6JUNE
2023

INVESTMENT IN VIETNAMEntering the Age of Co-Creation

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INVESTING IN VIETNAM

the international community to support
Vietnam’s efforts to avoid the ‘middle-income trap’ (failing to reach the levelof high-income countries due to slow
growth), and foreign investors are also
seeking new opportunities.”
Looking back on the evolution offoreign investment in Vietnam, threemajor turning points can be seen: thestart of Doi Moi (market opening policy)
in 1986, the lifting of U.S. economic
sanctions against Vietnam in 1994, andVietnam’s accession to the WTO (World
Trade Organization) in 2007. Moreover,due to expansion of Vietnam’s economic
partnership agreements and its growing
geopolitical importance, the country is
now also benefiting from the realignmentof regional supply chains including relocation of manufacturing plants. Spurred
on by such circumstances, it could besaid that a “fourth investment boom” inVietnam is underway.
Amid such a transition, while focus
had initially centered on ODA (Official
Development Assistance), there wasa rapid increase in FDI after Vietnam
joined the WTO. In 2008, the cumulative amount of approved FDI exceeded
USD100 billion, and in the following
decade it surged to nearly USD350
billion. The range of industries entering
the country has expanded from manufacturing companies to service sector
industries, and from large enterprises tosmaller enterprises.

Investment in Vietnam isEntering the Age of Co-Creation
Despite close relations with Japan, today’s rapidly-growing
Vietnam is far from being properly understood.
In this issue’s special feature, representatives fromthe Japan Bank for International Cooperation (JBIC)
Representative Office in Hanoi explain
the country’s development and the changing
Japan-Vietnam relationship.
Discover the appeal of this remarkable country throughthis feature, which includes a special interview witha Vietnamese high government official
and an on-the-ground report on a Hanoi industrial park.

From a manufacturing base to industry diversification anddecarbonization: The changing economy of Vietnam
As it continues to grow and pursues the goals of becoming a developed country by 2045 andachieving carbon neutrality by 2050, Vietnam is ASEAN’s most promising country.
Vietnam is enjoying an investment boom with an increase in FDI (Foreign Direct Investment) following the start of
the Doi Moi (open market) policy in 1986 and membership of the WTO from 2007.
Amid changes in Japanese corporate investment, along with JBIC’s support,
Japan and Vietnam this year celebrate the 50th anniversary of the establishment of diplomatic relations.

With 8% economic growth andexpanding domestic consumption
Vietnam is no longer a “cheap
manufacturing base”
Stretching 1650 kilometers from northto south, Vietnam is home to about
100 million people, 35% of whom livein urban areas, including the capital
Hanoi, and Ho Chi Minh City, the largest city. “Construction work is goingon everywhere in Hanoi, and you cantangibly sense that the country is in
the midst of economic development,”
says KAMITSUJI Haruna of the JBIC
Hanoi office, who assumed her post six
months ago.
Many people may have an image ofa city full of motorcycles, but car ownership is also on the rise. According
to IKENAGA Azusa, who works with
KAMITSUJI at the representative office,“On Saturdays and Sundays, the Aeon
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Mall is crowded with locals, and its
parking lot is packed with Japanese andKorean cars, as well as cars made by the
local private conglomerate Vingroup.”
She explains that the Aeon Mall contains
stores such as UNIQLO and MUJI, withthe selection of goods comparable tothat found in Japan, and some items
even priced higher.

Representative /JBIC Representative
Office in Hanoi

KAMITSUJI
HarunaJoined JBIC in 2018. Assumed her current position
after assignments to the Treasury Department
and New Energy and Power Finance Department
I (in charge of offshore wind power and solar
power project financing, nuclear power projects,etc.) Underwent overseas training in Singapore.
Graduated from Osaka University, School of Human
Sciences.

“While the gap between rich andpoor still exists, the economy is strong
with rising income levels. Last year, theeconomy grew by 8 percent, the highest
among the ASEAN countries. People
believe that tomorrow will be better
than today, and they are passionate
about investing in education for theirchildren,”says IKENAGA.
In terms of the perspective fromJapan, there may still be a deep-rooted
image of Vietnam as one of ASEAN’s
manufacturing hubs that wields inexpensive labor to its advantage. However,such preconceptions need to be drastically updated—Vietnam is changing in a
big way.

Ambitious aim of becoming a developed
country and carbon neutral
FDI is increasing, and attention is rising
Under Prime Minister Pham Minh Chinh,
who took office in April 2021, Vietnam

Hanoi’s Aeon Mall Long Bien, built almost exactly likestores in Japan, is bustling with Vietnamese customers.

is pushing economic reforms with theaim of becoming a developed country
by 2045, the 100th anniversary of thenation’s establishment. And at the 26th
Conference of the Parties to the United
Nations Framework Convention on
Climate Change (COP26) in November
2021, Vietnam announced its goal ofachieving net zero greenhouse gas emissions (carbon neutrality) by 2050.
Pursuing both rapid growth andcarbon neutrality would appear to beambitious goals for a middle-income
country like Vietnam. According to
AGUIN Toru, chief representative of the
JBIC Hanoi office, “To become a developed country by 2045, Vietnam will needto keep its annual economic growthrate around 6 percent or more. Despite
this difficult situation, the governmentof Vietnam has shown commitment
to achieving carbon neutrality. This isprecisely why momentum is growing in“Medium to long term relations”
desired by 97% of Japanese companies
Industries are also changing,including the entry of retailJapanese economic cooperation with
Vietnam began in earnest when it
resumed ODA in 1992, ahead of othernations. Then in 1993, JBIC assisted
Vietnam’s return to international financial markets. At the time, Vietnam’s debt
arrears to the World Bank and AsianDevelopment Bank were ballooning.
Since new funds could not be brought in
until these were repaid, JBIC provided a
USD22.5 million bridge loan prior to thelifting of U.S. sanctions.
The 2010s saw a significant increasein FDI by Japanese companies. “Japanranks top in ODA to Vietnam, but it
also ranks third in cumulative FDI,”
notes KAMITSUJI. According to an
overseas business development survey
conducted by JBIC on Japanese manufacturers (released in December 2022),
Vietnam ranked fourth after India, China,
and the U.S. as a promising destination
for medium-term business development (first among ASEAN countries forthree consecutive years). In a special

