the environment surrounding jbic · surging in emerging market countries. in addition, oligopoly...

JBIC Annual Report 2012

2The Environment Surrounding JBIC

Challenges and Efforts of Three Finance Groups

1 Energy, Natural Resources and Environment Finance Group 24

2 Infrastructure Finance Group 27

3 Industry Finance Group 30

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◉ Oil ● Natural Gas■ Coal◆ Iron Ore▲ Copper✚ Other

Mineral Resources, etc

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Frade Oil Field, Brazil

Purchasing oil product from PDVSA, Venezuela

Oil Sand, CanadaSakhalin I, Russia

Sakhalin II, Russia

Pagardewa Oil Field, Indonesia

En�eld / Vincent Oil Field

Oil & Gas Field, Oman

Advance Payment Loan to ADNOC

Khafji & HoutField

Ohanet Field, Algeri

Kashagan Field, Kazakhstan

BTC PipelineACG Field,Azerbaijan

Norwegian North Sea Oil Field

British North Sea Oil Field

LNG, Qatar

METOR Methanol, Venezuela

Oil & Gas Field, US

Marcellus Shale Gas, US

Cordova Shale Gas, Canada

Curtis LNG

Bayu Undan LNG

PNG LNGTangguh LNG, Indonesia

Kangean Oil & Gas Field, Indonesia

Gas Fields, Malaysia

Tiga LNG, Malaysia

Gorgon LNG

Batu Hijau Mine, IndonesiaPluto LNG

Wheatstone LNG

Cape Lambert Iron Ore Shipping Port West Angeles Mine

Shark Bay Salt Field

Worsley Bauxite Mine &Alumina Re�nery

Rasp Zinc &

Lead Mine

Minerva MineKestrel Mine

Rolleston Mine

Moolarben Mine

Oaky Creek / NCA Mine

Forestation, NewZealand

Tayan Alumina Project, Indonesia

Taganito Nickel Project, Philippine

Advance Payment Loan to VINACOMIN

Assmang Iron, Zinc,Chrome Ore Mine,

South Africa

MOZALAluminum Smelter,

Mozambique

Ambatovy Nickel, Madagascar

Woodchip, Mozambique

Tungsten Mine, Portugal

Kharassan Uranium Mine, Kazakhstan

West Mynkuduk Uranium Mine, Kazakhstan

Neryungri Mine, Russia

Pogo Gold Mine, US

Alouette Aluminium Smelter, Canada

Grande Cache Coal Mine, Canada

Similco Mine, Canada

Drummond Project, Columbia

Bayovar Phosphate Mine, PeruAntamina Mine, PeruCerro Verde Mine, Peru

San Cristobal Zinc Mine, Bolivia

Sierra GordaCopper Mine,

Chile

Promoly Project, ChileEscondida Mine, Chile

Caserones Copper Mine, ChileLos Pelambres Mine, Chile

Esperanza Mine, Chile

AMAZON Alumina Re�nery / Aluminum Smelter, Brazil

CENIBRA Pulp, Brazil

NAMISA Mine, Brazil

MUSA Mine, Brazil

Logistical Support for Iron Ore Transportation, Brazil

Eagle Ford Shale Oil, US

The Environment Surrounding JBIC

Challenges and

Efforts o

f Three Finance Gro

ups

1. Energy, Natural Resources and Environm

ent Finance Group

2

Energy, Natural Resources and Environment Finance Group1·

Increasingly Intense Scramble for Acquiring ResourcesForJapan,scarcelyendowedwithresources,itisimperativeto secure stable supplies of overseas energy and mineralresources,ifitistomaintainandmakeprogressoneconomicactivity. JBIC hasbeen supporting Japanese companies fordeveloping, acquiring interests in and importing overseasnaturalresourcesinfinancialterms,therebycontributingtosecuringtheirstablesuppliestoJapan. Especiallyinrecentyears,economicgrowthinChinaandotheremergingmarketcountrieshavemadeit increasinglytoughtoengageinglobalcompetitionforacquiringenergyandmineral resources.This isposingachallengeto Japanonhowtoobtainstableandaffordableenergyandmineralresources.

Rising Risk on the Demand and Supply SidesGrowingdemand forenergy inemergingmarket countrieshasexertedsignificantimpactsontheglobaldemand-supplybalanceofenergy.Inparticular,energyconsumptionintheAsia and Oceania region, which includes China, India andSoutheastAsia,showmuchhighergrowthratesthanotherregions. Oilhasasignificantgeopoliticalriskfactorinviewofthefactthatabout50%ofitsreservesareconcentratedintheMiddleEast.Japan’sdependenceofcrudeoilonthisregiondeclinedatonetime,buthasnowincreasedtomorethan80%ofitsimports.ThisisattributabletorisingdemandforoilinAsiancountries.Asthesecountrieshavechanneledthe

