May 2021

Special Feature

Survey of Overseas Direct Investment
by Japanese Companies-Rethinking Supply Chains-

After China and India, Vietnam remains firmly popular
What the future holds for globalized production networks
Supply Chain Overcoming Pandemic and Growing Increasingly Resilient
COVID-19 Renews Spotlight on Importance of BCP
Next Moves Anticipate Development of Overseas Production Bases
How Should We View the COVID-19 Pandemic?
Global Economic Trends as Seen from Companies’ Awareness of Issues

Our Global Challenges-Shinko Kogyo Co., Ltd.

Operating Automotive Components Factories in Three Asian Countries outside Japan
Demonstrating Our Strengths to the World by Instilling the Spirit of “Wa (Harmony)”

Project Frontline Our People and Their Work

Significance of project evaluation with anticipation of a post-COVID-19 futureFirst financial support extended to local suppliers that underpin Japanese automobile manufacturers in India

Special Feature

Survey of Overseas Direct Investment
by Japanese Companies-Rethinking Supply Chains-

After China and India, Vietnam remains firmly popular
What the future holds for globalized production networks
Since 1989, JBIC has conducted a survey of Japanese manufacturers every year on their overseas
business operations and reported its results. The objective of the survey is to understand thecurrent trends, agenda, and future outlook of the overseas business operations of internationallyactive Japanese manufacturing companies. Many companies cooperated in the FY2020 survey
even amid the impact of the COVID-19 pandemic. It revealed some interesting results in terms of
the outlook for the overseas expansion of the manufacturing industry in the future.
COVID-19 affects many companies' production activities
Expectations are growing for China, which resumed economic activities quickly
In FY2020 JBIC Survey Report on
Overseas Business Operations by Japanese
Manufacturing Companies (Survey ofOverseas Direct Investment by JapaneseCompanies), in addition to the regular themesof business performance evaluation, businessdevelopment prospects, and medium-term
promising countries/regions, this year’s
survey also covered the special themes of the
impact of COVID-19 on the supply chain andcompanies’ efforts and future outlook toward
the SDGs. While annual survey items are
positioned as fixed point observations, these
special themes are positioned as a prediction of
the current status and future trends of themesof particular interest.

Ever since it emerged, the COVID-19
pandemic has wreaked havoc around theworld, but the epidemiological situation andpreventive measures being taken vary fromcountry to country, and the impact on
corporate activities also varies.
Regarding promising countries/regions
over the mid-term (next three years or so),
China regained its position at the top of the
rankings in the FY2020 survey. The difference
between China and India, which fell back tosecond from the top spot, appears to havebeen these two countries’ respective
responses to the pandemic. While China wasquick to resume economic activity, India
has suffered from a protracted lockdown,

Promising Countries for Overseas Business over the Mid-term (Next 3 Years)
Ranking
2019

2020

2

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
16
18
19
20

1
3
4
6
5
7
9
8
9
14
11
21
15
12
12
17
26
18
20

Country/Region (Total)
China
India
VietnamThailandUS
Indonesia
Philippines
Malaysia
MexicoMyanmarGermany
TaiwanBangladesh
Australia
Korea
Singapore
BrazilUK
RussiaTurkeyNo. of Companies
2019
(404)

2020
(356)

180

168
163
131
111
98
96
37
34
32
25
20
18
16
14
12
11
11
9
8
7

193
147
133
93
102
48
41
47
41
14
18
7
13
15
15
11
4
9
8

Note: Countries/regions with the same rank were ordered based upon their rank in the previous survey.

Surveyed Companies

Percentage Share (%)
2019

2020

44.6

47.2
45.8
36.8
31.2
27.5
27.0
10.4
9.6
9.0
7.0
5.6
5.1
4.5
3.9
3.4
3.1
3.1
2.5
2.2
2.0

47.8
36.4
32.9
23.0
25.2
11.9
10.1
11.6
10.1
3.5
4.5
1.7
3.2
3.7
3.7
2.7
1.0
2.2
2.0

exacerbating its already troubling economic
situation.
Nevertheless, mere two votes separated
China and India. Although this reversal in the
top rankings is important, even more notable
points are the extent to which these twocountries have pulled ahead of thethird-ranking and lower countries/regions, thecontinued high expectations for ASEAN
member states in the overall rankings, and, on
the other hand, the decline in expectations
toward Mexico over the past several years.
Particularly worthy of attention is Vietnam,
which has consistently placed high in the
rankings for the past 15 years and continues tohold firm popularity. Given its clear gaps from
India in second place and Thailand in fourth,Vietnam is likely to remain in third place forthe foreseeable future. Vietnam has been
incorporated into the supply chain as a
production base for a wide range of industries,
including general machinery, and it is also
becoming increasingly attractive as a market
due to rising domestic incomes. These trends
are making Vietnam an attractive prospect interms of both internal and external demand.
Bangladesh, where trade inquiries havebeen increasing in recent years, and Germany,
which is a major industrial center in Europe,
continue to be seen as promising.
Co n v e r s e l y , M y a n m a r i s s e e n as
concerning, falling one rank to 10th place in
the FY2020 survey. It enjoyed a temporary
boom in popularity around 2015, before
settling down slightly in recent years, but thepolitical upheaval in February this year has
raised concerns that expectations for
Myanmar may decline significantly.

The companies targeted in this survey are Japanese companies which have three or more overseas affiliates (including at least one production base).
Number of surveyed companies: 954 Number of valid respondents: 530 companies (168 by post, 362 online) Valid response rate: 55.6% Survey period: August 21 – September 30, 2020

2

From production base to giant market: Shift in China’s positioning
Expectations for solid recovery and concerns about slowing economy
Data on overseas production ratios havebeen collected since 2001. This figure indicatesthe involvement of Japanese companies in
China. 2001 is the year when China joined theWTO, and it was also around that time that theJapanese manufacturing industry began toconsider China as a factory of the world.
Japanese companies started manufacturing
overseas in earnest in the 1980s. This trend
was further spurred on by the presence ofChina, with the overseas production ratio
increasing to more than 35% in 2015 andclimbing as high as 36.8% in 2018.
China’s position has changed significantly
over the past 20 years. When Japanesecompanies first ventured into China, whilesome production was for local sales, their main
intentions were to export the goods they
produced in China to Japan and the UnitedStates, or to assemble them in the ASEAN
region before re-exporting them on to othercountries. However, that perception haschanged significantly in the past 10 years or so.
The red line in the graph below shows thetrends in overseas sales ratios, indicating theextent to which Japan has captured overseas
markets. This figure started increasing in 2011.

