatives’ homes ensured that those leaders would have a range of instruments in unaffected areas; workers had to reconfigure their com- available to them almost immediately. mutes, taking hours each day to get to work; and elderly or sick people had to be moved out of hospitals and lodge with Rapid decision making through a secretariat and their families until services were restored. twice-daily council meetings. On the day of the quake the city established an organizational structure for decision First response: preexisting instruments triggered. making. Soon after, a disaster countermeasures headquar- When the quake struck, Kobe quickly drew upon a range of ters was set up, composed of the Mayor and the heads of pre-existing laws, regulations, and practices. A pre-existing department. It met twice a day to clear blockages and make national law automatically raised the ceiling of national fund- any decisions needed by those in the field. It was assisted ing for local action, from 66% up to 90% (depending on a for- by a secretariat formed around the handful of staff in the mula stipulated in the law) by designating the earthquake as pre-existing department for Disaster Management, plus many officials drafted from line departments involved in the headquarters. The secretariat prepared the agenda to keep the 8 Hyogo Prefecture Government, Hyogo Prefecture Govern- council efficient enough to ensure it could meet at such high ment (2010). Status of Recovery and Reconstruction After frequency without overwhelming the city executives’ time or the Hanshin-Awaji Great Earthquake (in Japanese); City of swamping their line work. Kobe. “We didn’t direct, we mobilized.” Importantly, neither 9 Hyogo Prefecture Government. 6,405 deaths were in the the decision-making council nor the secretariat attempted Prefecture as a whole, and 4,573 in Kobe. The number of to direct or control the recovery efforts in detail. Doing so, initial evacuees was 316,678 at peak, and the number of though a natural temptation and frequent pitfall of such damaged houses was 640,000. (Okuyama, Long-Run Effect structures, would have been paralyzing in the face of so vast Of A Disaster: Case Study on the Kobe Earthquake, 2016), p.4. 10 Industrial Department, Economic Bureau, City of Kobe, 12 Act on Special Financial Support to Deal with the Desig- interview and source materials. nated Disaster of Extreme Severity 11 Due to Kobe’s principal urban areas being near the sea, not 13 On the Japanese scales of one to seven, according to inter- from a tsunami. view with KIUR, April 2017 13 a scope of activity. Instead, by drafting in officials from the (from both prefectural and city governments) in assistance to line departments, the secretariat created informal channels 33,551 recipients, over a period of 17 years.15 through which issues from the field could be raised quickly. By keeping off the agenda issues that the draftees could tell Short term recovery, though possibly with a long- might be solved lower down, it kept the decision-making term price. Overall, the programs limited the immediate councils streamlined, but also signaled to staff in the field damage to the city’s landscape of industrial firms. By 2000, that they could and should try to resolve issues themselves the number of industrial firms was roughly equivalent to first. This principle could apply even in cross-jurisdictional what it had been in 1990. On the other hand, total produc- matters, in which national officials deployed to the city and tion had dropped by roughly 20%. It may then be that the city officials themselves would at times simply decide and flood of capital and demand during the early reconstruction proceed. This is sometimes referred to as an ‘Incident Com- had kept many firms afloat that were not competitive in the mand System’, in which roles and responsibility are shared long-run, and hence may have restricted some of the restruc- based on decision-making, information operation, and pro- turing that otherwise might have occurred. Following the cessing cases corresponding to sites. onset of fiscal austerity in the city in 2000, and then Japan’s banking sector reforms in 2002-3 that focused on eliminat- Energy with inefficiency, versus micromanaged cen- ing not performing firms, the number of industrial firms fell tralization. This method naturally led to some instances of steeply. By 2005, the number had fallen by 20%, and by 2010, inefficiency, but it is not clear, at best, that more centralized after the global financial crisis, by another 10% (Table 1). or more bureaucratically rigorous processes produce less inefficiency in a disaster. On the other hand, as Franklin The importance of eventual withdrawal. However, lev- Roosevelt is said to have remarked in mobilizing America els of industrial output and employment stabilized and then for World War II, “in a crisis an excess of energy at the price climbed during the 2000s, indicating the surviving firms of a little inefficiency is better than no energy with efficien- were growing and becoming more productive. The reduction cy”. Overall, in Kobe, the restoration of most parameters in the number of firms was also concentrated in the footwear of ‘normal life’—people able to go to work on time, back in industry, which had a perilous competitive position versus shelter and able to go about daily activities, the elderly back low-cost manufacturers in China and South-East Asia in any in care—was accomplished within a couple of months. While case. The industry registered a 75% decline in the number that fits within “normal” parameters, it does so for a quake of of firms and 60% decline in shipment values over the period extraordinary scale.14 (Figure 2). On the other hand, while machinery and metal firms declined in number by 60%, their production rose— Three responses for firms. Turning Turning to the indicating a significant reallocation of resources to more economic aspects of the recovery, the Bureau of Industrial productive firms. The problem of non-viable “zombie firms” Promotion quickly held its first planning meeting within was also by no means unique to Kobe in the late 1990s, but two days after the quake. It was decided to focus on three a phenomenon afflicting the Japanese economy in general in priorities: first, helping firms ensure they had access to the 1990s. Finally, it would be methodologically aggressive working capital to ride out the disruption; second, helping to assume that, in the wake of so large a catastrophe, perfect firms maintain access to labor, which meant helping their targeting would have been possible, by the city or by any employees; and third, helping companies access the physical financial institutions. It would be as aggressive to assume space needed to maintain their operations. The second and that, in the same circumstances, the firms would immedi- third involved programs to provide rental space for firms ately have put any such resources to work. The more realistic and, where necessary, temporary shelter for employees, counterfactual might then be, at best, a wide swathe of firms, though technically this exceeded the department’s mandate productive and unproductive, shutting down as lumbering the Bureau was proactive in acting on the need. The first programs and poorly informed private financial institutions program—targeting working capital—had by far the largest attempted, through the rubble, to find out who exactly was reach. It involved the provision of emergency loans, subsidies deserving of credit support. What seems more important for interest payments, and, in some instances, the arrange- is that ultimately the programs were wound down, and five ment of loans from domestic development finance providers. years after the disaster the restructuring of the city’s indus- The program would eventually provide JPY 422.2 billion trial ecosystem began. Table 1: Industrial Firms in Kobe 1990 2000 2005 2008 2011 Number of firms 4,542 4,498 3,767 3,620 3,164 Number of employees (1000 people) 109.1 76.6 70.5 75.4 71.6 Amount of shipment value (JPY 100 million) 32,809 26,722 25,724 31,164 29,922 Source: Industrial Survey Statistics of Kobe (all offices), City of Kobe 14 (World Bank, 2008) 14 15 (City of Kobe, 2011) Figure 2: Leather, rubber and plastic shoe the north suffered extensive damage, and Shin-Nagata suf- manufacturing fered similar damage (Figure 3). Shipment value (JPY million) No of companies A similarity to redevelopment projects and land 200000 2000 swaps in “normal” times. The reconstruction