previouslyexportedoiltomeetoildemandintheirdomesticmarkets,theiroilexportstoJapanhavedecreased. ThesituationinwhichJapanprocuresliquefiednaturalgas(LNG)hasbeenchangingatafastpaceinrecentyears.Untilabout2000, JapanhadapredominantshareinglobalLNGtransactions,butitssharehasdiminishedtoabout30%today.AsChinaandIndiahavebeenrapidlyincreasingtheimportsofLNG,weexpecttheprospectofsharply-climbingdemandwellintothefuture.InJapan,whichhasfounditverydifficultto supplyelectricity fromnuclearpower stationsafter theGreatEastJapanEarthquake,LNGisincreasingitspresenceasamajor sourceofenergy,asnaturalgasproduces lessgreenhousegas(GHG)emissionsrelativetooil.Inaccordancewiththesituationabove,thesuppliercountriesarechangingaswell.IndonesiaandMalaysiahavebeentraditionalsuppli-ersofLNGtoJapan.Sincebothcountrieshavecontinuedtopostremarkablegrowth,theyhavefoundasustainedincreaseindomesticdemandforLNG.Asaresult,itforcedthemtocutbackLNGexportstoJapan. Inthemineralresourceminingsector,demandhasbeensurginginemergingmarketcountries.Inaddition,oligopolyhassignificantlydisturbedthedemand-supplybalance.Forexample, in the ironore industry the topthreecompaniesaccountformorethanhalfofworldseabornetradeinironore,andthetopfourcoalcompanieshavecreatedanoligopolyintheworldmarket.Furthermore,increasedexportsinresource-richAustraliahavecreatedportcongestion,forcingshipstowaitinline.Thisisfurthertighteningresourcesuppliesand,as

AsofJuly312012

Major Projects Over the Last 10 Years (Amountofloanfornaturalresourceprojects(signed):Approx$51Billion)

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ent Finance Group

aresult,thepricesofaffectedmineralresourcesaresoaring. Inthisway,variousrisksareincreasingbothonthedemandandsupplysides.ThismeansthatJapanesecompanieshaveaneedtodiversifytheiroverseasinvestments.JBICwillconductoperationsbyfocusingmorethaneveronstrengtheningrela-tionswithresource-endowedcountriesandsuppliers.

High Expectations on Natural Gas as Cleaner EnergyEspecially,JBICisstrivingtoobtainnaturalgasbydesignatingitasthetoppriority.WhathappenedattheFukushimaDai-ichiNuclearPlantletusconsiderthatastablesupplyofelectricpowerisanurgentissuefortheJapanesepeople’slivesandeconomic activities. As mentioned above, there are risingexpectationsforsupportingastableandaffordablesupplyofnaturalgasasamajorsourceofpresentenergy. Respondingtotheseexpectations,JBICisactivelysupport-ingacquisitionofinterestsanddevelopmentofLNG-relatedprojectsaswellastheimportofLNG. Amidthesedevelopments,JBICisalsosupportingacquisi-tionofinterestsin“unconventional”naturalgas,suchasshalegasandcoalbedmethane(CBM)1.In2011,JBICsupportedthefundingofJapanesecompaniesforacquiringinterestsinashalegasfield,itsdevelopmentandproductioninCanadaand for acquiring interests in anddevelopmentofCBM inQueensland,Australia,aswellastheliquefyingCBMintoLNG. Further, JBIC is making efforts to strengthen coopera-tivetieswithnaturalgas-producingcountries.InJune2011,JBIC signed a memorandum of understanding (MOU) withBPMIGAS,agovernmentagencyinIndonesiaforoverseeingandcontrollingupstreamoilandgasbusinessactivities,forthepurposeofbuildingabusinessmodeltoencouragefur-therexpansionofthetotalcapacityofnaturalgassupplyinIndonesiaandpromotinggas-relatedbusinessopportunitiesforJapanesecompanies.

Risk Diversification with Multiple Sources to Purchase Resources

Forsecuringastablesupplyofresources,itisimportanttodiversifyriskswithmultiplesourcestopurchaseresources. Firstly, geographical diversification needs to be consid-ered.Asdescribedabove,JapanisheavilydependentontheMiddleEastforoil.Thus,itshouldurgentlyexploreoilsupplysourcesfromoutsidetheMiddleEastanddiversifythemintheMiddleEastregion.RegardingLNG,JBIChasmadeloanstotheSakhalinIIProjectandLNGprojectsinPapuaNewGuineaandAustralia,etc.,therebycontributingtodiversificationofJapan’sLNGsupplysources.Regardingcoal,JBICprovidedaloanforthethermalcoaldevelopmentprojectinColombiafromwhichJapanhashardlyimportedcoal.Furthermore,JBIChasalsodiversifiedthetargetingcountriesbyapproachingtoMozambiqueandMongoliawhichareexpectedtopoten-tiallybecomenewmajorsuppliers.Inthesecountries,amajorthemeistomeettheneedsofthesecountrieswithproposals

thatdrawonJapanesetechnologyandpreviousperformance. Secondly,weshouldmakeuseoftheun-tapped“uncon-ventional” resources to date. In this area, development isunderwayforextra-heavycrudeoilinVenezuela,shalegasandshaleoilintheUnitedStates(U.S.)andothercountries.Forshalegas,JBIChasalreadyprovidedloanstoprojectsintheU.S.andCanada,and,forshaleoil,aloanwasmadetoaU.S.project.

