Division 1 and 2
Equity Investment Department
Equity Finance Group

Tatsunori Matsubara
Director
Division 1
Equity Investment Department
Equity Finance Group

This is the first equity investment since the Equity Finance Group was established in October 2016. JBIC staff in charge

Matsubara: Infrastructure improvement, land acquisition, and difficulty in obtaining approval are issues
similarly faced in the management of this industrial
park. To ensure stable management of an industrial park,
it is vital to create an environ-(Note) Plug-and-play: Business system to provide suchservices as acquiring land and buildings, securing
electricity and water, obtaining approval and improving
various forms of support to enable firms to start
operation as easily as“plug-and-play”.

Building 1 of the rental factory inside the industrial park

Cover: Fuji Concrete Industry Co., Ltd. (Takeo City, Saga Prefecture)

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

For stable management of
the industrial park

ment that allows Japanese companies, state government and government agencies to discussproblem-solving. Accordingly, JBIC signed a memorandum of understanding (MOU) in January 10,2017 with the State Government of Gujarat, Gujarat Industrial Development Corporation (GIDC),
which manages the Mandal Japanese Industrial
Zone where the project is located, Toyota Tsusho
and Toyota Tsusho India Private Limited (TTIPL),
Toyota Tsusho’s country headquarters for India.
The purpose of this MOU is to execute the projectsteadily, while confirming the cooperative relationship between the parties.
Miyahara: It is not easy to manage a businesswith relatively high uncertainty in India. In this project, we conducted repeated analyses to identify
what risks lie ahead, with the support of highly
experienced and knowledgeable staff of Toyota
Tsusho and consultants. We were thus able to confirm the market situation and business feasibility
and to study the risks by drawing up many scenarios. Although we experienced various difficulties, it was rewarding.
In addition, we succeeded in making the Government of India aware of the importance of the
project that manages the industrial park by signing
the Subscription and Shareholders Agreement andthe memorandum at the time of the international
investment summit, Vibrant Gujarat Global Summit
from January 10-13 in 2017, held in the presenceof Prime Minister Modi.
This is the first project undertaken by the Equity Finance Group since its establishment in October 2016. We would like to continue supporting
Japanese companies expand overseas with the
JBIC’s equity financing scheme, while monitoring
the progress of each project with a sense of alertness and hope.

Tel. +81-3-5218-3100

Matsubara: In India, Maruti Suzuki India Limited,the Indian subsidiary of Japanese automobile manufacturer Suzuki Motor Corporation, has captured
nearly 50% of the passenger vehicle market. Because the domestic demand for automobiles is
growing rapidly in India, Suzuki Motor built a factoryin the state of Gujarat and started production in February 2017. Suzuki already has plans to construct asecond factory, and its annual production capacity is
expected to increase from the current 1.5 million
vehicles to 2 million in a few years.
The state of Gujarat is promoting a policy to improve infrastructure and to invite companies, but
Japanese companies in supporting industries, which
are vital for automobile manufacturing, have beenslow to expand. Responding to this situation, Toyota
Tsusho Corporation established TechnoTrends AutoPark Private Limited (TTAP) which manages theindustrial park set aside especially for Japanesecompanies to attract Japanese suppliers. TTAP has
secured a site in the Mandal Japanese Industrial
Zone, which has been built by the State Governmentof Gujarat and is supported by the Japanese Ministryof Economy, Trade and Industry (METI) and Japan
External Trade Organization (JETRO). It provides factories for rent and various infrastructure services toJapanese companies, including Japanese mid-tierenterprises and small and medium-sized enterprises (SMEs). Toyota Tsusho already operates sevenindustrial parks in four countries, including India, as
a key area of its infrastructure business, and in-tends to support Japanese companies expanding
to Gujarat by using its accumulated know-how.
Operation of industrial parks dedicated to Japanese companies is a business opportunity in India
due to its unique business environment. JBIC’s“FY2016 Survey report on overseas business operations by Japanese manufacturing companies”
ranked India at the top of the list of countries thatJapanese companies regard as promising over the
medium term, but there are many issues to solve,
such as underdeveloped infrastructure and thecomplex, bureaucratic legal system. One of thewidely known problems is the difficulties involvedin land acquisition, and it is not easy for Japanesecompanies to solve such problems alone.
To overcome this stalemate, JETRO has beendeveloping 12 candidate sites, which it selected forthe construction of industrial parks specifically forJapanese companies, in cooperation with the Indian
government to enable Japanese companies to go
through the formalities without difficulty. In the Mandal Japanese Industrial Zone, TTAP has made it easier for Japanese companies to expand overseas securely by constructing plug-and-play (Note) factories forrent. In addition to the locations, TTAP provides various services, such as assistance in establishing companies, obtaining approval from the government,
management of cafeterias and shared commuterbuses, and operation of shared infrastructure.

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

Supporting Japanesesuppliers to expand to India

4-1, Ohtemachi, 1-chome Chiyoda-ku, Tokyo 100-8144, Japanof the project talk about its significance and the issues they had to solve before it finally materialized.

