Australian Infrastructure A golden opportunity for Japan Contents

The Japan in the Reiwa Era series 3

One: Introduction 5

Two: The Opportunity 10

Western City Deal This report is part of Three: Western Sydney PwC’s new series and Japan 22 the centrepiece of a “Japan in the Reiwa era”, focusing on what the new era means $ for its people, its 175bn companies, its culture and its trading partners Four: Next steps investment pipeline and the wider world. 31

1 PwC | Australian Infrastructure A golden opportunity for Japan 2 The Japan in the Reiwa Era series

This series of reports is an initiative of PwC Collaborate Populate Imitate with assistance from PwC Japan. Collaboration at the personal, The population is declining in In the same way Japan adopted corporate, national and Japan and is unlikely to reverse, and then surpassed Western The aim of the series is to examine opportunities and obstacles that international level will be vital but the rapid increase in tourist manufacturing systems, there is are likely to emerge for Japan, Australia’s second-largest trading for Japan. numbers ahead of the 2020 potential for it to borrow elements partner and second-largest source of foreign investment, as the Olympics herald a more open of Western systems of corporate country officially enters a new era. Innovate Japan and may sow some seeds governance, organisational culture of support for expansion of skilled and entrepreneurialism while Japan is unique in many ways and the concept of eras is no Innovation is key to Japan migration. retaining unique features of its exception. The passage from one era to another, driven by a change maintaining its standards of living, economy and society that have of Emperor, is accompanied by some unselfconscious reflection and retaining its technological edges Educate underpinned its success to date. a kind of mental stocktake among policy makers, corporate leaders and coping with megatrends such and everyday Japanese alike. a decarbonisation of the economy Globalisation will continue to exert In keeping with that trend, we have adopted a similar approach and digital disruption. its influence on Japan’s education and come up with five key themes we think will be vital in Japan’s system as it strives to make its development in the Reiwa era as the starting point for a series universities more international looking at exploring how these themes may play out in practice. and increase collaboration with institutions abroad.