Strengthening Multilayered Relations with Resource-Endowed Countries

Itisalsoimportanttostrengthenmultilayeredandstrategicrelationswith the resource-endowedcountrieswithwhichJapanhasbuiltgood,stablerelations. In recent years, oil-producing countries in the MiddleEasthavebeenpushingforwarddiversificationofindustriesandinfrastructuredevelopmentintheircountriesbasedonabundantrevenuesgeneratedbyhighoilprices.Theyhavelaidtheireyesonoverseasgovernmentsandbusinesscom-paniesinseekingsupportfortransplantingtechnologiesforthesepurposes.Inthiscontext,economicrelationsbetweentheMiddleEastandJapanhaveshiftedfromthetraditional,simplerelationshipbetweentheoilconsumersandsuppliersto“multilayered”tiesbysupportingindustrialdiversificationthrough cooperation for energy-related and infrastructuredevelopmentprojects aswell as joint investments in thirdcountries. Forexample,inSaudiArabia,JBICprovided,inMarch2006,aloaninprojectfinancing2tooneoftheworld’slargestpetro-chemicalplantsbeingplannedbySaudiArabianOilCompany(Saudi Aramco), a state-owned enterprise, by cooperatingwithemploymentcreationandindustrialpromotionwiththeproductionofhighvalue-addedproducts. FortheLNGprojectinQatar,JBIChassupportedanumberofkeylinksinformingtheLNGsupplychain,suchasnaturalgasfielddevelopment,LNGplantconstructionandloading

Thezinc,leadandsilvermineprojectinBoliviainwhichaJapanesecompanypar-ticipated.

1. Coalbedmethane(CBM)ismethaneextractedfromandnearcoalbeds.It isdrawingattentionalongwithshalegasas“unconventional”naturalgas.

2. Projectfinanceisafinancingstructurethatreliesprimarilyonthecashflowgener-atedbytheprojectforrepayment.Itisusedforfinancinglargeprojectsinsuchsectorsaspowergenerationandoil,gasorothernaturalresourcedevelopment.

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2ChinaandotherChinesepolicy-basedfinancinginstitutions,asitconsiderssecuringthechannelofexchanginginformationwithrespecttoindi-vidualprojectsandpolicytrendandexploringthepossibilityofcofinancingprojects.

Developing Resources as a Package DealSofar, Japanhasprocuredvariousresourcesas one of the leading buyers in the world.As China and other emerging countries areproceeding to engage in global competitiontoacquireresourcesagainstthebackdropofvigorouslyincreasingdemand,Japan’srelativepositionhasdeclined.

Underthesecircumstances,inordertohavesecureandstableaccesstovariousresources,JBICshouldnotconfineitself to supporting acquisition of interests and long-termdeliverycontractsbyJapanesecompanies.Rather,likeitsap-proachtoMiddleEasternoilcountries,etc.,itshouldproposecomprehensiveresourcedevelopment,whichencompassesthedevelopmentof infrastructure, suchas railways, roads,portsandelectricpowersystems,andincreasinglyadvancedindustries,etc., inaccordancewith theneedsof individualcountries.Althoughthisisonlyindirectlylinkedtoresourcedevelopment,whenJapanesecompaniesprovidetechnologiesforhighlyefficientcoal-firedpowergenerationandreductioninenvironmentalimpact,theycouldcontributetopowerde-velopmentandenvironmentalmeasuresinresource-endowedcountries. And these may well work as important factorsconducivetotheirfavorablepositioninacquiringinterestsinresourcesandpricenegotiation. JBICwillcontinuetoprovidefinancialsupportinvarioussectorsandthematicareas,includingsupportforinfrastructuredevelopmentinresource-endowedcountries,therebycontrib-utingtosecuringstablesuppliesofresourcesindispensableforthesounddevelopmentoftheJapaneseeconomy.

Efforts to GREEN OperationsDuringFY2011,JBICprovidedloanstoICICIBankLtd.BancoNacional de Comercio Exterior, S.N.C. (BANCOMEXT) andBancoCentroamericanodeIntegraciónEconómica(BCIE)forsupportingrenewableenergyandenergyefficiencyimprove-mentprojectsinIndia,Mexico,andtheLatinAmericaandtheCaribbeanregioninaneffortforGlobalactionforReconcilingEconomicgrowthandENvironmentalpreservation(GREEN)operations( see p. 69 for details of this initiative).Theseloansareexpectedtocontributetoreductioningreenhousegas(GHG)emissionsand,inevitably,helpthediffusionofJapan’sadvancedenvironmentaltechnologiesinthesecountriesandregions.( For JBIC’s efforts in the environment sector, see p. 53–55.)