of the south- 1800 ern area involved its wholesale transformation, from an area 160000 1600 of dense streets with low-rise houses to one with large open 1400 areas and high-rise housing. The area had a relatively valuable 120000 1200 location, and so it was believed that the rehousing of existing 1000 residents, as well as small business owners, could be funded 80000 800 by building and selling new apartments and commercial fa- 600 cilities in the high-rise buildings. Existing residents would be 40000 400 compensated for giving up their prior land with apartments 200 in the new development, by fair exchanging . The scheme 0 0 then has a striking resemblance to forms of city center 1988 1993 95 96 1998 2007 2010 2012 redevelopment that have grown in popularity in recent years, Source: Produced by authors based on data from Industrial Survey Statistics especially redevelopment projects that are funded through of Kobe capturing future potential increases in property value.16 In such programs, areas where theoretical land values have risen Dealing with land markets and significantly, but which have low-quality housing or few pub- residents during reconstruction lic goods such as roads and parks, are targeted for redevelop- ment. The underlying land is provided to real estate devel- Creative reconstruction of the built environment. opers, using one of a variety of legal instruments, who then Once reconstruction began, the city declared its intent to use construct high-value residential or commercial space. The the process to accelerate changes in the built environment value generated and monetized by this development is used and the economy. It called this process a “creative reconstruc- to provide new housing or facilities for the prior residents tion”. In the economy, this meant primarily the development who are displaced. That is the theory. In practice, however, of the biomedical cluster, which is described in detail below. these abstract propositions run aground when encountering In the built environment, such “creative reconstruction” the realities of land markets and existing residents’ prefer- applied above all to the Rokkomichi and Shin-Nagata areas, ences.17 How Kobe managed to execute a complex program which had seen some of the most extensive damage. The of this nature in under a decade, from initial concept through southern half of Rokkomichi was almost entirely destroyed, to completed buildings, may contain useful lessons, even in non-disaster contexts. FIGURE 3: DAMAGE TO ROKKOMICHI State of STATE OF DAMAGE damage Southern Area of Souther Aera of Rokkomichi Rokkomichi Station Station ・ 34 persons Deaths:34 Deaths: persons Complete/half collapse: Complete/half ・ approx 65%. collapse: approx. 65% Source: Distribution Map of Buildings by Degree of Damage, The City Plan- ning Institute of Japan and Architectural Institute of Japan See, for example, (Huxley, 2009) 16 See for example, (Bezdek, 2009) 17 15 A first and top-down attempt runs into resistance. the varying plans and their rationale, to gather additional The city’s initial approach was to rapidly conceive a design for resident inputs, build consensus and jointly modify the plans the reconstruction that embodied what it thought would be until a common and accepted blueprint was developed. The best for the community. The design had an enormous new Conferences developed general meetings and officers’ meet- park which becomes an evacuation and recovery base in case ings to structure deliberations and decision making. Impor- of disaster at its center, with all the building stock concen- tantly, the officials did not merely set up these structures and trated in six very tall buildings around the edge of the park then assume they would work on their own, disappearing (Figure 4). When presented to residents, however, this plan except to return once a quarter and bemoan a lack of prog- caused a sharp and severely negative response. Residents, ress. Rather, they saw facilitating the Conferences as one of who had been used to a rich communal life in their dense if not their primary tasks, and hence engaged in a grueling neighborhoods, thought the park far too large to encourage schedule of repeated engagement and discussion—by one association and the tower blocks unsightly and likely to lead officials’ estimate, they met “hundreds” of times over 18-24 to anonymity. The residents themselves then self-organized months. The process resulted in substantive modifications to and made a counter-proposal that involved much smaller and the original plans from both sides, though one slightly closer more walkable areas. At this point, an inexperienced reaction to the city’s original vision than the residents’, since the city could have been to become defensive, or engage in formulaic persuaded them of the need for a large open space in case of consultation while insisting on the original plan. A common future disaster. The residents then acceded to the concept of a result of that approach elsewhere is a spiral of confrontation central space surrounded by buildings, while the city signifi- and delay. Officials in Kobe, however, took a very different cantly reduced the size of that space and the height of the approach. buildings, producing a more in-filled and close-knit design (Figure 5). As well as coming to agreement on the plans, Establishment of “Community Development Confer- the Bureau used the conferences to deliberate on and put in ences”. Drawing on their accumulated experience in citizen place the specific transfer agreements and pricing mecha- negotiations, Kobe’s officials believed that overly prioritizing nism necessary for implementation. Once all four blocks had consensus building in community development might cause signed off on the revised plans in early 1997, reconstruction initial delays, but would be more efficient and effective in proceeded rapidly, marked by an absence of disputes that the long run. They therefore divided the area into four large often characterize these projects. The building work was then blocks, and initiated in each a “Community Development completed by September 2005. Conference”.18 These Conferences were organized to consider FIGURE 4: ORIGINAL CITY AND RESIDENT PROPOSALS FOR RECONSTRUCTION Source: Comprehensive Strategy for Recovery from the Great Hanshin-Awaji Earthquake, City of Kobe These were enabled by a ‘community development ordi- 18 nance’ (Machizukuri Jyourei). 16 An emphasis on preserving choice and flexibility. An emphasis on relocation in place. Another source of Throughout the process, existing residents were provided potential conflict was removed by stipulating that none of with extensive choices in their involvement in reconstruc- the residents would be relocated or displaced outside the tion programs. . For example, in the conversion of their original area, unless they wanted to leave (as in principle 1 preexisting land rights to ownership of floors in the new above). Even during construction of the new buildings, the buildings, they were not forced to accept a specific type or temporary shelters were built in parks or other areas close size of apartment. Instead, the value of their prior land was to where the residents originally resided. This dramatically converted into a certain proportion of new building floors, alleviated some of the chained social impacts brought by which they could then choose how they converted into a mix displaced residents, whether ensuring their children go to the of apartment and cash. For example, if their prior land enti- same schools before the quake or preserving social capital in tled them to X square meters, they could select an apartment a connected community. larger than X, and pay in a specified amount to make up the difference, or choose one smaller and receive a cash amount Three necessary ingredients: prior expertise, public in return. They could also, if they chose, take the full value as funds, and enabling legislation. These principles are cash and move somewhere else. Such allowance for individual easier stated than implemented. What made them feasible in choice reduced the possible sources of conflict between indi- Kobe were: vidual land holders and the city. The emphasis on choice was also applied more generally, with step in the reconstruction 1. The expertise in negotiation and consultation that had characterized by an interplay between the city setting frame- been built up in the municipal bureaus over the prior for- work parameters and then community structures