Summary

Survey Report on Overseas Business Operations
by Japanese Manufacturing Companies– Results of JBIC FY2004 Survey: Outlook for Japanese Foreign Direct Investment (16th Annual Survey) –November 2004

JBIC InstituteJapan Bank for International Cooperation

Revised

Copyright © 2004 JBIC Institute. All Rights Reserved.

【 Contents 】

p.1
Ⅰ． Survey Overview

p．2

Ⅱ． Summary

p．4

Ⅲ． Survey Results

p．5

1． Prospects for Domestic and Overseas Business Operations（1） Top priorities for domestic and overseas business operations（2） Prospects for overseas business operations over the medium term
（3） Prospects for domestic business operations over the medium term
（4） Relationship between domestic and overseas business operations（5） International allocation of production
2． Prospects for Overseas Business Operations by Region（1） Prospects for overseas business operations (all regions)（2） Countries and regions for strengthening or expansion (all regions)（3） Prospects for overseas business operations (major Asian regions)（4） Functions for strengthening or expansion (major Asian regions)（5） BRICs（6） Relocation of overseas bases
3． Evaluation of Overseas Business Performance（1） All regions and all industries（2） Time series comparison of evaluation reasons by major region
4． Topics（1） Chinese operations and risks（2） Free Trade Agreements (FTAs)
5． Promising Countries and Regions for Overseas Business Operations（1） Ranking and the existence of business plans（2） Reasons for promising prospect（3） Issues（4） From reasons for promising prospect and issues

Appendix

Appendix 1． Changes and Details for Promising Countries and Regions
for Overseas Business Operations
Appendix 2． Promising Countries and Regions for Overseas Business Operations
over the Medium Term ~Details of Reasons for Promising Prospect~
Appendix 3． Promising Countries and Regions for Overseas Business Operations
over the Medium Term ~Details of Issues~
Appendix 4． Reasons for Evaluations of Satisfaction with Profitability~Comparison by Major Region and Major Industry~

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Copyright © 2004 JBIC Institute. All Rights Reserved.

Ⅰ．Survey Overview (1)p.2
Profile of Companies Surveyed

The purpose of this survey is to identify thecurrent and future trends of overseas business
operations※ and foreign direct investment (FDI)
activities of Japanese manufacturing companies.
This year’s survey was the 16th of an annual series
that began in 1989.
The survey covered 939 manufacturing
companies that have three or more foreign affiliates,
including at least one manufacturing base, as ofNovember 2003. The questionnaire was mailed and595 valid responses were returned over the period
from July to September. The effective response rate
was 63.4%. (In the FY2003 survey, valid returns
were 571 out of 932 companies surveyed, with the
response rate of 61.3%)
This year’s survey covered issues such as “Toppriorities for domestic and overseas business
operations”, “Chinese operations and risks”, “Free
Trade Agreements” and “International allocation of
production”.

Number of Respondent Companies, byannual sales (Consolidated base)
Number ofcompanies

less than \50.0 billion\50.0 billion ～ less than \100.0 billion\100.0 billion ～ less than \200.0 billion\200.0 billion ～ less than \300.0 billion\300.0 billion ～ less than \500.0 billion\500.0 billion ～ less than \1.0 trillion\1.0 trillion or more
Total

250 42.2%
100 16.9% \100.0 million
79 13.3% \500.0 million
41
6.9%\1.0 billion
43
7.3%\5.0 billion
36
6.1%
44
7.4%
593 100.0%

Number of Respondent Companies, by numberof employees (Individual company base)
300 employees
500 employees
1,000 employees
5,000 employees
10,000 employees

production, sales, research and development activities inoverseas bases, as well as outsourcing of manufacturing
and procurement overseas.

Companies Surveyed, Response Rate, and Overseas Affiliates
FY2004
FY2003 FY2002 FY2001 FY2000
939
932
812
792
791
595
571
508
501
469
63.4
61.3
62.6
63.3
59.3
10,079
9,838
8,924
7,710
7,285
（Unit：Companies, %）less than \100.0 million～ less than \500.0 million
less than \1.0 billion～
less than \5.0 billion～
less than \10.0 billion～\10.0 billion or more
Total