Representative /JBIC Representative
Office in Hanoi

IKENAGA
Azusa

Joined JBIC in 2010. Assumed her current position
after assignments including the Americas Finance
Department, the Country Credit Department(including sovereign credit of Turkey and Central
and Eastern European countries), and the Strategic
Research Department. She travels to various partsof Vietnam to support Japanese companies, engage
in policy dialogue, and conduct research. Graduatedfrom Kyoto University, Faculty of Law.

2021 survey of Japanese companies
in Vietnam conducted by the JBIC
Hanoi office, of the 195 companies that
responded, 97 percent replied that theywould like to expand their investment
in Vietnam in the medium to long term,
indicating high expectations. Althoughlabor costs in Vietnam have begun torise in parallel with economic growth, no
trend was seen for “moving to cheapercountries” because of this.
According to AGUIN, “We see many
Vietnamese people who are hard-working and skillful. The country’s educationlevel is high, and people are quick tomaster a range of things.” It must also
not be forgotten that bilateral relations
are deepening with a flow of humanresources from Vietnam to Japan. And
above all, Vietnam’s domestic market isexpanding as its economy grows.
Due in part to these changes,
Japan’s FDI in Vietnam, which used
to be dominated by manufacturing
and infrastructure-related investment,
has also been diversifying in recent
years. Looking at the number of newly
approved investments, about 30 percentof the total in 2021 was in the retail industry. Consulting and IT, which provide side
support for this industry, were also highon the list. Meanwhile, in manufacturingindustry investment as well, the strategy
of “Vietnam plus one” is spreading,in which investments previously concentrated in China are being shifted toVietnam, and production bases, which
tended to be located around Hanoi or Ho
Chi Minh City, are starting to spread toother regions in Vietnam.

Expectations on
the decarbonization sector
JBIC focuses on policy dialogue as well
As of the end of January 2023, JBIC has
provided financial assistance to Vietnam
for 315 projects, amounting to JPY848.1
billion. One of the pillars of this assistance is enhancing the resilience of theabove-mentioned manufacturing industry ’s supply chain, but another area of
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INVESTING IN VIETNAM

JBIC’s key projects supporting the clean energy and manufacturing industries
As of the end of January 2023, JBIC has supported a cumulative total of 315 projects
worth JPY848.1 billion in Vietnam, including areas such as building the resilienceof Japanese companies’ supply chains and spreading the use of renewable energy.
Going forward, JBIC will further strengthen support for decarbonization initiatives.
Outskirts of Hanoi
Lao Cai Province
Ta Thang hydropower

Manufacture and sales of animal vaccines
Manufacture and sales of candy
Manufacture of motorcycle parts, etc.

Ha Nam Province

Growth and tradition coexist in Hanoi. Construction work isunderway throughout the city, and the Nhat Tan Bridge (topleft, opened in 2015), which was financed by Japanese ODA, iscontributing to the lives of the residents. There are also sightsthat have not changed, such as the train street where shops andhouses line both sides of a railway track.

focus is the energy business. JBIC has
financed projects that account for 13
percent of Vietnam’s total power generation capacity. Now, with the Vietnamese
government’s announcement of its
commitment to carbon neutrality, there
will be an increasing number of areasin which Japan can cooperate, such as
renewable energy, expansion of thepower grid, and zero-emission thermal
power generation.
Against this backdrop, JBIC engages
in policy dialogue and individual project support while also utilizing theframework of its newly established
Australia-Japan-United States Trilateral
Infrastructure Partnership. The JBIC
Hanoi office, which is in charge of local
operations, thus has a wide range of
duties to perform. The way Vietnam’s
legal system operates on the groundcan be sometimes unclear to overseas
companies, and difficulties also arise
when obtaining FDI approval and otherpermits. The JBIC Hanoi office supports
companies expanding into Vietnam inthese matters. It also focuses on policy
dialogue with the Vietnamese government and agencies to recommend
further institutional improvements. One
such effort is the “Vietnam-Japan Joint
Initiative,” a framework for public-private
dialogue that was launched in 2003 forboth countries to work on improvementof the investment environment. The JBIC
Hanoi office has been serving as theleader of the initiative’s working teamin the energy sector, and works actively
in organizing meetings and making proposals to the Prime Minister of Vietnam
and relevant ministry officials.
“It is difficult for each company to act
individually, by making requests to the
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Hanoi

Hai Phong
Quang Ninh Province
Cam Pha Cement Plant

Nghe An Province
Manufacture of clothing

In addition to the projects
shown on the map:

*Offshore wind power generation projects
in Vietnam have recently been
attracting attention both domesticallyand internationally.

Financing for renewable energy projects
through Vietcombank
Support for rooftop solar power generation
at Thang Long Industrial Park
Support to Vietnam Development Bankfor supporting industries

Hue
Da Nang

Binh Duong Province
Manufacture of knitted apparel
Manufacture of various machine parts
Processing of auto parts, etc.
Manufacture of packaging materials

Ba Ria–Vung Tau Province
Manufacture of zirconium
oxychloride, etc.