April 2017

Ayako Miyahara

JBIC Today

Supporting Industrial
Park Operation in India byJapanese Companies

JBIC

April 2017

Today

Japan Bank for International Cooperation

Analysis ofSurvey Results

2016

Special Feature

Overseas Investment Destinations ofJapanese Manufacturing Companies

Understanding
the Latest Trends
Our Global Challenges

Toyota Kohki Co., Ltd. (Fuchu-city, Tokyo)
Fuji Concrete Industry Co., Ltd.(Takeo-city, Saga Prefecture)

Contributing to India’s nation-building
with high-quality concrete productsNews in Depth

SPOT LIGHT

Supporting Japanese Participation ina Geothermal Power Project in Indonesia
by Providing Project Financing

Supporting Industrial
Park Operation in India

Special FeatureSpecial Feature

Survey overview■ S urvey targets: Manufacturing companies that have three or more overseas affiliates(including at least one production base)Overseas Investment Destinations ofJapanese Manufacturing Companies■ No. of companies questionnaires were mailed to: 1,012■ Responses returned: 637 (response rate: 62.9%; 388 companies responded by post and 249 by web)■ Period of survey: July-September 2016
■ Main survey topics:
R egular topics•Evaluations of overseas business performance•Business prospects•Promising countries/regions over the mid-term

Understanding
the Latest TrendsS pecial topics of this year
•Status of cross-border M&A and issues•Current state of supply chain and roles of production/R&D bases•Competition in the global market
Note“Overseas business operations” is defined as production, sales, and R&D activities atoverseas affiliates, as well as outsourcing of manufacturing and procurement.

Based on JBIC FY2016 Survey: Outlook for Japanese Foreign Direct Investment
In December 2016, the Japan Bank for International Cooperation (JBIC) released the “FY2016 Survey Report on Overseas
Business Operations by Japanese Manufacturing Companies”. This annual survey has been conducted since 1989 to identify the current trends, challenges and future outlook for overseas business operations by Japanese manufacturing companies, and this year’s survey marks the 28th.
In this survey, three individual themes, “Status of cross-border M&A and issues,” “Current state of supply chain androles of production/R&D bases” and “Competition in the global market” were added to the fixed main themes which include “Evaluation of overseas business performance,” “Business prospects” and “Promising countries/ regions over the
medium-term.” In this report, we present several major findings of the survey including characteristic trends of overseas
business, and trends and possibilities of India which has been selected as the most promising country over the medium
term for three consecutive years. We also feature an interview with a company that has expanded into Myanmar which
was selected as the ninth promising country in the survey.

Changing trend in Japanese overseas businessGreater market orientation and the role ofhuman resource development
Overview■ T he ratios of overseas production, overseas sales, and overseas income continued to rise.
The policy of Japanese manufacturing companies to expand overseas production andoverseas sales remains unchanged.
Figure 1: Ratios of Overseas Production, Overseas Sales and Overseas Income

40

Overseas sales ratios
Overseas production ratios
Overseas income ratios

38
36

33.5%

34

30

27.9%

28

34.0% 34.7%

34.7%

35.4%

39.6%
37.9%

40.0%

36.5%
36.4%
38.5%
35.1%
35.2%
36.1%
35.6%

34.2%

33.7% 34.3%
32.9%
33.3%
29.1%
31.3%
30.5%
30.8%
31.0%
29.2% 30.6%

FY2016
projected

28.0%

26
24

37.5%

34.2%

32

20

April 2017 JBIC Today

Medium term plans (FY2019)

（%）42

22

2

Kasumi Yamazaki
Deputy Director
Research Division
Policy and Strategy
Coordination DivisionCorporate Group

Commitment to expanding overseas production
and sales remains unchanged

The ratios of overseas production, overseas
sales, and overseas income rose in 2015 asthey did in the previous survey (Fig. 1). Japanese manufacturing companies maintainthe policy of expanding overseas production, and the trend of placing importance on
the ratio of overseas production and overseas income remains unchanged.
The ratio of companies intending to“Strengthen/expand” overseas operations
was 76.6%, remaining at a high level in spiteof a slight decline from the previous year.
Meanwhile, the response ratio of “Maintainpresent level” rose to 23.0% from 18.0% in
the previous year.

Overseas Investment Destinations of Japanese Manufacturing Companies Understanding the Latest Trends

Actual

26.0% 26.1%
24.6%
01

02

03

04

05

06

07

08

09

10

11

12

13

14

15

16

(FY)

Trend 1

Purpose of overseas development is shifting from“for manufacturing”to“for market”
Competition between companies is expected to escalate

Fig. 6 on page 6 shows promising countries
and regions over the medium-term. “Current size of the local market” and “Future
growth potential of local market” are the top
reasons why these 10 countries are promising. Thus, the major reason for overseas development is shifting from “for production”
to “for market and sales” since “Inexpensive
source of labor” has declined compared tothe survey results 10 years ago when many
companies included it as the top reason.
On the other hand, the ratio of companies that chose “Intense competition withother companies” as an issue in business operation in promising countries increased innine countries except Mexico. As shown in
Fig. 2, regarding competitors in sales markets, the results showed that the largest competitors in the markets of India, North
America, EU15 and Brazil are Europeanand American companies, while the ratiosof companies which see Japanese companies as the largest competitors in ASEAN5
markets and Chinese companies in the Chinese market increased from the previous survey. The background of this trend isconsidered to be the increased presence ofJapanese companies in the ASEAN5 markets and the improved technological level ofChinese local companies. In particular,
many respondent companies consider Chinese and Indian companies as competitors
which have considerably higher price competitiveness, indicating that competition be-