（%）

42
7.1%
63 10.6%30
5.0%
122 20.5%
86 14.5%
252 42.4%
595 100.0%

Number of Respondent Companies,
by industrial classification

Number ofcompanies（%）
Foodstuffs
5.2%
31
（%）
5.0%
30
103 17.3% Textiles
0.8%
5
82 13.8% Wood and wood products
0.8%
5
119 20.0% Paper and pulp
14.8%
88
220 37.0% Chemicals［Chemicals (excluding pharmaceuticals］（77） [12.9%]40
6.7%［Pharmaceuticals］（11） [1.8%]
31
5.2%
2.0%
12
595 100.0% Petroleum and rubber
3.0%
Ceramics, cement and glass
18
2.4%
Steel
14
3.2%
Nonferrous metals
19
3.7%
Metal products
22
10.8%
General Machinery
64［Assembled products］（49） [8.2%]［Components］（15） [2.5%]
18.7%
Electrical equipment and electronics
111［Assembled products］（40） [6.7%]［Components］（71） [11.9%]
1.8%
Transportation (excluding Automobiles)
11
15.8%
94
Automobiles［Assembled products］（9） [1.5%]［Components］（85） [14.3%]
5.5%
33
Precision machinery［Assembled products］（21） [3.5%]［Components］（12） [2.0%]
Other
6.4%
38
Total
595 100.0%

Number ofcompanies～
301 employees ～501 employees ～1,001 employees ～5,001 employees ～10,001 employees ～Total

Number ofcompanies（%）※2 companies did not provide this information.

※ Overseas business operations are defined as

Number of companies surveyed
Number of respondent
Response rate
Number of overseas affiliates

Number of Respondent Companies, by paid-in
capital (Individual company base)Industrial classification

Copyright © 2004 JBIC Institute. All Rights Reserved.

Ⅰ．Survey Overview (2) ～Profile of Companies Surveyed (continued)～p.3

Number of Overseas Affiliates, by type of base and region( n = 595) （Unit：Companies）

FY 2004 Survey
NIES ASEAN4 China
Production Bases
Sales Bases
R&D Bases
Others
Total

612
830
25
107
1,574

1,190
383
29
89
1,691

Other
North
Asian
AmericaCountries

1,346
463
67
122
1,998

188
52
6
15
261

Latin
America

EU15

216
177
4
53
450

454
969
60
161
1,644

759
637
108
244
1,748

Other
CentralRussia, Southeast
Eastern European
Asia
Europe Countries other CIS Pacific

84
101
3
5
193

16
70
－
8
94

11
32
－
3
46

MiddleAfrica
East

68
141
8
26
243

16
53
－
3
72

Total

24 4,984
38 3,946
310
－
3
839
65 10,079* “Others” includes service companies, financial subsidiaries etc.
＜ The Classification of Provinces and Administrative Districts of China in This Survey＞＜The Classification of Major Regions in This Survey＞
NIES（Korea, Taiwan, Singapore, Hong Kong）
Northeastern China （Heilongjiang Province, Jilin Province, and Liaoning Province）
ASEAN4（Thailand, Indonesia, Malaysia, Philippines）
Northern China （Beijing, Tientsin, Hebei Province, and Shandong Province）
North America（U.S, Canada）
Eastern China （Shanghai, Jiangsu Province, Anhui Province, and Zhejiang Province）
EU15（U.K, Germany, France, Italy, Netherlands, Belgium, Greece, Luxembourg,
Southern China （Fujian Province, Guangdong Province, and Hainan Province）
Denmark, Spain, Portugal, Austria, Finland, Sweden, Ireland）
Inland China （Provinces other than those mentioned above and Autonomous regions）
Central and Eastern Europe （Poland, Hungary, Czech Republic, Slovakia, Bulgaria, Romania, Slovenia, Albania,
Croatia, Serbia and Montenegro, Bosnia and Herzegovina, Macedonia,）（Unit：Companies）
1,400

Changing of Overseas Manufacturing Bases in
Major Regions

Changing of Overseas Affiliates
in Major Regions（Unit：Companies）
2,500

1,200
ASEAN4

2,000

1,000

North America
1,500

800
North America

EU

600

NIES

1,000

NIES
China

400

200
0

EU

China

Other Asian Countries（Survey Year : FY）
89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04※ Data for China starts from FY1993. Data for Other Asian Countries starts from FY1996.
※ In the graph above, the EU15 for this year’s survey have been consolidated into the EU line.