selecting ty years. Such expertise must be built slowly and steadily, within them. For example, the city set aside space in each of and is often only refined through frequent application at the four blocks for common service areas, and then referred the local level. the decision of what to do with the space to the Community 2. The ability to use public funds to absorb externalities. Development Conferences. The city also proactively assisted The preservation of individual choice and the emphasis the community to attract tenants for those services, such as on relocation-in-place were and still would be costly. a supermarket in one block, a health club in another, and so Even after selling the new apartments at market prices, forth. the overall reconstruction netted a loss of approximately JPY 1 billion (roughly USD 10 million). This is a modest amount, but the project required large amounts of capital FIGURE 5: FINAL DESIGN FOR ROKKOMICHI SOUTH Source: Comprehensive Strategy for Recovery from the Great Hanshin-Awaji Earthquake, City of Kobe 17 to be tied up for many years—any Table 2: Progress of redevelopment projects commercial rate of return would have required vastly more than Redevelopment Area Date of urban Decided Area completed a nominal break-even. So it re- Project planning decision operation plan quired not only the public sector’s Rokkomichi Sta- 5.9ha March 17, 1995 10 work zones 10 work zones ability to absorb this small loss, tion South 14 buildings 14 buildings but it’s ability to absorb the cost of 5.9 ha (915 households) capital over those years. Shin Nagata Sta- 20.1ha March 17, 1995 41 work zones 33 work zones tion South 44 building 37 buildings 3. The prior legislation, from that on 19.8 ha (2,585 households) urban development to disaster re- covery. As described above, when Source: Progress and efforts for post-earthquake reconstruction in the past 20 years, City of Kobe the disaster struck the city could draw on legislation on urban administration. Striking that balance cannot be taken for development and disaster recovery that already existed. granted, even when the conditions described above—or their Moreover, on issues such as hold outs, resettlement and near approximation—are present. asset disposal or procurement, that legislation was more permissive than may be the case in many countries or “best practice” frameworks today. For example, rules on the buying and selling of land were relatively permis- From creativity to austerity, sive, with cities able to choose among multiple methods, and the “80% recovery” including auction and/or fixed price sales at a level set by ~$10 billion in new bonds resulted in a highly-indebt- licensed experts. ed city. To finance recovery and reconstruction, Kobe issued Scope of replicability and selection criteria, including almost JPY 1 trillion in municipal bonds in the 20 years for private sector projects. These criteria are unlikely to starting in 1995 for the general account.20 That represented be present in many contexts. They will likely be absent from roughly a half of the total JPY 2.2 trillion in reconstruction the private sector, most obviously because of the need to fund costs, the remainder coming from a mix of national trea- externalities. Yet it also suggests a selection criteria, where sury, the prefecture, drawing down prior surplus funds, and the private sector is involved—that it have many decades of municipal tax income. The debt issuance brought total city experience in complex negotiations with many small-holders, bonds outstanding to JPY 1.8 trillion (~USD 18 billion) in this being more important than experience in large-scale 1997, against JPY 250 billion (USD 2.5 billion) in municipal greenfield or single-site brownfield development. Even with income tax post-quake (down from JPY 295 billion in 1993). such expertise, the funding remains necessary, and abstract By 2000, on almost any measure the city was deeply indebted models that depend for their financial logic on the avoidance and debt service costs were 18% of the city’s budget.21 of relocation-in-place or resident choice are, even leaving “Wringing a dry towel for its last drops”: fiscal re- aside normative considerations, likely to simply exchange a trenchment. From 2000 onwards—and for some bureaus public funding constraint for a reality constraint deriving well before it—the city cut costs aggressively. It eliminated from inevitable conflict. all new projects that were not related to the recovery & recon- The hazards of trying to move too quickly—the re- struction. It imposed a strict mandate on all departments to construction of Shin Nagata. As noted above, there was reduce expenses wherever possible. It reduced city headcount one other area in Kobe that needed full reconstruction. Shin by 300-600 officials per year, every year, so that the total Nagata was a somewhat larger area, with a slightly less favor- number fell from ~22k in 1995 to ~18.5k in 2005 and 16k in able location than Rokkomichi (Table 2). The reconstruction 2010, primarily through natural attrition, but also some in- project there was more rushed than at Rokkomichi, however. vestment in IT systems and process improvement. The city’s This was reportedly caused by the presence of many small fiscal deficit swung from ~JPY 120 billion in 1995 to JPY 30 business owners that wanted to be able to operate again as billion in 2000 and effectively zero in 2011. Large parts of soon as possible. As a result, the careful deliberative process- this adjustment impacted domestic demand directly, not only es undertaken in Rokkomichi were sidestepped. Although its since much reconstruction work involved direct purchases of reconstruction has been complete, it is sometimes described local goods and services, but also indirectly, for example as as ‘struggling’ in contrast to Rokkomichi.19 It may, then, be reduced numbers of public officials spent less locally. a case of short-term haste jeopardizing long-term progress, or of yielding too quickly to the demands of one interest. The balance between fast and slow, and between deliberating and yielding, is then not infallibly struck, even by the same 20 These and subsequent figures from “Han-shin Awaji Great Earthquake and Finance of Kobe City”, April 28, 2017 21 Debt service cost (including interests and repayment) were 19 (Okuyama, The Rise and Fall of the Kobe Economy from JPY 154.0 billion, out of a total expenditure of JPY 876.9 the 1995 Earthquake, 2015) p. 638-9 billion. 18 Deficient demand followed, significantly crimp- executed in a rush. While services had to be restored, and ing the recovery. From 2000 onwards, Kobe’s economy immediate recovery conducted quickly, the “life support” entered a period of deficient demand. Although the national and “immediate recovery” categories of spending were only economy was struggling with deflation at the time, it was a third of total spending—two thirds was “reconstruction”. particularly severe in Kobe—technical work indicates that Such spending may have been smoothed over a few more local price inflation, which had tracked national levels prior years, reducing the sharpness of fiscal retrenchment. A to the quake, had tracked lower than the national average by second question mark must be the debt overhang entering 2001 and remained so until 2003. While it would be a stretch the quake. As noted above, it was incurred in the boom years, to claim that the retrenchment undid recovery, it has been for the second phase of the new port island, a troubled and identified as a likely candidate for Kobe never recovering to perhaps questionable project. So that debt was perhaps the its pre-quake trend, or indeed to other, comparable cities. weakest element of pre-quake readiness. Finally, the city may Low demand in the early 2000s is also a likely candidate for have been able to recover some more of the value created in the city’s demographic skew, as the young and particularly the reconstruction and land adjustment. Rokkomichi South graduates left the city for job prospects elsewhere.22 More ended with the city almost at breakeven because of such val- qualitatively, but perhaps as damaging, while a demographic ue capture, through the sale of apartments, but it is not clear crisis came ever close, while the global and national economy how other projects performed. Interviews suggest that where changed, the city had no fiscal capacity to respond, and at post-quake readjustment significantly increased land values, worst had its energy distracted by