tween companies is intensifying in Asianemerging markets.
Actually, machinery manufacturer A
which has increased its operating profit
nearly ten-fold in the past few years is doing
business in about 30 countries. It explained
its strategy for overseas development as follows: “Because we aim to sell our products
locally, we first set up booths at exhibitions,then promote the strengths of our products
and identify local needs, and study competing companies. Based on the information
we gather, we produce products in Japanand export them overseas. When the markets mature and offer the prospect of buy-

ing a sufficient volume of our products, we
set up a production base abroad. This is ourprocess of expanding overseas.”
Company A is expanding overseas byitself, without relying on a consulting
firm. Thus, companies with enough ability in fields other than manufacturing,such as sales, service, branding and marketing, may be able to succeed in differentiating and building high value-added
products and continue to develop in the
future without getting into a price war
with other companies.

■ The largest competitors are Japanese companies in ASEAN5 market, Chinese companies in
the Chinese market, and European and American companies in other markets.
Figure 2: Competition in Overseas Markets

100%(742)(788)(754) (924)(953)(878) (416)(437)(404) (523)(594)(563) (428)(444)(423) (239)(273)(209)80%European/
Americancompanies
Indiancompanies
Taiwanesecompanies
Koreancompanies
Chinesecompanies
Japanesecompanies

60%

40%

20%

0%

12 14 16ASEAN512 14 16China

12 14 16India

12 14 16

North America

12 14 16EU15

12 14 16 (FY)

BrazilApril 2017 JBIC Today

3Special Feature

Trend 2

Upward trend to“strengthen and expand”domestic operations
Differences in roles of R&D bases between industries

With regard to the medium-term prospects
for domestic operations, the response ratioof “Maintain present level” was the highest(58.3%) as in the previous year, while thatof “Strengthen/expand” has continued toincrease gradually since FY2011, reaching
34.0%, rising above 30% for the first timein six years. In addition, 92.8% of respondent companies which plan to strengthen
overseas business indicated that they would“Strengthen/expand” or “Maintain present
level” of their domestic operations. According to a recent study, increasing the level ofoverseas development will help companies accumulate experience and know-how
abroad, and working to meet overseas demand will help companies increase theiroverall profitability of their business including the domestic business.
Moreover, as for the medium-termbudget of R&D bases by countries and regions, the response “increasing R&D
budget in Japan” is the highest, showingthat the center of R&D will continue to be
in Japan (Fig. 3-1). However, the degree
differs considerably between industries:

Europe/America show a trend of increasing the R&D budget in the automobile industry, and India does so in the electricalequipment and electronics industries (Fig.
3-2). In the case of the automobile industry, this is because Europe and America
are well ahead of Japan in improving theinfrastructure including road testing of
automated driving, which has been a focus
of development in recent years. It is also
because Japanese companies intend to
conduct R&D by studying the trends ofAmerican IT companies including Google
which is ahead of Japan in developing automated driving. The following commentof auto parts manufacturing company B
reveals the growing trend of increasing
R&D budget in Europe and America.
As various types of companies including IT start to enter the automated driving
industry, as a supplier we are closely monitoring which companies will become thede facto standard. In the auto industry,smartphones are replacing car navigation,and electron mirrors are also under development. The structure of the industry pyr-

■ Looking at the medium-term budgets of R&D bases, the most(score)0.6

We hope that this survey will help companies thatare planning to expand overseas to solidify theirpositions as they do so. (Yamazaki)

amid consisting of Tier 1, Tier 2, and Tier
3 suppliers with the manufacturers of completed automobiles at the top is changing
greatly, and we have to figure out carefully
who will be the winner.” Company B is
keeping a close watch on open innovationand is ready to adapt to the trend fasterthan competitors.

■ Europe and America surpassed Japan in automobiles, whilecommon response was “this will be increased in Japan.”Figure 3-1: M edium-term Budget of Research and Development Bases(All companies)

India surpassed Japan in electrical equipment and electronics.
Figure 3-2: M edium-term Budget of Research and Development Bases(Industries)(score)0.6

Automobiles

0.50

0.47

Electrical Equipment & Electronics

0.34

0.4

0.30
0.21

0.28
0.23

0.23

Japan

（520）

4

April 2017 JBIC Today

China

（252）

ASEAN5
（215）

India

（105）

Europe and America
（203）

0.0

China
（63）
（42）

Figure 5: Efforts Having Impact on a High Sales Share of Major Products■ Eﬀorts emphasized over the past three years (455 companies)■ Eﬀorts important for the next three years (452 companies)
42.0

1. Strengthen our brand

51.3
66.8

2. Strengthen price competitiveness

71.5
57.4

3. Develop/produce products that meet local customer needs

66.6
11.9

4. Increase number/size of stores/shops

11.3
45.1

5. Enhance quality of local human resources

61.1

6. Give chances of promotion to local staff/managers
Delegate authority to local staff/managers

16.5
32.7
27.0

7. Improve maintenance/customer service

36.3
2.2

8. Other

2.9
0

Japan

0.22

ASEAN5（54）（33）

resources, promoting them and transferring power to them.