portdevelopment,sincetheearlystageofitsdevelopmentinthe1980s.LNGproducedinQatarnowaccountsfor17%ofJapan’stotalimportofLNG.Atthesametime,JapanisthedestinationofthelargestvolumeofLNGexportfromQatar.Thisisagoodexampleofsecuringastable,long-termsupplyofLNGtoJapan,atthesametime,contributingtostrength-ening the relationshipbetween the two countries throughcontinuouscooperationintheworldLNGsupplychain. Australiaalsoaccountsforabout20%shareofLNG,60%of coal and 70% of iron ore procured by Japan. Given itsgeographicalproximity,politicalstabilityandabundanceofvariousresources,AustraliaisoneofthecountriesincreasinglyimportanttoJapanasaresourcesupplysource.JBIChasbuiltfavorablerelationshipswithitsresourcedevelopersthroughcontinuedfinancingovertheyears.Asdescribedabove,JBICsupportedunconventionalLNGprojectswhereCBMisusedforasarawmaterialandacquisitionofinterestsincoalbyJapanesecompanies.Further, JBICcultivatedrelationswithstategovernmentsbysigningMOUsoncomprehensivestrate-gicpartnershipswiththeWesternAustralianGovernmentandQueenslandGovernment.TheseMOUscontainanexchangeof information on investments Japanese businesses couldmakeandtheholdingofperiodicconsultations.Thus theyareexpectedtoleadtolayingthegroundworkforJapanesebusinessdevelopment. Inotheractivities,JBICsignedaMOUwiththeMinistryofFinanceofMongoliaforenhancingfinancialcooperation,in-cludingprovisionofcreditlines,withMongoliawheremineralresources,suchascoalandcopper,areabundant. ForTurkey,whichhasbecomeincreasinglyimportantinrecent years with its geopolitical location, bordering withMiddleEastern,NIS(NewIndependentStates)andEastEu-ropeancountries,JBICguaranteeditsprivatelyplacedSamuraibondissuetosupportthecountry’sefforttodiversifyfundingsources. In addition, although Japan and China tend to be in acompetitive relationship in theareaof resources, JBIChasbeenbuilding up relationswith the Export-Import Bankof

TheLNGprojectinQatarinwhichaJapanesecompanyparticipated.

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withrivalcompaniesinothercountries,especiallythoseinfast-growingemergingmarketcountries.Inaddition,thehostcountrieshavecometoexpect infrastructuredevelopmentasacomprehensivepackagedealthatincludescooperationinperipheralareas,OperationandMaintenance (O&M)offacilitiesandrelevanthumanresourcedevelopment. ThusamajorthemeforJapanhasemerged:tomeettheneedstoahostcountrybyenergeticallyproposingan“inte-gratedinfrastructuresystem”inwhichtheprojectparticipantsget involved in thecomprehensiveworkassociatedwithagiveninfrastructureprojectbyprovidingadvancedtechnologyandknowhowasthecoreoftheirbusiness.

Strengthening the Overseas Deployment of Integrated Infrastructure Systems

TheJapanesegovernmentespousedinits“NewGrowthStrat-egy:BlueprintforRevitalizingJapan”decidedbytheCabinetinJune2010thepromotionoftheoverseasdeploymentofinte-gratedinfrastructuresystemssothatJapanachieveseconomicgrowthtogetherwithothercountries,especiallywithAsiancountries.Lateron,the“RebirthofJapan:AComprehensiveStrategy”decidedbytheCabinetinJuly2012embracedandexplicitlystatedthatitplacedhighpriorityonthepromotion

Recentyearshaveseenasharpincreaseindemandforservicesprovided by infrastructure, in-cludingelectricpowersystems,railways, roads,ports,airports,water supply and seweragesystems, in Asian and otherdeveloping countries register-ing high economic growth. Indeveloped countries, there isagrowingmomentumtomeetrisingdemandforreplacingan-tiquatedinfrastructurefacilities;developing new railway net-works;andgeneratingelectricitybyharnessingrenewableenergytoaddressenvironmentalprob-lems and globalwarming, andinstallingsmartgrids,etc. “TheNewGrowthStrategy:Blueprintfor Revitalizing Japan” (Cabinetdecisionin June2010)andthe“RebirthofJapan:AComprehen-siveStrategy”(Cabinetdecisionin July2012)encompassed thepromotionof theoverseasdeploymentofintegratedinfrastructuresystemsasastrategyformakingsuchenormousdemandforinfrastructureleadtoJapan’seconomicgrowth. JBICiscommittedtoactivesupportforJapanesecompa-niesparticipatinginvariousoverseasinfrastructureprojectsinsuchsectorsaspower,railway,port,road,waterandsew-eragesystemoperation,bydrawingon itsexperience inarangeofoverseasinfrastructureprojectsandbymakinguseofrelationshipsofmutualtrustcultivatedovertheyearswiththehostcountrygovernments.