3 PwC | Australian Infrastructure A golden opportunity for Japan 4 Executive summary

Australia’s $175bn Japan offers all these traits and infrastructure pipeline capabilities as well as a level of commitment, stability, reputation is the kind of offshore and a long-term approach that developed world none of Australia’s other major opportunity that Japanese trade and investment partners can match. Japanese firms will companies and banks take a collaborative approach to have been searching for. opportunities where what “Team Japan” can offer is greater than the For Australia, this is a match made sum of its parts. in heaven - while we have world- leading capability in public-private The recent angst around partnerships and a number of technological investment from large-scale investors, the scale of Chinese telco Huawei, banned the infrastructure task is beyond from supplying to Australia’s 5G our capacities both financially and network, and similar controversies technologically. around Chinese investment in ports and other critical infrastructure, The depth and breadth of Japanese highlight the risks and uncertainties expertise, technology, products and of a dependence on China. services in infrastructure is exactly what’s needed. The US, while the leading investor in Australia, arguably lacks the And this is particularly true of breadth and depth of offering the Western Sydney opportunity, when it comes to financing and where Japan Inc has made its technological solutions. With some intentions clear via the signing of exceptions, the majority of US firms Memorandum of Understanding are unlikely to take the patient, long (MoUs) from Hitachi, Mitsubishi term and collaborative approach of Heavy Industries, Sumitomo Mitsui Japanese firms. Financial Group and Japan’s Urban Renaissance Agency. So all roads point to Japan, but Australia needs to commit and Company executives in Tokyo seize this opportunity and it is are not only conscious of the up to the country’s network of opportunity but actively interested friends of Japan to drive this vital 01 Introduction in getting involved. We know collaboration forward for the good Japanese companies are sitting on of Australia. Y506 trillion ($4.8 trillion) of cash reserves that needs to be invested. At PwC we see our role as Under the country’s overhauled helping shape and structure these corporate governance structures, collaborations for the benefit not firms are expected to use capital only of the firms involved, but more productively. for that of Western Sydney and the rest of the Australian infrastructure opportunity. 5 PwC | Australian Infrastructure A golden opportunity for Japan 6 Sydney is Australia’s global city. A growing metropolis in a country of 25 million people that’s also experiencing rapid The Western Sydney opportunity population growth through a combination of a strong birth is a great opportunity for Japan rate and steady immigration. By 2056, Sydney will be home to more than 8 million to collaborate, the first of the key people, and Australian home to almost 40 million people. themes identified as important for Thanks to geographic and economic drivers, two thirds of that growth is expected to occur in Sydney’s west. Greater the country’s future in the “Japan Western Sydney, which is already larger than Adelaide on a population basis, is set to become more populous than in the Reiwa Era” series. Brisbane. This surge of growth will trigger a host of opportunities for Thus the interlinked developments in Sydney’s west global integrated financial, technological, development represent a unique opportunity. And it is one that and construction players both in Western Sydney and in Japanese companies are uniquely placed to capitalise connecting the region to the rest of the city. on via the innovation and integrated offering that they bring to the table, building on the strong government-to- The redevelopment of Western Sydney, expected to government links between the two countries. feature $50bn of private sector investment in its own right, is part of a broader infrastructure build on Australia’s Japanese firms hold extensive expertise in technology, eastern seaboard that includes $50bn of rail projects in transport infrastructure, construction, utilities, urban Melbourne and another $25bn in Brisbane with rail and development, sustainability and waste and smart city airport projects. design, transport and associated value capture. This expertise, along with the capital and commitment that But it is , already one of the fastest Japan possesses, could be the success factor for the growing urban areas in Australia, that offers the largest and development of Western Sydney. most proximate opportunity for international investors. Leading Japanese firms, including the trading houses, Governments have recognised that it is transport that offer many of these attributes in the one entity. And their will be the key enabler to ensure and foster the region’s ability to form consortia gives another advantage in growth. The construction of the Western Sydney Airport providing an integrated solution. (WSA) and the Western Sydney Aerotropolis (Aerotropolis) will accelerate that growth and a new railway linking The Western Sydney opportunity is one that leading it to Sydney’s metropolitan rail network, will open up companies from Japan have already begun to get new commercial opportunities in a variety of industries involved in. Mitsubishi Heavy Industries, Sumitomo including aviation, aerospace, defence, logistics, advanced Mitsui Financial Group and Hitachi have signed MOUs manufacturing, food export, medical technology, with the NSW Government, flagging their intention to agribusiness, education and tourism. consider investing in the project. As well as a significant industrial opportunity, the Western The Western Sydney opportunity is a great opportunity Parkland City (the region which will be home to the WSA for Japan to collaborate, the first of the key themes and Aerotropolis) presents an opportunity to build on identified as important for the country’s future in the an already-growing education sector, featuring a ring of “Japan in the Reiwa Era” series. It is an opportunity to universities and vocational training facilities. This will be not only attract new offshore investment, but to also supported by residential development, enabling people establish a global partnership for the future benefit of to live in a “30-minute city”, where they can access these both Japan and Australia. new employment and educational offerings. While there are competing investment opportunities for For the first time, a project of this scale is being progressed Japan throughout the developed and developing worlds, in Australia’s global city with all three levels of government there are few - if any- projects with as compelling a (federal, state and local) working in unison towards its mix of attributes in terms of: the attractiveness of the development, contributing a combined $20bn under a investment environment in Australia, underpinned by vision that extends out to at least 2050. an open and relatively buoyant economy; enthusiastic support from all levels of government for the project; and strong economic, governmental and cultural connections between the two countries. Jason Hayes Partner - Japan Practice Leader, Asia region

7 PwC | Australian Infrastructure A golden opportunity for Japan 8 02

The opportunity

The Western Sydney Aerotropolis will be built on 11,200 hectares of land around the planned airport - by comparison, that’s equivalent to 10% of the area of Greater Sydney, or 15% the size of the 23 wards of Tokyo.

9 PwC | Australian Infrastructure A golden opportunity for Japan 10 Population growth Western Greater Western Sydney population is expected to grow to 3 million people by 20361.

The area has one of the fastest population growth Australia Sydney in rates in the developed world and is expected to New absorb two-thirds of future population growth of the Sydney region. The population of the Western South Parkland City is projected to grow from 740,000 in Wales Sydney numbers 2016 to 1.1 million by 2036, and to well over 1.5 million by 2056.3

Economy Housing Greater Western Sydney is already The Western City District to create for the third largest economy in Australia an additional 184,500 dwellings over comprising 8% of GDP. 20 years.4

Sydney, the capital city of NSW, has the Sydney larget population of any city in Australia. Infrastructure pipeline Public sector investment $35 billion5 in Western Sydney Region. $20 billion committed so far.

Key developments Employments Western Sydney Airport and 200,000 forecast under the Western Aerotropolis, Western Parkland City, Sydney City deal in 20 years. Sydney Metro Greater West (formerly known as North-South rail link).

$513 billion $93 billion AAA 8 million+ Airport Aerotropolis Largest economy Pipeline of Credit People call New Commonwealth land Large-scale precinct development opportunities held in Australia infrastructure projects rating South Wales home by a range of private owners including individuals, Aerotropolis Core (1055ha out of 11200 hectares) - private companies, local developers and institutions. state government Five landowners in and around the Aerotropolis with consolidated holdings of over 200 hectares and more than ten owners with holdings of over 100 hectares.