0(601 companies)
50

1. To produce innovative products

Japan
（100）
（79）

■ More companies are addressing the issues of improving quality of local human

20

40

60

80

（%）

Figure 4: Medium-term Roles of Production Bases

India Europe and America

（32）
（15）

（59）
（30）

3. To produce products at low cost
4. To improve the production process
and bring these improvements andknow-how to other production bases
5. To train human resource/
To transfer skills
6. Other

100 0

56.1

2. To produce products which meetthe needs of the market
0.0

a bridgehead for developing overseas sales
channels to succeed in the intensifying
competition with foreign companies.
Although not stated in the trend analysis, this year’s survey report discussed theissues of supply chains and responses tothe risk of discontinuing the supply ofparts and raw materials. It is helpful toknow the approach of Japanese companies involved in global supply chains which
are becoming increasingly sophisticatedand complicated.

products in the domestic infrastructure market, but there is huge demand for new business in emerging countries. A core part ofengineering in the future will be to pass onwhat we have accumulated since the end ofWorld War II to local material suppliers.”
As mentioned above, Japanese companies expect their overseas production baseto serve as a base for human resource development and skill transfer, while maintaining and strengthening their domestic
business including R&D and increasing
profitability by expanding overseas bases asfollowing Japan and Europe/America.

0.30

0.2

0.2

The expected roles of production bases both
domestic and overseas are changing. As forthe expectations of respondent companies
regarding the roles of their production
bases, both “To improve the production process and bring these improvements andknow-how to other production bases” and“To train human resources/To transfer
skills” were the highest, accounting for60.4% of responses. In addition, it is notablethat companies expect to place the role “Totrain human resources/To transfer skills”
not only to production bases in Japan andEurope/America (15.4%) but also to thosein ASEAN5 (13.1%).
In reality, an increasing number ofcompanies picked “Enhance quality of
local human resources”, “Give chances ofpromotion to local staff/managers’’ and“Delegate authority to local staff/managers” as an increasingly important activity
for the next three years compared with in
the past three years (Fig. 5). From the viewpoint of reducing labor cost and maintaining and improving the motivation of local
human resources, Japanese companies areshowing a positive attitude toward developing and promoting local human resources.
Supporting this trend, an optical manufacturer told us “Experienced engineers
used to pass on skills to new hires within
Japan, but we have now been doing this in
Bangkok since one or two years ago.” And
an infrastructure manufacturer told us “Wehave only demand for maintaining obsolete■ ASEAN5 receives the third highest response ratio of 13.1% as the production base “To train human resources/To transfer skills,”

0.49
0.38

0.31

Roles of production base expanding to include development of local
human resources

0.55

0.42
0.4

Trend 3

Overseas Investment Destinations of Japanese Manufacturing Companies Understanding the Latest Trends

China

India

(436 companies)(216 companies)

6.7

3.7

5.1

50

100 0

50

72.5

45.3

100 0

Europe and America

100 0

50

58.0

53.2

8.8

3.2

ASEAN5(494 companies)(286 companies)
50

30.4
70.3

69.9

68.3

63.0

10.1

60.4

17.4

16.7

4.6

18.9

60.4

11.7

13.1

3.7

15.4

2.0

2.5

3.7

(%)
100

3.5

April 2017 JBIC Today

5

Special Feature

Overseas Investment Destinations of Japanese Manufacturing Companies Understanding the Latest Trends

Trends of promising countries in the medium term
We asked the surveyed companies to select up to five countries and regions that they
consider promising over the medium-term. The table below shows the top 10 countries.
Of these, we selected India and Myanmar to present the insights of JBIC staff and Japanese companies which are closely and directly involved in these two countries.

TOPICS■ Figure 6: Promising Countries/Regions for Overseas Business over the Medium-term

Ranking
2015

→

2016

1

-

2

-

2

▼

1
2
3

5
4
6
7
8
10
9

▲
▼
▲
▼

4
5
6
7
8
9
10

Country/Region (Total)

No. of companies

2016
483

India
China
Indonesia
VietnamThailand
MexicoUSA
Philippines
MyanmarBrazilIndia
No. 1: India

2015
433

Percentage share（%）
2016

2015

230

175

47.6

40.4

203

168

42.0

38.8

173

168

35.8

38.8

158
142
125
93
51
49
35

119
133
102
72
50
34
48

32.7
29.4
25.9
19.3
10.6
10.1
7.2

27.5
30.7
23.6
16.6
11.5
7.9
11.1

Masashi Kishioka
Director
Division 2
Social Infrastructure Finance Department
Infrastructure and Environment Finance Group

India was ranked first among promising countries over the medium-term, with the percentage
share of 47.6%. This means that about half of the companies that gave a response named India.
In the following discussion, a JBIC staff member in charge of relationship management between
India and Japan talks about the attractive points and challenges of India, business expansion by
Japanese companies in India, and the trends and future prospects for domestic reforms in India.