This is when Japanese companies started to
see China as a market. In other words, thegraph shows that, for Japanese companies,
China was a production base until the early
2000s, but in the following decade, theirpositioning of China changed to a market forthem to sell their products.
The impact of COVID-19 can also be seenin this graph. Overseas production ratio roseas high as 36.8% in 2018, but fell to 33.9% in
2019, which was the largest decline in history.
Based on extremely rough calculations, if wewere to divide this decline by 12 months, it
represents a decline of about 3 % per month. In
other words, from a macro - economic
perspective, it can be assumed that, overall,
COVID-19 and the accompanying lockdowns
had the impact of suspending overseas
production by Japanese companies for about amonth.
Views on the outlook for future recovery
vary depending on the industry. In the summer
and autumn of 2020, when the questionnaires
were sent out, many observers at that point intime were predicting that a recovery to about
34.6% would be achieved by the end of fiscal
2023. However, with the Chinese market

Trends in Overseas Production Ratios*1 and Overseas Sales Ratios*2
44％

Medium-term plans(FY2023)

Overseas Production Ratios*1

42％

Overseas Sales Ratios*2

39.6

40％
37.5

38％
36％

34.7
33.5

34％
32％

24％

35.4

35.6

35.2
35.1

34.2

38.5

36.8

36.2

35.6

35.6

35.0
33.9

32.9
31.3

31.0

34.6

33.2

FY2020
Projected

28.0
26.1

24.6

Actual

22％
20％

38.7

29.2

26.0

26％

33.3

30.8
30.6

29.1
27.9

28％

34.2

34.0

30.5

30％

34.7

37.9

39.3

01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

17

18

19

20

21（FY）*1 (Overseas Production) / (Domestic Production + Overseas Production) *2 (Overseas Sales) / (Domestic Sales + Overseas Sales)*3 Each of the ratios in the graph is a simple average based upon the values reported by responding companies.

Commentator of the survey
Director, Division 1, Strategic Research Department

KASUGA Takeshi

showing a steadier recovery than expected,
some companies are now aiming to recover
during fiscal 2021.
In general, the overall view of the
manufacturing industry is that the higher asector’s dependence on the Chinese market,
the earlier that sector is expected to recover.
For example, at the time of this survey, there
had been a large drop in the automotive andgeneral machinery sectors, but these two
sectors are now riding the wave of China’s
recovery. Hence, it is expected that somecompanies will see their business performanceachieving better results than expected in the
future.
Respondents from all industries, regardlessof sector, commented that their business in
China has recovered. While this is certainly apromising sign amid the COVID-19 pandemic,
for this very reason, the concerns expressed
about what would happen in the event of aslowdown of the Chinese economy arecertainly understandable. Continuing todiversify their markets, in other words,
developing markets other than China could be
described as a common challenge for allindustries.

Countries Attracting Attention for Overseas Business Investment
Germany

Germany boasts the largest concentrationof industry in Europe and demonstrates amajor presence as a gateway to thecontinent/Europe and as a country withtechnology development partners. With
railway connections between Germany andChina being developed in recent years,
Germany’s role as a European base forentering the Chinese market is also
attracting attention.

Bangladesh

Bangladesh rose in the rankings from 21 in the previous
survey to 13 in FY2020. In addition to expectations thatthe market will expand against the backdrop of its
large population, many companies seem to be
attracted by Bangladesh as a production base for
automotive components due to its reasonable laborcosts. Its future development is also expected fromgeographical perspectives, with hopes for futurecooperation with neighboring countries such as India
and Thailand also growing.

MexicoMexico's rank peaked in 2016 but fell during
the T r u m p a d m i n i s t r a t i o n . D u e t o i t s
proximity to North America, the automotive
industry has high e x p e c t a t i o n s o f t h i s
country. However, many companies seemto consider the enforcement of the UnitedStates-Mexico-Canada Agreement (USMCA),
in particular, its Rules of Origin, as a constraint
on their business, so this situation will requireongoing monitoring.

3

Survey of Overseas Direct Investment by Japanese Companies - Rethinking Supply Chains -Supply Chain Overcoming Pandemic
and Growing Increasingly Resilient
COVID-19 has brought issues in production networks to light. Supply chains are shifting from cost-consciousness toimprovement of reliability.
SDGs are also showing signs of spreading through supply chains.
Limitations of supply chains developed with an emphasis on cost
Goal now is reliability as represented by Just-in-Time
The FY2020 survey has revealed anew thehigh degree of dependence on China and
ASEAN member states by Japanese companies’
supply chains and their vulnerability toexternal shock, namely the pandemic.
However, the signs of any repatriation to Japanare weak, with few companies considering
withdrawing from overseas. Not many
companies are choosing to relocate or
reorganize their bases. The overall direction is
to first secure and increase their working capitaland work on areas such as strengthening local
procurement, before engaging in qualitative
improvement of the supply chain.
Of particular note in this regard is factory
automation. In the FY2019 survey, when asked
about automation of production processes,

labor saving, and IT-based optimization, a thirdof the respondent companies expressed someinterest. In particular, they have already been
considering factory automation in China,
Thailand, Indonesia, and Vietnam, and the
pandemic could also be thought of as a trigger
that will further encourage such trend.
Based on the results of the survey, when
we asked experts, a common response
was that, until now, Japanese companies havesought out locations with cheaper labor for
their supply chains from an emphasis on
lower costs, but it appeared that, since thepandemic, their awareness has started tochange toward making “reliability” a source ofcompetitiveness. There is a tremendous senseof trust in Japanese companies that pursue

