JBIC Today
July 2017

Learning the Way ofBusiness in Arab World– Ethos of Insha’Allah

JBIC

Today

Japan Bank for International Cooperation

Sheikh Zayed Grand Mosque in Abu Dhabi

resentative Office in Dubai introduces the secrets of building relationships in the Arab business world.

Representative in Dubai

ments and deputies is also understandable
taking into account the Arabian social structure. Most of the Arab countries are underimperial rule or are centrally-governed, so
calls from royalty or the president on otherseniors inevitably becomes the top priority formost Arabic people, regardless of prior engagements. Nevertheless, Arabs still wish to
make the most of the meetings with visitors
who made the journey, so they request tochange the appointment time on the day orsend their deputies to meet with the visitors.
Such quirks of fate seem to be all interpreted
as “Insha’Allah” – what God wills.
It goes without saying that whenever one
intends to do business with someone from an
Arabic area or any other culture, one needs tohave a flexible mindset and not necessarily expect them to follow one’s business culture. In oil
producing countries of the Middle East, I believethat one of the keys to successful Arab businesses is to understand the ethos of Insha’Allah.

Night view of Burj Al Arab Hotel

URL: http://www.jbic.go.jp/en/

positively or negatively. There is even a phrase
to imply the difficulty of doing business in the
Arab world – Arab’s IBM: I for Insha’Allah, B
for “Bukra” (Tomorrow), and M for “Malesh”(Never mind).
This leads some people to complain thatArabs are uncandid, and, being a little impatient myself, I have to admit I sometimes feelthe same. But likewise, I noticed that Japanesealso have a culture that favors ambiguous
phrases – “I will give it consideration” or “wewill try our best” – as an indirect message implying “No.” By reflecting on one culture, we
can put the other cultures into perspective.
Insha’Allah is probably somewhat similar to thephrases Japanese use in the way that they arerooted in the local society and beliefs.
For example, the difficulty of making appointments could be understood by taking into
account the Arabic culture that puts a premium on face-to-face conversations with visitors. Originally desert-inhabiting Bedouins,
Arabs value harmony and communication
within their tribe. They have the custom of
meeting in majlis (assembly) to have shura(consultation), in which decisions are madewhile listening to opinions of others, as advised in the Quran. Coupled with the teachings of Islam that encourage hospitality topilgrims, that is, travelers, Arabs delay their
response to appointment requests until thelast minute to avoid declining the visits. It may
be this combination of the Arab culture andcustoms that is creating the impression ofhesitation to commit to appointments.
Last-minute change of time for appoint-

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Arabs have many customs based on the Islamic beliefs, including daily prayers and Ramadan. The customs that foreigners like myself struggle with the most when trying to dobusiness with Arabs is that it is extremely
difficult to set appointments with them, farmore than typical Japanese would expect. It isof course understandable that it takes a while
for ministers and executives of government
agencies to fix their schedules because theylead busy lives. But in the case of Arabs, it is
not uncommon that neither their secretaries
nor they themselves know their schedules until the very last minute. When one wants tomake appointments with Arabs, he or she
may have to be very persistent in approaching
them, using any means one can think of –phone, email, mobile SMS, social media, mutual acquaintances, etc.
Even if appointments are successfully
made, they are sometimes postponed on short
notice, or guests are greeted by deputies when
they arrive at the meeting place. When we havebusiness trips to the Middle East, we always
have to make sure to have some leeway in theitinerary given the possibility of not meeting theperson we flew to meet.
A phrase “Insha’Allah” is frequently heard
when having conversations with Arabic people. When reminding them of appointments,
the phrase, “Insha’Allah” is almost always
given as an answer. This translates as “if God
wills,” but what they mean in this situation is,“only God knows whether this promise will be
fulfilled” – an ambiguous phrase which may
leave foreigners puzzled whether to take it

Ryo Kuwahara

Press and External Aﬀairs Division, Corporate Planning Department, Corporate Group, Japan Bank for International Cooperation

to successful business with the Arabs. Mr. Kuwahara from JBIC’s Rep-

4-1, Ohtemachi, 1-chome Chiyoda-ku, Tokyo 100-8144, Japan

Understanding the unique culture of the Arab world is one of the keys

July 2017

SpecialFeatureTowards New Relations between
Japanese Companies andMiddle Eastern Oil Nations

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Osaka Sealing Printing Co., Ltd. (Osaka City, Osaka Pref.)“The Daily Pursuit of the newie and the grandeur”
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S POTLIGHT
Learning the Way ofBusiness in Arab World‒ Ethos of Insha AllahSpecial Feature

Towards New Relations between Japanese Companies and Middle Eastern Oil Nations

SpecialFeatureTowards New Relations between
Japanese Companies andMiddle Eastern Oil Nations

Drastic change of policy to reduce dependence on oil

2016.3Q

2015.4Q

2015.3Q

2015.2Q

2015.1Q

2014.4Q

2014.3Q

2014.2Q

2013

2014.1Q

Source: Compiled by JBIC Representative Oﬃce in Dubai from the sources of IEA and EIA

2 July 2017 JBIC Today

Supply-demand gap (mbd)

Supply and demand (mbd)

100
98
96
94
92
90
88
86

2012

Supply-demand gap of crude oil

2016.2Q

Tamaki Each country is suffering from thedeteriorating financial condition. Oil prices
have been stagnant since the end of 2014 because of the slowing world economy andsupply-demand gap caused by the glut, although oil prices recovered to the current
level thanks to an agreement on production―What measures and policies are
oil-producing countries in the Middle
East taking to balance their finances?