ASEAN4500

Other Asian Countries（Survey Year : FY）

0
89

90

91

92

93

94

95

96

97

98

99

00

01

02

03

04

Copyright © 2004 JBIC Institute. All Rights Reserved.

p.4

Ⅱ．SummaryAggressive attitude toward business in Japan and as abroad
The current top priority issues for domestic and overseas business operations are “Strengthenor expand overseas production”, followed by “Strengthen or expand R&D functions”,“Strengthen or expand customer base by company’s own efforts” and “active expansion into new
business areas”. Compared to the results of FY2002 survey, “Strengthen or expand domestic
production” rose substantially in the ranking, as companies take a more positive stance toward
not only overseas but also domestic operations. Efforts to enhance their own business systems,
such as “Review domestic production systems from the viewpoint of total cost” declined
relatively.
It appears that Japanese manufacturers are not aiming for a one-way shift toward overseas
production, but rather they intend to strengthen R&D functions and domestic production at thesame time in order to achieve high-added value production in Japan and establish an optimized
global production system.

Continuing trend to positive stance for overseas businessExamining the medium-term outlook for overseas operations, 81.9% of companies in allindustries responded that they expect to “Strengthen or expand”, demonstrating that last year’s
enthusiasm for overseas operations has not abated.

A trend toward strengthening or expansion in domestic operations as well
When questioned on their stance on domestic business operation over the medium term,
47.2% of the companies in all industries said “Maintain the present level”, and 45.2% said
“Strengthen or expand”. These two responses each account for nearly half of all respondents,
with a mere 4.6% expecting to “Reduce” in scale.

Exports from the parent company in Japan grow with the strengthening or expansion ofoverseas business operations
Investigation into the relationship between strengthening or expansion in overseas business
operations and parent company exports from Japan over the past three years revealed that 49.7%
of companies in all industries said their “Exports have increased”, while only 13.3% said
“Exports have decreased”. By major industrial classifications, a majority of companies in theareas of general machinery, electrical equipment & electronics, and automobiles stated that
“Exports have increased”, indicating a deep-rooted relationship between strengthening or
expansion in overseas business operations and growth in the parent company’s exports fromJapan.

Strongly positive stance on China, Central and Eastern Europe and Russia

The regions for which a high portion of the respondent companies named as prospects for“strengthening or expansion of the scale of overseas business operations” are China (76.5%),
Central and Eastern Europe (64.1%), Russia & other CIS (63.0%) and North America (53.9%).
Compared to FY2003 survey, this year’s survey found that intentions to expand overseas
business operations have grown stronger for almost all countries and regions.

Very active toward China, Thailand and the North America in all industries

Many companies in all categories intending to strengthen or expand their operations havecited Eastern and Southern China, Thailand and the North America as business destinations.
However, the number of such companies citing Latin America, the Middle East and Africa are
relatively small.

Evaluation of overseas business performance have improved in all regions, but

profitability levels are still unsatisfactory
The evaluation of sales and profitability satisfaction in their overseas business operations
shows a trend towards improvement in each region and country. Business evaluations for the
NIES, ASEAN4 and China show relatively high levels of satisfaction, and there has been some
improvement in Central and Eastern Europe, Latin America and elsewhere, so the businessevaluations for Europe and North America have also seen relative increases. However, thisyear’s survey found some issues that still need to be addressed for the improvement of
profitability.
Evaluation of business in China rose in this year’s survey, as it did in last year’s, but the levelof profitability is still unsatisfactory. Many companies are trying to strengthen or expand the
production and marketing sides of their business in China. However, if they want to raise theprofitability of that business, it is becoming increasingly important for them to make more
efficient investments, well tailored to the market, as they open up and secure market positions.

Economic growth in China to continue until 2010
When companies are asked how long they anticipated economic (high) growth in China tocontinue, as they draw up their business plans, the most common answer is “Until 2010 (theShanghai Expo)” (174 companies), followed by “Until 2008 (the Beijing Olympics)” (150companies). Among the major industries, “Until 2008” is the most common response inElectrical equipment and electronics, while “Until 2010” is the most common response in theautomobile industry. Thus, views of economic growth vary between industries.