Ho Chi Minh City

Outskirts of Ho Chi Minh CityCan ThoManufacture of medical devices

Precision machinery

authorities that have the power to makeapprovals for that company’s business.
Therefore, we think that it is important
for a governmental organization such as
JBIC to successfully summarize and represent the views of Japanese companies
as a whole, and to demonstrate Japan’s
presence,” says AGUIN.
Prime Minister KISHIDA Fumio, whoplaces great importance on JapanVietnam relations, has met with Prime

Chief Representative/
JBIC Representative
Office in Hanoi

AGUIN
Toru

Joined the bank in 1999. Assumed his current
position in 2019 after assignments including the
Asia and Oceania Finance Department, WestJapan Office, and Corporate Planning Department.
Graduated from the University of Tokyo, Faculty ofLaw. Received his masters from the University ofManchester, and MBA from Kobe University. He
has given numerous lectures on energy policy andinvestment trends.

Why Vietnam Has Become a Foreign Investment Magnet
Director General of Foreign
Investment Agency,
Vietnam’s Ministry of Planningand Investment

Director General Do Nhat Hoang, Foreign Investment Agency of Vietnam (FIA),
explains how the nation’s economy has been restructured,
the role Japan has played, and why the future looks even brighter still.

Do Nhat Hoang

Manufacture of engines and transmission-related products
Manufacture of printed wiring boards
Manufacture of precision machinery
Manufacture of electronic components for electronic products

Hung Yen Province
Manufacture oflightweight roofing tiles
Manufacture of
nonwoven fabric
Manufacture of nonwoven
fabric products
But Son Cement Plant

SPECIAL INTERVIEW

Automobile-related

Healthcare

Others

Minister Chinh three times so far. At their
meeting in May 2022, Prime Minister
Chinh presented Prime Minister KISHIDA
with a calligraphic scroll inscribedwith the words “Sincerity, Friendship,
Trust” in Japanese and Vietnamese.
The two countries, which are hailed
to now have “the best relationship in
history,” celebrate the 50th anniversaryof the establishment of diplomatic relations this year. AGUIN, IKENAGA, and
KAMITSUJI, who are very familiar withthe situation on the ground, feel that therelationship between the two countries
is no longer that of a donor and a recipient. KAMITSUJI notes that there arealso many excellent Vietnamese IT engineers, “I feel we can learn from Vietnam
in areas where they are more advanced
than Japan, such as the penetration of
online payment systems.”
The future of Japan-Vietnam relations
is “future-oriented” and “co-creative.”
The two countries are about to begin thenext 50 years of their complementary
relationship.

Disclaimer: The map is for illustrative purposes only and does not indicate the view of JBIC on the legal status, borders or demarcation of any country or territory, or the geographic names.

Q Vietnam’s GDP growth topped 8% lastyear. Could you please talk about Vietnam’s
current economic situation and its future
prospects?
A Against the backdrop of a global economy facing difficulties and a slowdown in
the regional economy, Vietnam has becomea growth “bright spot” for the region andthe world. It will work to curb inflation andcontinue to implement dynamic and flexible
solutions for the development of infrastructure that will boost the connectivity of theeconomy. Vietnam will enhance its national
competitiveness and also accelerate theprocess of restructuring the economy to
one that is digital, circular, and knowledge
based, as well as enhance internal capacity,
autonomy, and self-reliance. The target foreconomic growth this year is 6–7%.
Q The FIA has been emphasizing the openness of Vietnam for business; would you tell
us about the current wave of foreign direct
investment (FDI), your measures to promote“high-quality FDI,” and the Vietnam-Japan
Joint Initiative (VJJI)?

A In terms of the investment trend, major
economic corporations and groups wanted
to restructure their manufacturing production, and they wanted to restructure their
supply chains. In that context, our reforms
have attracted the attention of more andmore foreign investors, and Vietnam is now
in the top 20 countries in the world in termsof foreign investment.
Regardinghigh-quality
investment,
according to our strategy, we aim to be selective in approaching the opportunities before
us. We set criteria such as quality, efficiency,
and environmental protection. Accordingly,
we lean toward high-tech electronics,
renewable energy, biotechnology, andinfrastructure projects that have high added
value — specifically, projects related to semiconductor manufacturing and hydrogen. We
also plan to set up many R&D centers andwant Vietnam to become an innovation hub,as well as to build a financial center to attract
finance from all over the world.
To draw such investment projects, weneed to continue to constantly review therelevant mechanisms, laws, policies, andinvestment conditions, and make appropriate adjustments so that our investment
environment is more competitive and attractive.
Regarding VJJI, after 20 years of implementation, of the 594 subcategories ofissues that have been addressed — including
tax, tariffs, and labor laws — 84% have now
been resolved.
Q 2023 marks 50 years of Vietnam-Japan
diplomatic relations. How do you see thecurrent status and future outlook for these
relations in terms of trade and investment,
economic partnership agreements, movement of people, and deepening economicties?
A We have maintained a profound andexpansive strategic partnership that contributes to peace in Asia. We deem this apartnership of trust. Building on this, wehave cooperated in various fields, including
politics, diplomacy, economics, and culture.
Accordingly, we hope the Japanese side willcontinue its proactive promotion of tradeand investment relations with Vietnam. The
determination to further strengthen the relationship will only bring benefits to both sides.
The relationship is very complementary:
Japan has technology, financial resources,
and modern governance practices; we havehuman resources and a growing market.