―How about the politics and economies of other GCC countries?

Tamaki Taking the current situation as anopportunity for reform, they have started to
introduce a value added tax (VAT) and to cut
subsidies to increase revenues. Moreover,
GCC countries except Bahrain started toissue government bonds in 2016 by utilizing
the room for borrowing. They appear determined to adjust to the new normal, if
necessary, by drawing down the assets ofgovernment funds.

Tamaki The GCC countries enjoy high income, but they are still developing in termsof industry and require further infrastructuredevelopment and more investment. The
countries follow Dubai as a role model fornation-building and are drawing up visions
to diversify their economies and reduce dependence on oil. They are planning toinvest in fundamental fields for nationbuilding such as education and medical services, and to focus on renewable energies

Influx of speculative money

100
80

Outbreak of the Iraq war

60

9/11 attacks

2011〜Crude oil production
increase due to the shale revolution

40
20

2016.2.16 International Discussions to keep oil production at the current level
2016

2015

2014

2013

2012

2011

2010

2009

2008

2007

0
2006

Gulf Cooperation Council (GCC)Note now
use lower oil prices than in previous years
when drawing up their budgets. Lower oil
prices mean lower revenue in each country,
which cannot be sufficiently offset by reducing expenditure.

2008.12 Collaborative production cuts by OPEC

120

2005

cuts reached by Russia and the Organizationof Petroleum Exporting Countries (OPEC)
in November 2016. Prices have remained
around USD50 as of the spring of 2017, inline with the Trump administration’s policyof promoting the development of shale oil.
Informed sources give various predictions
for the trend of oil prices, but many oil-producing countries foresee oil prices graduallyrising amid the slow shift to electric vehicles
and increasing demand for petrochemical
products. However,they all seem toGap
Demandagree that oil prices
Supplyare unlikely to re2.5
2turn to the USD100
1.5
1level enjoyed by
0.5
oil-producing coun0-0.5
tries in the past. In-1fact, most member
countries of the2016.1Q―How are the oil-producing countries in the Middle East being affectedby stagnant oil prices?

2008.12 USD33.87 (Closing price): The lowest
price after the financial crisis

2008.7.3
Peaked at USD145.3 (Closing price)

2004

Impact of low oil prices on financial standing of oilproducing countries in the Middle East

140

2003

Chief Representativein Dubai2008.9 Collapse of Lehman Brothers

160

2002

Naoki Tamaki

Tamaki Iran has been increasing its global
presence since the easing and elimination of
sanctions as a result of the nuclear deal. However, Saudi Arabia severed diplomatic relations with Iran, supposedly to show its strong
stance toward Iran, which is increasing its
presence, to the Saudi Arabian people. If theconfrontation between the two countries
worsens and the Strait of Hormuz is blocked,
Japan would suffer as energy exports toJapan would stop. However, the Strait is unlikely to be blocked because it would also
damage economic activity in Iran and
GCC countries including Saudi Arabia.

Track record of future price of WTI crude oil since 2000
(USD per barrel)

2001―Please give a general picture of thesituation in the Middle East.

2000

Oil prices hit a historic high of USD145 per barrel in July 2008 and then plunged to USD33 in
December of the same year due to the financial crisis. Despite some recoveries, they remained around USD50 per barrel as of the spring of 2017 and have been greatly affecting thefinances of oil-producing countries in the Middle East. Against the backdrop of low oil prices, oil-producing countries have started turning to new policies for developing a country,
assuming that the current level of oil prices becomes “the new normal”. In particular, countries in the Middle East, which are actively trying to break away from their dependence on
oil by diversifying their industries, have high expectations for foreign countries including
Japan to create business opportunities and bring in technological and financial capabilities.
Will the changing environment and growing expectations for cooperation from Japan bringnew business opportunities?

Source: Compiled by JBIC Representative Oﬃce in Dubai from the sources of IEA and EIA

such as photovoltaic power using their geographical characteristics. In particular, they
are planning to increase GDP by focusing on
downstream industries like oil refining andpetrochemicals besides upstream industries.
These visions, led by the kings, are unopposed by the people and are unlikely to becanceled because these industries are vitalfor fundamental infrastructure and for supporting people’s daily lives.
Among these visions, “Saudi Vision2030”, which is the medium-term national
vision of Saudi Arabia, is attracting attention in Japan. Assuming the new norm ofoil prices remaining low for some time, thevision aims to depart from being an oildependent economy by 2030 and to diver-sify the economy by investing actively in
manufacturing and logistics. Taking theopportunity of King Salman’s visit toJapan in March 2017, Saudi-Japan Vision
2030, which calls on Japan to cooperate
actively with Saudi Arabia, was published,offering many business opportunities toJapanese companies.
―Do you see any changes in infrastructure projects amid low oil prices?
Tamaki The financing proposals are requested more frequently in the tendering
stage of engineering, procurement and construction (EPC). Oil-producing countries
wish to carry out projects such as infrastruc-(Note) The six GCC countries are Saudi Arabia, Bahrain, Kuwait, Qatar, United
Arab Emirates (UAE), and Oman.
July 2017 JBIC Today

3Special Feature

ture development not with government
funds but through public-private partnerships (PPP) where private companies and financing is mobilized for the provision of
public services. The greater number of PPP
projects offered, the more opportunities
there will be for Japanese companies toparticipate in such projects. To take advantage of these opportunities, we will
actively support projects in which Japanese companies participate by providing
know-how and helping them build structures using our financing expertise.