1 www.westernsydney.edu.au/rcegws/rcegws/About/about_greater_western_sydney 2 www.westernsydney.edu.au/rcegws/rcegws/About/about_greater_western_sydney 3 www.greater.sydney/portal/metropolis-three-cities/vision-metropolis-three-cities/western-parkland-city-vision 4 gsc-public-1.s3-ap-southeast-2.amazonaws.com/western-district-plan-0618.pdf 5 business.nab.com.au/western-sydney-australias-third-largest-economy-32773/

11 PwC | Australian Infrastructure A golden opportunity for Japan 12 A Metropolis of three cities Preferred network for Western Sydney

Richmond

Rouse 5 Hill Schofields Hornsby Marsden Park Castle Hill T1 Greater Parramatta M Greater Penrith Penrith T1 T5 St Marys Blacktown Macquarie T1 T1 Park T1 M Harbour CBD Chatswood 1 Westmead T6 T1 Parramatta A Liverpool Rhodes North 2 Sydney T7 Sydney 3 Western Sydney Airport – T2 Prairiewood T5 Olympic Badgerys Creek Aerotropolis Metropolitan centre Park Sydney Fairfield Western T3 Burwood T4 Metropolitan cluster Sydney Airport Bankstown A Bondi Junction Airport- M Bankstown Randwick Badgerys Creek Milperra T3 Green Aerotropolis Liverpool B Square Campbelltown- Areas of influence C Reversby Sydney Macarthur Kogarah Airport 4 T4 Eastern Harbour City T8 T2 Hurstville Port Botany Central River City T5

Western Parkland City 1 Protected natural area Sutherland T8 Greater Sydney area Cronulla Narellan Campbelltown Macarthur

Menangle Park Growth in gross regional product (GRP) from PwC's Geospatial Economic Model (GEM) PREFERRED NETWORK FOR WESTERN SYDNEY

Rail links connecting Western Sydney Rail links connecting to Greater Sydney North Shore, Northern Weighted average GRP growth, FY2014 -18 and the airport T1 & Western Line A Upgrades to the T1 North Shore, Northern Inner West 1 North-South Link via Western Sydney Airport & Western Line to increase capacity T2 The figures consider the 2014 -18 financial & Leppington Line years. Estimates are for weighted average 2 East-West Link via Western Sydney Airport B Upgrades to the T8 Airport & South Line to T3 Bankstown Line growth in GRP across the 2014 -18 period, increase capacity Eastern Suburbs % % % T4 3.87 3.57 2.74 with regional GRP forming the weights. This Extending the Sydney Metro City & & Illawarra Line means that areas with higher GRP make a Rail links supporting growth and the airport C Southwest from Bankstown to Liverpool T5 Cumberland Line greater conribution to the reported average 3 Sydney Metro West Western Sydney Greater Sydney Rest of Australia growth figures. (detailed planning has commenced) Key existing or future transport interchange T6 Carlingford Line (inludes Western Sydney) (not including Greater Figures for the 2019 financial year are not 4 South West Link from Leppington to Western Sydney Infrastructure Plan T7 Olympic Park Line Sydney) the Badgerys Creek Aerotropolis major road projects yet available given primary input data are T8 Airport & South Line not published until November 2019. Extending the Sydney Metro Northwest Growth areas in Western Sydney M 5 from Cudgegong Road to Schofields Future Sydney Metro Growth areas for investigation Western Sydney Airport

13 PwC | Australian Infrastructure A golden opportunity for Japan 14 Western City + Aerotropolis Western Sydney Airport Corporation Authority (WCAA) The government business enterprise Western that is building the airport, which is The agency facilitating the design and delivery of the project. Jointly expected to open in 2026 as a 24-hour established by the NSW and federal curfew-free international airport. Sydney governments. www.wsaco.com.au www.wcaa.sydney explained Western Sydney Aerotropolis Greater Sydney Regional Plan A mixed commercial and residential The key plan underpinning the development surrounding the Western concept of Sydney as a metropolis of Sydney Airport focused around the Greater Western Sydney three cities: the Eastern Harbour City, aerospace and defence, advanced The term for the 12 local government the Central River City (centred around manufacturing, health, tourism, freight areas of Sydney’s west, including Greater Parramatta) and the Western and logistics, agribusiness, education the eight municipal areas within the Parkland City. The plan extends out and research industries. Western City District. to 2056 to shape the development of Sydney in a structured way based on www.westernsydneyairport.gov. the 30-minute city concept. au/sites/default/files/Aerotropolis_ Investor_Guide.pdf www.greater.sydney/metropolis- Western Parkland City of-three-cities The western most of the three cities under the Greater Sydney Regional Rail Links Plan - A Metropolis of Three Cities. Sydney Metro Greater West will bring The first of its scale in Including the established centres of passengers between St Marys (served Western Sydney City Deal Liverpool, Penrith and Campbelltown- by existing metropolitan rail linking it to Australia - with the Macarthur, the Western City District The 2018 deal between the NSW and the CBD), the Aerotropolis and Western Commonwealth developing also includes the Western Sydney federal government and the eight Sydney Airport. A detailed business the airport, the State Airport, the Western Sydney local governments within the Western case is also underway for a link south to Aerotropolis and the regional City District to develop the region and Macarthur, and a developing the Aerotropolis hinterland to the west. establish the Western Parkland City. connecting Leppington to the Airport. and both projects enjoying A future rail connection will provide www.greater.sydney/portal/ www.wscd.sydney and rapid service between the Airport, bipartisan support. metropolis-three-cities/vision- citydeals.infrastructure.gov.au/ Aerotropolis and Parramatta CBD.6 metropolis-three-cities/western- western-sydney parkland-city-vision www.transport.nsw.gov.au/ corridors/nsrl-swrl

