The Economist December 4th 2021 Asia 57F
oryearssomelibertarianshave
dreamed of creating floating settle
ments. Fans of “seasteading” talk of
setting up selfgoverning hamlets in
international waters, which would
charge little or no tax. In 2019 Chad
Elwartowski and Supranee Thepdet, an
American and a Thai, spent time living
in a small cabin floating some 12 miles
off Thailand’s coast. The Thai govern
ment objected, towing away their “sea
stead” soon after it was built.
Elsewhere in Asia governments see
value in tempting people to live on
water (but not to govern themselves). In
November officials in Busan, a port in
South Korea, said they planned to offer
space for a floating neighbourhood that
may be built near its shore. The project
is endorsed by un-habitat, a unagen
cy that deals with urbanisation. Itai
Madamombe of Oceanix, the company
that aims to fund and build the floating
platform, says its prototype will cost
around $200m and have room for 300
500 people. In theory, linking lots of
these together could create a district
that could house 10,000.
The idea is to demonstrate a tool
cities might use to adapt to rising sea
levels. Building floating cityblocks is
arguably more sustainable than land
reclamation, which requires masses of
sand. Busan’s authorities seem to think
the project will boost its shipbuilders.
South Korean cities have a history of
backing big infrastructure projects that
may benefit local industry.
One of Oceanix’s founders, Marc
Collins Chen, previously ran a firm
seeking to create a special economic
zone in a Tahitian lagoon. (Some sea
steaders recognise that living in in
ternational waters would be inconve
nient and expensive; better to work
with governments prepared to offer
some autonomy in calm seas close to
shore.) That project failed amid protest
from locals, who did not relish the idea
of an influx of taxavoiders.
There is no plan for residents of
Busan’s floating neighbourhood to
benefit from any special rules. Instead,
the goals are technical: to find out if
floating districts can be comfortable,
affordable and scalable. These lessons
may one day help people who still hope
floating homes can help them escape
the grabbing hand of the state. But not if
governments get there first. SeasteadingAstop in the ocean
The unpromotes floating citiesBusinessinJapanAt the sharp end
I
noue toyosaku moved to Tokyo in 1913
and became an apprentice to a metal
worker. When he struck out on his own a
few years later he found profit making scis
sors for hair salons. The company he
founded, Tokosha, now sells its Joewell
brand scissors in more than 50 countries,
for as much as ¥330,000 ($2,900) a pop.
“We make scissors in the Japanese coun
tryside but export to New York, London
and Paris,” boasts Inoue Kenji, a grandson
of the founder and Tokosha’s current boss.
Companies such as Tokosha, which has
around 50 employees, make up a big share
of Japan’s economy. The country has some
3.6m small and mediumsize enterprises
(smes), which employ 70% of workers (in
Britain the figure is 61%). These firms are
less productive than peers in other wealthy
places. The gap between the labour pro
ductivity of Japan’s smes and its bigger
companies is greater than the average in
the oecd, a club of rich countries.
In the coming years even the better
small firms may face a reckoning. Hun
dreds of thousands of profitable business
es responsible for millions of jobs risk
shutting down because their ageing own
ers cannot find successors. Consolidation
would make smes more spritely, and save
good ones from closing needlessly. But ef
forts to encourage it are going slowly.
Japan’s small businesses are often fam
ilyrun. But families have fewer children
than they did in the past, and fewer of them
are excited about inheriting the family
trade. In 2000 some 80% of leadership
changes at smes involved one family member handing control to another; now it is
only 34%. Committing to take over the
family business can require youngsters to
abandon dreams of city life to toil for years
at their parents’ feet. “Being a successor is
lonely,” says Suzuki Hiroaki, who this year
won a business competition that the gov
ernment runs for them. “There are con
flicts with family members, with fathers.”
Though mergers are becoming more
common, many business owners remain
loth to sell to competitors or foreigners.
Getting all the decisionmakers in a family
to agree to the terms of a sale is difficult,
says Tsunoda Michie of Sapporo Universi
ty: “Many miss the chance to sell, and so
many profitable companies close.” Some
60% of the 50,000 or so smes that closed
down last year were in the black when they
shut. Researchers at the International
Monetary Fund and Japan’s Research Insti
tute of Economy, Trade and Industry argue
that these closures also increase the likeli
hood of their suppliers and buyers shut
ting their doors—a domino effect with
macroeconomic implications, especially
in rural areas.
As their owners age, Japan’s small firms
may start to lose their dynamism. In 2000
some 21% of smebosses were 65 or older.
By 2020 it was 42% (see chart). Research
suggests that Japanese firms with older
managers see sales and profits grow at a
slower pace than those with younger ones.
Older managers are less likely to seek entry
into new business fields, less likely to
make capital investments and less likely to
foster a corporate culture that encourages
trial and error.
Government policies have not helped.TOKYO
Japan’s small companies lack spark—andsuccessorsClosing timeHanging around
Japan, bosses of small and medium-sized
enterprises, % by age groupSource: Tokyo Shoko Research2520151050
70- 80+
7460-
6450-
5440-
4430-
3425-
29202020 52005 20 02000