Expected contribution of Japanese technology
to Middle Eastern oil nations―What fields are promising for private companies in the future?
Tamaki Electricity and water infrastructure
are the area that have good business opportunities for private companies. It is impossible
to substantially diversify a country’s industry
without these well-organized infrastructures. We believe that Middle Eastern countries including GCC have high expectations
for Japanese technology. However, because
companies from other countries participate
in tenders and some have strong businesslinks in the Middle East, it is more importantfor Middle East and GCC to see the ability tosupply electricity and water at low rates
using state-of-the-art efficient plants andcompetitive financing. Oil-producing
countries in the Middle East are all keen to
diversify industry by promoting the construction of oil refinery plants and expanding manufacturing and sales of
petrochemical products in the oil industry,
and then diversifying into manufacturing industries like the auto industry in the future.
―Highly skilled professionals are vital for industrial diversification. Are
there any fields in which Japanese companies can contribute to human resource development?
Tamaki Qatar, for example, enjoys a highGDP on purchasing power parity of 130,000
dollars, which is about three times that ofJapan, and it is currently focusing on education and medical services in addition to information technology. However, it lacks
highly skilled professionals in such fields domestically and is currently recruiting humanresources and technologies from various
western countries.
Oil-producing countries in the Middle
East including Qatar are strongly motivated
4 July 2017 JBIC Today

to improve their countries and acquire excellent technologies using foreign capital.
They open their doors widely to foreign capital and offer many opportunities forworking with them on human resource development. Now is the time to establish mutually beneficial bilateral relations with themin diverse fields including politics, economy,
culture, and human exchange in addition totechnical cooperation.
The “Saudi-Japan Vision 2030” releasedon the occasion of the King Salman’s visit toJapan in March 2017 describes a policy ofproviding technical cooperation in electricity,
sharing experience in the medical field, anddispatching professionals in the education
sector. I hope these will promote creation of
enabling environment for Japanese businessdeployment in Saudi Arabia.
―How will JBIC become involved in
the Middle East in the future?
Tamaki Out of JBIC’s total commitmentof JPY2.4 trillion(about USD 21.2 billion)
for fiscal 2015, approximately JPY400
billion(about USD 3.5 billion), nearly 20%,
is for the Middle East. Projects for the Middle East are typically very large, and oil & gas,
power generation and desalination are thethree largest sectors in terms of cumulative
commitments. We support Japanese companies utilizing our extensive networks, our capabilities to provide information and ourleverage with international key-players as apolicy-based financial institution. With thetransformation and diversification of the industries of oil-producing countries in the
Middle East, we wish to help Japanese companies actively develop new opportunities,
such as expanding exports and establishing
manufacturing and business bases in the
Middle East, while expanding financing to
the manufacturing industry.

Visions of the

Towards New Relations between Japanese Companies and Middle Eastern Oil Nations

Middle Eastern countries and major JBIC-supported projects

KuwaitBahrain

UAE

National vision

National vision

National vision

Kuwait Vision 2035

The Bahrain Economic Vision 2030

The UAE Vision 2021

▶Aiming to strengthen the democratic system as▶Aiming to create a private-sector-led economy▶National strategy aiming to make the UAE one

well as implementing such economic policies
as improving infrastructure and the businessenvironment, privatizing state-owned companies and increasing revenues from the non-petroleum business.

based on sustainability, competitive edge andimpartiality.

▶Focusing on renewable energy, transportation,

JBIC-supported projects

education, healthcare, technology, water andthe space industry.

・Al Hidd Independent Water and Power Producer Project

Abu Dhabi

JBIC-supported projectsof the most innovative countries in the world.

The Abu Dhabi Economic Vision 2030

・Az-Zour North Power and Desalination Project▶Promoting the diversification of industry andaiming to reduce the share of the oil and gas
sectors in GDP to 36% by 2030.

Kuwait▶Aiming to achieve annual economic growth of
more than 7.5% to increase its GDP by morethan five times, to USD400 billion, from 2008
to 2030.

Bahrain

Dubai
Dubai Plan 2021/2030

Qatar
UAE

Dubai

Abu Dhabi
Saudi Arabia

Qatar National Vision 2030

Oman

▶Aiming to develop the country to make it a sustainable advanced society by 2030.
▶To do this, the mission focuses on modernizing society with emphasis on four main pillars:
economic development, social development,
human resource development and environmental development, while maintaining traditions.

Saudi Arabia

Oman

National vision

National vision

Saudi Vision 2030

Oman Vision 2020

JBIC-supported projects▶Plans to depart from being an oil-dependent▶Aiming to stabilize the economy and finances,economy by 2030 and to diversify the economy
by developing such sectors as investment,sightseeing, manufacturing and logistics.

expand the private sector, and to globalize anddiversify its economy.

・Guarantee for Privately Placed Samurai Bonds
Issued by Qatar Petroleum
・Facility D Natural Gas-Fired Power Generation
and Desalination Project

JBIC-supported projects
・Export of a Supercritical Pressure Thermal
Power Generation System Project・Expansion Project of Rabigh Integrated Oil Refinery and Petrochemical Plant
・Manufacturing and Sales Business of Methyl
Methacrylate Monomer and Poly Methyl Methacrylate Molding Materials
・Titanium Sponge Production andSales Businesson the economy and finance sectors drawn up
on the basis of the UAE Vision 2021.