Japan has an aging population, while
Vietnam has youthful demographics. Japan
has advanced technology, while Vietnam has
mid-level tech. There are many complementary areas.
Q Against the backdrop of a global shift
to supply-chain diversification, a growing
number of Japanese companies are establishing operations in Vietnam. Would you tell
us about the impact of Japanese companies’
investments in Vietnam?
A Many companies are looking at relocating their manufacturing operations, andVietnam is one of the leading destinations.
Japanese companies are no exception,and based on the strong existing bilateralrelations, and the ongoing improvements
in Vietnam’s investment environment, moreare considering Vietnam.
Japanese companies were some of theearliest to invest in Vietnam, and they havemade great contributions to the restructuringof the economy, including its modernizationand industrialization. This has also led to theimprovement of human resources, helping
Vietnam access international markets andglobal supply chains. Japanese companies
are also law abiding, and care both for theirworkers and about social issues, such assustainable development.
Investment from Japan also contributes
to bilateral and regional relations; Japanesepeople get to know more about Vietnam,
which helps tourism, and there is also cultural exchange, such as the developmentof co-produced films. Many Vietnamesestudents and workers now visit Japan andcome to understand Japanese culture.
Q What are your expectations for therole of the Japan Bank for International
Cooperation (JBIC) in terms of VietnamJapan relations?
A JBIC has been providing significant andeffective support for companies and investors, and we hope it will continue to do sogoing forward in order to expand investment
in Vietnam.
Q Do you have a message for Japanesecompanies planning to start doing business
in Vietnam?
A We have a great deal of trust in andappreciation for Japanese investors. We
continue making efforts to improve theinvestment landscape so that they will havepeace of mind about doing business inVietnam. Please come to Vietnam. We arecommitted to being your partners.

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INVESTING IN VIETNAM

The secret behind how an industrial park allows companies
to dedicate themselves to manufacturingThang Long Industrial Park supports manufacturers which are entering Vietnam to restructure their supply chains.
It provides a stable supply of electricity, water, and other infrastructure, legal support,
and even holds events to build friendship.
There’s also much to gain for the Vietnam side, with stable tax revenues, job creation,and technology transfers in various fields.

Workers start returning homejust after 5 p.m. As the railway
network is still in developmentin Vietnam, motorbikes are usually used for commuting (phototaken at the main gate of theThang Long Industrial Park).

Japanese trading companies, and companies from countries such as Thailand,South Korea, and Singapore. When looking just at the leasing fees, “Thang Longis relatively expensive,” notes WACHI,
but available slots are quickly filled. The
series of expansions it has undergone
demonstrate its popularity. What is thereason for this?
“When it comes to operations in
ASEAN, there are a lot of things that haveto be considered before starting to actually manufacture. These include matterssuch as: Will there be a stable supply of
power? How is the quality of water? How
can we properly hire people? How do
we deal with frequently changing laws?
We take care of all of these steps thatneed to be dealt with in advance so thecompanies can dedicate themselves tomanufacturing. I think that is what they
really appreciate,” says WACHI.

Posting Japanese staff to provide
support for environmental complianceand digital transformation

Vietnam was selected because of its
young and diligent workers,
and inexpensive labor
Hanoi is Vietnam’s capital and a megapolis with a population of over 8 million.
A 30-minute drive north from the city
center, across the Red River (Hong River),sits a concentration of industrial plants
on a vast expanse of land. The ThangLong Industrial Park (TLIP I) is home toa total of 106 companies, ranging fromJapanese global corporations such as
Canon, Denso, and Yamaha to leading
small and medium-sized manufacturing
companies, which combined employ
some 60,000 people.
Established in 1997 as a joint venture
between Sumitomo Corporation anda Vietnamese company, it is cited as a
“successful example of an industrial
park.” Two more parks have since beendeveloped on the outskirts of Hanoi,
with establishment of the Thang Long
Industrial Park II (TLIP II), in 2006, andThang Long Industrial Park III (TLIP III)in 2015. WACHI Satoru, who was seconded from the Overseas Industrial Park
Department of Sumitomo Corporation to
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Thang Long Industrial Park
Location

Hanoi

Year of establishment

1997

Thang Long Industrial Park II

Thang Long Industrial Park III

Hung Yen Province

Vinh Phuc Province

2006

2015

(outskirts of Hanoi)

346 hectares(outskirts of Hanoi)

Total developed area

274 hectares*3rd phase of expansion underway(181 hectares)

213 hectares

No. of tenant companies

106 companies (85 plants)

79 companies (73 plants)

47 companies (34 plants)

Total no. of workers

About 60,000

About 29,000

About 7,000

serve as the deputy general director of
TLIP II and III, explains as follows: “Theconcept of this business is to attract
Japanese and non-Japanese manufacturers by laying the groundwork using
the format of industrial parks in countries
that, from a Japanese perspective, lackdeveloped infrastructure or systems.
Our main targets are ASEAN countries,
plus India. Vietnam is one of them, andalthough it might be considered a success story in hindsight, I believe that theestablishment of TLIP I in 1997 was quite
challenging.”
Sumitomo Corporation was looking
for a place to invest in the “industrial
park format.” The business in Indonesia
was already on track, and Vietnam was

the next destination of choice. Vietnam
has a large, young workforce, low laborcosts, and a national character of diligence and pro-Japan sentiments. With
the shift to the Doi Moi policy, Vietnam
began to show solid growth in the
1990s. However, developments were at
the time centered in the south, home toVietnam’s largest city, Ho Chi Minh City.
In the north, where Hanoi is situated, theunderdevelopment of roads, ports, andother infrastructure was a bottleneck tocompanies entering the market.
A quarter of a century has passed
since the establishment of TLIP I, andthere are now said to be more than 300
industrial parks in Vietnam, including
those funded with local capital, by other

