Infrastructure Superstructure

Canada and Japan are finding smart, mutually beneficial ways to bolster their infrastructures

Coming up with a definitive take on infrastructure is like being one of
the proverbial blind men touching that mysterious elephant—most of us grasp only one part of the whole beast.

Hard infrastructure such as bridges, roads, airports, mobile network towers, gas pipelines and railways are highly visible and quantifiable. Soft infrastructure, however, typically isn’t as obvious. The latter includes all the institutions and services that keep a country educated, connected, safe and healthy, economically and environmentally sound, and culturally vibrant. That encompasses schools, banks, parks and playgrounds, theatres, hospitals, police stations, sanitation systems and more.

How these elements are woven together is complex and constantly varying in reach and strength, both within a country and globally. Witness, for instance, the U.S. addition of EV charging stations to its Build Back Better initiative, which is one of a growing number of green infrastructure options being pursued worldwide.

One thing is certain—countries with robust infrastructures tend to thrive; ones that do not typically struggle.

Overlaying all of that is a country’s trade infrastructure, and how quickly and smoothly it transfers goods to trade partners. When products disappear from store shelves, for example, a fractured supply chain is often the cause. The same when shipments of fuel or critical components and other materials dwindle. All it takes is the disruption of some key hard infrastructure element—a flooded road, malfunctioning bridge or port with failing facilities, for example—to hinder the flow. So can shaky or outdated IT infrastructure, or a natural disaster. A pandemic can be just as damaging, because infrastructure doesn’t function without people.

On a wider scale, what’s often overlooked is how the actions of one metaphorical elephant can affect others in the herd. Just look at the havoc Russia is creating with its decision to withhold the energy it produces as punishment for countries protesting its invasion of Ukraine.

Fortunately, the infrastructure interactions between Canada and Japan present a positive model of an alliance between partners with mutually beneficial intentions. In many ways, in fact, the two countries are beginning to create a stable infrastructure superstructure.

Interwoven Interests

Energy security and food security are both acute, long-term concerns for Japan. Much of the infrastructure support that has flowed from Canada to Japan has been in the form of food, fuel and agricultural products such as lumber. In 2013, for example, a $4.8-million investment project called the Canada-Tohoku Reconstruction Project that had federal and provincial governments working alongside Canadian forest product companies helped Tohoku rebuild after the 2011 earthquake and tsunami. The project restored essential soft infrastructure such as community centres, care facilities and kindergartens that were washed away.

Japan is well known for the quality of its infrastructure technology, and for exporting the knowledge of how to duplicate it to other nations. One example is the country’s vast and efficient rail infrastructure—a key economic and infrastructure facet—which consistently ranks at or near the top in the annual Global Competitiveness Index the World Economic Forum produces.

Canada recently sought out that expertise. In June 2022, British Columbia signed a memorandum of understanding with the Japan Overseas Infrastructure Investment Corporation for Transport and Urban Development (JOIN), a Japanese government-owned private entity. The pact specifically targets the province’s railways as well as other infrastructure projects such as ferries, port terminals and airports. JOIN will potentially address design, funding and operational aspects on a growing number of multi-billion-dollar road and public transit infrastructure projects on BC’s horizon, including Metro Vancouver.

Randy Toone president of AltaGas Ltd.’s Midstream division

The knowledge traffic is not all one-way, either. The Canadian Technology Accelerator (CTA) business development program, run by Global Affairs Canada’s Trade Commissioner Service, is intent on exporting prime Canadian tech to Japan.

The CTA runs two Japan-focused cohort programs a year. From January to March 2022, for example, a CTA Japan program offered participants the chance to be part of Japan’s recent smart city/super city spree, designed to spearhead the nation’s Society 5.0 agenda and enhance international competitiveness and economic revival. While multinational Japanese industry leaders such as Toyota, Panasonic, Hitachi, NTT Data and trading houses occupy this space, Japan also wants to invest in new technologies from abroad, as evidenced by the $191 billion in mergers and acquisition spending started in 2019.

The CTA invited Canadian companies focusing on aspects such as urban design and smart technology: Smart homes, smart living, smart energy, and what are known as “digital twins”—including virtual replicas of homes and buildings that mirror real-time activity and conditions. Connectivity and communication technology such as grid networks, AR/VR interfaces, monitoring, access control systems and more are also sought.