managing the process and much of the value may have gone to private landowners.27 consequences of retrenchment. This period has only recently come to an end, as the large bonds for recovery have been An achievement nonetheless. After destruction of such repaid and the city’s debt to revenue ratios have recovered to magnitude, “80% reconstruction” within a decade, and only be close to the median among Japanese cities.23 a minor long-term impairment in trend growth, is not to be sniffed at.28 The city did refresh at least one part of its eco- The “80% recovery”. Among observers in Kobe, the nomic structure, becoming massively less dependent on the common phrase to describe the economy after the quake is footwear industry (as described above).29 Once the older firms the “80% recovery”—the economy is mostly whole, but not began to drop off, the city’s industrial sector did become far quite as it was. Perhaps the most lasting consequence of is more productive (at least in terms of labour productivity). Kobe’s skewed demographic profile today. As one proxy for And in at least one area, “creative reconstruction” does seem dependence, 25% of households in Kobe do not receive a wage to have succeeded, in one of the most difficult of tasks. That or salary, compared to 18-19% in Tokyo and Yokohama.24 was the creation of a new cluster at a global technology fron- Further, there is evidence that the proportion of people over tier, the Kobe Biomedical Innovation Cluster [KIBC]. THE 65 has increased more in Kobe since the quake than in other cities, even those neighboring it.25 It would be inaccurate to characterize a “good” period (1995-2000) of rapid recovery and then a “bad” period (2000-2005) of retrenchment, since the periods are interrelated. The swiftness of the first period of recovery may not have been possible without so swift and BIOMEDICAL significant a buildup of debt to make later retrenchment necessary. Nevertheless, by 2005 it appears as if an output gap of 19-28% against Kobe’s pre-trend growth had become 27 The city captured value from the apartments that it owned entrenched, and would persist until today.26 If anything, the or took ownership of as the excess units built, but did not, result demonstrates how a coherent and large-scale process to our knowledge, have policy instruments to obtain a of restructuring can become severely limited if the macroeco- share of the increase in private land, except to some extent nomic context of a city becomes a severe headwind. through property taxes. Source: Interviews with former Possible counterfactuals in pace, prior debt, and officials, Kobe City. value capture. Abstract “what ifs” a few decades later are 28 As a comparison, after the 2011 New Zealand Christ- tempting but suspect. Nevertheless, it might be asked if the church earthquake, its city council published growth sheer pace of debt issuance and spending was necessary—as projections for the next 30 years, comparing Christchurch’s described in several sections above, some of the programs growth with pre-quake projections. Even under “quick that evolved over years were more effective than those recovery scenario”, it was estimated that Christchurch can only attain 76% of pre-quake projected growth in the next 10 years. This number dropped down to 58% and 22 (Okuyama, The Rise and Fall of the Kobe Economy from 40% under moderate to slow recovery scenarios. All these the 1995 Earthquake, 2015) highlight the difficulty of economy returning to its project- 23 Technically, the median among “ordinance-designated ed growth path post disasters. Source: http://resources.ccc. Japanese cities”. govt.nz/files/homeliving/goaheadbuildingplannings00/ 24 Employment Status Survey, October 2012 feesandcharges-s08/dcpgrowthmodel-summaryofpostea- 25 (Okuyama, 2016) rthquakegrowthprojections.pdf 26 (Okuyama, 2016) 29 See also (Edgington, 2011) and (City of Kobe, 2012). 19 20 CLUSTER: 1995- a) Multiple processes converge Some local activity prior to 1995, but real strength in the region. Kobe had only a small life sciences indus- A new, but on most evidence, a thriving cluster. Locat- try prior to the earthquake. Sysmex, a firm specializing in ed on Port Island, Kobe Biomedical Innovation Cluster (KBIC) instruments and reagents for in vitro diagnosis, had been was one of the “creative reconstruction” projects proposed by established in 1968, was a world leader in hematology and Kobe city government after the 1995 earthquake. At a total reagents, and had been growing rapidly. In pharmaceuticals, project cost of 420 billion Yen (~3.8 billion USD at 1995 ex- Eli Lilly had chosen Kobe as its Japan headquarters in 1975. change rate), including national and prefectural funds, Kobe It had a manufacturing facility in the Seishen area and an city played a major role in putting together all the necessary office for managing clinical trials, which had slightly expand- infrastructure to build up the island, as well as establishing a ed in the wake of Japan joining the international regulatory biomedical cluster department within the city government to regime for global trials. However, these were the only firms promote and attract firms, research institutes, and hospitals of note, and there were few to no local academic centers or to locate to this island. Within twenty years of development, research institutes in the sector. On the other hand, the KBIC today is a large and thriving biomedical cluster, with broader Kansai region had and still has several world-class 344 companies and organizations (as of September 2017). It research universities and institutes in life sciences. This is has been designated as a “National Strategic Specialty zone” particularly true of Kyoto, where the University of Kyoto is a with researchers and doctors conducting cutting-edge bio- global leader, and Osaka, which by some estimates is home to medical research and surgery procedures here. 30% of Japan’s pharmaceutical industry.30 Figure 6: AERIAL VIEW OF THE KOBE CLUSTER Source: Provided by the City of Kobe (Schlunze, 2007) 30 21 Some discussions just after the quake, drawing on of other cities, and contains more useful lessons, than such a multiple sources. Some of the city’s policy documents had standard plan would have been. What is clear is that the se- mentioned health-related industries as early as 1993.31 How- lection resulted from the combination of several institutional ever, serious discussion began in autumn 1997, when a few drivers, emergent needs, capabilities, and opportunity: ruling party members proposed a project to attract the med- ical industry. The city had previously heard about a medical 1. The research networks in the Kansai area. cluster plan in Hokkaido Prefecture, the ‘HIMEX’ plan, which was abandoned in 1998. At the same time, in the early 1990s 2. Municipal and institutional leadership in pursuing a the national government had identified the life sciences as a unique opportunity in an emergent area. potential industry of the future,32 and was encouraging local 3. The city’s availability of land and pursuit of “creative governments to develop it. In April 1998, the City assigned reconstruction”, and an official to be in charge of coordinating partners for the project. The city councilors’ initial idea for the cluster was 4. The national government’s desire to help Kobe and to focused on attracting multi-national companies, particularly grow the life sciences industry US medical technologies firms. As a result, it was called a “Kobe Medical Industry Development Project”, and the city started visiting US firms and trying to attract them.33 Institutional foundations and anchor tenants Convergence of research, application and manu- The establishment of strong institutional foundations facturing. In the early 1990s, it was believed that Japan’s as the first step. The city’s first step was to create a pub- strengths in basic research in medicine, clinical application lic-private-academia council, chaired by Dr Imura, to set the and pharmaceutical manufacturing were not complementing basic parameters and institutional form of the cluster. That each other as they should, because there was no effective became an enduring “triple helix” organization, the Founda- bridge between the two. Basic research remained in the tion for Biomedical Research and Innovation (FBRI), with Dr universities, while industry concentrated on incremental in- Imura as its first president. The concept of the cluster, and novation. An opportunity emerged in the intersection of the the