TLIP has its own power substation forelectricity and thoroughly controls thequality of groundwater and rainwatershared as industrial water. Stable supply
of infrastructure services is realized
through strict daily maintenance of
these facilities. “Although the frequencyof power outages in Hanoi has recently
been decreasing, there are still a lotof power failures when you go to theoutskirts of the city. Momentary voltage
fluctuations that make the lights and TV
in your room suddenly go off happen
about 1000 times a year. In TLIP however, momentary voltage fluctuations
only occur about 20 to 30 times a year.”
Five Japanese staff members are also
posted to each of the three TLIPs. Whileconstantly exchanging information with

Deputy General Director
Thang Long Industrial
Park II
Thang Long Industrial
Park III

WACHI
SatoruJoined Sumitomo Corporation in 2001. Engaging
in logistics industry-related work, he learned thebasics of the business through assignments including a shipping company and the rental of containers
for shipping liquids. Has been a part of the Overseas
Industrial Park Department since 2014, in charge ofattracting companies in Japan and the development
of TLIP III. Assumed his current post in 2017.

This mikoshi portableshrine for the industrial
park’s summer festival
was specially built by aVietnamese temple carpenter.

Solar panels being installed on factory roofs in TLIP to secure a stable supply of power and as an environmental
measure (left). The vast site is even equipped with channels and retention basins to store rainwater for flood
control (right). (Both photos are of TLIP II).

the tenant companies, they provide input
on changes in laws and systems, andrecently have even started to provide
support for environmental complianceand the digital transformation of plants
and company management. The senseof security that comes from all this was
also cited as an advantage by KAWABE
Kazuharu, president of Suzuran Viet
Nam, the local subsidiary of medical
and hygiene products manufacturer
Suzuran Medical Inc., which makes
cotton products at TLIP II. “Our plant is
operating 24/7 on a four-shift system.
In the five years we have been here, wehave had no major problems with poweror water. It is also a great help to us thatthey check our government-related documents and provide us with informationin Japanese.”
Active efforts are also taken to regularly hold events in the industrial park
to deepen friendship among the tenantcompanies and their employees. WACHI
takes pride in this, saying, “We value theJapanese aspect of the park. We want theVietnamese people, who are generally
pro-Japanese, to be even more positive
toward Japan. In the spring, we holdan inter-company ekiden long-distance
relay race, and in the summer, we holda summer festival, inviting the employees of our tenants and their families.
There are food stalls, and even a mikoshi
portable shrine to carry. The Vietnamese
people seem to find this fresh and exciting, and we always have a big turnout.”

Vietnam is an ideal destination
for company expansion
Some challenges,
but nothing insurmountable
For Japanese companies that are
restructuring their supply chains, “Whenit comes to the infrastructure or thepolitical system, Vietnam has somechallenges, but nothing insurmountable.
And its low risk and good balance areadvantages when compared to othercountries,” explains WACHI. Althoughlabor costs are now higher than in
Laos or Myanmar, the political systemis stable. In addition, Hanoi is home tomore than half of the country’s top 20
universities, which makes it easier to

KAWABE Kazuharu is General Director
and President of Suzuran Viet Nam,a subsidiary of Suzuran Medical Inc.,
which is headquartered in Nagoya,Japan. The company manufactures cotton
products at its factory in TLIP II from raw materials
procured from Indonesia and South Korea.

hire Vietnamese executive candidates
and engineers.
Nevertheless, expanding overseas
is not easy, whether it be to Vietnam
or elsewhere, especially for small andmedium-sized companies. One approach
would be to find a local company topartner with, but some companies may
find it difficult to build good relations. In
this sense, entering a Japanese-owned
industrial park is a big advantage since
the company can then concentrate on
manufacturing.
Industrial parks are also very beneficial to Vietnam, which wants to attract
foreign companies. Rather than attracting
individual companies that might eventually leave, it is more advantageous tohave highly reliable Japanese-affiliatedindustrial parks that can be expected to
not only generate stable tax revenues
and have a significant impact on job
creation, but also facilitate the transfer
of technology in a variety of fields.
According to WACHI, the industrial park
has a good reputation among not only
the local governments of Vietnam but
also the employees. “It appears that theVietnamese employees are proud towork for a Japanese company; they evenwear their factory uniforms when they
go back to their hometowns,” he says.
TLIP is currently attracting a growing number of non-Japanese tenants,
including companies from Taiwan andHong Kong. The infrastructure and operational know-how of the TLIP, which evenhost summer festivals, are generating
effects that go beyond supporting the
expansion of Japanese companies.
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Kyosha Co., Ltd.
Representative Director andPresident

KOJIMA
KazutoJoined the company in
1996, and after serving ashead of subsidiaries in the
United States and Mexico,
became president in 2009.
Always keeps a global
perspective central to his
growth strategy. Valuing
communication within thecompany, he frequently
visits the factories, andlistens to the voices of
employees.

Kyosha Co., Ltd.

A printed wiring board manufacturer from Kyoto
Builds a global production and supply system on the power of trust
Equipped with state-of-the-art machinery utilizing IT and automation,
its Vietnam plant is now in full operation.
Aiming to become a top global niche manufacturer, Kyosha is responding swiftly to changes in demand
and accelerating overseas expansion, a strategy it pioneered.