Soaring Overseas Demand for Infrastructure ManyAsiancountrieshavingcloseeconomictieswithJapanhavebeenpostingsignificanteconomicgrowth.Demandforinfrastructure development in these countries is projectedtoreachatotalof$8trillionduringtheperiodof2010-20.1InEurope, investment in infrastructure isalsoprojected to€1.5–2.0 trillion (about$1.9–2.6 trillion2) inadopting smartgrids and renovating or newly building power generationfacilities.3 Intheworldasawhole,oneestimateprojecteddemandforinfrastructuredevelopmentwouldexceed¥1.2trillionannually.4 SuchoverseasinfrastructuredevelopmentmaywellbeanopportunityformanyJapanesecompaniesaswellasprefec-turalandmunicipalgovernmentstomakegooduseoftheiradvancedtechnologicalcapabilitiesdevelopedovertheyears.However,therecenttrendisthattheexportofasinglecompo-nentrelatedtoinfrastructureisexposedtopricecompetition

Infrastructure Finance Group2·

Japaneseequipmenttobeexportedasakeycomponentforanoverseaswaterinfrastructurebusiness(desalinationplantfacility)

1. AsianDevelopmentBank,“InfrastructureforaSeamlessAsia,”20092. Conversionrate:1euro=1.3USdollars3. TheEuropeanCommission,CommissionStaffWorkingPaperontheEurope2020

ProjectBondInitiative,“StakeholderConsultationPaper,”February28,20114. TheMinistryofEconomy,TradeandIndustry,AReportofthePractitioners’Review

Meeting,InfrastructureSystemExportSub-Group,TradeandEconomicCoopera-tionCommittee,IndustrialStructureCouncil,June2012

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◉ Power● Water■ Transport Infrastructure　 (ports, railways, roads, etc.)◆ Broadcasting, Telecommunication▼ Renewable Energy✚ Others

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✚ Infrastructure Fund Focusing

✚ Infrastructure Fund Focusing

▼ TSL for Renewable Energy-Related Project

The Latin Americanand Caribbean region

■ São Paulo Beltway (RODOANEL) Project

■ São Paulo Urban Railway Project■ Cargo Railway Network

Development Project◆ Equipment Export for

Digital Broadcasting◆ Telecommunications Project▼ TSL for Renewable

Energy-Related Project

Brazil

◉ Export of High Energy Ef�cient Coal-�red Power Plant

◉ Portfolio Acquisition of Existing IPP Projects

◆ Telecommunications Network Expansion Project


Mexico

■ Panama Canal Expansion Project

Panama

◉ Porce III Hydroelectric Power Plant Project◉ Export of Water

Colombia

■ Intercity Express Programme

United Kingdom

◉ Export of Gas-�red Power Generation

Morocco

■ The Port of Durban Expansion Project◉ Power Transmission and Distribution Project

South Africa

■ Export for Metro Construction Project

Egypt


Turkey

◉ Export of Gas-�red Power Generation Plant

Kazakhstan

◉● Shuweihat S2 IWPP Project

◉● Fujairah F2 IWPP Project

◉ Shuweihat S3 Power Project

UAE

◉● Ras Laffan C IWPP Project

◉ Mesaieed A IPP Project

Qatar

■ The Sohar Port Expansion Project◉ Sur IPP Power Project

Oman

● Water Supply and Sewerage System Operation Project

Maldives

◉ Export of Hydro Power Generation Facilities

Sri Lanka

◉ Equity Participation in Acquiring Shares of Senoko Power Limited

● Export of Seawater Desalination Plant

Singapore

◆ Export of Telecommunication Machinery and Equipment◉ Cirebon Thermal Power Plant Project◉ Paiton Thermal Power Plant Expansion Project◉ Tanjung Jati B Coal-Fired Power Plant Expansion Project◉ Java-Bali Submarine Cables replacement project

Indonesia

North America and European

Asian Emerging

◉ Nong Saeng Natural Gas-Fired Combined Cycle Power Plant Project

Thailand


Viet Nam

◉ Portfolio Acquisition of Existing IPP Projects

The Philippines

■ Delhi-Mumbai Industrial Corridor (DMIC) Project

◉ High Energy Ef�cient Coal-�red Power PlantManufacturing and Sales Project

◉ High Energy Ef�cient Coal-�red Power PlantManufacturing and Sales Project


▼ Equipment Export for Renewable Energy-Related Project

India

■ Chongqing Monorail Project

China


Korea


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the United States and other developed countries to shiftfrommotorvehiclestorailsystems,inordertorespondtoincreasingconcernontheenvironment.InemergingmarketcountriessuchasVietNamandChina,ithasbeenpointedout that the increasingurbanizationandeconomicgrowthcallforhigh-speedrailwaysandurbantransitrailnetworks. Inthesesectors,thescaleofinvestmentfortheoverseasdeploymentofintegratedinfrastructuresystemsisexpectedtobesignificantlylarge.However,electricpowerandtransportprovidevitalservicesasfoundationsofeconomicactivityandthelivesofpeople.Bytheirverynature,theprovisionofsuchservicesdoesnotrecoupinvestedfundsinashortperiodoftimebymakingsignificantprofit.Itisforthisreasonthat,inadditiontotheprovisionofappropriatesupportbythehostcountrygovernment,stableand long-termfinancing that isnotvulnerabletochangeintheeconomyaswellascountryriskisimportantforsuccessfulprojects.