Supply Chain-related Actions based uponExperiences during the COVID-19 Pandemic

SMEs
Large enterprises

Expand working capital

86

Multiply factories by product

78

47

133

45

123

Expand investment for automation and labor saving

73

49

122

Enhance local procurement and local sales

68

50

118

Review distribution network including
identiﬁcation of alternatives

73

38

Return to Japan

27

Move to third country“Just-in-Time” operations, so that is likely to
become a key point in their competitive
advantage.
In fact, some companies are starting toconsider increasing the reliability of their
supply chain, even if it means incurring certain
costs. Their intention is to treat the symptoms
through responses such as multiple streams
of procurement and building-up of inventory,
while, at the same time, strengthening thequality of the supply chain itself and improving
reliability to make it more resilient. It is
becoming more difficult for Japanesecompanies to continue to compete successfully
against China and emerging countries by costcompetitiveness alone, and the manufacturing
capabilities of emerging countries are also
progressing dramatically. Because the
COVID-19 pandemic occurred in this kindof competitive environment, it may be only
natural for Japanese companies to reflect
on their development of bases from asingle-minded pursuit of lower costs and to
start re-thinking their supply chains on thebasis of competitiveness in terms of resilience,that is, their ability to recover from external
shocks.
The friction between the U.S. and China
and the COVID-19 pandemic have led to therealization that globalization is not all good.
Ensuring resilience against various external
shocks in the future, including climate change,
appears to have emerged as an important
theme.

16

111

43

18 10 28

Expand ﬁnancial support for supplier/procurer 10 7 17
None

70
0

(Ref: FY2019 Survey)
Status of Introductionof Factory Automation Equipment/Technologies to Overseas Production Sites

58
50

128

100

150

(companies)

Country/Region to introduce factory automation technology/facilities● Already introduced● Now considering

62

54

China

Not sure
141 companies
26%

Already
introduced
99 companies
18%
Now considering
97companies
18%

Not yet introduced
209 companies
38%

40

Thailand28

US
Indonesia

17

Vietnam

15

4

11

11

Malaysia

19
17

India

9

8

Taiwan8

1 9

Percentage
by industry
38%

Automobiles

196

23%

companies

Electrical
Equipment
General& Electronics
Machinery Chemicals

22

8

47

Other

26

6

74

34
26

16

16

EU15

19
17

10

Mexico0Overall ( total answers = 546 companies)

34

116

9%

40

80

12%

18%

120

(companies)

US-China Decoupling Response of Companies
with Bases in Both U.S. and China

Decoupling already underway even before US-China friction
Trend in optimization of production locations will continue
Companies with business bases in both theUnited States and China were asked about how
they were handling the debate about US-China
decoupling, referring to the separation of their
US and China businesses. The most common
response, as expected, was "no discussion,"but a considerable number of companies
responded that they had already decoupled
their US and China businesses. A surprising
result was a large number of companies that
responded that they were in the process of
decoupling.
In interviews, we also received several
comments along the lines of “US-China
decoupling took place naturally,” “China as a
production base ended around 2010. As
China's working-age population has peakedout and production costs are rising, ourproduction bases have been transferred to the
ASEAN region.” These responses could lead tothe assumption that the relocation of businessbases had already started even before the riseof US-China friction.
Companies that responded that they werein the process of decoupling or that they were

Already
decoupledconsidering decoupling but had not yet started
appear to sense the risks in their supply chains
straddling these two huge markets amid the
US-China friction and the COVID-19
pandemic. Examples of such risks are thepossibility of customs clearance procedures
being disrupted due to the pandemic or theneed to check whether or not a product isaffected by the US-China dispute. For thesekinds of reasons, it appears that somecompanies, rather than unreasonably
maintaining supply chains that involve multiple
markets, want to change their supply chains
into a form in which local production and local
consumption can be completed in separate
individual markets.
The important point is that US-China
decoupling is not an objective, but the result of
optimal business development by companies.
This means that decoupling is one optional
outcome of the process of reviewing andoptimizing production frameworks, and that
the US-China dispute and COVID-19 have
served as a promoter or a catalyst leading tothat action.

58

companies

Under procedure

18companies

No discussion

150companies

Under consideration

36companies

No need todecouple

30companies

T h e r e h a s a l s o b een a n o t h er k ey
development relevant to US-China decoupling.
In February this year, U.S. President Joe Bidensigned an executive order to strengthen U.S.
supply chains. The United States will work on
measures to strengthen the resilience of U.S.
supply chains over the next three months to ayear, while at the same time promoting close
cooperation with allies and partners of theUnited States. We should continue to bear inmind that global interest in supply chains is
expected to remain high.

Rising expectations for Japanese companies’ potential
SDGs initiatives expanding through supply chain
Japanese companies' interest in the SDGs
was thought to be low, but in this survey,
approximately three-fourths of all respondentcompanies answered that they were either
working on or considering the SDGs in some
way or another.
The analysis by company size wasparticularly interesting. Company size wasirrelevant in the top two motivations for
efforts toward the SDGs, but there was aclear difference in the third motivation,with large companies citing "relationshipmanagement with investors" while SMEs cited"Requests from procurement sources/delivery
destinations." For this reason, it could be said
that large companies dealing with investors ona daily basis are taking the initiative in theirefforts toward the SDGs and that the SDGs arestarting to spread among SMEs through actual
business (namely, the supply chain).
By industry sector, growing awareness of
the SDGs through supply chains can be seen in
the automotive industry in particular. Requests
from business partners are very influential. A
certain SME was even told by its European

Motivations behind Efforts towards SDGs
Increased interest from consumers,
buyers, and professional federations

53.0

Self motivated

57.5

29.9

Relationship managementwith investors

6.7

Relationship managementwith ﬁnancial institutions

7.3

45.3
11.8
17.4

Request from procurers/suppliers
11.5

Inﬂuence from competitors

28.7

17.1

Large enterprises (287 companies)

10.5
10.4

Parent company, group company

7.0

Requirement from local authority
0

59.9

10

partner that it would be excluded from thepartner’s supplier list if it did not make efforts
toward the SDGs. In Japan as well, it is evident
that awareness of SDGs is increasing,particularly among large companies.
There are 17 goals in the SDGs, and it
is quite understandable that they may seem
too lofty to feel any affinity toward them.