Applying the printing technology of
traditional crafts to shift the businessto large household appliances
From televisions and air conditioners,
to personal computers, smartphones,
automobiles, and airplanes, printed
wiring boards (PWBs) are indispensable.
A PWB is a substrate on which manyelectronic components are mounted tocreate electronic circuits.
Kyosha is the world’s top manufacturer of single-sided PWBs, which havean electronic circuit only on one side.
The company was established in 1951

Global leader in single-sided PWB production(Photo is the plant at the Kyoto headquarters)

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as a manufacturer of screens for textile
printing in a traditional dyeing method
called Kyo-Yuzen. Using the manufacturing technology cultivated in the textile
industry, in 1967, Kyosha began manufacturing and developing PWBs. Currently,
in addition to its core PWB business, thecompany is expanding into the fields
of electronic component mounting andjigs for mounting components. A PWB
displayed at the company’s head officein Kyoto had beautiful patterns, just likean exquisite work of traditional craftsmanship.
“This all began when our founderwent on an overseas study trip andlearned of a company that uses dyeing
technology to manufacture PWBs,” says
KOJIMA Kazuto, the third president ofKyosha. “The textile industry in Japanwas showing signs of a downturn, butlarge household appliances were sellingwell at that time, so he decided to enter
that market. There are various typesof PWBs. Making high value-added
products requires intensive capital
investment and extensive financial

resources. That is why we decided toinitially focus on the most basic product,
the single-sided PWB.”

a lucky encounter with a person who
happened to be sitting next to him on
the plane,” says KOJIMA with a heartylaugh. The company then establishedproduction bases in Guangzhou, China,
and Indonesia.
But it had a bitter experience when
it set up business in Mexico in 1998.
The popularity of flat-screen TVs andsubsequent changes in the businessenvironment led to a decline in PWB
orders, and adding to this blow was thesoaring cost of local labor. The company
then decided to focus on making products for the auto industry, which is a very
stable sector, and eco-friendly consumer
electronics, which has growth potential.
To meet increased demand for the double-sided PWBs used in these products,
the company decided to make Vietnam
its manufacturing and export base forthem because that is where auto parts
manufacturers are expanding their operations.

It is no longer the age of cheap labor
A cutting-edge production centerin full operation
The Vietnam plant, which mainly produces double-sided PWBs for the auto
industry, was completed in March 2020.
It is a cutting-edge production base withstate-of-the-art machinery and robots.
“It is no longer the age of going overseas because of low labor costs. Labor
costs will probably rise soon in Vietnam
as well. This makes factory IT and automation crucial.”

One of the company’s aims in
expanding to Vietnam was to diversify
risk by its dependency on sales in China.
Compared to Mexico, where exports arelimited to the United States, the attraction of Vietnam was not only its rapidly
growing market of some 100 million
people, but also its function as an exportbase. The establishment of the new
Vietnam plant was based on a “decision
looking to the future” to raise sales inSoutheast Asia, including Vietnam, tothe same size as that of Japan and China.
“The launch of the plant was halted
because of the COVID-19 pandemic. But
the delivery date for products to autoparts manufacturers was fast approaching. So, when we heard that a chartered
flight was going to Vietnam, we sent
our employees there from Japan. By
communicating with the machinery
manufacturer via smartphone, they managed to get the plant up and running.”
An efficient production system on a
150-meter-long production line was built,
with functions surpassing that of theplants in Japan. In July 2023, a second
production line will come on line, bringing the plant to full operational capacity.
A loan from JBIC was also used here.
Work that would usually beoutsourced in Japan is, in Vietnam, integrated into the plant’s work. The entire
process has to be done in-house sincea supply chain has not been established,but this has been well received by parts
manufacturers who prefer integrated
production. In addition to the plant’s

location in a well-equipped Japaneseindustrial park, the plant also draws
strength from its personnel—former
technical intern trainees who studied inJapan and speak Japanese.
At the core of the company’s mission to build a global production andsupply system is KOJIMA’s vision of“becoming first-class” and the slogan
of “Build Trust.” “A relationship of trustwith suppliers, customers, and among
the employees is indispensable for thegrowth of the company. We can only
create trusting relationships by striving
to improve ourselves with the aim to be
the best.” The company maintains thesame approach at home and abroad as
it continues on the path to becoming aleading global niche manufacturer.

Kyosha Co., Ltd.
1951

Company established1967

Began manufacturing anddeveloping printed wiring boards

1993

Established what is currently
Kyosha Hong Kong

1994

Established what is currently
Guangzhou Kyosha in Guangzhou,
China
Established what is currently
Kyosha Indonesia

2010

Established Kyosha (Thailand)

2019

Established Kyosha Vietnam

Leading the industry
in overseas expansion
Capitalizing on failure
to change direction
In addition to the plant in Kyoto, thecompany established a production
base in Kumamoto in 1972 to fortify its
foothold in the market. At the time, thecompany was producing PWBs for cathode-ray tube televisions and other large
household appliances, but domestic
consumer electronics manufacturers
were beginning to relocate their factories overseas. Anticipating growth indemand from those offshored plants, thecompany decided to expand its businessoverseas, ahead of its competitors.
The company’s first overseas foray
was the establishment of a joint venture in Hong Kong in 1993. “When our
second president, currently our chairman, went to China on a study tour, hefound a good business partner throughStraddlingthePacific
Ocean, a production andmarketing system has been
built around the world—in
China, Southeast Asia,
North America, and Latin
America. IT is used for theautonomous managementof the Vietnam Plant. (Photo
left: exterior; Photo right:
system control room)

Loan Summary

Guangzhou Kyosha &Guangzhou Kyosha
Trading Company

Kyosha North America

Kyosha Hong Kong, Shanghai Office

Kyosha Vietnam

Kyosha Hong Kong

Kyosha de Mexico

Kyosha (Thailand)

Kyosha Malaysia
Kyosha Indonesia

In August and December 2021, loan agreements were signed with Kyosha Vietnam Co., Ltd., the Vietnam subsidiary of Kyosha
Co., Ltd., for loans up to USD2.5 million and USD1 million, for a total of up to USD3.5 million (JBIC portion). Co-financed with
Shiga Bank. This support contributes toward maintaining and improving the international competitiveness of Japanese industry.