6 https://www.westernsydneyairport.gov.au/files/Aerotropolis_Investor_Guide.pdf

15 PwC | Australian Infrastructure A golden opportunity for Japan 16 Coupled with the addition of rail links to Sydney’s Qantas CEO Alan Joyce has committed to using the Foreign capital will likely be essential to deliver a existing metropolitan network, this initiative is WSA for both its core airline and low-cost subsidiary project of this significance, with up to $100bn required. expected to usher in a host of projects, businesses Jetstar’s lack of a curfew opens up the opportunity for Japan’s capacity for financing and the desire to and investment, attracting new residents to what’s now night flights to key Asian capitals arriving in the early diversify beyond its home shores makes it a logical fit. known as the Western Parkland City. morning. It also offers significant potential for air freight Japanese businesses and expertise can play a - an increasingly important industry - as the curfew This could result in a significantly large and carefully large part in the development of this project and disrupts distribution. thought-out urban development, planned by all three the subsequent development of the entire Western levels of government - the first of its scale in Australia - Experienced hands in aviation note that low-cost Parkland City. Global expertise in transport, services, with the Commonwealth developing the airport, the carriers are likely to initially take up the slots at WSA infrastructure, digital technology, innovative utilities, State developing the Aerotropolis and both projects but with no prospect of expansion at Kingsford Smith sustainability and waste solutions will be critical, along enjoying bipartisan support. Airport, full service airlines are likely to follow. with financing and knowledge and innovation on smart cities and value capture in commercial and residential The concept underpinning the development, and the The development also includes an educational real estate. related defining (from a planning perspective) of Sydney component aimed at shifting the academic centre into three distinct cities, is that of a 30-minute city - of gravity in Sydney westwards. A new education where residents have all they need from the perspective campus, a ‘multiversity’, to be jointly developed by of jobs, education, recreation and green spaces within four universities, including the University of NSW, 30 minutes’ journey on public transport. The $150m will be located in the Western Parkland City, with allocated to a liveability program to enhance public a focus on science, technology, engineering and amenity may need to be increased to provide the level of mathematics (STEM). amenity to support these outcomes. Rail links to the Sydney metropolitan rail network have With a timeline reaching the halfway mark of the been planned (and in the case of the first stage of the current century, this is unusually long-term planning $15-$20bn North-South Rail Link, approved), along by Australian standards and is backed by a total of with upgraded road connections, helping to make this Australia is a vibrant aviation market $20 billion in committed investment so far, although a connected development. Ultimately a fast and direct with Sydney as the nation’s key the need for private sector involvement is clear with an link to the Central River City and the Eastern Harbour international gateway and busiest estimate $100 billion of total investment required. City, home to the CBD, will be required. domestic destination. The development will occur across vast areas of land to be released close to established centres in Penrith, But its capacity to continue to play this role Liverpool and Campbelltown. is limited with all takeoff and landing slots at The key commercial driver for the project is without Kingsford Smith Airport filled and the freight and question the WSA (more than 40 years in the making) logistics load that it bears made increasingly and the Aerotropolis, designed to be a booming difficult due to traffic congestion and the costs industrial precinct alongside the airport in the same of operating these operations in an inner urban way we see at airports in Incheon (Seoul), Shanghai, environment. Singapore and Schipol (Amsterdam). Subsequently, the long-planned second gateway While Sydney’s Kingsford Smith Airport (KSA) will for Sydney has now been approved and is being remain the preferred destination for the majority of constructed by the federal government. airlines, a new greenfield airport in a global city is a rare The construction of the first major airport in opportunity, especially one that will be curfew-free (KSA Australia in 50 years is the key catalyst for what currently has a curfew running from 11pm will be the transformation of Sydney’s outer west. to 6am).