Long-term investment is the key to determining expansion
India has been selected as the most promising country in the medium term in this survey for three consecutive years. The survey
results indicate “Future growth potential of
local market (85.2%)” and “Current size of
local market (30.9%)” as the most popular
reasons for the selection. India has huge domestic demand due to a population of 1.3
billion people with steady GDP growth at
7.0% (year-on-year) for the period between
October and December 2016 (figure released by the Office of the Registrar General & Census Commissioner, India). As
India is expected to grow steadily, it ishighly expected as a new growth frontier
replacing China and ASEAN.
The number of Japanese companies operating business in India is
1,305 (as of October 2016, figure released by the Japanese Embassy inIndia), and it has increased steadily
every year for the past 10 years. However, the absolute number of bases ofJapanese companies in India is about

6

April 2017 JBIC Today

one eighth of those in China. That is
to say, business has not expanded asmuch as expected.
The above trend can be attributed tomany challenges including “Underdeveloped infrastructure (51.4%)” and “Execution of legal system unclear (35.4%).” The
Modi administration has been working on
improving infrastructure as a politicalissue. However, India is the world’s largest
democratic country and it focuses on policies with the consensus of 1.3 billion people. Therefore, it is not easy to acquireland for building infrastructure, and it ishard to invest labor and capital intensively
to improve infrastructure rapidly.
Nonetheless, the Modi administration
has implemented “Make in India” (designed to promote India’s manufacturingindustry by attracting inward direct investment) and “Skill India” (designed to improve skills through projects to develop
professional abilities of mainly young people). It has also introduced a succession ofreforms that include the introduction of
GST (goods and service tax), simplifying
the traditional complicated taxation system, and demonetization (the elimination of high-value notes to eradicate
black money). These measures are expected to make steady progress in solving various issues.
Relations between Japan and India
are strengthening, but are still not so
widespread in view of the economic
scale of the two countries. Japanesecompanies are preparing to gain accessto the Indian market gradually, though
there is a gap between high expectations
and the reality. This characterizes thecurrent stage of business between Japanand India. It takes time to customize theJapanese model to fit India. The key todetermining whether to expand into
India, where it is often said to take 10
years to make a profit, is whether a company can make long-term investments
and take a long-term approach.

MyanmarFeatured country Myanmar

Yoshiharu Hinata
Director
ATSUMI MYANMAR CO., LTD.

Ranked 9th in the survey, Myanmar rose up the rankings and gained a larger share of the votes
from last year, attracting more attention than other ASEAN countries. Although the country isgoing through rapid urbanization and construction of industrial complexes, not so many companies
have branched out to Myanmar yet. Under such circumstances, Atsumi Myanmar Co., Ltd. entered
Myanmar and has maintained a stable operation of a plant, and plans to expand production
further. Following is an interview with Mr. Hinata, Director of Atsumi Myanmar Co., Ltd.

Sales to start soon in Myanmar,with a view to expanding globally
Interview

ATSUMI FASHION CO., LTD. (Himi City, Toyama Prefecture)

Founded in 1982, Atsumi Fashion is a small
and medium-sized enterprise specializing in
the production and sales of clothing mainly
for women. We established joint-venturecompanies in Thailand and Vietnam (bothnow liquidated), and were one of the first in
the industry to set up a manufacturing basein China (1987) and Malaysia (2008). However, as production costs are now rising in
China, our main overseas manufacturingbase, we established a joint venture company, Atsumi Myanmar Co., Ltd. (AMC),
with a local company in Myanmar because it
has a geographical advantage for exportingto Asian countries, as well as an abundanceof inexpensive labor.
We considered Cambodia, Thailand
and Vietnam as candidate sites, and finallyselected Myanmar because a Japanese-affiliated clothing manufacturer with which
we are doing business strongly expected us
to expand into Myanmar. We had discussed
this in the past but gone no further because
Myanmar was then under economic sanctions. Finally, we decided to establish a joint
venture company with my Burmese friendof 20 years, Mr. Maung Maung Kyi.
The location is Tirawa Industrial
Park, the first large-scale industrial park in
Myanmar. We chose it because it has good
supporting infrastructure including anelectric power plant and is designated as a
special economic zone (SEZ) that does not
require complicated procedures to obtainapproval for investment. We asked Mr.
Maung to select a company for constructing the plant. Myanmar does not apply in-

ternational building codes, but buildingsin the SEZ are required to comply with international standards. For this reason, wewere asked to modify the application several times before gaining approval to set
up our plant, which would be constructedby a local Burmese construction company.
This lengthened the construction period
considerably, and the plant was finallycompleted in June 2016 and approved thefollowing month. Now, the plant is being
operated as a manufacturing plant in thetrue sense of the word.
At present, overseas production accounts for 95% of the total production of
the group, of which China accounts for
80%. We plan to increase AMC’s production ratio of total overseas production to
50% in a few years and expand AMC’s
business to make it our base for global
transactions, selling our products not
only in the Burmese market but alsoworldwide. The Burmese women’s cloth-

ing market is polarized between luxury
brand products and low-quality, lowpriced products. Because there are few
fashionable products for middle-classconsumers, which constitute the largevolume zone in Myanmar, AMC has excellent growth potential in Myanmar. We
believe that owning its own manufacturing plants gives us an advantage for design development and cost competition.
The current challenge that we have toaddress is training employees. In Myanmar, some people cannot even write theirown name, do not work without being
given instructions and will readily moveto another company in the same industry
that offers higher wages and better benefits. Basic compulsory education is vitalnot only for our company to grow, butalso for Myanmar to grow as a country.
We will need to provide training for employees if we are to promote local employees to managerial positions.