“Economic recession and market contraction” is viewed as most serious risk
The risks that could have a grave impact on operations in China are investigated separately as“Risks faced now” and “Future risks”. The results show that the main risks seen as “Risks faced
now” are “Insufficient electrical power supply” (56.5%), “Rising prices for energy and raw
materials” (36.5%) and “Infringement of intellectual property rights” (29.3%). As for “Futurerisks”, the most common response is “Revaluation of the Yuan” (67.7%). The company
interviewed said that, in addition to decreased export competitiveness due to a revalued Yuan,other concerns included economic slowdown due to a rising Yuan and increased economic
uncertainty caused by exchange rate fluctuations.
Among the current and future risks faced in China, the ones viewed as the most serious are“Economic recession and market contraction” (20.2%), “Insufficient electrical power supply”(18.8%) and “Revaluation of the Yuan” (17.0%). While the most common view is that China’s
economic growth will continue until 2010, company interviews pointed to concerns such as an
earlier-than-expected economic recession or slow growth beyond 2010.

India and Russia rise in ranking, but anticipations are ahead of business plans

In the countries and regions that companies view as promising for business development in
the medium term, the top ten countries/regions remained unchanged in this year’s survey.
However, India, which was ranked the fifth last year, rose to the third place, while the tenth-place
Russia rose to the sixth. Vietnam gathered more votes than during the last survey. These results
imply that Japanese companies’ interests in these countries are growing. However, the number ofcompanies with no specific business plans for these countries exceeds the number of companies
that actually have such plans. This is not the case for China, Thailand and the U.S.. Therefore,
the ranking is considered to be a reflection of anticipations for future potentials, rather thanrealistic investment possibilities. Among the countries and regions that fell in the ranking as
compared to the last survey, Indonesia saw the largest drop in votes.
Copyright © 2004 JBIC Institute. All Rights Reserved.

Ⅲ. Survey Results 1. Prospects for Domestic and Overseas Business Operations（1）【 Top priorities for domestic and overseas business operations 】

p.5

Figure 1
FY 2004 Survey
Rank

Top-priority issues to be tackled in domestic and overseas business

1 Strengthen or expand the overseas production

FY 2002 Survey(n = 584)
No. ofcompanies

Ratio

Rank

Top-priority issues to be tackled in domestic and overseas business(n = 489)
No. ofcompanies

Ratio

338 57.9%

1

Strengthen or expand the overseas production

267 54.6%

235 40.2%

2

Strengthen or expand the customer base by the company’s own efforts

185 37.8%

3 Strengthen or expand the customer base by the company’s own efforts

155 26.5%

3

Review and improve efficiency of group companies’ management

159 32.5%

4 Active expansion into new business areas

131 22.4%

4

Review domestic production systems from the viewpoint of total cost

124 25.4%

5 Reduce interest-bearing debt

126 21.6%

5

Strengthen or expand service operations related to the company’s products

120 24.5%

6 Review and improve efficiency of group companies’ management

122 20.9%

6Acquire business resources to strengthen principle business

117 23.9%

7 Acquire business resources to strengthen principle business

115 19.7%

7

Reduce interest-bearing debt

115 23.5%

8 Strengthen or expand the domestic production

104 17.8%

8

Active expansion into new business areas

87 17.8%

9 Strengthen or expand service operations related to the company’s product96 16.4%

9

Introduce or establish a global supply chain management

81 16.6%

10 Introduce or establish a global supply chain management

92 15.8%

10 Concentrate on environmental issues and environment-related business46 9.4%

11 Review domestic production systems from the viewpoint of total cost

60 10.3%

10 Review overseas production systems from the viewpoint of total cost

46 9.4%12 Concentrate on environmental issues and environment-related business

49 8.4%12 Strengthen or expand the domestic production

42 8.6%

13 Review overseas production systems from the viewpoint of total cost

41 7.0%13 Outsource the activities of production

22 4.5%

14 Outsource the activities of production

20 3.4%14 Develop technology by utilizing venture companies

9 1.8%○ 15 Renewal of overage domestic plant

17 2.9%15 Expand transactions over the Internet

8 1.6%○ 16 Securing energy, resources and materials for the company’s own operations

13 2.2%○ 2 Strengthen or expand the R&D functionsNote) 17 companies answered “Other” as a priority issue.

Note)(1) An empty circle “○” indicates options newly added for the first time into this year’s survey.
(2) 18 companies answered “Other” as a priority issue.