17 PwC | Australian Infrastructure A golden opportunity for Japan 18 Tsukuba City

Sam Sangster, CEO Tsukuba is a planned science connection of the Tsukuba Express of the Western City park designated in 2007 that railway line in August 2005 putting is now home to numerous it within 45 minutes of Tokyo. Aerotropolis Authority leading companies, including US “Development went very, very multinational Intel, as well as higher (WCAA), has said slowly until government committed education facilities and schools Tsukuba Science to the Tsukuba express,” he said. centred around a series of zones. City, about 50 km “What has now happened is “Tsukuba is probably the closest to the northeast of about seven cities along (the line) proximity to what we’re thinking the have gone through a massive Tokyo, serves as a aerotropolis core will look like,” Mr regeneration process, not just Sangster told a business lunch in possible blueprint for focused on jobs but hospitals and 2019. “It’s a really good example on the Western Sydney education. It’s a prime example of a global scale.” Aerotropolis. how train connections can make or Tsukuba was built in the 1960s, break development.” but only began to flourish with the

Western Sydney timeline Greater Sydney population expected 10 million passengers to hit 8 million, half a year through Western expected to be living Present time Sydney Airport west of Parramatta Announcement of Western Sydney City deal

2016 2017 2018 2020 2026 2031 2038 2040

Western Sydney Airport Signing of Western opens; 5 million passengers End of lifespan of 20 year Sydney City deal a year Sydney Metro Greater Western Sydney City Deal. West complete 200,000 jobs expected to be created

19 PwC | Australian Infrastructure A golden opportunity for Japan 20 The Aerotropolis, which is at the heart of the commercial development in Western Sydney, has attracted international and local interest.

18 foundation partners - including The project is expected to four leading Japanese companies attract new investors from Japan - have signed MoUs with the NSW and other countries as well as Government, expressing their intent investment domestically. Early to invest in the project. investment is occurring in the form of drug manufacturer Vitex The MoUs are aimed at aligning Pharmaceuticals and NSW the goals of the federal, state universities who have committed to and local governments as well develop a new education institution as the commercial goals of the on the site dedicated to Science, participating companies. Technology, Engineering and The Japanese companies bring Mathematics (STEM) courses. a diverse range of expertise from The United States defence and technology, transport, construction, aerospace company Northrop smart-cities, urban development, Grumman announced it would energy, utilities and financing. In invest $50m technology investment some cases, all these offerings can into the precinct, as well as South be found in a single entity or in a Korea’s Samsung SDS signing up consortium of the kind favoured by as a foundation partner. Japanese industry. PwC’s Michael Bacik said the Japan’s strong government- Japanese involvement was vital to to-government links with both the project. Australia and NSW provide a 03 strong foundation for Japanese “It’s a unique opportunity for these participation. companies to do what they are best at - infrastructure, transport, integrated energy, utilities and sustainability systems, IoT,’’ he said. “It is a good match with the capabilities of team Japan. This is a greenfield site - building a new Western Sydney city from scratch. I don’t think there are many places in the world where this has been attempted in such and Japan close proximity to an existing major global CBD.”

21 PwC | Australian Infrastructure A golden opportunity for Japan 22 While we see Japan as the ideal partner for Australia on this project, there will be work needed in marrying up the differing approaches to The key for Japanese business with Australia following a more Western, transactional approach and Japan applying a corporate leaders is longer-term lens to its involvement. Strong and collaborative partnerships will be to start to proactively essential to success and the many friends of Japan identify potential within Australia, and professional services firms such as PwC, will need to play a role in helping opportunities now drive these joint ventures and bringing key firms and people together. rather than sitting From the Australian side, it will require back and waiting understanding of the need on the Japanese side Foundation for consensus based-decision making. And on the for it to unfold. Japan side, understanding will be required in terms of trusting Australian partners and advisory firms partners on navigating required permitting, regulatory and government relations challenges and collaboration with other local operators. In many ways what’s offered by Differing expectations on the amount of preparatory and investigative work required for joint venture Japanese and Australian companies is partners will also have to be managed. complementary - Australia’s expertise Japan’s tendency towards exhaustive research, in the commissioning, management, encapsulated in the expression ‘ishibashi o tataite and design of infrastructure projects wataru’ (to tap the stones in a bridge as you cross and Japan’s integrated technology it), is something that Australian partners will need to come to terms with, along with understanding solutions and competitive, substantial that trust is built over time through face-to-face and flexible financing and knowledge connections and respectful and considered of the opportunities through value dialogue. However, they should draw comfort from capture in large and transformative the understanding that once a commitment is given, that is absolute and inviolable. transport and infrastructure projects. And from the Japanese side, there will have to be In Japan, the challenge is not in generating some understanding that the time to strike is now, enthusiasm among Japanese companies - as and that without being cavalier, it won’t pay to the series of signed MoUs already shows, major let the perfect be the enemy of the good in terms Japanese firms are clamouring to either get of seizing this opportunity. What might seem like involved or deepen their involvement in the Western undue haste in an Australian partner may be driven Sydney opportunity and in Australian infrastructure. by the knowledge that there will be advantages for first movers. Nor is it in bringing firms together - Japan’s The key for Japanese corporate leaders is to established system of inter-company collaboration start to proactively identify potential opportunities takes care of that. now rather than sitting back and waiting for it to Rather, the challenge is more in helping companies unfold. Commencing field research and starting understand the breadth of the offering they can put discussions, either with potential partners or forward across the full range of business units and external advisors, ensures that firms will be well presenting this in an integrated and cohesive way. placed as the development gathers pace.