SMEs (164 companies)*Percentages calculated with numberof respondent companies in respective
categories as denominator

12.8
20

30

40

50

60

70(％)

Therefore, in order to make them seem more
real to the respondent companies, JBIC
prepared a list of examples of efforts being
made overseas to achieve the 17 goals andattached it to the survey as a reference. Our
hope is that Japanese companies will refer tothat list as they reflect on their businessactivities and become aware of their potential.

JBIC Survey Report on Overseas Business Operations by Japanese Manufacturing
Companies can be found from the following website.

https://www.jbic.go.jp/en/information/research.html
5Survey of Overseas Direct Investment by Japanese Companies - Rethinking Supply Chains -COVID-19 Renews Spotlighton Importance of BCP
Next Moves Anticipate Development ofOverseas Production Bases
Sumitomo Corporation leverages its strengths as a major trading and business investment company to develop and operateindustrial parks overseas. We interviewed NAKANISHI Eisuke, General Manager of Sumitomo Corporation’s Overseas Industrial
Park Department about the signs of change that only a company that has supported manufacturers for about 30 years can sense.
Decentralization of bases attracts renewed attention as BCP measure
Thinking about the ideal vision of overseas industrial parks in the future

NAKANISHI Eisuke

General Manager, Overseas Industrial Park Department,
Sumitomo Corporation—I imagine the COVID-19 pandemic has
impacted on overseas industrial parks invarious ways.
NAKANISHI Since the development of our
first industrial park in Indonesia in 1990,
Sumitomo Corporation has developed eightindustrial parks in six countries. There are 552
tenant companies in those parks in total as
March 2021. The distinctive feature of ourbusiness is well express in the catchphrasethat concluding a contract means commencing
the relationship. We also provide high-quality
infrastructure, such as water and electricity, tosupport tenant companies in the stable
operation of their businesses. With pandemic
countermeasures varying from country tocountry, we did struggle to respond, and whenrules that foreign companies were not happy
with were established, we compiled theopinions of tenants in the industrial parks andmade submissions to the authorities.
—Have there been moves such as there-examination of supply chains?
NAKANISHI Our overseas industrial parks
have attracted attention from the perspectivesof business continuation planning (BCP) in thepast as well. In particular, the Great East Japan
Earthquake and the Thailand Floods in 20116

had a great impact. Manufacturers learned thathaving only one production base or supplier
could put production continuity at risk in theevent of an emergency, which made them startconsidering measures such as decentralizing
their bases and searching for new suppliers.
The number of tenant companies at our
industrial parks in the Philippines increased
between 2012 and 2014. I think that this was
because, in the aftermath of 2011, companies
that had business operations in Thailand andChina evidently focused on the Philippines as alocation for decentralization.
Recognition of the importance of BCP
measures continued, and I think that the global
COVID-19 pandemic has cast a new spotlighton that importance and accelerated that trend.
However, as COVID-19 is not yet under control,
even if manufacturers want to set up a newfactory in another location, they are not able tovisit potential sites. Changes that involve
investment are probably still some way off.
—Have you sensed any change inthings other than the supply chain?
NAKANISHI This is not something that is dueto the pandemic, but because our customers’
needs are continuously changing, we also needto evolve ourselves alongside them. Recently,
the introduction of green energy is attracting
increased attention. This may be due to the
influence of the SDGs trend, and we havelaunched a solar power generation project at
our Thang Long Industrial Park II in Vietnam
to meet the demands of the tenants companies.
Based on the knowledge that we acquire fromthat project, we intend to deploy it in our otherindustrial parks as well.
—How do you see the overseas
businesses of Japanese companies
evolving in the future?
NAKANISHI
Large-scale investment may
take some time, but I think it is possible thatJapanese companies will re-organize the rolesof their bases. When the U.S.-China friction
boiled over, the growth of the Chinese market
also factored into the decision by somecompanies to convert their factories in China to
production exclusively for the Chinese market
and move their export production lines to theirfactories in Vietnam for export to the UnitedStates and other markets.
There also seems to be some talk about
repatriating production bases to Japan, but
given that the reasons for Japanesemanufacturers venturing overseas in the firstplace were cost and labor issues, until thoseissues are resolved, I believe that the global
production will be maintained. Having said
that, while we are still feeling the effects of thepandemic, we will continue to communicate
with our customers to consider how to update
our industrial parks to meet future demands.
On the other hand, manufacturers without
the know-how for venturing overseas needsupport, so we are developing more factories
for rent, in which we set up the factorybuilding, and the customer only needs toprovide the necessary machinery andequipment. This business enables companies
to save money on their initial investment andlowers the hurdle to making overseas moves,
making it suitable for pilot projects. Goingforward, we will strive to expand our services
further to support our customers' overseas
expansion.

Thang Long Industrial Park II in Vietnam, with a total development
area of 346 hectares

A total of 220,000 people work at Sumitomo Corporation’s overseas
industrial parks in various countries.