JBIC-supported projects

Qatar
National vision▶The economic development strategy focuses・Loan for Renewal of an Oil Field Interest in
Abu Dhabi
・Investment in an Integrated Water Management Company Headquartered in Dubai
・Loan for Abu Dhabi National Oil Company(ADNOC)・Manufacturing and sales of large-diameter weldedsteel pipes for oil/gas pipelines in Abu Dhabi
・Development of new oilfield (Hail) in Abu Dhabi

JBIC-supported projects
・Al Ghubrah Seawater Desalination Project
Investment in an Integrated Water Management
Company Headquartered in Dubai

Facility D Natural Gas-Fired Power Generation
and Desalination Project

Expansion Project of Rabigh Integrated Oil
Reﬁnery and Petrochemical Plant

July 2017 JBIC Today

5

up
se

Special FeatureloC

Towards New Relations between Japanese Companies and Middle Eastern Oil Nations

Interview

Eyeing business opportunities with
the UAE’s industrial diversification

Establishing manufacturing and sales business of large-diameter weldedsteel pipes for oil/gas pipelines in Abu Dhabi, UAE

Japan has long been working on industrial diversification in these countries, with theUnited Arab Emirates (UAE) being a good example. The UAE, which took the initiative to
reduce its dependence on oil, is developing well-balanced multilayered relations with Japan
in such industries as infrastructure and manufacturing.
Noting the implications for other countries, we focus on the UAE’s pioneering efforts forindustrial diversification, business development by Japanese companies in the fields of energy
resources, infrastructure and manufacturing, and how JBIC is supporting their efforts.

National visions materializingNain
i each emirate
Japan depends on imports for nearly all
crude oil, with the UAE accounting forabout 25% of total imports, second only to
Saudi Arabia. Characteristically, it grants
concession rights in oil fields to foreign companies, which is unusual for Middle Easternoil-producing countries. The UAE is a very
important partner for Japan beyond simply
exporting oil to Japan.

The two emirates, Abu Dhabi andDubai, jointly lead the economy of the
UAE. The reserves of oil and gas in the
UAE are mostly located in Abu Dhabi,
but it formulated the “Economic Vision2030” as early as in 2008 in pursuit ofeconomic growth without dependency
on oil exports through industrial diversification, and is now working hard tobuild such an economy. On the other
hand, Dubai, which is not blessed withlarge reserves of oil and gas, has been focusing on improving vital infrastructure
for economic activities including airports, ports and roads since the country
was founded in 1971, in order to construct an economy independent of oil.
Today, Dubai International Airport isone of the world’s leading hub airports
for international airlines, and the country is prospering as one of the leading financial centers in the Middle East.

Con
Constructing
multilayered
relationswith the UAEr
JBIC supports the endeavors of Japanesecompanies to construct multilayered relations between Japan and the UAE, andhelps them to participate in projects that

Signing ceremony with Abu Dhabi National Oil
Company (ADNOC)

6 July 2017 JBIC Today

help Japan to secure oil resources andthe UAE’s policy to diversify industry.
In August 2016, for example, JBIC
provided a loan for the development of
a new oilfield (Hail oilfield) off the coastof Abu Dhabi in which Abu Dhabi Oil
Co., Ltd., which is wholly owned by
Japanese companies, had acquired theconcession rights. Because nearly all of
the oil produced in the Hail oilfield(20,000 barrels per day) will be shipped
to Japan, it will greatly contribute toJapanese efforts to secure oil resources.
In addition, JBIC has extended fourloans to Abu Dhabi National Oil Co.,
Ltd. (ADNOC) (JBIC’s cumulative portion is USD8.4 billion) since 2007 to assist the stable import of crude oil. The
loan to ADNOC is intended to support
Japanese companies in renewing theconcession rights in offshore oilfields
held by Japanese companies and theirefforts to acquire concession rights
through good relations with the UAE,
and thus help Japan to procure stablesupplies of crude oil.
On the other hand, JBIC has been
supporting the efforts of Japanese companies to participate in electricity infrastructure projects especially since themid-2000s in response to growing electricity needs in line with rapid economic
growth in Abu Dhabi. For example, in
the Shuweihat S3 Natural Gas-Fired
Combined Thermal Power Generation
Project, Sumitomo Corporation, together with Abu Dhabi Water and Electricity Authority, etc., constructed and isoperating a natural gas-fired combined
thermal power generation plant with an
output of about 1,600 MW and sells thegenerated power to Abu Dhabi Water
and Electricity Company. JBIC has been
supporting projects involving Sumitomo
Corporation by providing project financing of up to USD400 million to thecompanies carrying out this project.
Meanwhile, in the manufacturing industry, the advanced manufacturing
technologies of Japanese companies thathave entered Abu Dhabi are warmly
welcomed. For example, JFE Steel andMarubeni Itochu Steel established a

Hisashi Inoue

Deputy Director
Division 2
Oil and Gas Finance Department
Energy and Natural Resources
Finance Groupjoint venture company with a local company in Abu Dhabi, which is scheduled
to manufacture and sell large-diameterwelded steel pipes for oil/gas pipelines
with a production capacity of up to 240
thousand tons per year. In February
2016 JBIC provided a loan to this joint
venture company to assist the project(see the interview on page 7).