23 PwC | Australian Infrastructure A golden opportunity for Japan 24 Japan International

Four Japanese companies Sumitomo Mitsui Banking have signed MoUs with the Corporation Northrop Grumman GE Additive NSW Government to commit in Will offer financing support and The Global defence and aerospace Ehenima vollige ntibus. Agnimo the project. collaboration with Japanese and company has announced plans blam nihilla boratem reicab ium global clients tin the Western for a $50 million investment in an incto ma quodistius, od ullacest, Hitachi Sydney development, such as advanced defence electronics sendes doluptur arum est, ellaute maintenance and sustainment ea conse maior am fugias mo Has proposed assisting with transport, logistics, healthcare, centre. omnist iliquo maxim siti occabo. precinct design and social education, renewable energy or Oluptate con eseriorro velendebis infrastructure services. energy, residential/commercial/community rae venda sum qui ut construction, water and railway development (including concept of BAE Systems systems to defence, digital systems smart cities). BAE Systems is a British DB Schenker and health technology. multinational defence, security, Japan’s Urban Renaissance and aerospace company. Its Iciis vendam, ut es am dit eniti Mitsubishi Heavy Industries Agency headquarters are in London in the omnis et in pedis ut ex estrunt, United Kingdom with operations vendit explatur, ommodi aliam Wants to offer its energy The semi-governmental worldwide. alibus modipit ibustibusam, ulpa management and low carbon organisation has extensive demod ut que cus, nonsequi technologies along with social experience in urban revitalisation, ate dolor rent omniatus re infrastructure expertise. smart city design and energy- efficient building both in Japan and voluptatusItatium ipis rerum lique overseas. Including Tokyo CBD and parunt volorpore etur, od est ut Yokohama portside area. volorem utem con eati sedi.

Australia

Sydney Markets Universities Will establish a presence in the Education is Australia’s largest Aerotropolis to take advantage of services export and a key agri-business, freight and logistics component of plans for the Western opportunities that will develop over Parklands City. The University the next decade and beyond. of Sydney has plans for a global agricultural science hub. Vitex Pharmaceuticals Vice chancellors from the University Announced plans to invest an initial of Newcastle, University of NSW $10 million in a pharmaceutical and University of Wollongong training and research facility to (the NUW Alliance), and Western support about 100 jobs and train Sydney University have agreed up to 200 students at a time. to jointly deliver a world-class higher education institution within the Aerotropolis with a focus on science, technology, engineering and mathematics (STEM) education.

25 PwC | Australian Infrastructure A golden opportunity for Japan 26 “In Western Sydney, it’s not just about the airport, it’s about stimulating the whole Western Sydney economy. It’s about residential, commercial, jobs and services - the whole piece.”