mission of the FBRI, had three parts: to revitalize Kobe’s national government’s desire to support Kobe, the city’s goal economy, provide health care for the local community, and of “creative reconstruction”, and pre-existing plans to develop support the development of medical technology in Asia. That a biomedical cluster somewhere in Japan. focuses on three areas, decided by its round-table gathering: Selection was not deeply analytical, but the result of support clinical trials of pharmaceuticals; promote research on multiple capabilities intersecting. In late 1998, the city regenerative medicine; and conduct and support research on announced that an unused part of the New Port Island would medical technology. be designated for a medical cluster. Officials outside the main A range of complementary institutions and divisions. departments involved considered it a surprise, and the area in The FBRI has evolved to include a set of child or affiliated orga- question had, prior to the quake, been designated for attract- nizations (Figure 7). The Institute of Biomedical Research and ing a theme park. The city’s decision at the time was focused Innovation (IBRI) facilitates (or conducts) clinical research. on medical activities, and in general the city argues that its The “Translational Research Informatic Centre”, which has planning for large MNC attraction was the motive force. On supported almost two hundred clinical trials and maintains the other hand, the subsequent development was less typical various information portals to disseminate research infor- mation. Other divisions attract companies to the cluster, host 31 (Okuyama, The Rise and Fall of the Kobe Economy from networking events and provide consulting on commercializa- the 1995 Earthquake, 2015), p. 638 tion, among other activities. The Foundation admits, however, 32 Kobe disputes that the National Government ever prior- to still evolving its approach to intellectual property (IP), itized the life sciences, prior to the city’s plan. However, given the natural tensions in managing and sharing sensitive from 1990-1996, government spending on the life sciences research results among companies in an industry where value increased by almost 10% per year, each year, even as the na- creation is heavily tied to IP. It does not have any IP lawyers tional economy entered recession. As early as 1987, Prime on standby, although it has relationships with some who are Minister Nakasone initiated the Human Frontier Science external. Among the various divisions and affiliate organiza- Program, to fund both local and international teams doing tion, the staff have a mix of research, commercial and official basic research in the life sciences. Finally, the “Basic Plan backgrounds. Building on the success of the FBRI, it is highly for Science and Technology”, introduced in 1996, reallo- conceivable that further investments into patent process cated significant research funding from energy to the life streamlining and the expansion of intellectual property relat- sciences. The national priority on life sciences in the 1990s ed partnerships will continue. is indisputable. 33 “Hanshin-Awaji Daishinsai 10 Nen Tobe Phenix” [10 years after the Great Hanshin-Awaji Earthquake, Fly Phenix]. Published by The Great Hanshin-Awaji Earthquake Memo- rial Research Institute, January 2005. 22 Figure 7: INSTITUTIONAL COMPONENTS OF CLUSTER The early, organic attraction of a world-leading FOUNDATION research center. Perhaps the most crucial event in the clus- ter’s early development was the decision in 2000 by RIKEN, Japan’s leading basic research institute, to establish a Centre of Developmental Biology (CDB) in the cluster. The institute FBRI Foundation for Biomedical Research and Innovation and the city seem to have been approaching each other in • President • Vice Executive President • Senior Executive Director parallel, with the reputation and networks of Dr Imura and • Executive Director and Secretary General • Director other prominent actors being important. RIKEN’s initial impetus to create the CDB derived from the national govern- Management Planning Division ment’s “Millennium Project”, launched in early 1999. The city Audit Office desired the CDB to be located in the city as its basic principles match the cluster. RIKEN was also convinced that placing the IBRI Institute of Biomedical Research and Innovation CDB in Kobe would enable its research to be commercialized PCK Pro-Cluster Kobe more quickly than elsewhere. TRI Translational Research Informatics Center RDC Research & Development Center for Cell Therapy IMDA, Project Promotion Office for International Medical Device Alliance Eye Center Project Planning Office Source: FBRI brochure 23 Figure 8: Map of Kobe Biomedical Innovation Cluster Source: KBIC 24 Building complementary institutions around the Companies have crowded in, but anchor. At almost the same time when the decision on two big questions remain the CDB’s location was made, the City decided to establish the Institute of Biomedical Research and Innovation (IBRI), A strictly enforced, narrowly targeted subsidy pro- which began building in 2000 and fully opened in April 2003. gram with a strict sunset clause. The primary instrument The CDB’s research campus and the IBRI were then located in for company attraction has been a rent subsidy. Companies proximity to each other, enabling research and clinical trials that move into the cluster can rent lab space and other facili- to take place in rapid succession and frequent interaction. ties at deeply discounted rates of 50% reduction of rent for the Both opened in the period 2002-3. Thereafter, a new RIKEN first three years. The discount applies for 3 years, after which research unit was established in the city every few years, such full market rates apply. By subsidizing access to lab facilities, as the Advanced Institute for Computational Science (AICS) this instrument reduces the risk of moving into the cluster for in 2007, and the Quantitative Biology Center (QBiC) in 2011. biomedical companies. To some extent, this reduces the risk of Then in late 2011, the city moved a general hospital, the free-riding or capture by companies that would have operated Kobe City Medical Center General Hospital, in the cluster. anyway, or having more interest in subsidies than research (a Other hospitals were also set up, such as the Kobe Minimally common risk with subsidy programs). Over fifteen years it has Invasive Cancer Center, Child Chemo House, and Hyogo Pre- attracted over 500 companies, of which 344 companies and fectural Kobe Children’s Hospital. This interplay of advanced organizations (as of September 2017), continue to operate, research institutes and medical facilities was complemented attrition has shown the cluster’s discipline in fact as well as in by a growing number of private companies, from less than theory. While some of those that left did so for other business 20 in 2001 to over 200 by 2010 and over 300 by 2016. These reasons, some could not survive after the subsidy expired. components of the innovation system remain tightly located, That might help mitigate the common risk of cluster programs most along a central axis that runs from RIKEN facilities in propping up weak companies. Companies are physically located the south to Kobe Minimally Invasive Cancer Center. in a dense strip along the main axis of the cluster, and cover a wide range of subsectors. Careful, thorough embedding in local and regional research networks. Today, the cluster is embedded in High-end jobs, if low in total number, and wide regional research networks. In terms of personnel, as one spill-over effects. One critique of the cluster may be the example, the heads of the Riken centers are also professors relatively low number of direct jobs it has created. Even now, at Osaka. The most prominent research breakthrough from this remains at the relatively small number of 8,000 people the cluster, the use of induced pluripotent stem (iPS) cells (~10,000 people if including biomedical firms located in for regenerative retinal treatment. This research has the Seishen). That is only a fraction of Kobe’s total workforce, potential to make a significant impact on vision loss among and a small amount compared to the top clusters in the US. the elderly, and has been led by Dr Masayo Takahashi at the On the other hand, the jobs are in high-wage sectors, which CDB. The latest phases of the research have been conducted makes it possible that they have significant