**4. Cooperation for industrial human resource development led by the private sector through public-private partnerships**

Although we have reviewed government-led cooperation for industrial human resource development, the Japanese private sector has also contributed significantly. Since the 1950s, various organizations have supported the development of industrial human resources for the private sector.

This section focuses on the training programs conducted by AOTS to meet the private sector's human resource development needs. AOTS was established in 1959, with the approval of MITI, to respond to the Japan Machinery Federation's request to provide training programs for overseas engineers that would contribute to increasing exports of Japanese products and the overseas expansion of Japanese businesses.

We focus on AOTS's technical training programs and management training programs, which are government subsidized. The technical training programs are conducted at parent companies in Japan, inviting participation by employees of foreign companies such as overseas representative offices, venture companies, and technology partners. The programs (which last 3 to 4 months on average) have been implemented for over 50 years since AOTS was established. The programs consist of general orientation courses (such as introducing and teaching Japanese language and culture) at the AOTS training center, followed by specialized technical training provided by Japanese host companies whose expertise matches the demands of the trainees.

Management training programs (each lasting about 2 weeks) were initiated in 1977, teaching Japanese-style management and administration skills at one of the AOTS training centers. Three-fourths of the companies participating in the management training program have been non-Japanese. They apply to the program through the AOTS Alumni Association in each country.

#### **4.1 Trends of AOTS assistance**

To analyze trends in AOTS training projects, we use data on the number of trainees in technical training programs and management training programs. The numbers of trainees for the two training programs are combined to compare regional and industrial trends. We use the same categories of region and industry as in the previous section on JICA's projects.

#### *4.1.1 Target regions*

Asia as a whole has almost always accounted for over 70% of all trainees participating in AOTS programs. In particular, Southeast Asia and East Asia represent 43 and 28% of the total, respectively. North, Central, and South America also provide a significant proportion of the trainees, but their share is considerably smaller than that of Asia (see **Figure 4**).

*Perspective Chapter: Japan's Government-Led and Private-Sector-Led Cooperation for Industrial... DOI: http://dx.doi.org/10.5772/intechopen.112514*

#### **Figure 4.**

*Number of trainees received by the AOTS (unit: Persons) by region. Source: Compiled by the author using data provided by AOTS.*

While JICA has increased assistance to Africa in recent years, AOTS has continued to concentrate more on Asia throughout the period since the 2000s. In other words, AOTS has not been influenced by global aid trends or Japan's policy contexts as much as JICA. Other factors have been at work, as will be analyzed in the next section.

#### *4.1.2 Target industries*

As with JICA's budget, the manufacturing industry alone provides the largest share of the total number of trainees in AOTS programs, accounting for 66% (see **Figure 5**). Very few come from the agriculture, forestry, and fishery industries, while other industries share 34%. But AOTS places even more emphasis on manufacturing than JICA does. For example, in the category of "Other Industries," JICA provides training

**Figure 5.**

*Breakdown of sectors covered by AOTS training programs. Source: Compiled by the author using data provided by AOTS.*

in skills applicable to various industries, such as business and logistics, but AOTS's training programs for "Other Industries" teach skills more directly related to manufacturing, such as production and quality control.

Manufacturing of transportation equipment accounts for 32% of the total number of AOTS trainees. This category includes automobiles and ships, which were the flagship sectors of Japanese export-oriented manufacturing. For AOTS, the electric and electronic category (30%) represents the manufacturing of automotive accessories and semiconductors, while for JICA, it covers more generally electrical engineering, electronic engineering, and communications engineering.

AOTS has provided more product- and manufacturing-specific training to meet the human resource needs of Japanese private businesses expanding overseas. AOTS training was primarily meant for upgrading skills to meet the needs of the automobile-related sectors among the diverse fields of manufacturing.

#### *4.1.3 Assisted entities*

AOTS has conducted technical training programs from the beginning. It originally launched the training program to meet the growing need for personnel to operate and maintain Japanese machinery as exports increased. Later, as the number of Japanese companies expanding overseas grew, the emphasis on technical training programs shifted to developing human resources capable of manufacturing Japanese products.

The management training program was launched in 1977 to foster intermediate and advanced managers. The main objective of these programs was to develop human resources capable of "Japanese-standard" quality control and management. The target audience has expanded from mid-level employees to senior managers and directors [5] as the number of courses has gradually increased in line with the needs of Japanese businesses.

In the 1980s, management training programs targeting specific countries were initiated. While previous programs had targeted developing countries in general, there was a growing demand to go further and provide training content that took into account each country's specific circumstances. AOTS developed new courses, with a surge in country- and region-specific management training that provided simultaneous translation into the participants' mother tongues.