Michael Burns PwC

Japan is already the second-biggest source of “Then there is also an opportunity related to “If you are looking at the key transport projects in The problem in the past with attracting international foreign direct investment in Australia behind the development and O&M of utilities including power, Australia to have involved Japanese companies have investors to projects in Australia has been scale, United States and the pace of that investment water and gas - so that major Japanese utility been the Northwest Rapid Transit and Canberra but now they have big enough projects that they can has grown. companies and also some of major prefectural Metro light rail project. These have been under a design and construct and supply equipment into, government such the Metropolitan Government of public private partnership framework. Mr Burns said. Japan has the financial capacity and willingness Tokyo would also be interested. to become even more involved in investments in In most cases Japanese companies tend to team “We don’t want just financiers or just constructors - we Australia in areas ranging well beyond the traditional “There are also opportunities for real estate and up with local partners who know the local business have those. We have our own real estate development resources sector. industrial park development, particularly from the environment, regulations and culture very well. companies. We need all those rolled into one company perspective of smart cities, energy management Almost always they will have a local partner and that has done all this before. We need players who The key Japanese companies know Australia very system, and distributed generation. sometimes and international partner. have cheap money and we are also looking for high well and are facing pressure to continue the process quality innovative players who offer something better in In recent history, Japanese cities have been A recent example of that in urban development of diversification of earnings outside of Japan to terms of capability than we are able to offer. combat the impact of declining home markets. successfully developed under the transit-oriented was the recent East Quarter 44-storey Docklands development model where stations become nodes for skyscraper being built by LendLease and “And Japan shines above other countries in this Eiji Kamiyabu, Partner, PwC Advisory LLC (PwC development on the back of rapid and Mitsubishi Estate. regard. In Western Sydney, it’s not just about the Japan Group) says the Japanese government has convenient public transport links. airport, it’s about stimulating the whole Western been promoting urban development to corporate PwC’s Michael Burns, an infrastructure and urban That is also the intent with the Western Sydney Sydney economy. It’s about residential, commercial, Japan from the context of promotion of “Quality renewal specialist, said the scope of the Western opportunity, although the links from the Western jobs and services - the whole piece.” Infrastructure” investment and export. Sydney opportunity, and the project pipeline on the Parklands City back to the CBD, are yet to be rest of the eastern seaboard, meant it was essential approved and funded. “Looking at the urbanisation trend globally, I think for Australia to attract integrated infrastructure this is an area that needs to be promoted,’’ he says. Nonetheless Eiji Kamiyabu is confident that there will investors who can build and operate key transport “With respect to Western Sydney, I would think be significant opportunities around the Sydney Metro and commercial developments in the area. Japanese companies interested would include Greater West (formerly known as North South rail key urban development businesses and also large link) for Japanese firms such as railway companies “If you are into rail and airports and the associated construction companies and general contractors. - who have an intimate understanding of what rail road infrastructure, well these are big projects and construction brings to commercial and residential real all three cities are looking at the associated real estate development in terms of value uplift - as well as estate investment that goes with it. That’s also a trading companies. big opportunity. 27 PwC | Australian Infrastructure A golden opportunity for Japan 28 Housing and Key accommodation 185,000 homes are required in the Western Parklands City, and far more sectors throughout Greater Western Sydney, during the course of the project, presenting a substantial development opportunity. Additionally, housing across the rest of Greater Sydney will be required to an even greater scale as Aerospace and defence Food and agriculture Advanced manufacturing the population grows. Northrop Grumman has committed a The same advantages that the The freight export potential, the area The residential market is an area $50m investment in electronic warfare curfew-free airport offers to logistics available and the mix of local and of increasing interest for Japanese equipment and advanced electronics at also apply to food manufacturers international companies present and investors, who have been increasingly the Aerotropolis. Talks have begun with and the agricultural, aquaculture a skilled workforce nearby make active in the market in Australia, the Japanese Aerospace Exploration and horticulture supply chain. the Aerotropolis a key candidate for including Sekisui House, Daiwa House Agency (JAXA) and other national space Rising overseas demand for trusted the establishment of an advanced and constructor Obayashi Group, who agencies. Local space companies and Australian food, particularly from Asia, manufacturing sector. There is already has partnered with commercial and supporting organisations are developing is the key driver of Australia’s growing a significant manufacturing presence in residential builder Built Group. a Space Industry Hub in Sydney that will air freight task, the majority of which the west of Sydney. later relocated to the Aerotropolis. is food. Sydney Markets’ agreement to Health become part of the Aerotropolis’ Tourism Logistics proposed agri-business precinct is With the global medical technology The influx of passengers from the WSA the first of what proponents hope will and pharmaceutical industry predicted will create opportunities in tourism, with A dedicated logistics hub must be at be a cluster of food manufacturing to be worth $3 trillion globally by 2025, this sector currently limited in Greater the centre of the development with this and export companies serving Asia’s this is a priority area for the project. Western Sydney to the Blue Mountains being a central element of successful growing middle class population. Investment in the area’s hospitals as the main attractor. The challenge will Aerotropolis developments in Incheon and medical facilities, along with be the draw of the central and harbour (world’s second largest air cargo hub). access to educational facilities and cities, which have world renowned Currently, Sydney’s Kingsford Smith export markets, provide potential for tourist attractions. To date, the Eastern Airport takes most international air health sector investment building on Harbour City has dominated the tourist freight but unlike Melbourne and other Vitex Pharmaceuticals’ plans for an market, with an expanse of major airports there is no adjacent freight zone education and training base. with forwarders scattered through the attractions, drawing millions of tourists region and heavy congestion a problem. every year into Kingsford Smith Airport.

29 PwC | Australian Infrastructure A golden opportunity for Japan 30 04 Conclusion

31 PwC | Australian Infrastructure A golden opportunity for Japan 32 “For this type of significant and large project probably a significant government to government discussion would help and would help Japanese companies to consider this type of project.”