multipliers as a joint effort with the University of Kyoto’s Center for iPS through local consumption and other indirect effects. The Cell Research and Application (CiRA), the CDB, the Kobe cluster has also outperformed the one in Singapore, a city of City Medical Center, and Osaka University Hospital. Such roughly six times the population and with all the levers of research links extend into private companies—for example, a nation state available to it. The FBRI itself claims that its Eli Lilly’s R&D department in Kobe keeps abreast of results total economic value is JPY 161.5 billion (USD ~1.6 billion). in the cluster and, where relevant, discusses them with the If anything, given the momentum in the cluster’s growth, the company’s global R&D network. A regular rhythm of sem- wide gap to clusters in the US might be taken as an indication inars, “open days”, networking events and matchmaking of potential, and a motivation for sustained city priority. services are offered by institutes and companies themselves, as well as facilitated by the arms of the FBRI. This density of Cost and returns, to city and nationally. The total public links was important in the city’s successful bid to host the “K” cost of the cluster is estimated at JP 420 billion (USD ~ 4-5 supercomputer, Japan’s most powerful and one of the top ten billion), which works out to approximately JPY 52 million in the world. The supercomputer, hosted in the AICS in the (~USD 520k) per job. Again, that may seem somewhat high, cluster, serves the complex quantitative biological modeling though this should be seen from the perspective of other conducted by companies there, but has found wider appli- likely uses of such money at the time. Japan in the last few cation as well. For example, it is used by the ASICS Sports decades has repeatedly conducted large infrastructure builds Science center to conduct rapid modelling of complex new with questionable, if much, long-term economic returns.34 chemical compounds. The ability of the supercomputer to The city itself bore only JPY 70 billion of expenditure, and find uses among a wide variety of researchers and companies, there is little evidence that the national share of costs crowd- through the networks built by the cluster and the city more ed out other national funding. At a direct cost to the city of broadly, was one of the primary factors that led the national “location selection” committee to choose Kobe. 34 Reviews of spending in the 1990s showed that national investment in infrastructure had positive but limited and declining effects, and were less effective than local social spending. (Bruckner & Tuladhar, 2010) 25 JPY 9 million (~USD 90k) per job, the returns do not seem Promising research, many small companies—but few paltry. Last, the full long-term benefits of the cluster, includ- promising start-ups. A final point is that the biomedical ing with other parts of the city economy, are still developing. industry is prone to a “superstar economy” type structure. In addition to the examples of ASICS and Eli Lilly described While large numbers of firms may achieve partial success or above, Sysmex and Kawasaki Heavy Industries have recent- fail, firms that achieve a decisive breakthrough in treating ly formed a joint venture to pursue surgical robotics. Both a widespread condition can achieve extraordinary growth. companies long predate the cluster, but in interviews both It would require only one such firm in the Kobe cluster for reported that they would have been unlikely to pursue the JV evaluations of it to change dramatically, both in economic had it not been for the development in the city of so strong a returns and social benefit, and there is good cause to be- concentration of knowledge. lieve that this is not impossible. It is, at the least, possible to identify plausible candidates for such breakthroughs, most Table 3 notably the iPS cell technique currently going through safety Location of the Estimated number of trials. But there is one striking lack in the cluster, and this Bio-pharma clusters direct job creation in 2015 points to a weakness in Kobe more generally—an absence of significant density of startups. There is great opportunity Boston-Cambridge 54,000 -57,000 for the cluster to stimulate the startup ecosystem within San Francisco Bay Area 50,000 Kobe building on its success with large and medium sized New York/New Jersey 77,000 enterprises but many challenges exist. Almost all interview San Diego 46,000 subjects mentioned high barriers in the “risk aversion” and Maryland/DC Metro Area 36,000 “cultural attitudes” among young researchers. It does not appear as if these barriers have been the subject of a concert- Singapore 6,000-7,000 ed or large-scale and aggressive public program. For exam- Source: GEN; Department of Statistics, Singapore 35 ple, available funding and the deep links to academia have not been used to construct a program that would offer the best young researchers both the capital and career security (through guaranteed reabsorption) that might, for some of them, overcome or mitigate risk aversion. Such programs have existed elsewhere—as in Changsha, China, which with a much more limited endowment has attracted world-leading researchers (from diaspora networks) to create startups in the city. While such programs involve risk, and will undoubt- edly require patience over many years, it seems unlikely that the capabilities assembled in the cluster will truly play a role in transforming the city without some similarly bold effort. These challenges are in no way unique to Kobe, or even Japan for that matter, bold action to overcome these challenges may see great return for the cluster, city and country. Source: GEN (Generic Engineering & Biotechnology News), 35 job figures estimated by JLL and crossed checked by GEN using workforce figures: http://www.genengnews.com/the- lists/top-10-us-biopharma-clusters/77900393; Depart- ment of Statistics, Singapore: http://www.tablebuilder.sing- stat.gov.sg/publicfacing/createDataTable.action?refId=1754 26 RISKS, DEFINITE AND UNCERTAIN: 2017- A demographic crisis temporary jobs may at least be an option, but are unlikely to be desirable—it has being reported that they may then leave An aging demographic across Japan. Against this to seek employment in Osaka or Tokyo, where stable and background of impressive and enduring capabilities must be diverse jobs may be considered more plentiful. Kobe city is set the steeping and rising challenge of the city’s demograph- geared toward attractive and creative employment opportuni- ics. All Japan is facing a crisis of aging, and Kobe is not an ties in order to make sure to capture young citizen to the city. exception. It has fairly high number of households without a wage or salary, and its elderly population has increased The allure of Tokyo for marketing and management. disproportionately since the quake. Over the next ten years, Finally, some of the same companies that report a relative those over 65 will grow to 30% of the population, and then ease in attracting technical and research staff to Kobe report reach a full third in 2030.36 It is therefore a persistent and some difficulties in attracting marketing and management daunting challenge of Japanese cities to remain competitive staff away from Tokyo. The capital is often considered to have while ensuring significant tax revenues necessary to meet greater opportunities for advancement in those fields, partic- the welfare and other social service cost of an aging popula- ularly given the concentration of financial services, consult- tion.37 ing and other business services. On aggregate, the city has a net outflow of people in their 20s, amounting to just under a The continued quest for high quality jobs. Underneath thousand per year. Many are young people who had studied the headline data the employment scenario is somewhat in the city and are then moving elsewhere to work, but the mixed. In common with the rest of Japan, many of the city’s inability to retain them may be worrying, particularly jobs being created are not permanent, especially for lower given its demographic profile. Similar to the discussion of value-added roles that do not require specialized technical firm capabilities and the absence of start-ups above, the city skills and experience. Wages for such roles are relatively low here appears to have enduring strengths—in developing, in Japan, compared to some of the peers such as Germany, attracting and retaining high-skilled labor—but