To summarize AOTS's assistance trends: (1) the strong emphasis has been on Asia, especially Southeast Asia; (2) in the manufacturing industry, especially in the automotive industry, AOTS aims to transfer specific skills directly related to Japanese businesses expanding overseas; and (3) the objectives of technical training programs changed from developing human resources capable of operating and maintaining Japanese machinery to developing those who could actually manufacture products that meet Japanese companies' quality standards. The management training programs also expanded their scope, aiming to develop human resources capable of quality control and management.

#### **4.2 Factors influencing AOTS's assistance**

Since the beginning, AOTS has consistently focused its industrial human resource development efforts on Asia and the automobile-related manufacturing industry. It is evident that the background and purpose of establishing AOTS were to promote

*Perspective Chapter: Japan's Government-Led and Private-Sector-Led Cooperation for Industrial... DOI: http://dx.doi.org/10.5772/intechopen.112514*

the export of Japanese products and the overseas expansion of Japanese businesses. As a result, many of the training programs are aimed at Asia, where many Japanese businesses in the manufacturing sector have advanced.

As mentioned in Section 1, in the 1960s, the Japanese government believed that human resource development in developing countries would contribute to the further expansion of Japanese businesses into overseas markets. Rapid economic growth and government expectations led to a steady increase in trainees at AOTS. In the 1990s, the government's decreasing interest in industrial human resources development reflected the declining attention to TVET found in the international aid trend. This led to a drop in the budget for JICA's technical cooperation projects in this field. On the other hand, AOTS was active in the same period, with the number of trainees growing steadily and new courses being actively developed. In contrast to JICA, which is easily influenced by Japanese policy changes, AOTS has tried to meet the human resource development needs of the private sector without being significantly affected by government interest.

The following graph compares Foreign Direct Investment (FDI) trends in Asia with those of AOTS trainees (**Figure 6**).4 It shows that the number of AOTS trainees follows the FDI trend with a few years' lag. Much of the FDI in Asia has consisted of manufacturers building factories and other facilities and developing related infrastructure. This led local companies to have more opportunities to do business with Japanese companies and to have a greater need for human resource development.

#### **Figure 6.**

*Changes in the number of participants (unit: Persons) in AOTS training programs and the amount of FDI to Asia (unit: Million dollars). Source: Created by the author using data provided by AOTS and JETRO [6].*

<sup>4</sup> In **Figure 6**, the FDI data from 2005 onward could not be reflected in the graph due to the different format of the Japan External Trade Organization (JETRO) [6] data.

In turn, AOTS, which has emphasized the manufacturing industry, implemented training programs that meet those needs.

In the early years, AOTS had the goal of developing human resources capable of operating and maintaining Japanese-made machinery as the volume of machinery exports increased. However, the rapid appreciation of the Japanese yen following the Plaza Accord in 1985 caused production costs in Japan to rise sharply. This led Japanese companies to begin moving their manufacturing bases overseas in search of inexpensive labor. AOTS also shifted its training objectives to developing human resources capable of manufacturing Japanese products. In addition, overseas Japanese businesses began to promote localization after several years of operation, and more companies entrusted the operation of local factories to local people. The need grew for human resources capable of quality control and management based on Japanese standards, and AOTS started management training programs.

Japanese companies have conducted human resource development according to the stage of their overseas expansion. Many of the companies participating in management training programs are not Japanese, but are local to the countries where Japanese companies operate. Also, the demands for management training follow the trend of FDIs with a lag of a few years. This fact suggests that the training needs for Japanese-standard quality control and management gradually increased in local businesses that started working with the Japanese.

AOTS's assistance is also influenced by events affecting the global economy that disrupt FDI. Specifically, the Asian Financial Crisis that began in 1997, the war in Iraq triggered by the terrorist attacks in the United States in 2001, and the collapse of Lehman Brothers in 2008 caused noticeable changes in the number of AOTS trainees. When the global economic situation has caused changes in the activities of Japanese businesses, their human resource development needs have changed accordingly.

Moreover, since AOTS training programs are subsidized by the government and have been conducted in public-private partnerships, we cannot ignore the influence of government budget allocations and policies. For example, the rapid decline in the number of trainees since the late 2000s can be attributed not only to the global financial crisis triggered by the Lehman Shock but also to the reduction of ODA budgets since the late 1990s. The budget-screening policy introduced by the Democratic administration in 2009 and the shift in the METI's priority from large corporations toward SMEs may also have contributed to the decline in the number of trainees.<sup>5</sup>

In summary, while JICA's operation is inseparable from government policy contexts surrounding industrial human resource development, AOTS has prioritized the needs of private businesses as only a private-sector technical cooperation organization can. However, since the training program based on public-private partnerships uses government subsidies, it too is influenced by the policy regarding subsidy amounts and budgets.

<sup>5</sup> Although preferential subsidy rates for SMEs were introduced to support their overseas expansion, the training needs of SMEs for local personnel were not as great as those of large enterprises.

*Perspective Chapter: Japan's Government-Led and Private-Sector-Led Cooperation for Industrial... DOI: http://dx.doi.org/10.5772/intechopen.112514*