ofJapanesecompanies’participationtodevelopmentofover-seasintegratedinfrastructuresystems.JBICisthusdevotingitselftosupportingthisstrategy. Examples of deploying infrastructure as an integratedsystemareoftencited in thepower,water, transport andtelecommunication sectors. In the power sector, JapanesecompanieshavealongrecordofdeliveringorparticipatingintheprojectsforbuildingultrasupercriticalpowerplantsthatarecapableofgeneratingelectricpowerefficientlywithlessfuelthanpreviousplantsinAsia.Asdemandforelectricityisexpectedtogrowinemergingmarketcountries,therearerisingexpectationsonparticipatinginthebroaderscopeofworkrelatedtooverseaspowerprojects,includingnotonlybuildingandoperatinghighlyefficientpowerplants,butalsoinstallingsmartgridsandmeterswhichtransmitanddistributeelectricityefficientlybyexploitingInformationTechnology(IT). In the transport sector, there is growingmomentum in

AsofJuly312012

(Note)AnIndependentPowerProducer(IPP)buildsandoperatesapowerplantonitsownandsellstheelectricityproducedtopowerutilities. AnIndependentWaterandPowerProducer(IWPP)buildsandoperatespowergenerationandwaterdesalinizationplantsonitsown

andsellstheelectricityandwaterproducedfromthem.

JBIC’s Financing for Infrastructure Projects

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infrastructure-relatedfacilitiesandequipmentfromJapanesecompaniesandthefundingrequiredforJapanesecompanieswhentheyparticipateinprojectsasequityinvestors. Particularlyinrecentyears,theseinfrastructuredevelop-ment projects are not directly implemented by the publicsector. Instead,thereareincreasingcasesof implementingthem in the formofPublic-PrivatePartnership (PPP). In thecaseoflargeinfrastructureprojects,expectationsarerunninghighamongdevelopingcountriesthattheycanreducetheirgovernments’debtburdenbymakinguseofprivatesectorfundsthroughPPPandprovidemoreefficientinfrastructureservicesbymakinguseofprojectparticipantsintheprivatesector. JBIChassupportedanumberofsuchprojectswithproject financing andother finance schemes. In thesePPPprojects,governmentcommitmentanditscertainextentofinvolvementareexpected,andthekeytosuchprojectsishowtoallocaterisksandresponsibilitiesappropriatelybetweenthegovernmentandprojectparticipantsintheprivatesector.ThusJBICconsidersitasanimportantroletoprovideadvicewithrespecttoaninstitutionalframeworkindevelopingcoun-triesandsupportprojectstructuringfromtheearlieststagethroughmatchingthemutualneedsofdevelopingcountriesandJapanesecompanies,inadditiontosuchdirectfinancialsupport as lending. From this perspective, JBIC has beenmakingwayforwardinanarrayofefforts,includingfinancialdialogueswiththehostcountries. JBICwillcontinuetoperformtheroleofapolicy-basedfinancing institution in multiple aspects by supporting theexportofJapanesecompanies’plant-relatedmachineryandequipmentandbyactivelysupportingtheirparticipationininfrastructureprojectssothattheywillleadtocreationandexpansionoftheirbusinessopportunities.

Meeting New NeedsJBIChasfocusedmainlyonsupportingJapanesebusinessindevelopingcountries.Yet,asdescribedabove,demandforinfrastructureexistsnotonlyindevelopingcountries,butindevelopedcountriesaswell.Therearecountlessopportuni-tiesforinfrastructurebusinessindevelopedcountries,includ-inghigh-speedrailprojectsintheUnitedStatesandUnitedKingdomandurbantransitrailsandwatersupplyprojectsinAustralia.Inlightofthissituation,theJapanesegovernmenthaslaiddownalegalandinstitutionalframeworkconcerningthespecifiedsectors,suchasinfrastructure,whereJapanesecompaniesareconsideredtohavebusinessopportunities.Inthesesectors,JBICcannowoffer,jointlywithprivatefinancialinstitutions,exportloans(financeforsupportingtheexportofmachineryandequipmentfromJapan)andoverseasinvest-mentloans(financeforsupportingtheJapanesecompanies’overseasinvestment)indevelopedcountryprojects. JBIChasabundantexperienceinfinancinginfrastructureandplant-relatedprojectsinmanyAsianandotherdevelopingcountries.Byengaging inmoredialoguewithhostcountrygovernmentsand,inthatprocess,gettinginvolvedintheearlystagesoftheprojects,JBICintendstoprovidesupportinwaysthatwilleffectivelyandappropriatelyexploitthestrengthsofJapanesecompanieswithconsiderationtodemandsinhostcountries.

Performance and Recent Efforts of JBIC Todate,JBIChassupportedoverseasinfrastructurebusinessconductedbyJapanesecompanieswithavarietyoffinancialtools, including loans, guaranteesandequityparticipation.JBIChassupportedthefundingofdevelopingcountrygovern-ments, theiragenciesandprivatebusinesses forprocuring

ThethermalpowerprojectinIndonesiainwhichJapanesecompaniesparticipated.