How Should We View the
COVID-19 Pandemic?
Global Economic Trends
as Seen from Companies’
Awareness of Issues
While the factors that affect the economy are many and varied,
unlike issues that are limited to certain nations or regions anddisasters such as earthquakes, the novel coronavirus (COVID-19)
pandemic is a truly global factor that has spread across the entire
world. We interviewed international economics expert ITOH
Motoshige, Professor Emeritus of the University of Tokyo andProfessor of the Faculty of International Social Sciences, Gakushuin
University, on how we should view future economic trends.
—What was your view of the results of the Survey ofOverseas Direct Investment by Japanese Companies
conducted during the pandemic?
ITOH In the global economy, trends are decided by major turning
points, such as the global financial crisis in 2008. The COVID-19
pandemic is also likely to become such a turning point. In thatregard, the results of the survey give us a great deal to think about.
Information such as what individual companies were thinking, how
they acted, and what their awareness of the issues was like in thecurrent critical circumstances, give us an opportunity to think about
future trends. The three keywords I am focusing on at the momentare "supply chain," "U.S.-China relations," and "SDGs."
Before I explain these matters, I would like to point out that,while it is true that various changes have been occurring because of
the pandemic, not all of them were actually caused by it. In my view,
the pandemic accelerated some changes that had already started,and brought other changes that had already occurred into the light.
—Are you saying that these changes did not happen
spontaneously, but that they occurred as part of an ongoingprocess or based on a build-up of things that had occurredpreviously?
ITOH That’s right. Events that occurred around the time of the fallof the Berlin Wall in 1989 are believed to be the turning point that
led us to the present. It was around then that the globalization of theeconomy really started to take off. Today, more than 30 years later,some people describe the developments of those days as“hyper-globalization.” This term does not refer merely to theincrease in the volume of trade. It also includes how globalization
prompted the division of labor beyond national borders and caused
supply chains to expand and become increasingly complex. In fact,
there are many people who have started to express doubts andsense risks in the supply chains that have evolved to this extent, andI think the pandemic has brought those doubts to the surface.
In addition, globalization has accelerated people’s movements
across borders at a faster pace than ever before. While there may benothing wrong with such movement by itself, if overseas workers
are not handled appropriately, it has the potential to cause serious
problems. If financial markets also overheat due to globalization,
this could also become a risk factor, so we need to be careful in thatregard as well.
—What is your view of the friction between the UnitedStates and China?
ITOH This is another issue that was not directly caused by the

ITOH Motoshige, Ph.D.

Professor Emeritus, the University of Tokyo, and Professor,
Faculty of International Social Sciences, Gakushuin University
Professor ITOH is an expert in international economics, serves as an
outside director for many companies, and is also a televisioncommentator. He also serves in a number of public positions, including
Chair of the Reconstruction Promotion Committee and Member of theCouncil for the Promotion of Social Security System Reform.

pandemic. It had already started around the time Donald Trump
became President and has continued to accelerate to its current
state. Essentially, there is a risk of politics having a major impact on
the economy. This is certainly not limited to the United States andChina. The same could also be said for Brexit, and it could also
happen in other countries and regions.
However, it should be noted that China has been growing
rapidly over the past 30 years, and particularly since it joined in
the WTO in 2001. While China’s growth in itself is not a bad thing,it has had no small impact on international politics andinternational organizations. The deterioration of the functions of
the WTO is a typical example. Ultimately, this has led to trade
friction with the United States, and I think it could affect theperformance of individual companies.
—Could you give us your opinion on the SDGs?
ITOH Among the 17 goals of the SDGs, I am focusing on
green-related issues such as climate change and environmental
conservation. This is neither a direct result of the pandemic, nor isit an effort to reinvigorate economies that have cooled due to thepandemic. My view is that more attention is being given to themesthat have been the subject of various activities for some time,
including citizens' movements.
While I would not say that it is directly related to thehyper-globalization that I mentioned earlier, I do think that it isprecisely because there are concerns about excessive globalizationthat it is attracting attention.
What changes will happen to international activities such as the
SDGs going forward? How will the companies surveyed assess
the magnitude of those changes? I think the survey was quite
significant in that it has prompted us to think about these kinds ofquestions.
7Our Global Challenges

Operating Automotive Components Factories
in Three Asian Countries outside Japan
Demonstrating Our Strengths to the Worldby Instilling the Spirit of “Wa (Harmony)”
Shinko Kogyo Co., Ltd.
Shinko Kogyo Co., Ltd. manufactures automotive components at three factories in Okayama
Prefecture’s Soja City in Japan and at four factories in Thailand, China, and Indonesia.
It realizes low cost and high quality by transferring Japanese manufacturing, such as building thecompany’s original automatic production systems at its locations outside Japan as well.

Manufacturing automotive components related to all aspects of driving motion
Finding new opportunities through diversification since 2000
‘As articulated in our company credo, “Wa Shite Nagarezu(Harmony without mindlessly following others),” which we haveupheld since our foundation, we are taking on the challenge ofmanufacturing around the world while demonstrating teamwork.’
These are the words of SASANUMA Yasunori, President of
automotive components manufacturer, Shinko Kogyo Co., Ltd.
Headquartered in Soja City, Okayama Prefecture, Shinko Kogyo
has three plants in the city and four plants in Thailand, China, andIndonesia. It has manufactured and marketed a wide variety of
automotive components, responding to the trend toward local

President

SASANUMA Yasunori
8

procurement of client companies that have ventured into overseas
markets, including major automotive manufacturers.
Shinko Kogyo is one of Japan’s largest producers of propeller
shafts, its core product line. It also handles some of the mostimportant components involved in driving motion, namely driving,turning, and stopping. They include transmissions, engine
components, power steering components, brake components,
wheel hubs, and engine connecting rods.
The company’s origins date back to 1948, when SASANUMA’sgrandfather founded Shinko Kosakusho and started trading with
Mitsubishi Heavy Industries, Ltd. (Mitsubishi Motors Corporation
since 1970), which was located in the Mizushima Complex inKurashiki City, Okayama Prefecture. Initially, its business was themachining of various types of screws, bolts, and gears. The
company subsequently changed its name to Shinko Seisakusho andexpanded its business into sheet metal parts manufacturing andwelding assembly. In 1966, to further develop the company inresponse to increases in orders, the company split up its sheet metal
processing division and machining division into two separate
companies. Shinko Kogyo came into being as the machining
division, and, since then, it has built up its history as a supplier to
Mitsubishi Motors Corporation.
A turning point in that history arrived when Mitsubishi Motors
formed a capital alliance with DaimlerChrysler in 2000. SASANUMA
recalls, ‘Under DaimlerChrysler’s policy, Mitsubishi Motors clarified
its own direction toward global procurement. Hoping to overcome
this situation, we broadened our product range, while expanding ourbusiness with major components manufacturers and major
automotive manufacturers, a move that ultimately became very
fruitful for Shinko Kogyo.’
Shinko Kogyo’s strength in manufacturing is its ability to produce
high-quality products at low cost. What makes this possible is theadvanced automatic production system that it has designed andbuilt for itself in-house. This system makes it possible to perform
highly productive, flexible manufacturing that accommodates a wide
variety of products. It also enables the company to recover quickly of
its own accord in the event of a disaster or other emergency
situation.
In the construction of the automatic production system, to keep
costs down, Shinko Kogyo uses inexpensive general-use
components on which their internally-designed, dedicated jigs aremounted. It also strives for thorough cost reductions by designingand manufacturing tools for machining in-house. SASANUMA says
proudly, ‘Amid increasingly intense global competition, we are able