Inside the plant of AMC
April 2017 JBIC Today

7

Our Global Challenges

Toyota Kohki Co., Ltd. (Fuchu-city, Tokyo)
Fuji Concrete Industry Co., Ltd.(Takeo-city, Saga Prefecture)

Contributing to India’s nation-building
with high-quality concrete products
Courageous challenge by cross-border relationship based on trust
In India, which is enjoying rapid economic growth, the demand for concrete construct to improve its infrastructure including
roads, ports and bridges is rising. Amid this dynamic situation, two Japanese small and medium-sized enterprises (SMEs)
with technology for manufacturing high-precision, high-quality concrete products jointly branched out to India, and started
production and sales locally. Since orders for concrete products are usually placed with local companies, no other Japanesemanufacturers of concrete products had entered India. However, an encounter with young Indian entrepreneurs who put theirhearts into building the nation made the two CEOs decide to take on a courageous challenge.

The plant of Fuji Silvertech Concrete Private Limited

SMEs working together todevelop business in India

Toyota Kohki, which manufacturesand sells concrete forms for making
concrete products, and Fuji Concrete Industry, which manufactures and sells
concrete products, are working together
to develop their business in India which
has a population of 1.3 billion. Fuji Concrete Industry manufactures and sells
precast concrete products*1 using forms
made by Toyota Kohki. According to
Mr. Toyoda of Toyota Kohki, the CEOsof the two companies have a long relationship of strong trust, also as shown
by Mr. Irie of Fuji Concrete Industry
who said, “I work closely with Mr. Toyoda, and ask him for advice even on
subjects other than business.” The twocompanies jointly set up an Indiancompany, Fuji Silvertech Concrete
Private Limited (FSC), to manufacture precast concrete products in

8

April 2017 JBIC Today

Ahmadabad in the state of Gujarat
together with an Indian company.
The two companies had been exploring the possibility of expanding overseas
amid the decreasing demand for concrete products in Japan. About two years
before setting up FSC, Toyota Kohki established a wholly-owned subsidiary,
Toyota Forms India Private Limited(TFI), to manufacture concrete forms in
India. The relationship Mr. Toyoda built
up with an Indian businessman in theprocess of establishing TFI gave him theconfidence to take on the challenge oflaunching a joint venture project.

Strong trust boosts business“Abusiness cannot grow without trustwith local partners,” said Mr. Toyoda and Mr. Irie unanimously. An encounter between Mr. Toyoda and Mr. Rajkumar
Oswal marked the start of the relationship.
Mr. Toyoda was introduced to Mr. Oswal

First shipment of concrete products

by an Indian associate who was working as
an assistant in a booth at an exhibition for
construction machinery in Mumbai in February 2013 at the time of registering his
company. Mr. Oswal was the person responsible on the Indian side in the negotiations with world-famous companies
including Honda Motor on expanding inIndia. He has a great deal of experienceof working for multinational companies,
and is a man of faith and integrity.
Interested in his personal history andcharacter, Mr. Toyoda asked Mr. Oswal
to help him launch TFI. At the time, Mr.
Oswal was 69 years old, having retired
before becoming even 50. He liked Mr.
Toyoda’s idea, became the advisor of
TFT, and subsequently became a director. The strong tie between the two men
led to a new business opportunity.
TFI gradually started to receive requests
from local Indian precast manufacturers tovisit Japanese manufacturers of concrete
products. In particular, Mr. Brijesh Shah,
who is a young top executive of a 60-year-old

company that manufactures concrete products, wished to learn sophisticated technologies abroad and introduce them to India tohelp develop India’s precast industry andimprove the country’s infrastructure. Hestrongly expressed his wish to visit Japanthrough Mr. Oswal, with whom he becameacquainted following an introduction from a
consultant. His ambition finally led to a visit
to Japan by a group of top executives of Indian companies, including himself. During
the tour, Mr. Toyoda showed the grouparound the plants of Fuji Concrete Industry
and his own company. Amazed by the sophisticated manufacturing technology using
high-fluidity concrete*2 as well as excellent
product quality and high productivity, Mr.
Shah immediately asked Mr. Toyoda to help
him launch a new precast company jointlywith Japanese companies including Toyota
Kohki. He also asked Mr. Oswal for support.
Moved by the aspirations and sincere
personality of Mr. Shah, Mr. Toyoda
agreed with the idea of establishing a newcompany to realize his wishes. However, heconsidered that his company could not
help him, because it already had a commitment as a concrete form manufacturer that
had already established a subsidiary for
manufacturing forms in India. Therefore,
he passed Mr. Shah’s request to Mr. Irie of
Fuji Concrete Industry and suggested that
Mr. Irie should take on the challenge of expanding into India. Mr. Irie immediately
agreed to the idea, considering that his
company could contribute to the growth ofIndia by providing high-quality concrete
products and in particular because the request came from Mr. Toyoda. After several
negotiations with the Indian side, the Japanese side agreed to establish a new jointcompany among the two Japanese companies and one Indian company, finallyfounding FSC in March 2015. Mr. Irie became chairman, Mr. Shah became president, and Mr. Toyoda, Mr. Oswal and thefather and son of Mr. Raval, who are relatives of Mr. Shah and influential figures in

Relationshipwith JBIC

the local community, became directors.
The arrangement truly symbolizes thetrust between Japan and India.