UAE’s new approach for buildUA
iing the “most innovative
country”
Lately, there have been growing efforts
to strengthen non-oil sectors in the
UAE. To attract foreign capital, thecountry has set up free zones, permitted the establishment of companies
wholly-owned by foreign direct investment, and approved corporate tax andincome tax reduction or exemptions. It
is also focusing on renewable energy,
with a good example being Masdar
City.The electricity used for air-conditioners and lighting in the city comesfrom renewable energy such as solar andsolar thermal energy, etc., thus making
good use of the long hours of sunlight.
They have also already started working
on completely eliminating carbon dioxide emissions.
As described above, the UAE is ambitiously diversifying its industries, andoffers immense opportunities to Japanese companies. JBIC will continue
helping Japanese companies to enter
the market through new projects thatmeet the UAE’s needs, while maintaining and strengthening relations with
the UAE from the viewpoint of securing oil resources. At the same time, because
otherMiddleEasternoil-producing countries including
Saudi Arabia are expected to promoteindustrial diversification as a policy inthe future, JBIC backs up Japanesecompanies and helps them capturebusiness opportunities in various industries and sectors through policy financing; the case of the UAE is a good
example of this.

More and more Japanese companies are expanding business locally in the UAE, which is diversifying its industries. JFE Steel Corporationand Marubeni-Itochu Steel Inc. established a joint venture company, Al Gharbia Pipe Company LLC (AGPC), with Abu Dhabi’s investment firm,
General Holding Corporation PJSC/SENAAT (SENAAT), and will manufacture and sell large-diameter welded steel pipes for oil/gas pipelines
in Abu Dhabi, with main operations scheduled to start in October 2018. In February 2016, JBIC signed a loan agreement totaling up to
USD111 million with AGPC. Because development and production of oil and natural gas is expected to remain strong in the future in the Gulf
countries, demand for high-quality steel pipes for pipelines is also expected to remain strong. We interviewed a General Manager of JFE SteelCorporation which started local production of high-quality steel pipes in the Middle East for the first time and a General Manager of MarubeniItochu Steel Inc. which is in charge of this project, who elaborated on the challenges and prospects for business development in Abu Dhabi.

Bringing it local: manufacturing of
high-quality high-strength steel pipes
expected to remain in high demand

Trending business model ofproducing locally and distributing
to neighboring countries▶ Please describe the background of▶ What is the difficulty for stableestablishing JFE Steel’s first production
base in the Middle East.

production of high-quality large-diameterwelded steel pipes in Abu Dhabi?

Mr.Anezaki Demand for steel pipes for oil/gas
pipelines has been solid in the Middle East, andlarge steelmakers from Europe and Japan enjoya major share of production. In recent years,
however, new steel manufacturers in India andChina have improved their technologies to a levelcomparable with Japan in some product fields.
Because India is geographically closer to theMiddle East than Japan and can ship steel pipes
at a lower cost, it has a cost advantage. Therefore, in order to increase cost competitivenesswe decided to do bending work in Abu Dhabi utilizing high-quality steel plates produced in Japanto manufacture finished products. We consider
that our production base in Abu Dhabi will become a bridgehead for exporting steel pipes toGulf countries like Saudi Arabia and Kuwait.

Mr.Anezaki It is hot and humid in Abu Dhabi
in summer. Because the environment in Abu
Dhabi differs from that in Japan, we need toseveral technological problems associatedwith the manufacturing of materials featured
by very sophisticated specifications. We arestill working on the solution in collaboration
with the research division of JFE Steel. In addition, site workers come from more than 10
countries including India and Pakistan, so it isimportant to secure the number and quality ofworkers. We are addressing these issues incooperation with SENAAT.

▶ Please describe the importance of the
Middle East for Marubeni-Itochu Steel.

Mr.Kaneko The Middle East is a very importantregion for trading houses, and we have held alarge share in this area for over 10 years regarding steel pipes for pipelines. Especially, for highquality large-diameter welded steel pipes likesour resistance line pipe (hydrogen sulfide crack
resistant steel pipe), such as APIX 65-60 grade
manufactured and sold by AGPC in this project,
Japanese companies and some European companies still have a technological lead including
thick plate, raw material for sour resistant pipe.
We expect stable, strong demand for this product in the Middle East.

▶ Oil prices have remained low for along time. Does this affect the local
manufacturing and sales of steel pipes?
Mr.Kaneko In Abu Dhabi, the cost of developing oil and natural gas is low, so production is
maintained even after oil prices fell. The fiveyear plan formulated by ADNOC sets a target foroil production at 3.5 million barrels per day by
2018 (Note: OPEC is currently taking measures
to curb production). Demand for pipelines is expected to continue growing in the Middle East.

▶ How are JBIC’s supportand response evaluated?
Mr.Kaneko SENAAT initially planned to procure
funding through project finance. However, because of the attractive proposal for JBIC’s investment financing, we were able to expand the scopeof negotiations. Although we faced several issues
on specific financing conditions, they greatly evaluated the merits of setting up a joint venture withJapanese companies with financing from JBIC.
We are very grateful for the support of JBIC.