to provide products of reliable quality at costs that satisfy ourcustomers.’
The company’s veteran craftsmen who have played a central rolein manufacturing since the time of SASANUMA’s grandfather havebeen committed to improving their technical abilities and have been
instilling their expertise and culture throughout the company. In
recent years, the company has been working on passing thoseveterans’ skills on to younger generations through the establishmentof an in-house workshop program called “Densho Juku,” for which
one of those veteran craftsmen serves as the principal.

(Above) Factory opened in Indonesia(Right) Production line at the factory inIndonesia
The same equipment as the Japanese factories
has been installed there.

Building automatic production system even in Asia, a region of cheaper labor
QC presentation events held in five locations in Asia including Japan
Shinko Kogyo first ventured into the overseas market in 1988.
This was triggered by moves by Mitsubishi Motors’ factory inThailand, which had begun manufacturing pickup trucks, to procurecomponents locally. Shinko Kogyo formed a partnership with a Thai
industrial group, Thai Summit Group, to establish a joint venturecompany, Thai Summit Engineering Co., Ltd. (TSE).
With the aim of also providing forged products from Group
companies, in 2009, Summit Group established Thai Summit Meiji
Forging Co., Ltd. in a joint investment with Meiji Drop Forge Ltd.,
TSE, and Shinko Kogyo. In 2011, Wuxi Shinwashin Precision
Machining Parts Co., Ltd. was established in Jiangsu Province withthe aim of capturing demand in the massive Chinese market.
Furthermore, PT. Shinko Kogyo Indonesia (SKI) was established in2014 when Mitsubishi Motors decided to produce a compact-sizemini-van, “Xpander,” for the Southeast Asian market. At all its
overseas locations, Shinko Kogyo manufactures components for
major automotive manufacturers and major components
manufacturers, with a focus on Japanese companies like Mitsubishi
Motors that have expanded into local markets.
Like its production locations in Japan, the company has built its
original automatic production system at these overseas locations,thus achieving low costs and high quality. TSE began pursuing
automation in the early 1990s. ‘Cheaper labor is one attraction of the
Asian market. Back then, only a few companies were tackling
automation. However, we felt that, if we were to achieve equivalentquality to the products we make in Japan, we should adopt the same
production system and the same controls. We wanted todemonstrate our strengths by transferring the manufacturing of
Shinko in Japan directly to other countries.’ (President SASANUMA)
The company has also been actively engaging in improvement
activities to ensure quality. It has implemented the same QC group
activities at its overseas locations as it conducts in Japan. Prior to
the COVID-19 pandemic, five teams in total, namely the top twoteams from Japan and the respective top teams from Thailand,
China, and Indonesia, gathered for presentation events annually ineach country. SASANUMA described the effects of this initiative. ‘If
staff believe that, if they try hard, they might have a chance to gooverseas, they will become more motivated toward the improvement
activities to ensure quality and other activities to improve their own
skills. As a result, these activities have re-invigorated the company
and led to the global transmission of technologies.’
As the foundation for these activities, Shinko Kogyo has placed
great importance on the “Spirit of Wa (Harmony)” embodied in its
company credo. SASANUMA says, ‘The most important thing ispeople helping people in their work. People might lack ability, but weplace more importance on their working dependably in accordancewith the rules. In the recruiting process, we communicate this spirit
to candidates and employ people who can relate to it. For example,
the general manager of SKI’s administration department is an
outstanding individual who has experience working for a major

automotive manufacturer and amajor
automotive
component
manufacturer. He understood ourcompany credo and felt that hewanted to take on the bold challenge of working in an environment
where he has been given authority, which is why he agreed to comeand work for SKI. The success of our overseas business depends
on how well we can instill our philosophy.’ (President SASANUMA)In July 2019, SKI received a co-financed loan from JBIC andChugoku Bank. ‘We were introduced to JBIC by Chugoku Bank andwere able to take advantage of a loan from JBIC for the first time to
install machinery at the plant. The loan is offered at a long-term fixedinterest rate and can be funded in local currency, which allows us to
avoid both interest volatility risk and foreign exchange risk. I feel that
this loan is supporting our business in Indonesia on the financial
front. What we would really like going forward is a system that could
be accessed easily for working capital loans,’ said SASANUMA,
hopefully.
With the wave of “CASE (Connected, Autonomous, Shared &Services, Electric)” sweeping across the automotive industry, thetimes are predicted to become even more turbulent. ‘We want tolearn new technology and take on the challenge of manufacturing
the kinds of components that are required to have high-precisionfunctions. We also hope to make use of our cutting technology in thefields of welfare and agriculture.’ While continuing to pass on its
passion for manufacturing, Shinko Kogyo will take on the challengeof change.