Aiming to be the largest
precast company in IndiaF

SC’s plant was completed on January
25, 2016, just seven months after construction started. This was exceptionallyquick, as it usually takes much time and effort in India to acquire land and constructa plant due to the complicated legal system. It would never have been possible
without the support from the construction
company managed by Mr. Shah and from
Mr. Raval who is a developer. In addition, financing by JBIC was used forthe plant construction. Mr. Irie highly
praised JBIC, “We have never done business with JBIC before, and were amazedby its speed. Thanks to their expertise inoverseas financing, we could receive funds
in just two months.”
Overseas expansion is a major stepthat determines the direction for SMEs.
Mr. Toyoda emphasized, “We had someconcerns, but they were outweighed by
the possibilities in India. Japanese manufacturing technology is the best in theworld. Even SMEs can do a lot of things inforeign markets. We just need the courage
to take a step forward, as well as ties withlocal people.” The new plant commenced
operation in March 2016 and business is
now going smoothly. FSC aims to become
the largest manufacturing and sales company of precast products in India. The
new company is a challenging pioneer.

Minoru Toyoda
President

Toyota Kohki Co., Ltd.

Name

Toyota Kohki Co., Ltd.

Established1966

Capital53.5 million yen

Businesslines

Manufacturing forms for
manufacturing concrete products
Manufacturing and construction ofequipment for continuous
manufacturing of concrete
products

Headquarters 6-12-8 Yotsuya, Fuchu-city, Tokyo*1 Precast concrete product: Concrete products thatare accurately mass-produced at a plant, rather thanbeing manufactured at the building and construction
site (cast-in-place concrete).
*2 High-fluidity concrete: Concrete that does not
require compaction using a vibrator during placement
because it is highly fluid. To maintain quality, it
requires unique technology to adjust the amount ofwater, etc. depending on the weather conditions.

Shunsuke Irie
President

Fuji Concrete Industry Co., Ltd.

Name

Fuji Concrete Industry Co., Ltd.

JBIC signed a loan agreement in July 2015 worth USD

Founded1970

1.65 million (JBIC portion) with Fuji Silvertech Concrete

Capital40 million yen

Private Limited, an Indian company jointly owned byBusinesslines

Manufacturing, sales, and designof secondary concrete products

Toyota Kohki Co., Ltd. and Fuji Concrete Industry Co.,
Ltd. The loan is cofinanced with The Tama Shinkin Bank.

Headquarters 7552-2 Nagano,
Higashikawanobori-cho,
Takeo-city, Saga Prefecture

April 2017 JBIC Today

9Behind the scenesof media coverage

Project Financing for Muara Laboh
Geothermal Power Project in Indonesia

News in Depth

Supporting of Renewable Power Generation Businesses by Japanese Company in Collaboration with the Asian Development Bank and Other Financial Institutions

Supporting Japanese Participation in a
Geothermal Power Project in Indonesia by
Providing Project Financing
Indonesia has been actively introducing renewable energy under the government’s policy to diversify
energy sources to meet the growing demand for power, focusing on geothermal power in particular.
Despite having the world’s second largest geothermal resources, it uses less than one third of the U.S.,
which is the world’s largest user of geothermal power for generation. The Muara Laboh geothermal
power project, in which Sumitomo Corporation and other companies are participating as investors, is alandmark project in Indonesia which has high potential for geothermal development. JBIC’s project
financing supports to make it a reality. The staffs in charge of this project talk about risk analysis for
project financing for geothermal energy and the future prospects.
An article related to this project was published in the morning edition of The Nikkei on January 27, 2017.

The Japan Bank for International Cooperation (JBIC; Governor: Akira Kondoh) signed on January 26 a loan agreement, for project finance, amounting up to approximately
USD198 million (JBIC portion), with PT. Supreme Energy
Muara Laboh (SEML), an Indonesian company invested in by
SUMITOMO CORPORATION and other entities for Muara
Laboh Geothermal Power Project. The loans are cofinancedby three private financial institutions, Mizuho Bank, Ltd.,
Sumitomo Mitsui Banking Corporation, and The Bank of Tokyo-Mitsubishi UFJ, Ltd., as well as the Asian Development
Bank (ADB), bringing the total cofinancing amount to approximately USD439 million. Nippon Export and Investment
Insurance (NEXI) provides insurance for the portion cofinanced by the private-sector banks.
In this project, SEML will construct, own, and operate ageothermal power plant with a capacity of 80MW in the South
Solok Regency in West Sumatra, Indonesia, and will sell electricity generated by this plant to PT. PLN (Persero), a stateowned power utility in Indonesia, for a period of 30 years.
This loan supports an overseas infrastructure project inwhich Japanese company not only participate as investors,
but also operate and maintain a power plant over a long period of time, using advanced Japanese technologies. Thisloan thereby contributes to maintaining and strengthening
the international competitiveness of Japanese industries.
This loan is also in line with the Japanese government’s strategy of promoting Japanese involvement inprojects that include the design, construction, operation,and management of infrastructure. Furthermore, thesame applies to “Actions for Cool Earth: ACE2.0”, announced in November 2015, which aims in assisting developing countries that are taking measures against climate change. This is the second project in which JBIC
has provided project finance to a geothermal IPP projectin Indonesia, after the Sarulla geothermal power project.
In order to respond to the country’s surging electricity
demand, which has increased in line with steady economic
growth, the Indonesian government has committed to promoting its “35 GW power plants development plans” for five
years, from 2015 to 2019, and this project is positioned asa part of that plan. The government has been actively promoting geothermal power generation, which taps into thecountry’s rich geothermal resources, including the issuing ofa new law for geothermal power production in 2014. By generating a steady power supply, which contributes to climatechange mitigation, this loan is also expected to support Indonesia’s economic development as well.
As Japan’s policy-based financial institution, JBIC willcontinue to financially support the expansion of overseas
infrastructure business of Japanese companies, in collaboration with multilateral financial institutions, including ADB, by drawing on its various financial facilities andschemes for structuring projects, and performing its riskassuming function.
* Press release of JBIC, January 30, 2017