JUNE 2023

JBIC TODAY

9Our People and Their Work
Division 2 (EMEA & Americas)
New Energy and Power Finance Department I
Infrastructure and Environment Finance Group

OKABE Mai

JBIC engages in various projects around the world.
Senior JBIC staff on the front line share their thoughts
and stories behind their projects.

Project Financing for NeuConnect, UK-Germany Interconnector Project

JBIC’s first financing of an interconnector project in Europe,
which is pushing ahead with decarbonization
Experiencing JBIC’s global connectivity and looking ahead

Joined JBIC in 2006. She has been
involved in the export of power generator parts to Mexico, operations in
the Americas, and power generationand desalination projects in the
Middle East and Europe. Graduatedfrom Sophia University, Facultyof Foreign Studies, Department of
Hispanic Studies. A member of theflamenco circle at university.

As renewable energy expands, so does the number of interconnector projects,
which link countries via power cables to allow the exchange of electricity. OKABE Mai, who was involved in complex
and tough negotiations among multiple stakeholders in one such project, shares her story.

Four countries andsome 30 organizations
A complex and epic projectAt a project ceremony held in London
in November 2022, members from allover the world, who had been negotiating online, met in person for the firsttime. OKABE Mai, who was in charge ofthe project in JBIC’s Infrastructure andEnvironment Finance Group, was alsopresent. The time differences had themengaged in intense online discussions
both day and night. “We all praised
each other for the very hard work wepoured into this project,” OKABE recallswith a smile. While striving to movetheir respective agendas forward, they
were united in their strong desire to do
whatever it took to make this project a
success. This brought them together asa team, and their sense of accomplishment in finally wrapping up negotiations
was evident.
This “NeuConnect, UK-Germany
Interconnector Project” is a megaproject to construct a high-voltage direct
currenttransmission
system—720
kilometers long with a capacity of 1400
megawatts—between southeast Britain

and northwest Germany, due to operate for 25 years. It falls under the legal
jurisdiction of the UK and Germany,
while the transmission cables will passthrough the exclusive economic zone of
the Netherlands. Participants from Japan
include Kansai Electric Power Co., Inc.
(KEPCO), which possesses cutting-edge
technology in the operation of high-voltage direct current transmission systems.
The approximately 30 project stakeholders, including sponsors, operatingcompanies, and lenders, are mainly fromthe UK, Germany, the Netherlands, andJapan.
“This was JBIC’s first project financing (PF) for an interconnector project,
and with no frame of reference, in the
beginning we had no idea as to how
to proceed with the negotiations,” says
OKABE. Since her main work up to thenhad been the monitoring of projects after
their signing, this was also the first timefor OKABE to structure a new PF.
PF repayment from business revenues is scheduled over a long periodof time, which makes the review ofbusiness feasibility critical. This project’s
income source structure is complex,
involving the UK and German operators,

and multiple lenders (see figure below).
There were also a number of risk factors
affecting the project review, including
the environmental impacts of laying andmaintaining undersea cables, and delays
in procurement of construction materials
due to the COVID-19 pandemic.

The conflict in Ukraine heightened
the importance of interconnectors
JBIC became involved in the projectin 2018 when KEPCO became the firstJapanese electric power company toembark on an interconnector project
and approached it for a loan. However,the project was pushed back significantly due to reasons such as delays in
obtaining approval from the British andGerman authorities for undersea cableinstallation, and the UK’s withdrawal
from the European Union.
A breakthrough occurred in July
2021, when a meeting between then
UK Prime Minister Boris Johnson andGerman Chancellor Angela Merkel saw
them reaffirm the importance of the
UK-Germany NeuConnect interconnector, and the project was quickly set into
motion. It was right around this timethat OKABE was placed in charge of thisproject at JBIC.
The development of renewableenergy is progressing in Europe as it
strives to become carbon neutral. As
renewables such as wind and solar
power are dependent on weather, it
is essential to deploy interconnector
systems that allow countries to shareelectricity to effectively use renewable
power.
Just as the negotiations were reaching a critical juncture, Russia invaded
Ukraine in February 2022. “Since wedidn’t know how the situation would
develop, we all felt an even stronger
urgency to move ahead with the project.”
There was a growing sense of crisis
in Europe over the supply of power. This
reaffirmed the importance of the projectfrom the perspective of energy security
as well. “I personally saw how JBIC’soperations are connected to the global
situation,” says OKABE.
“The sponsors, operating companies,
and lenders all had different agendas,
and when an agreement couldn’t bereached, we had to negotiate with eachof them individually. This is a large-scale
project, but I became keenly aware that it

Project Summaryis built upon steps taken one at a time.”
After overcoming these various challenges, construction of UK-Germany
NeuConnect interconnector has begun,
with completion scheduled for 2028.