The private sector is already linking Canada and Japan in the form of Topaz, the first trans-Pacific subsea fiberoptic cable system to connect Canada and Japan, running from Vancouver via Vancouver Island’s Port Alberni to Ibaraki and Mie prefectures. This Google-led hard and soft infrastructure project is set to go online in 2023 and will ramp up capacity to those regions for an array of network operators in both nations.

Such investments spur a lot of economic activity in the areas involved—exactly the kind of regional revitalization Japan desires. Google’s network infrastructure investments, in fact, will reportedly add a cumulative US$303 billion to Japan’s GDP between 2022 and 2026.

Fueled and Ready

Now for a real-world illustration. Randy Toone, an executive VP at Canada’s AltaGas Ltd. and president of the firm’s Midstream division, describes a market pivot from North America to Asia that his company began a decade ago. “We realized that Canadian energy needed a new market,” he says. “The U.S. was oversaturated, western Canadian producers sending their LPG down there were not getting a good price, and we knew that countries like Japan needed energy.”

That’s what inspired AltaGas to build RIPET—the Ridley Island Propane Export Terminal—on a 24-acre brownfield site near Prince Rupert, British Columbia. Opened in May 2019, RIPET is the first facility of its kind in Canada. The flagship terminal leverages Canadian National Railway’s existing network and North America’s deepest harbour to give Canada’s natural gas producers direct access to other international markets. “Our original target was 40,000 barrels a day, or 1.2 million tonnes a year,” Toone reports. “We’ve actually been able to move closer to 70,000 barrels a day, so say two million tonnes, and that will potentially grow to nearly 2.4 million without much capital investment.”

Japan uses a lot of propane for many things, including heating and cooking, much of which goes to rural areas. AltaGas supplied 14 percent of the LPG Japan imported in 2021 and expects to win more market share. A key here is the longstanding partnership AltaGas has with Japan energy giant Idemitsu Kosan—and most recently Idemitsu’s majority owned Astomos Energy Corporation.

While its volume is still a fraction of the nearly 1.5 million barrels the U.S. ships a day, RIPET has given AltaGas and Canada some crucial tactical advantages. “The U.S. Gulf Coast suppliers have to go through the Panama Canal, or even—due to congestion in the Canal—all the way around Cape Horn,” Toone notes. “We have a fifteen-day shipping advantage and lower freight costs. We’re closer, safer and more secure. There’s also cycle time—they need more ships, and the ships are on the water longer and burning more marine fuel.”

That all translates into a heavy carbon bootprint. Toone further observes that Japan’s infrastructure has long relied on coal, oil and nuclear as its primary sources of power. “Now, though, they’re trying to reduce their carbon footprint and meet a net zero goal by 2050. Our LPG, which is a great transition fuel, can play a key part in that.”

He mentions another cleaner fuel that’s coming which will help—ammonia. “If you mix ammonia into coal, you use less coal, get the same energy, and produce less greenhouse gases.”

According to Toone, a majority of the ammonia being produced in the world today is called “gray ammonia,” largely used for fertilizer, but there’s a big push to make “blue ammonia” using a process that incorporates a carbon capture system. “You’ll have an even lower greenhouse gas emission footprint because you’re putting the CO2 underground,” he says.

The planet is bowing to the realities of climate change, and Canada and Japan both share a powerful commitment to the UN’s Sustainable Development Goals. It’s reassuring to have a solid partner to depend on for resources and knowledge as they wrestle with crucial decisions on infrastructure that can make or break a nation.

Not Just Shovel Ready

The Canada West Foundation (CWF) says Canada needs to up its infrastructure game. Formed half a century ago by a group of leading business philanthropists, this think tank’s mission is to ensure that Canada’s trade infrastructure policies and projects are unified, sustainable and keep the whole country strong.

The think tank’s 2022 report, From Shovel Ready to Shovel Worthy, stresses the need to view Canadian infrastructure projects and their value with a wide-angle lens and an eye to the future.

John Law, the report’s primary author and a recognized leader in Canada’s national and interprovincial transportation policy who has held many senior government and industry positions, had this to say: “We’ve sometimes made investments in construction and capital projects simply because they are ready to go or because they satisfied a political agenda. Some have been very legitimate in sparking construction, employment or stimulating the economy in the short term somehow but without necessarily offering lasting long-term benefits. They’re ‘shovel ready.’