Well test for steam and hot brine production—This is the second time for JBIC to provide project
financing for a geothermal power plant project in Indonesia after the Sarulla Geothermal Power project in2014. What is the difference between the projects interms of financing and what aspects of the project required your ingenuity?
▶Abe Usually, project financing is characterized by its financing scheme,
which limits the source of repayments to come from the cash flow created by the project itself. The Muara Laboh geothermal power project isbased on the framework set up for the Sarulla geothermal power projectwith some modifications to suit its specifics. In terms of scale, while theSarulla project has the world’s largest class geothermal power generation capacity of 320 MW and co-financing amounted to USD 1.17 billion, the Muara Laboh project is smaller, with a power generation capacity of 80 MW and co-financing amounting to USD 439 million.
In order to provide project financing, it is important to analyze andcontrol various risks that affect the cash flow created by the project. In
the case of project financing for geothermal power generation, we
have to consider risks specific to geothermal power including the“riskof geothermal resources”in addition to risks peculiar to a power generation project, such as the completion risk involved in constructing
the power plant and off-taker risk concerning non-payment by thebuyer of power. In this project, the risk of geothermal resources was
the most difficult issue we had to address.

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April 2017 JBIC Today

Excavation by rig

In geothermal power generation, because steam and hot brine
are taken out from the reservoir several thousand meters below
ground for a long time, it is hard to be sure whether they will keep
delivering steadily. Moreover, the layer structure and undergroundheat quantity vary greatly with the location. For example, after five
years the eruptive volume may decline by 5% in some places but by
10% in others. Accordingly, we held detailed discussions on reasonable assumptions and the risks acceptable to JBIC.

▶Anan In addition, simply confirming the existence of a geothermal
resource alone is not enough to run a project for as long as 30 years.
The output may decline due to the decreased production of steam
and hot brine, or loss of injectivity in injection wells after the start ofoperation. In this project, therefore, West Japan Engineering Consultants, Inc., which is the world’s technology leader in geothermal
power generation, will help analyze the steam and hot water for along period after the start of operation.

—Are there any specific technological features inthis project?
▶Abe In this project, the“dual flash”system is used for the first time inIndonesia. While the standard geothermal power generation separates
hot brine from steam only once before the steam is directed to a turbine, the dual flash system separates them twice to utilize more steam.
This increases the generation efficiency because the generation

amount (output) is increased with a smaller amount of steam.

—Please tell us about the current situation of the
project and future prospects for geothermal power generation development in Indonesia.
▶Anan Construction started in March 2017 and is scheduled to finish
in mid 2019. With many active volcanoes, Indonesia has the world’ssecond largest geothermal resources, but has not developed the industry as much as in other countries. Indonesia needs to keep developing
geothermal power generation to cope with the increasing demand for
power, and so the Indonesian government is drawing up support policies like a policy to increase the purchase price of geothermal power.

—JBIC is expected to keep extending support.
▶Abe The Muara Laboh geothermal power project has been madepossible by the combination of the management know-how of overseas
power generation projects of Sumitomo Corporation, consulting expertise on geothermal power technology by West Japan Engineering Consultants, and financing from three Japanese banks, JBIC, and Nippon
Export and Investment Insurance. This project is significant because
Japanese companies and organizations are working together as a Japanese team to develop high-quality geothermal infrastructure in Indonesia.
At present, coal fired power generation supplies about half of all
power in Indonesia. The Indonesian government has been actively
investing in environmentally-friendly technology on a long-term basis,and so has high expectations for geothermal power generation projects by Japanese companies. At the same time, renewable energy
projects in developing countries have high policy significance in thelight of their contribution to overseas development of infrastructure
and climate change mitigation, both of which are being promoted by
the Japanese government. Therefore, JBIC will keep supporting new
projects utilizing its accumulated know-how.

Ryoichi Abe

Deputy Director
Division 3
New Energy and Power Finance Department I
Infrastructure and Environment Finance GroupMayuko Anan

Deputy Director
Division 3
New Energy and Power Finance Department I
Infrastructure and Environment Finance Group

April 2017 JBIC Today

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