Shinko Kogyo Co., Ltd.
Head Office129-46 Tonbara, Soja, Okayama
URL
http://www.kogyo.shinko-grp.co.jp/
FoundedNovember 1966
Capital
JPY80 million
Sales Volume
Approx. JPY14.4 billion (Year Ended March 2020)
President
SASANUMA Yasunori
Employees
427 (January 2021)
Business
Manufacturing components for automotive,farm equipment,
and industrial machinery

9Project Frontline
Our People and Their WorkJBIC is engaged in an array of different projects in various parts of the world.
JBIC’s leaders talked about their work on the front lines, their commitment toprojects, and what they find most appealing as professionals in theirrespective fields.

Significance of project evaluation
with anticipation of a post-COVID-19 future

The automobile industry in India is

primarily been used for purposes suchconcept of support for enhancing supply

growing rapidly. In FY2019, the number ofas global environmental preservation.

chain resilience has been incorporated intocars sold in India was the fifth largest in

However, with the COVID-19 pandemic, we

JBIC’s new facility, which we hope will be

the world after the United States, China,

have recognized anew the need to enhanceused to provide similar support in many

oil tanker. MODEC, Inc. (MODEC) of Japan

Economic Forum as a Lighthouse of the 4thJapan, and Germany. Japanese automobile

supply chain resilience and support India’s

countries and regions going forward. We will

has the world’s top share in this field. In

Industrial Revolution in January 2020, themanufacturers have built up a majority of

automobile industry, which has a wide

strive to broaden the scope of our support torecent years, oil developing companies in a

first Japanese company to receive suchmarket share in India through efforts suchrange of supporting industries. As such, wemeet the needs on the ground, without being

number of countries have been actively

recognition. I believe that providing support

as localizing their supply chains as much as

began looking into untied loans as a means

constrained by existing frameworks.

developing offshore oil fields. In Brazil, inon the financial front to these kinds ofpossible. This structure is in line with “Makeof assisting the supporting industries ofparticular, abundant offshore oil fields haveprojects that will take us into the future is ain India,” a key initiative to promote local

Japanese automobile manufacturers.

been discovered, and MODEC has beensignificant step for JBIC as well.

manufacturing in India led by the Prime

There were many challenges, andputting efforts into the FPSO business for

JBIC has been involved in financing

Petrobras for some time. The FPSO projects

MODEC’s FPSO chartering services for

In 2020, economic activity in India

easy. However, after carefully identifying

in Buzios and Marlim oil fields are the 15th

Petrobras since its very first project. In

stagnated due to lockdowns caused by thewhat was needed to assist those supportingand 16th FPSO projects conducted bydoing so, we had been accumulating diverse

COVID-19 pandemic. JBIC’s Representative

industries and holding many discussions

MODEC in Brazil. These projects involve aexpertise with regard to the contemplation

Office in New Delhi regularly exchanges

about a mechanism to meet those needs with

cutting-edge technology known as digitalof FPSO projects. However, the situation

opinions with local Japanese companies. On

the State Bank of India (SBI), the largest

twin technology, which enables big datachanged completely due to the COVID-19

this occasion as well, Japanese automobile

state-owned commercial bank in India withrelated to FPSO operations conducted more

pandemic. As well as the inconvenience of

manufacturers came to JBIC’s representatives

a wide range of customers, the decision

than 150 km offshore from Rio de Janeiro tohaving to negotiate with the relevant parties

in New Delhi for advice about their local

was made to provide financing to SBI.

be collected and analyzed for breakdown

online, the turmoil in crude oil prices andsuppliers and dealers and about financial

During negotiations, our main focus wasprediction and other purposes.

other impacts of the pandemic made thesupport for sales. They expressed concern

to create a mechanism that would benefit

business environment unclear, adding to thethat if Japanese automobile manufacturers’

Japanese companies. From that viewpoint,difficulties in evaluating the project.

local suppliers, including SMEs, were to

we asked SBI to keep talking to the Japaneseandsuffer serious damage from the lockdowns,

automobile manufacturers that underpin the

The active commitment of Japanesecompanies in the energy sector in theWeconducted

verification

Minister Narendra Modi.

coordination among stakeholders was not（then)Director, Division 1,
Marine and Aviation Finance Department

development of natural resources overseas
and the outstanding track record that they

deliberation anew several times over toit could have a major impact on theirautomobile industry in India. We hope that

SAEKI Taisuke

are building up will help enhance Japan's

determine the bankability of the projects. In

automobile production.

the loan will lead to the development ofinternational competitiveness in this sector.

doing so, our emphasis was not on

We started considering what JBIC could

The technologies and expertise that have

immediate economic and social trends but

do to assist. Usually, we offer export loans

been cultivated through marine resourceon the anticipation of energy demand. Thisand overseas investment loans to support

It was also good experience for our

I was in charge of the project financing

development overseas are expected to prove

was in light of the fact that, even if there is toJapanese companies, but in this case, thedivision to work together with ourfor long-term FPSO (Floating Production

useful in coming years, when mining and

be a temporary economic slowdown and falltargets of support would be local businesses.

representative office to structure the project

Storage and Offloading system) chartering

production of offshore energy resourcesin energy demand, the economy will

The idea that emerged was to use

and to execute the loan, based on the needs

services to Petróleo Brasileiro S.A.

such as methane hydrate near Japan begin

continue to grow and the population

untied loans. Until now, untied loans havegarnered from the field. Moreover, the(Petrobras), a state-owned oil company inin earnest. It will also lead to the digitization

increase in the medium to long term. Being

Brazil, for the development of an oil fieldof the entire oil and gas industry as anable to take such long-term view and finalize

located off the coast of Brazil.

example of introduction of cutting-edge

the appropriate project structuring, even in

An FPSO is a type of floating production

digital technology. In fact, MODEC’s efforts

such highly uncertain circumstances, wasfacility for oil and gas that uses the hull of an

have led to its recognition by the Worldan invaluable experience for me personally.

Japanese companies located in India and thecountry’s automobile industry.