Mr. Mitsuru Anezaki
General Manager
Energy Industry Steel Products
Export Dept.
JFE Steel Corporation

Mr. Yoshihisa Kaneko
General Manager
International Trade Dept. I
Tubular Products Div.
Marubeni-Itochu Steel Inc.

▶ From the experience of having started
local production ahead of other Japanesecompanies, please give some advice toJapanese companies planning to expand
to countries in the Middle East including
Abu Dhabi.
Mr.Anezaki In this project, we visited Abu
Dhabi several times and talked with local partners. As a result, we found Abu Dhabi is very
eager to diversify its industries and is interested
in Japanese technology and know-how. Although we have had a few difficulties in negotiations, we can surely proceed with the project by
explaining logically and with patience. The Middle East is a very promising market, and we lookforward to growing business for processed
products of steel plate, not only for pipelines but
also for a wider range of industries.
Mr.Kaneko We expect that it will increasingly
become the mainstream business model to process and manufacture in local plants and ship
products to neighboring countries, like what our
AGPC will do in Abu Dhabi. This is not limited tosteel products. We think that the potentiality ofbusiness will grow bigger and broader in otherindustries, thus creating greater opportunities
for Japanese companies.

July 2017 JBIC Today

7

Our Global
Challenges

Osaka Sealing Printing Co., Ltd. (Osaka City, Osaka Pref.)Company Profile
Name
Osaka Sealing Printing Co., Ltd.

“The Daily Pursuit of the newie
and the grandeur”
Towards the next century– Stepping Up to the World Arena with our label products
Reaching to the 90th anniversary in this year, Osaka Sealing Printing Co., Ltd. (OSP) is a mid-tier enterprise which is at theforefront of small-lot production and distribution of a wide variety of adhesive labels. The company boosted sales after
obtaining a patent in 1961 for inventing stickers which were peeled off from the mount. Afterwards OSP has become theleading company in the adhesive label industry with establishing an integrated production system which includes a material paper production, package planning, design, and printing. For overseas business, OSP paved their way by establishinga material procurement base in New York State (U.S.) in 1995, and has ever since then steadily developed, setting up asales office in Shanghai (China) in 2003 and a production base in Suzhou (China) in 2006. Then in 2014, the company
opened OSP (THAILAND) CO., LTD. as a sales office in Thailand, where a production base, OSP LABEL (THAILAND) CO., LTD.,was set up two years later. With its unique ideas, OSP continues to turn consumer needs, ever-changing with time andlifestyle, into business opportunities and is now stepping up into the global market for the next challenge.

Winning trust from the market
with the innovative production
process and technology
OSP began broadening its playing fieldin the 1970s. This coincided with the
emergence of hyper markets, which
drastically changed the retail business,where, until then, food and daily products had been sold directly to customers
by privately-owned shops. President Mr.
Matsuguchi looks back at the time: “private shops used to wrap fish, meat, orvegetables in used papers and hand theirproducts to their customers, but at thehypermarkets where customers freely
walk around, products need to be packed

8 July 2017 JBIC Todayand labeled with their names and prices.
This helped the demand for adhesive labels to grow rapidly.”
The demand for the labels wasboosted even further by the introductionof the POS (Point-of-sale) cash registersystem and barcodes for managing sales
data. With a radical reform of the production process, OSP developed a system to meet small-lot orders and its own
printer and automatic labeling machine,providing the service at a cost that would
not be possible for its rivals. This mindset was the key to accelerating the
growth. “In recent years, it has become
an obligation for retailers to indicate not
only the ingredients of processed foodbut also where they are made and allergens. This has been a driving force forour growth.” Mr. Matsuguchi says thathe sees the aging as well as the declining
population in a different, more positive
light. “While the population is shrinking,the number of households is growing
due to an increase of single-personhouseholds and trend toward the nuclear family. More specifically, the increasing number of the elderly, theyoung who live alone, and working couples leads to more people having meals
alone. One product that used to contain
400 grams is now sold at 100 grams per
pack, and this has increased the demand
for the adhesive labels.”

Established

1927

Incorporated

1954

Capital324,439,200 yen

Executive
Officer

Tadashi Matsuguchi, President

Business lines

Production and distribution of stickers, labels,
processed films, and packages
Manufacturing and distribution of label printerand automated labeling machines

Headquarters

1-8 Obasecho, Tennoji-ku, Osaka

Sales branches

32 in Japan

Production and
R&D bases

13 in Japan: Tochigi (3), Gifu (2), Shiga (2),Osaka (3), Kyushu (3)Group companies: US (New York), three in
China (Shanghai, Suzhou, and Qingdao), two in
Thailand (Bangkok and Nakhon Pathom)Expanding overseas production
base with an eye to develop newprospective markets
OSP’s challenge continues with a keen eye
on the future. In 2006, it established
OSAKA SEALING PRINTING (SUZHOU) CO., LTD. (China). “The business did not expand as much as we
expected in the beginning, but it picked up
when the inbound to Japan boomed. Chinese people who visited Japan started toseek Japanese quality, and together with ourheightened automation ratio of the production line, this helped us get on track.”
With the rising labor cost and stricter
regulations for overseas remittance imposed in China, the company set up OSPLABEL (THAILAND) CO., LTD. in 2016as an adhesive label production base in
Thailand. This aimed to mitigate the riskof overconcentration of their overseas
bases in a single country, and to target thepromising ASEAN market with 600 million people as a new overseas branch. In
fact, many Thai households do not yet
have a kitchen and so the demand for perishable ingredients at supermarkets is relatively low. Thus they are planning to startfrom producing and selling labels for industrial use, and then gradually launch the
production of labels for general consumers as the middle class grows. OSP utilized