alongside France, or the UK. In the Japanese economy overall, much weaknesses to be addressed—in retaining young people, of the increase in net jobs in the last 15 years has been in those out of college, and those seeking permanent jobs or “non-regular”, temporary contracts, through labor agents. jobs in certain creative industries.41 The most recent national data has indicated there may finally be a shift underway to permanent jobs, with those making Attracting youth is at the core of the city’s “Vision up over 60% of the jobs created in 2016.38 The city also 2020”. The city is aware of this, and attracting youth is at faces similar challenge although some data indicates Kobe’s the core of the current mayor’s vision for its future. It aims employment situation is improving. Over the past several to do so by redeveloping the area around the central train years 39 the city’s unemployment rate is much lower than its station (Sannomiya), with the stated aim to develop it into a neighboring metropolitan city.40 For young people who are walkable cultural area (it already has a vibrant culinary sector not highly skilled (even if possessing undergraduate degrees), and nightlife). It is said that a few other cities in the Kansai region have created similar areas in recent years, and many of the shops and buildings do not meet current regulations 36 Population projection by region, National Institute of Pop- for seismic safety. The city can pursue the project because it ulation and Social Security Research has finally regained some fiscal capacity in the last few years, 37 Population projection by region, National Institute of Pop- with the paying down of most of the earthquake-related debt. ulation and Social Security Research 38 (Bloomberg, 2017) The temptations of hard infrastructure, national 39 (Monthly report from the labor bureau of Hyogo prefec- projects and policy fads. Faced with the looming demo- ture, Kobe branch of Bank of Japan, 2017) 40 (Labor survey by the Ministry of Internal Affairs and Com- munications, 2016) (City of Kobe, 2015 [tbc]) 41 27 graphic crisis, and the hard-won restoration of fiscal capacity, A combination of enduring strengths it is natural that the city will turn to urban construction and capital investment. The temptation to default to such hard in- Attractive to high-skilled talent. Kobe has a remarkable frastructure is certainly not unique to Kobe among Japanese set of strengths. It is home to companies with impressive cities, or even to Japanese cities among cities everywhere. capabilities, pursuing innovative, high-tech work in a broad Naturally, some hard infrastructure investment is doubtless range of sectors—from robotics to shoes, pharmaceuticals necessary. But given the high quality of the existing building to haircare. ASICS, for example, is pursuing the equivalent stock, the existing vibrancy of central Kobe, the attractive- of rapid iteration, agile development in a fiercely competitive ness to high end young technical staff, and the contrasting and high technology industry—running shoes (in which Nike absence of start-ups, an emphasis on aggressive human cap- is the world’s largest user of 3D printers, and ASICS itself at ital development and startup programs may be more central times employs the Spring-8 particle accelerator). Proctor & to meeting the city’s future challenges. Another risk is to Gamble’s Kobe R&D office led the development of SK-II, now allow priorities to be set by whatever national programs are one of the company’s single best performing brands. Firms in available, in place of deciding on strategic priorities and seek- the city are installing leading edge 8-axle robotic machinery ing to leverage national support (a common approach among and connecting them to the “industrial internet” to improve Japanese cities). A third and final risk will be to focus less on productivity through big data. Japan’s economy has long been its distinct comparative advantages in favor of more fashion- characterized by a deep bench of specialized, highly capable able sectors. The city has deep strengths in biotech, medical SMEs, and Kansai is particularly known for this. Some of devices, and apparel and design, and few in software devel- these medium sized enterprises are now supplying both the opment. The former call for very different models of start-up type of robotics described above and the services that enable facilitation than the capital-lite model of Silicon Valley. If the them.42 At the high end, there is little evidence of any difficul- city wishes to retain “500 startups”, declaring that it is open ty in recruiting high skilled labor. None of the companies to other sectors will be a useful start, but is unlikely to be interviewed mentioned much if any friction attracting young enough—rather, it will have to modify the funding, content engineers, technicians and researchers to Kobe. If anything, and processes of the program fundamentally. it was the reverse, with several mentioning Kobe as a strong attraction. “We say Kobe and the hands go up”, one R&D head mentioned, described the reaction at recruiting events even in Tokyo itself. 42 Kyoto Seisakusho, which is said to have begun by manufac- turing machines for packaging cigarettes. Strong networks of companies at the frontier. These A need for thorough experimentation, boldness and companies are also forming networks of collaboration at the learning. It is always easier to say what should be avoided technological frontier. Such collaborations are focused on than should be done. The city is at the frontier, and has many two poles: the KBIC, but as if not larger, the Seishin area. The strengths, but for those to be realized it its innovation system latter is built on the area of the mountain cut away to build must become much stronger, or those strengths may fade the new port island, and is home to a concentration of large away. That will require aggressive and likely quite risky pro- firms’ R&D activity. It likely has more activity than in KBIC, grams, focused on soft infrastructure, on two fronts: though more focused on incremental within-company inno- vation and with a lesser observed density of collaboration. • First, supporting the islands of high productivity that ex- The companies that are present also lobby together, and it ist in the city’s big companies and R&D centers to spawn was repeatedly stated that the various chambers of commerce significant, rapidly growing new companies, or to help (local and foreign) wield strong influence. As noted in the in- scale up existing small companies. In doing so the city troduction, in the past such strength may have restricted the will need to approach risk-aversion among researchers city’s development options, and it was reported that “vested not as a natural law, but as an acutely difficult problem interests” have remained prevalent and influential even in re- to be solved through purposeful experimentation. As cent years. Overall, whether in such joint action, in cross-in- illustrative examples, the city might consider forming dustry joint-ventures such as that of Kawasaki or Sysmex, or a partnership with regional universities to guarantee a private-public-academia, as in ASICS’ use of “K” and Spring-8, researcher who leaves to pursue a start-up can return to there appears to be little lack of social capital or the capacity their post, and provide once-off but significant upfront for joint action necessary to combine existing firm-level or housing or other subsidies to the researcher and any institution-level capabilities into network-level capabilities. initial employees. The city might also institute large, but again once-off, competitive cash grants to new start-ups These capabilities are not in software start-ups, but (an approach found to be far more effective than con- hardware, biotech, consumer. The most glaring absence, sultant-heavy “technical assistance”, even in developing however, is that of new firm creation. The absence of start- countries).44 ups noted in the KBC is, if anything, much more severe in the rest of the city’s economy. One large firm active in robotics • Second, supporting the spread of those islands of high reported not even worrying about its best researchers leaving productivity to encompass more of the workforce, par- to create new companies—the prospect seemed too remote. ticularly the young. While vocational training is under ASICS has recently created a fund to invest in startups active responsibility of Hyogo Prefecture and the National