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Total responding companies

FY2007 FY2008 FY2009 FY2010 FY2011

(595)1.0%

16.8%

82.2%

(611)0.7%

20.1%

79.2%

(611)2.0%

32.2%

65.8%

(594)0.7%

16.5%

82.8%

(586)0.2%

12.6%

87.2%

■ Scale back/w

ithdraw

■ Maintain p

resent level

■ Strengthen/expand


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2

Industry Finance Group3·

Major Issues of Japanese Companies in Conducting Overseas Business Operations

AsthemajorissuesofJapanesecompaniesinconductingover-seasbusinessoperations,asharpappreciationoftheyencanbeaddressedfirstly.ThisisweighingonJapaneseexportersasaheadwindincompetingwiththeircounterpartsinemergingmarket countries such as China or Korea. Secondly, amiddifficultiesofobtainingdollarfinancingbyEuropeanprivatesectorfinancialinstitutions,triggeredbytheeurocrisis,itispossibletoconsiderthattheircreditstancewillnotchangefor thebetter,whichwillposeasubstantial financialchal-lengetoforeigncompaniesthatdesiretopurchaseproductsmanufacturedinJapanandJapanesecompaniesconductingoverseas operations. Thirdly, the progress in globalizationhasforcedmajorJapaneseindustriestocometogripswithincreasinglycomplexandlarge-scalesupplychainnetworks.Giventheseissues,theGreatEastJapanEarthquakeandthefloodinThailandhaveprovidedJapanesebusinesseswithanopportunitytoreviewtheirsupplychains.

Active Overseas Investment by Japanese CompaniesBesides the above situation, the appreciated yen broughtaboutprominentoverseasinvestmentsbyJapanesecompa-nies.Foreigndirectinvestment(FDI)madebyJapanesecom-paniessincethe1980shavetwomajorpeaks:oneoccurredintheearly1990sinresponsetothesoaringyenfollowingthePlazaAccordandtheotheroccurredin2008justbeforetheLehmanShock;thoughthesecondsurgeturnedaroundtosubsidein2009and2010.InFY2011,however,FDIroseby108%toabout¥10.1trillion.TheincreaseisparticularlypronouncedinAsia(whereFDIroseby42%toabout¥3tril-lion)andinEurope(whereFDIroseby127%to¥3.2trillion).1 Especially under the present circumstances where the

1. [Source]MinistryofFinanceJapan

Japanesecompany’sautomobilepartsfactoryinIndia(fromBestexKyoeiCo.,Ltd.)

Figure 1-1 Medium-term Prospects (next 3 yrs. or so) for Overseas Operations

(Note)1.“Overseasoperations”isdefinedasproduction,sales,andR&Dactivitiesatoverseasbases,aswellastheoutsourcingofmanufacturingandprocure-mentoverseas.

2.Thenumbersintheparenthesesabovethebargraphsindicatethenumbersofrespondingcompaniestothequestion.

3.Mid-tierfirms/SMEsarecompanieswhosepaid-incapitalislessthan¥1billion.

[Source]ResultsoftheJBICFY2011Survey:—OutlookforJapaneseForeignDirectInvestment(23rdAnnualSurvey)—

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01 02 03 04 05 06 07 08 09 10 1120

25

30

35

40

(FY)

（%）

Overseas Sales Ratios

Overseas Production Ratios

27.9

29.1

33.5 34.034.7 34.7

35.9

33.3

34.2

34.2

38.5

31.030.830.630.5

29.2

28.0

26.126.0

24.6

FY2011 projected

Medium-term plans (FY2014)

Total Amount

5,371.1 billions of yen

Oceania11%

Europe(Including Russia)

23%

Africa 3%

Asia23%

The Middle

East12%

North America

12%

Latin America and the Caribbean

17%

(FY2007–2011) 2


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have a strong intention to expand overseas business (seeFigure 1-1). Both the overseas production and sales ratiocontinuedtogrow,andtheirgrowthseemedtohavegainedmomentumaftertheLehmanShock.Theoverseasproductionratioisforecasttoincreasefurtherandreachcloseto40%overthecomingyears(seeFigure1-2).Whatisworthnotinghereisthatofthecompanieswithanintentionto“strengthen/expand”overseasoperations,about90% replied that theywouldmaintainorexpanddomesticoperations.

Supporting Overseas Business Deployment by Japanese Companies

Giventhesituationandcorporatetrendsdescribedabove,JBICissupportingtheoverseasbusinessdeploymentofJapanesecompaniesfromvariousaspectstomaintainandimprovetheinternationalcompetitivenessof Japanese industries.FirstlyJBICissupportingoverseasinvestmentbyJapanesecompaniesbyprovidingfundsforpurchaseofcapitalequipmentrequiredforoverseasbusinessoperationsandsalesfinancingbymak-ingmostuseofprojectfinanceandlocalcurrencyfinance.