Relationshipwith JBIC

loans from JBIC for setting up OSPLABEL (THAILAND) CO., LTD. “Theloan was introduced to us by a financial institution with whom we already had business. We are extremely grateful that JBIC
provided us with competitive, long-term,and stable funds denominated in Thai baht,
although it might take us a while for ourThai business to move into the black.”Moving forward to
the 100th anniversary
Towards the fourth industrial revolution
For the past 90 years since its establishment,
OSP has been continuously proposing new
products that are part of people’s daily lives,and is now expanding its arena abroad.
“Our current consolidated net sales
amount to 95.127 billion Japanese yen*.
The net sales from overseas business is still
small, but we are aiming to achieve 100 billion yen from domestic and 20 billion yen
from overseas business in the medium tolong term. In order to achieve this number,
we will utilize our branch in Thailand toform partnerships with local printing
companies in various Asian countries,
such as Malaysia and Vietnam, and solidify our foundation in the Asian market.”
OSP will have its 100th anniversary in
10 years. Towards this milestone, and to

Tadashi Matsuguchi
President
Osaka Sealing Printing Co., Ltd.

achieve “OSP’s Industry 4.0 (the fourth industrial revolution)”, the company has
formed a network for domestic sales
branches and factories through IoT. By developing the optimum production efficiency, it aims to create a “Smart Factory,”
built on the philosophy of “mass customization” which would flexibly respond to diverse but small-lot needs. “Although wehave many products with a domestic market share of 70% or more, technological innovation is progressing minute by minute,and our strengths might sooner or later become depleted. If, for example, there is aninvention of a technology that allows direct
printing on products and packages, adhesive labels will no longer be needed. We will
infinitely challenge to create businesses thatmeet the next generation’s demand, both inand outside of Japan.”
The insatiable curiosity and challenging spirit of Mr. Matsuguchi continue tocreate new ideas and big innovations,
proposing original “methods to print information” with a keen eye on our needs
one step ahead of time.
*As of January 2017 (consolidated)

In September 2016, JBIC signed a loan agreement amounting to 63 million Thai baht (JBIC portion) with OSP LABEL(THAILAND) CO., LTD., a Thai subsidiary of OSP’s holding company, OSP HOLDINGS CO, LTD. The loan was co-financedwith Resona Bank, Limited, and intended to provide the necessary funds for sticker and label production and distribution
by OSP LABEL (THAILAND) CO., LTD. and will be used to install new factory equipment.

July 2017 JBIC Today

9Behind the scenes of media coverageNews in Depth
Assisting Iraq’s Autonomous
Economic Growth by Financing
Export of Substation Facilities〜First Project under JBIC’s Special Operations

Baghdad and surrounding areas of Basra, a major city in thesouth. This is expected to bring more stabilized power supply.
According to Toyota Tsusho, approximately 1.3 million households will have better power supply when all of the substations
are completed, which is scheduled to be in 2021.

—Please tell us how this project became the first to befinanced under the Special Operations.
▶Kida The Special Operations were established to enable JBIC to finance overseas infrastructure projects by expanding its risk-taking
ability, in order to further promote Japanese companies’overseas infrastructure businesses. Given its correspondence with this objective,
this project became the first to be financed under the Operations. We
believe that this project is significantly meaningful for the Iraqi government, as it goes one step ahead of the ODA (official development assistance) into loans based on commercial terms.

—In what business are the Special Operations expected to be utilized?

The economy of the Republic of Iraq (Iraq) has been exhausted due to a series of civil wars and other instabilities, and its
growth is currently bottlenecked by the damaged and degraded infrastructure. Significant improvement of power supply, inparticular, is placed as one of the high-priority issues for the Iraqi government. Amid such conditions, JBIC decided to provide
a new loan to Iraq for the first time in 31 years as the very first under the Special Operations , which commenced on October 1,
2016, through a partial amendment of the JBIC Act enforced in the same year. This loan is greatly significant in that it financially
supports the self-sufficient growth of Iraq, while complementing private-sector finance. It is expected not only to lead toopportunities for exporting Japanese products, but also to strengthening of relations between Japan and Iraq, the world’s fifthlargest oil reserve holder. JBIC’s staff members in charge of this project share with us the behind-the-scene stories on the loan
and its significance, as well as the future outlook of Iraq.
An article related to this project was published in the evening edition of The Nikkei on March 30, 2017.

—Please share with us the background of this project
and the steps you took to finalize the loan.
▶Kida The loan was motivated by the Japan-Iraq Joint Statement
which was announced when the former Prime Minister of Iraq, H.E.
Mr. Nouri Kamil al-Maliki, paid an official visit to Japan in November
2011. The statement declared to promote a new phase in the bilateral economic relationship, shifting from support centered on the
post-Iraq war reconstruction to promoting Iraq’s self-reliant economic
development, bearing in mind the imminent withdrawal of U.S. armed
forces. Since then, several finance scheme conferences have been
held among governments and government agencies of the two nations, in which the export loan, which provides the requisite funds for
the Iraqi government to purchase Japanese-made facilities, had beenchosen as the support framework.