Picturing the knowledge gainedin Europe being applied
to Japan and Asia as well
KEPCO, which began investing in a project company in 2018 and was involvedin the development of the project,possesses cutting-edge technology indirect current transmission systems
that enable high capacity and low loss
in long-distance power transmission.
On the back of its successful use of thistech in the southeast Seto Inland Sea
in Japan, KEPCO took on its first project overseas. “By supporting KEPCO’s
expansion into Europe, we could contribute to the international competitivenessof Japanese companies and work forthe good of the country, giving me agreat sense of fulfillment,” says OKABEof the true pleasure of her work. TEPCOPower Grid, Inc. later joined the project,expanding the involvement of Japanesecompanies.

For JBIC as well, the successful implementation of this pioneering initiative tofinance an interconnector project serves
as a stepping stone to the future. “Theknow-how and technologies developedin Europe should lead to the creation ofhighly efficient power interconnectors inJapan and other parts of Asia.”
OKABE was also inspired by the persuasive negotiation skills of the female
staff of European financial institutions
who she worked closely with on the
project. As the global trend toward decarbonization accelerates, OKABE is alreadylooking ahead to the next challenge.

NeuConnect Interconnector
Total route length 720 km
Capacity 1400 MW

UK

Netherlands

Germany

In July 2022, loan agreements were signed for a maximum of GBP270 million and EUR156 million (JBIC portion) for project financing of NeuConnect, an interconnector project that will link the UK and Germany. Theseloans are co-financed, bringing the total amount to approximately GBP1069 million and EUR910 million.

Press release on this project
10

JBIC TODAY

JUNE 2023

JUNE 2023

JBIC TODAY

11

JBIC History

1964

vol.2

Japan’s participation in the world economic systemand the role playedby the Export-Import Bank of Japan
A look back at the steps taken by JBIC’s predecessor, the Export-Import Bank of Japan (JEXIM),
and the postwar history of the Japanese economy. Japan overcame three obstacles to join the OECD in 1964.

Financed by the World Bank,
the Tokaido Shinkansen(bullet train) opened forservice to coincide with
the Tokyo Olympic Games(October 1964). In April ofthe same year, Japan joined
the OECD.
©The Asahi Shimbun / amanaimages

Three obstacles: Bretton Woods,
GATT, and post-war reparations
Immediately after the end of WorldWar II, it became imperative for Japanto establish itself as a trading nation
because it had few natural resources.
But as Japan sought ways to participate
in the world economic system, it cameup against three obstacles.
First was participation in the Bretton
Woods system, the U.S.-initiated global
financial system centered on the WorldBank and the IMF. Second was membership of the General Agreement on Tariffs
and Trade (GATT), the predecessor to the
WTO. And third was resolving the issueof reparations. Japan overcame theseobstacles and achieved rapid economic
growth, and was then able to join theOECD in 1964.
The Japanese government’s first
approach to the World Bank and the IMF
was in April 1950, when Finance Minister
IKEDA met with U.S. economic advisor
Dodge to discuss the establishment of
JEXIM. For Japan’s economy, which was
struggling with a current account deficit,
there were substantial advantages toreceiving foreign currency loans underthe Bretton Woods system. The GHQ
was indifferent to this at first, but thesituation took a turn for the better when
General MacArthur was relieved of his
command. With the support of the U.S.,
Japan became a member of the WorldBank and the IMF in August 1952.
Japan was able to borrow the foreign
currency needed for postwar reconstruction from the World Bank. The loans
were used to build much of the country’s
economic infrastructure that underpinned Japan’s rapid economic growth,
including the Tokaido Shinkansen, theTomei and Meishin Expressways, andthe Kurobe Dam.
Next was the coveted membership of
GATT. Japan formally applied to join in
July 1952, but was met with unexpected
opposition from the countries of Europe,
reflecting a deep-seated warinessover the prewar dumping of Japanese
textile products. But with U.S. support,
Japan was finally able to join GATT in
September 1955. Japan was forced toself-regulate textile exports even after
its accession, but GATT membership
had symbolic meaning for the nation’s
return to the international community.
Japan’s exports subsequently expandedfrom textiles to the chemical and heavy
industries, and became the main engine
driving its rapid economic growth.

Payment of reparations and JEXIMFirst non-Western country
to join the OECD
This was also the period when thesigning of the Peace Treaty accelerated negotiations over reparations to
war-damaged countries. Japan firstsought to resolve the issue of reparations

June 2023 Edition
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 Tel : +81-3-5218-3100*Any unauthorized reproduction or publication of the images or text in this paper is prohibited.

JBIC Website

Facebookwith the countries of Southeast Asia inorder to normalize trade relations.
Payment of reparations began in 1955,
and JEXIM was central in the financingof economic cooperation projects that
accompanied the reparations. Japan’s
economic cooperation began with reparation payments. As Japan’s industries
became increasingly sophisticated, its
exports of plant, along with chemicaland heavy industry products, such as
steel, ships, and machinery, grew intandem. JEXIM’s activities including
export loans and overseas investment
loans also increased as a result, supporting Japan’s rapid economic growth fromthe financial side.
And so, in April 1964, Japan became
the first non-Western country to join theOECD. Japan was now expected to takeon more responsibility as a developed
country.

Participation in the World Economic System
1952

AugustJoined World Bank and IMF

1955

September Joined GATT1956

December Joined United Nations (UN)1960

December Prime Minister IKEDA Hayato
announces the Income
Doubling Plan

1964

April
OctoberJoined OECD
Tokaido Shinkansen Line
opens for service
Tokyo Olympic Games

InstagramThis printed material uses
vegetable oil ink, which
includes soybean oil ink.