“By contrast,” he continues, “the other part of our report’s title, ‘shovel worthy,’ places the highest priority on projects that offer the best long-term value and return on investment by improving the competitiveness of our trade corridors for the international trade that accounts for two-thirds of Canada’s national income.”

The CWF report notes that a 2021 analysis by the European Court of Auditors found that Canada was the only country reviewed that had no long-term national strategy for major transportation projects. Coordination, planning and performance monitoring were seen as haphazard, and described as “a big risk to future prosperity.”

Less than two decades ago, though, Canada’s Asia-Pacific Gateway and Corridor Initiative (AGCPI) lit up the infrastructure scene. “It was one of the first national infrastructure programs that the federal government brought into play that focused specifically and strategically on improving Canada’s trade and transportation infrastructure, for the purposes of enhancing   trade,” says Carlo Dade, the foundation’s director and coauthor of the report. “There was an awareness that Southeast Asia was going to be looking for avenues to access the North American market. It focused specifically on how we could enhance the fluidity and connectivity of our transportation networks to move products from the West Coast.”

Law, Dade and the Foundation recommend a dual approach that combines AGCPI facets with the best of national plans from abroad. One of the latter is Australia.

“We convened a roundtable of stakeholders in Canada—federal government, provincial, transportation, logistics, business, etc.—and invited Infrastructure Australia to present their model,” Law says. “They had several things that seemed to be missing in Canada that just made sense. Infrastructure Australia, for example, has laid out in legislation what is nationally significant infrastructure by requiring projects to demonstrate a material improvement to national productivity.”

From Shovel Ready to Shovel Worthy cites seven building blocks to a national plan that ensures the shovel-worthiness of Canadian infrastructure projects:

Get everyone on the same page. First, inventory the key corridors of the national trade network, all transportation assets and infrastructure projects that form Canada’s supply chain. Transport Canada has set the pace on this with its Regional Transportation Assessments of the Maritimes, Ontario, Québec and Western Canada, including identifying key international export markets, prospective transportation bottlenecks and an initial inventory of potential infrastructure solutions to address the latter.

Develop criteria of national significance to guide decision-making. Canada needs criteria that clarify and determine project priority to distinguish projects of national significance from those of local, regional or exclusively commercial benefit. Key questions: Does the project at hand enhance trade corridor fluidity? Will it provide benefits beyond local capital improvement? And what’s the potential return on investment?

Institutionalize independent trade advice. Inject private sector input and expertise into national planning models. The UK, Malaysia, Australia and New Zealand already do this to fill intelligence gaps and reinforce the government’s experience with policy and regulatory oversight. This includes consulting on operational challenges, supply chain expertise, construction innovation and cost management, and business requirements.

Develop and maintain a long-term project pipeline. Looking decades ahead is an essential facet of the national infrastructure plans of other countries such as the UK. And according to the International Monetary Fund, due diligence helps ensure that projects will be “shovel worthy.” Having an inventory of projects with established long-term benefits that are ready to go is also a plus during the COVID-19 economic recovery.

Regular assessments to measure progress. Monitoring all this activity through infrastructure audits and criteria-based approval systems is crucial to selecting projects. Public reports should reveal whether a project was a success and pushed the national plan forward. Canada’s first national assessment will be devoted to reporting on the outcomes of the past five years and $71 billion worth of infrastructure projects under the twelve-year Investing in Canada plan.

Upgrade infrastructure intelligence, including forecasting and modelling. Better data leads to more robust intelligence, which helps determine trade infrastructure requirements. Canada’s competitors already employ strategic foresight methods and tools. That includes “horizon scanning” to understand national and global forces shaping the country, trend analysis to predict transportation sector outcomes, and spotting sector-based challenges and opportunities. CWF used this in 2020 to analyse the impact of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership trade agreement on Canadian transportation infrastructure, including which gateways, ports of clearance and major modes of transportation would be affected.

Strategic communications. Signaling the commitment to Canada’s first trade infrastructure plan is critical. Transparency and sharing essential information from working groups across the country about its trade corridor network is just as vital. CWF recommends a single electronic portal for these findings on initiatives such as the Supply Chain Visibility Project and the Gateway Transportation Collaboration Forum.

If Canada does manage to put all these infrastructure blocks together, it may well be able to understand the whole elephant.



Caption: A ship taking on LPG at RIPET—the Ridley Island Propane Export Terminal