On October 27, 2020, JBIC signed a loan agreement amounting to up to USD600 million (JBIC

On July 30, 2020, JBIC signed a loan agreement in project financing amounting to up to USD491

co-financing amount is USD1,000 million. The portion co-financed by the private financial

USD352 million (JBIC portion) with Dutch company Marlim1 MV33 B.V. under the same scheme. The

YAMATO Yasuyuki

portion) with the State Bank of India (SBI). The loan is co-financed with Sumitomo Mitsui Banking
Corporation, MUFG Bank, Mizuho Bank, the Shizuoka Bank, and the Bank of Yokohama. The total
institutions is guaranteed by JBIC. SBI is the largest state-owned commercial bank in India.

Inc. (MODEC), Mitsui & Co., Ltd., Mitsui O.S.K. Lines, Ltd., and Marubeni Corporation. Also on
October 9, 2020, JBIC signed a loan agreement in project financing amounting to up to approximately

Director, Division 3,
Social Infrastructure Finance Department

Untied Loan to State Bank of India
Supporting Production and Sales of Japanese
Automobile Manufacturers

Project Financing for FPSO Projects
in Buzios and Marlim Oil Fields of Brazil
million (JBIC portion) with Dutch company Buzios5 MV32 B.V., which is incorporated by MODEC,

This loan is intended to provide, through SBI, the funds necessary for the manufacturing and sales
An FPSO under operations offshore Brazil(photography courtesy of MODEC)

purpose of these loans is to finance long-term FPSO vessel chartering services to Petróleo Brasileiro

S.A. (Petrobras), a state-owned oil company in Brazil, for developing the Buzios and Marlim oil fields
located off the coast of Brazil, in which Petrobras and others hold interests.

https://www.jbic.go.jp/en/information/press/press-2020/1012-013862.html

10First financial support extended to local suppliers that
underpin Japanese automobile manufacturers in India

The loan agreement was concluded over an online
connection between Japan and India.

businesses of suppliers and dealers of Japanese automobile manufacturers, as well as for theprovision of auto loans for the purchase of Japanese automobiles. The loan will help promotesmooth funds flows for the whole range of business operations of Japanese automobile

manufacturers in India, from production to sales, thereby serving to maintain and improve theinternational competitiveness of Japanese industry.

https://www.jbic.go.jp/en/information/press/press-2020/1028-013919.html

11Trilateral Infrastructure Partnership Meets with Communist
Party of Vietnam Central Economic Commission,
State Bank of Vietnam, and Relevant Ministries
Trilateral partners commit to
supporting energy infrastructure
based on openness, transparency,
and fiscal sustainability
In November 2018, the Japan Bank for International Cooperation (JBIC)
entered into a Memorandum of Understanding on the Trilateral Partnershipfor Infrastructure Investment in the Indo-Pacific (Trilateral InfrastructurePartnership (TIP)) with the U.S.’s Overseas Private Investment Corporation(now the U.S International Development Finance Corporation), Australia’s
Department of Foreign Affairs and Trade, and Export Finance and Insurance
Corporation (now Export Finance Australia).
On October 30, 2020, representatives of the TIP held a virtual high-level
conference with senior officials of the Communist Party of Vietnam (CPV)
Central Economic Commission (CEC) and Central External Relations
Commission (CERC), State Bank of Vietnam (SBV), and relevant ministries.
The trilateral partners noted that Vietnam is planning a number of
infrastructure projects to meet its growing demand for energy. They
appreciated the recent announcement of CPV Politburo Resolution No. 55 on
the "Orientation of Vietnam's national energy development strategy to 2030,
vision to 2045" regarding Vietnam’s policy shift of reducing the share ofelectricity supplied from coal-fired thermal power generation and moving
toward greater use of gas-fired power and renewable energies. The trilateral
partners highly commended this approach and declared that they would
commit to providing financial support based on international standards andprinciples for development such as openness, transparency, and fiscal
sustainability. They agreed to cooperate further to advance to Vietnam's
development goals.
The trilateral partners reiterated the importance of a bankable
Public-Private-Partnership (PPP) scheme for securing private capital flows toVietnam and promised to continue supporting the development of a strong
regime in cooperation with the private sector. According to the CEC,
USD150 billion in funding will be needed to meet Vietnam's domestic energy
infrastructure demand by 2030. To assist in meeting that demand, thetrilateral partners also stressed the importance of flexible and targeted
support for the projects developed as an Independent Power Producer (IPP)
project, while ensuring projects are developed in accordance with the G20
Principles for Quality Infrastructure Investment.
The aims of the TIP are to strengthen cooperation among like-mindedcountries in order to drive economic growth and promote sustainableinfrastructure investment in the Indo-Pacific region, with the goal ofachieving a “Free and Open Indo-Pacific.” The virtual conference was asignificant event in terms of further advancing those aims.

Participants from Vietnam

Participants from Trilateral Infrastructure Partnership

The Socialist Republic of Viet Nam
Population
Approx. 97.62 million[2020, General Statistics Office of Vietnam]
Area329,241 sq. km
CapitalHanoi
Language
Vietnamese
GDP in 2020
Approx. USD340.6 billion [IMF estimate]
GDP per capita in 2020
USD3,498 (VND81.90 million) [IMF estimate]
Major traded goods
Exports: textiles and garments, mobile phones
and parts thereof, computers, electrical products,
spare-parts and components thereof, footwear,
machines, equipment, tools and instruments, etc.
Imports: machines, equipment, tools andinstruments, computers, electrical products,
spare-parts and components thereof, textiles andgarments, iron and steel, telephones, mobile
phones and parts thereof, etc.
[2020, General Department of Vietnam Customs]
Trading partners and regions
Exports: United States, China, Japan, South
Korea, Hong Kong
Imports: China, South Korea, Japan, Taiwan,
United States[2020, General Department of Vietnam Customs]
Information from Ministry of Foreign Affairs of Japan unless otherwise noted.

Visit the address below for Topics about this matter
https://www.jbic.go.jp/en/information/topics/topics-2020/1112-013991.html
JBIC Today May 2021
Published by】Press and External Affairs Division, Corporate Planning Department,
Corporate Planning Group, Japan Bank for International Cooperation
4-1, Ohtemachi 1-chome, Chiyoda-ku, Tokyo 100-8144, Japan
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