NR/2000 - 31
October 27, 2000
Overseas Economic Cooperation Operation
JBIC FY 2000 SURVEY
JAPANESE FOREIGN DIRECT INVESTMENT
- Japanese Manufacturing Companies Show Intention to Expand Overseas Business Operations as They Continue Domestic and International Management Reformation at Brisk Pace -
Japan Bank For International Cooperation (Governor: Hiroshi Yasuda) surveyed the trend of foreign direct investment by Japanese manufacturers (valid returns: 469 companies, effective response rate: 59.3%) and published the result in English today.
The purpose of this survey is to identify the current and future trends of foreign direct investment (FDI) activities including overseas business operations by Japanese manufacturing companies. This year's survey, taken over from the former EXIM Japan, was the twelfth of an annual series that began in 1989.
This year's survey examines the medium-term prospect of Japanese manufacturing companies' overseas business operations through FDI. As a special topic, this survey also focuses on "efforts to restructure overseas business operations" and the "introduction of IT for overseas business operations".
- 1. The Number One priority issue is to "Review and strengthen management methods (establishing procedures such as new financial indicators or operating performance evaluation standards)." (Refer to the attached material, Page 5)
As Japanese manufacturing companies devote themselves to restructuring their existing businesses, the Number One priority issue for their domestic and foreign business operations is to "review and strengthen management methods (establishing procedures such as new financial indicators or operating performance evaluation standards)". This is followed in importance by "review and improvement of the efficiency of group management (sell or spin-off a unit of existing businesses, etc.)" and "acquire business resources to strengthen the principal business (acquisitions, alliances, mergers, etc.)".
- 2. Despite low profitability, an improvement can be seen through evaluation of satisfaction with profitability. (Refer to the attached material, Page 8)
On the whole, evaluations of Japanese manufacturing companies' satisfaction with the profitability of overseas business operations through FDI are at a comparatively low level. Although depressed operating performance was seen in the results of the prior fiscal year survey, operating performance has improved moderately in the current fiscal year survey results.
- 3. Overseas business operations through FDI projected to be strengthened and expanded over the medium term (next three years). (Refer to the attached material, Page 7)
As for their medium-term (next three years) outlook regarding future overseas business operations, 54.5% of the companies that responded to the survey answered that they "will strengthen or expand overseas business operations". Japanese manufacturing companies are expected to expand overseas business operations, especially in sectors such as automobiles, electrical equipment and electronics.
- 4. Overseas business operations through FDI aimed at improving evaluations of satisfaction with profitability. (Refer to the attached material, Page 9 - 11)
As international competition grows increasingly intense, Japanese manufacturing companies must further improve the efficiency of overseas business operations. The tendency for overseas business operations and orientations to differ greatly depending upon each region will continue to grow stronger in the future.
･In the EU, where relatively slack conditions with respect to the evaluation of satisfaction with profitability will continue, the most pressing issue has become "recovery from depressed operating conditions as quickly as possible by restructuring existing businesses in the region".
･In North America, where renewed, strong expectations for a promising market have emerged, the direction will be to "continue restructuring existing businesses in the region and qualitatively strengthen and expand business operations".
･"Qualitative enhancement based on restructuring of existing businesses in the same manner as in North America, and a preparatory stance aimed at expanding business size" can be seen for the ASEAN4, which are recovering from the Asian economic crisis.
･Despite the fact that local business operations is not so easy, Japanese manufacturing companies foresee the potential of a future market in China. The orientation of these companies is to "move quickly to restructure existing businesses in the region, and expand the size of FDI by strengthening and expanding business operations, including new businesses".
- 5. For overseas business operations through FDI, IT introduction is gradually proceeding. (Refer to the attached material, Page 13,14)
The introduction of IT for overseas business operations will continue to proceed gradually. Companies with a high level of satisfaction in their evaluation of profitability are addressing this trend relatively early, compared to companies with a low level of satisfaction. Looked at by main regions, the introduction of IT for business in North America is proceeded at the fastest pace, followed in turn by Europe and Asia. The largest number of respondent companies said "management and control (accounting, etc.)" is the area where they are putting IT to practical use. Other areas for IT investment include "sales" and "information gathering".
- 6. Promising destinations for overseas business operations through FDI over the medium term (next three years). (Refer to the attached material, Page 16)
The largest number of respondent companies (242 companies) said they consider China to be the most promising destination for overseas business operations through FDI over the medium-term (next three years). This was followed by the U.S. (154 companies) and Thailand (88 companies). Numerous problems and issues confront business operations in China, but the number of respondent companies that see potential there rose substantially (Fiscal 1999 survey: 153 companies -> current fiscal year survey: 242 companies), with 126 companies answering they will "actively advance into the market in the future while utilizing existing bases", and 57 companies saying they will "actively advance into the market with new investment".
(See Appendix for details.)