Supporting Ship and Plant ExportsAstheyenishoveringathighlevels,JBICisalsoactivelysup-portingtheexportof Japanesecompanies. Inparticular,aseconomicturmoilinEuropedeepensandstretchesout,result-inginamoreconservativecreditstancetakenbyEuropeanprivatefinancialinstitutionsthanpreviously,therearestrongexpectations on JBIC, as a Japanese policy-based financial

Japanesedomesticmarketwill inevitablycontractwiththedecliningbirthrateandagingpopulation,agrowingnumberofJapanesecompaniesaremakingeffortstocapturepartofthedemandinemergingmarketcountries,primarilyinAsia,thecentralpillarofworldgrowth.Inparticular,whatstandsoutisthatawiderangeofindustriesandsectorsaredevelopingproductstargetingthemiddleincomeclassinemergingmar-ketcountries,calledthe“volumemarketsegment.”Japanesecompaniesarealsoformingjointventures,offeringJapanesetechnologieswithlocalcompaniesinemergingmarketcoun-triesinanefforttocreateanewmarketthere.Atthesametime,asmajorJapanesecorporationsareexpandingoverseasproductionandlocalprocurement,domesticmid-tierenter-prisesaswellassmallandmediumenterprises(collectively"SMEs")areactivelyworkingtoexpandoverseasoperations. TherecentcontinuedyenappreciationhasalsoboostedoverseasM&Aactivities.Therewere624mergersandacquisi-tionsofforeigncompaniesworth¥5,780billionbyJapanesecompanies in FY2011, which set a record, exceeding theprevioushighachievedinFY2008.2 SuchatrendwasidentifiedintheFY2011SurveyReportonOverseasBusinessOperationsbyJapaneseManufacturingCompanies(whichdescribesthefindingsofthe23rdsurveyconductedfromJulytoSeptember,2011,with603companieshavingresponded).( see p. 56) For example, as formid-termprospects (next 3 yrs. orso)foroverseasoperations,thenumberofJapanesemanu-facturingcompanieswillingto“strengthen/expand”overseasbusinessincreasedtoarecordlevel(87.2%).TheseresponsesclearlyshowedthatJapanesemanufacturers,includingSMEs,

Figure 1-2 Ratios of Overseas Production and Overseas Sales Figure 2 Overseas Investment Commitments by Region

(Note)1.(OverseasProduction)/(DomesticProduction+OverseasProduction) 2.(OverseasSales)/(DomesticSales+OverseasSales) 3.Ratioswerecalculatedbysimplyaveragingthevaluestherespondentcompaniesprovided[Source]ResultsoftheJBICFY2011Survey:—OutlookforJapaneseForeignDirectInvestment(23rdAnnual

Survey)—

2. [Source]ThomsonReuters.

(Note)ThetabledoesnotincludeTSLsforJapaneseprivatefinancialinstitutions,etc.

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2paredwithlargecorporations,JBIChavebeensupportingtheiroverseasbusinessexpansionbyprovidingvariousinformation,includingtheforeigninvestmentclimate,inadditiontosup-portingthembyprovidingloansandotherfinancingproducts.( see p. 49–52)

Responding to the Flood Disaster in ThailandThefloodthathitThailandinOctober2011inflictedsubstan-tialdamageonanumberofJapaneselocalsubsidiariesandaffiliates.Tosupporttheirrehabilitationandbusinessactivities,JBICsignedatwo-steploanagreementwithKASIKORNBANKPublicCompanyLimited,acommercialbankinThailand,tar-geting localsubsidiariesandaffiliatesof JapaneseSMEsaswellas localcompaniesthatconstitutesupplychainswithJapanesecompanies.JBICalsofinanceslocalJapanesesub-sidiariesandaffiliateswhosustaineddamagefromthefloodforreplacingmachineryandequipment.

Accurate Response to NeedsJBICwill continue to actively support Japanese companiesbyeffectivelydrawingona rangeoffinancial facilitiesandschemes, including loans, equity participations and guar-antees, tomeet theirneedswithaccurateresponse,whilerecognizingvariousissuesofJapanesecompaniesindeployingtheiroverseasbusiness,inordertomaintainandimprovetheinternationalcompetitivenessofJapaneseindustries.

institution, for providing credit primarily to ship and plantexporttransactions,towhichJBICispositivelyresponding.

Supporting Foreign M&A Activities under the Emergency Facility in Response to Yen Appreciation

FollowingtheEmergencyPackageAgainstYenAppreciation,apolicypackagereleasedbytheGovernmentofJapaninthefaceofthesharplyclimbingvalueoftheyen,JBIClaunchedtheemergencyfacilityinresponsetoyenappreciationtotakeadvantageofthehighervalueoftheyen.Underthisfacility,JBICissupportingJapanesecompaniesforacquiringforeigncompaniesanddevelopingaswellasacquiringinterestsinoverseasnaturalresources,etc. ToencourageM&Aactivities,JBICnotonlymakesdirectinvestmentbutalsoprovidesM&Acreditlinesfordomesticfi-nancialinstitutionstoexpeditiouslyandflexiblyfundJapanesecompanieswithmediumandlong-termforeigncurrenciesforoverseasM&Aactivities.

Supporting Overseas Business Deployment by SMEs ThesuperiortechnologicalcapabilitiesofJapaneseSMEshavereceivedhighcreditathomeandabroad.Atthesametime,developingcountriesthemselvesarefocusingeffortsonat-tractinginvestmentsfromthecompanieshavingsophisticatedtechnologies.However,asSMEsoftenhaveconstraintsonfinancing,collectinginformation,andhumanresourcescom-

ThesiteoftherefineryandpetrochemicalplantprojectinwhichJapanesecompaniesparticipated

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the environment surrounding jbic · surging in emerging market countries. in addition, oligopoly...

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