in sports-related technology, but the fund is looking in the Government, Kobe City could complement their initia- US and Tokyo to source sufficient opportunities. The compa- tives in the form of workforce development and training ny is considering the establishment of an accelerator linked programs, particularly focused on women and youth. At to the fund, but is more likely to place that accelerator in present, the city has decided not to intervene in voca- Tokyo. The city has undertaken some initiatives, such as a tional labor programs except some training programs “500 startup” program that developed in Silicon Valley for in- for SMC, as these are the responsibility of the National cubating low-capital, short lead time software start-ups. The Ministry of Health, Labor and Welfare . The city also city’s strength in industry meant that non-software compa- believes that there is little necessity to prepare vocation- nies applied to the program, with the question being whether al training with a focus on non-regular young employees, a different type or model might be better suited to the city’s since the young can easily get jobs, and are not willing to strengths. The city also has put together a demonstration obtain training (although young technical workers are project in self-driving cars, another area with at best a thin earning wages below other developed countries’ mini- relationship to the city’s strengths. The city also attempted mum wages in R&D centers in Seishin). to put together a demonstration project in self-driving cars, another area with at best a thin relationship to the city’s Becoming the place where it’s easiest to fail. None of strengths.43 In all, the city may find benefit in looking for the above is a simple task, and to find answers to these chal- sources of ideas not as much to Silicon Valley, and more to lenges the city will need to systematically experiment and cities more like it in the combination of industrial, medical learn.. It has the example of the KBIC, with its network of and consumer capabilities—cities like Boston, or Portland, or public-private-academic institutions and range of programs, combinations thereof. including incipient ones in fostering start-ups. A return to being the “first in Japan to try new things”, and to accept new challenges may provide the necessary catalyst for the next wave of Kobe growth. Kobe may have to become the first Japanese city to try something fundamentally new in the country: somewhere both the young and mid-career come to risk failing at. The project did not get off the ground, but was attempted, 43 according to interviews with officials. 44 (McKenzie, 2015) 29 30 CONCLUSION I n its first century as an open port, from the late 1850s so, especially if the alternative was a difficult confrontation to the period after World War II, Kobe followed a clear with entrenched interests. By the 1980s an already mas- substantive vision. It sought to be the city in Japan most sive land reclamation project was almost doubled in scope, open to the world, and most open to trying the new. From the saddling the city with a huge debt that shadowed it into the 1960s onwards, it shifted to the vision of “Kobe, Inc.”, a city 1990s and hobbled its recovery from the quake. While the that constantly remade itself. After the earthquake, the city very first months of the quake recovery had to be rapid—to chose to pursue a vision of rapid and creative reconstruction. restore some measure of normal life—and some aspects of the reconstruction proceeded deliberately, overall the recon- Along the way the city recorded some notable successes. It struction was to some extent rushed. That resulted in a steep shifted its economic structure into shipbuilding, then into demand fall off after 2000, and may have delayed industrial machinery and advanced materials, then into consumer restructuring, a flood of capital buoying up poor firms as well goods from footwear to agriculture, then into the life scienc- as good ones. The austerity after 2000 then restricted the es. It built deep institutional expertise in one of the hardest city’s freedom to experiment or devise new programs, even as tasks in urban management, the repurposing or upgrading of a demographic crisis drew ever closer. urban areas to unlock and capture implicit value. It deployed many of these strengths to make a rapid and substantial The city today retains strengths with which to combat that recovery from one of the most devastating natural disasters looming crisis. At present it is attempting multiple approach- of the last century, without any demographic tailwind and in es to harness or complement those strengths. Some of its the face of a national economy caught in a “lost decade”. In at attempts are locally generated, a response to the problems it least one neighborhood, the city not only responded substan- has identified. Others are generated more by a sense of what tively to citizen concerns, but harnessed citizen engagement programs are available nationally, constructed by the nation- to execute a significant urban renewal program at a rapid al government’s sense of pressing problems. Still others are pace, with minimal eventual costs, and with enduring value routine active labor market interventions, such as job fairs to all stakeholders. In one sector, life sciences, it has largely and demand-supply matching, or typical accelerator and succeeded where many fail—the initiation of a frontier tech- incubator programs. nology cluster—and has outperformed Singapore, six times its size and more feted. It may, though, still need to build processes or institutions to provide space for and learn from problem-driven itera- There is much that developing world cities can learn from this tion. The city has a quite remarkable set of capabilities, from experience. But there were also cautionary elements. In the design through robotics to biotechnology, and a reputation decades after the 1960s the pursuit of self-remaking, and in- for a highly attractive lifestyle that attracts high-end techni- stitutional self-confidence, seems to have become somewhat cal talent. Through bold vision and being ambitious enough untethered from a sense of scale and proportion. A city that and inclusive enough in its vision for youth development and had carted mountains into the sea could simply keep doing innovation, may then be the key challenges ahead of it. 31 BIBLIOGRAPHY Andrews, M., Pritchett, L., & Woolcock, M. (2017). Building State City of Kobe. (2015 [tbc]). Survey on Young People [title tbc]. Capability: Evidence, Analysis, Action. Oxford University Press. Edgington, D. (2011). Reconstructing Kobe: The geography of crisis and opportunity. UBC Press. Bezdek, B. L. (2009). Putting Community Equity in Community Development: Resident Equity Participation in Urban Rede- Huxley, J. (2009). 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The Singapore Economic Review, the 1990s. Washington, DC: IMF Working Paper. 61(1). City of Kobe. (2011). Hanshin-Awaji Daishinsai No Gaiyou Oyobi Schlunze, R. D. (2007). Spurring the Kansai Economy: Embedding Fukkou (Summary and Reconstruction of the Hanshin-Awa- foreign corporations. Ritsumeikan International Affairs, 5, ji Great Earthquake). Kobe. 17-42. City of Kobe. (2012). The Great Hanshin-Awaji Earthquake Statistics and Restoration Progress. Retrieved from http://www.city. kobe.lg.jp/safety/hanshinawaji/revival/promote/janu- ary.2012.pdf 33 This work is product of the staff of the World Bank Group with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of the World Bank Group, its Board of Executive Directors, or the governments they represent. Nothing herein shall constitute or be considered to be a limitation upon or waive of the privileges and immunities of the World Bank Group, all of which are specifically reserved. The Tokyo Development Learning Center (TDLC) program is a partnership of Japan and the World Bank Group. TDLC supports and facilitates strategic World Bank Group and client country collaboration with select Japanese cities, agencies and partners for joint research, knowledge exchange, capacity building and other activities that develop opportunities to link Japanese and global expertise with specific project-level engagements in developing countries to maximize development impact. Find the main report and the companion papers at www.worldbank.org/competitivecities World Bank Group Social, Urban, Rural and Resilience Global Practice Tokyo Development Learning Center (TDLC) Program