Eiji Kamiyabu PwC

Sydney’s west has Australian and international of complexity. companies. The decision by the great potential as a But the exact precincts to be government to build the airport developed and the structure of region and the Western - itself the subject of more than it has not been developed yet. 40 years of debate - has helped Sydney Airport and Conceptual plans and details on take out some of the uncertainty. Aerotropolis will be what who is going to lead the project unlocks that promise. Nonetheless, the Aerotropolis need to be clarified. and WSA projects are greenfields “For this type of significant and Conceived under Malcolm projects and therefore participants large project probably a significant Turnbull’s Prime Ministership, the will be facing higher risk than government to government project retains the support of the buying into existing assets. discussion would help and would Morrison government and the PwC’s Eiji Kamiyabu says that’s help Japanese companies to re-election of the NSW Coalition OK as companies such as trading consider this type of project,’’ government Premier has given houses are prepared to tackle Kamiyabu san says. continuity to the early this kind of investment and most state development. While the scale of the development would look to partner with local opportunity and associated Historically, second airports have companies. transport links are one of not always been successful and “The Western Sydney project the project’s attractions, the questions around the need for a is significant in terms of area to complexities in negotiation second airport in Sydney, where be developed and the industry approvals with three levels of the population has been relatively expected to get involved is quite government, securing productive small by global standards, have wide ranging. partnerships with local operators been raised, However, Sydney is and navigating the purchase of growing fast, with an extra 3 million “I think traditional investors such as suitable land parcels are areas inhabitants expected by 2040, trading houses continue to make where global investors are going to which will increase the demand investments in both greenfields need advisory support. for both living space and air travel. and brownfields projects - they This growth is also being seen in just expect different levels of return And with the development in industries which rely on air freight, because of the different risk profile Western Sydney rolling out quickly, placing further pressure on existing and time horizons. firms looking to get involved airport infrastructure. should move quickly. In the next “In general investors would be 6-12 months the structure of Progress so far has been looking for the risk to be shared various elements of the project solid with MoUs signed with - be that with government or with and the likely bidders will begin to 18 companies (including Japan’s local partners.” become clear. Hitachi, Sumitomo Mitsui, The land involved in the Banking Corporation, MHI and Aerotropolis project is a mix of Urban Renaissance Agency) government owned and privately and investment committed from held, which adds another layer

33 PwC | Australian Infrastructure How we can help? What truly differentiates PwC from other advisors is our multi-disciplinary approach, which allows us to provide an integrated service offering across all stages. Our IUR team often works alongside PwC’s best-in-class experts in tax, legal, structuring and corporate finance to assist clients in seeing their projects through from beginning to end.

Overall service provision and management led by your IUR team, bringing along specialist tax, accounting, funding and legal services from PwC as required.

Project planning, business Structuring case and feasibility and Procurement

• Project management • Identify optimal development structure • Project governance • Analyse, advise and prepare delivery and • Strategic direction contracting and procurement plans • Identify opportunities among key market • Advise and prepare optimal tax and corporate structure segments and participants • Prepare and negotiate legal project agreements • Map potential supply chains • Market sounding • Lead feasibility study and site assessment • Project and transaction management • Manage technical and design consultants • Statutory approval management • Demand Modelling • Strategic value capture and land use

Equity raising / Debt raising Partner selection

• Prepare valuation report • Advise on optimal funding structure • Prepare/audit financial model • Advise on optimal debt syndicate including • Run tender process for partners or equity use of export credit agencies • Prepare and negotiate related contracts • Run debt tender process (e.g. shareholder agreement) • Prepare debt term sheets • Negotiate debt package and debt agreements

Due diligence Financial close

• Undertake multi-disciplinary due diligence – covering tax, • Contract negotiations including negotiation with government legal, financial and commercial • Execute all legal agreements (project, debt and equity) • Prepare key take-out and gap analysis, including risks and opinions and mitigates • Understand financial close processes

Post financial close – Delivery

• PMO – Assist with construction and operational • Assist with claims and disputes management • Divestment of assets/ownership • Program and budget management • Refinancing • Prepare management manuals for construction • Review projects for ongoing compliance and capability and operation phases

35 PwC | Australian Infrastructure A golden opportunity for Japan 36 PwC-Australia

Jason Hayes Masao Kamiyama Partner - Japan Practice Leader, Partner - Japan Desk Leader, Asia region Australia [email protected] [email protected]

Michael Burns Toru Aikawa Partner - Infrastructure and Urban Partner - Deals Renewal [email protected] [email protected]

Yasuyuki Kato Kylee Anastasi Director - Deals Partner - Infrastructure and [email protected] Urban Renewal (until 30 April 2020) [email protected]

Michael Bacik Director - Infrastructure and Urban Renewal [email protected]

PwC-Japan

Hiroshi Tomita Yasuyuki Kato Director - PwC Advisory LLC Director - Deals [email protected] [email protected] (after 1 May 2020) www.pwc.com

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