▶Morimoto In Iraq, the current supply from existing power
plants is limited to 12GW against the demand of 16GW to 18GW.
Thus improvement of power supply, including power distribution,is an urgent task for the Iraqi government. Amid such circumstances, the government chose among several candidate projects
the substation facilities construction project that was proposedby Toyota Tsusho Corporation (Toyota Tsusho), and requested tocarry it out under the export loan framework. Toyota Tsusho has
had a track record of delivering power-related facilities continu10 July 2017 JBIC Today

ously to Iraq since before the Iran-Iraq War which began in 1980.
We understand that such long-term track record of exporting facilities, along with the fact that the Iraqi Ministry of Electricity
highly praises the efficiency of Japanese-made equipment, is thereason for the project to be chosen by country. Since then, JBIC
and the Iraqi government had been holding discussions on theloan, but as the safety issues made it difficult for us to go to thecountry frequently, we held meetings in Jordan as well as teleconferences between Japan and Iraq to negotiate over the loan
agreement. Also with the assistance from the Japanese government and the Japanese Embassy in Iraq, we managed to reachthe signing of the loan agreement.

▶Kida This has broadened the possibilities for JBIC to support the
infrastructure projects in countries and regions which had been difficult for Japanese companies to participate. We are hoping that byproviding financial support together with private financial institutions
to projects in countries and regions which had been restricted due torisks relatively new to JBIC, it will broaden the field for Japanese companies to expand their activities.

▶Morimoto The Special Operations support projects whichhave not been considered under the ordinary operations, so in order to smoothly carry them out, it is vital that JBIC utilizes its position as a government financial institution so as to cooperate withinternational financial institutions and export credit agencies inother countries. In this project, we have used our global network,
cooperated with NEXI, and conducted analyses of Iraqi politicaland economic climate through consultations with IMF, the World
Bank, and European and American export credit agencies. We willcontinue such effort to smoothly implement Special Operations.
■ Power demand in Iraq

The Iraqi power demand is projected
to exceed 20,000MW in 2018.
（MW）
20,000

About 20,000

Buyer’s Credit for
Government of Iraq

Supporting Export of Substation Facilities byJapanese Companies
The Japan Bank for International Cooperation (JBIC; Governor:
Akira Kondoh) signed on March 27 loan agreements on buyer’s credit(export loan) totaling up to approximately JPY10.3 billion and USD193
million (JBIC portion), respectively, with the Government of the Republic of Iraq (Iraq). The loans are cofinanced with The Bank of TokyoMitsubishi UFJ, Ltd. (lead arranger) and Sumitomo Mitsui Banking
Corporation, bringing the total cofinancing amount to approximately
JPY17.3 billion and USD322 million. Nippon Export and Investment
Insurance (NEXI) provides insurance for the portion cofinanced bythese two Japanese commercial banks.
These loans are intended to finance the purchase of a set of substation facilities from Toyota Tsusho Corporation by the Ministry ofElectricity of Iraq in order to carry out construction of the substationsin 16 domestic sites. TOSHIBA CORPORATION will manufacture
400/132kV substation equipment for 4 sites, while MEIDENSHA CORPORATION manufactures 132/33kV mobile substation equipment for
12 sites. Toyota Tsusho Corporation assumes engineering, procurement and construction of the equipment.
The Iraqi power sector currently remains at approximately 12GW of
supply capacity, whereas a capacity of around 16GW to 18GW is inneed. In order to increase the capacity and meet the demand, thegovernment of Iraq is planning to improve and develop facilities for
power generation, transmission, and transformation. Under such circumstances, these loans will help promote Iraq’s independent reconstruction through enhancement and stabilization of power supply byintroducing high-quality infrastructure, and at the same time contribute to maintaining and strengthening the international competitiveness of Japanese industries. Furthermore, the project’s initiatives
have been developed under an agreement between Japanese andIraqi governments, and thus it is expected to build stronger relationship between the two countries.
As Japan’s policy-based financial institution, JBIC will continue tosupport Japanese companies’ export of infrastructure facilities, aswell as their overseas business deployment, by drawing on its various
financial facilities and schemes for structuring projects and performing its risk-assuming function.
* Press release of JBIC, March 30, 2017■A reas in Iraq where the project’s substations are scheduled to be constructed (highlighted in green)

Mosul

Masahiro Kida

Director of Division 2, Oil and
Gas Finance Department,
Energy and Natural Resources
Finance Group

16,00015,000

About 11,000—How much improvement is this project expected tobring to the Iraqi power situation?

10,000▶Morimoto In Iraq, the summer temperature can rise as high as
40 to 50 degrees Celsius, so air conditioners and the power forthem are absolutely necessary. But the country regularly has
blackouts that last 7 to 8 hours a day and the Iraqi people seemto be frustrated with this situation. To address this issue, the Iraqi
government will manufacture substation equipment from TOSHIBA CORPORATION and mobile substation equipment from
MEIDENSHA CORPORATION, and develop substations which
would lower the power pressure in order to transmit electricity to

5,000

0

Baghdad2013：Power demand

2018：Power generation capacity

Source: Created from “Feasibility Study for Add-On Project for
Gas Turbine Power Station in South Region of Iraq” (February2016) by Ministry of Economy, Trade and Industry (METI)

Basra

Haruka Morimoto
Division 2, Oil and Gas
Finance Department, Energy
and Natural Resources
Finance Group

July 2017 JBIC Today

11