 Strengthening or expansion of overseas production is a top-priority issue, R&D functions and domestic function are also focused.
Aggressive attitude toward business in Japan and as abroad.
The current top-priority issues for domestic and overseas business operations are “Strengthen or expand the overseas production” (338 companies), followed by“Strengthen or expand R&D functions” (235), “Strengthen or expand the customer base by the company’s own efforts” (155) and “Active expansion into new businessareas” (131). Compared to the results of the FY2002 survey, “Strengthen or expand the domestic production” (104) rose substantially in the ranking, as companies take amore positive stance toward not only overseas but also domestic operations, while efforts to enhance their own business systems, such as “Review domestic production
systems from the viewpoint of total cost” (60) declined relatively.
It appears that Japanese manufacturers are not aiming for a one-way shift of production function toward overseas, but rather they intend to strengthen R&D functions
and domestic production at the same time, in order to achieve high-added value production in Japan and establish an optimized global production system.
Copyright © 2004 JBIC Institute. All Rights Reserved.

p.6（2）【 Prospects for Overseas Business Operations over the Medium Term 】
Figure2 Prospects for Overseas Business Operations over
the Medium Term (by major industry)

Figure 3 Changing Patterns of Overseas
Production Ratio (overall industrial average)40%

FY 2004 Survey

590
0.2%
100%

31

18.0% 22.6%

30

87

63

109

93

(Companies)

33

30%

13.8% 11.1% 18.3% 10.8%

26.7%

30.3%
Will reduce or 80%
withdraw fromoverseasbusiness
60%
operations
Will maintainthe size of
86.2% 88.9% 81.7% 89.2%
40% 81.9%
overseas
77.4% 73.3%
business
69.7%
operations at thepresent level 20%

Will strengthenor expand0%
overseas
All Industries
Textiles Chemicals
Automobiles
business
Foodstuffs
General Machinery
Precision
operations
Electrical equipment & electronics

FY 2003 Survey 558(Companies)

22

16

85

100% 0.2% 9.1%
21.5%
31.3%
80%
60%
78.3%
40%

64
104
90
1.6%
10.0%
23.5% 20.3% 19.2%

90.9%

80.8%
76.5%
68.8%

78.1%

34
29.4%

90.0%
70.6%

Note) Overseas business
operations are definedas production, sales, 20%
research anddevelopment activities
at overseas bases, as
0%well as outsourcing of All Industries
Textiles Chemicals
Automobiles
manufacturing andFoodstuffs
General Machinery
Precision
procurement overseas.
Electrical equipment & electronics(Medium-term plan)
33.2
28.1

Overall industrial averagefor FY2003：26.1% (n=516)

26.1

25.9 Planned value for
21.7
24.3
FY200419.0
20.9 21.1
20%
15.1 16.1 17.3 19.2
13.7
14.1 14.8
23.0

10%

0%

Actualvalue

Plannedvalue

89 90 91 92 93 94 95 96 97 98 99 00 01 02 03

Figure 4 Overseas Production Ratio (for major industries)
All Industries
Chemicals
General Machinery
E&E
Automobiles

Number ofcompanies
516
75
53
99
76

FY2003
actual value
26.1%
16.9%
18.4%
38.8%
26.8%

FY2004
Medium-term
estimated
plan
28.1%
33.2%
18.3%
24.1%
19.9%
25.8%
41.1%
45.5%
28.7%
35.5%

 Continuing trend to positive stance for overseas business

Questioned on their stance toward overseas business in the medium term (next3 years or so), 81.9% of respondents in all industries said “Strengthen or expand
the overseas business operations”. The proportions of companies in the chemicals
and general machinery categories which responded “Strengthen or expand theoverseas business operations” were each up by ten points on the preceding year,
and increasing numbers of companies have strongly more positive attitudes toward
overseas business operations.

 Overseas production ratios are expected to rise

When examining the actual values of overseas production ratios in FY2003, it
is seen that the average responses of all industries was 26.1%, the fifth consecutive
year of increase. When asked for their planned values for FY2004, and for the
medium term plans to FY2007, the average responses were 28.1% and 33.2%
respectively, indicating that many companies plan to expand their overseas
production in future.
Copyright © 2004 JBIC Institute. All Rights Reserved.

p.7（3）【Prospects for Domestic Business Operations over the Medium Term 】
Figure 5 Prospects for Domestic Business Operations
over the Medium Term
Strengthen or
expandFigure 7 Fields to Focus on in Japan in Future (multiple responses)
Strengthen or expand(257 companies)

45.2%
42.9%

Maintain thepresent level

（％）
80

4.6%
6.8%

Under
consideration

60

FY 2004 Survey ( n=568)

7.4%

2.1%
0.0%

Production
10.0%

20.0%

30.0%

40.0%

57.7

56.4
45.1

42.4

FY 2002 Survey ( n=487)

Other

70.9

70.8

3.0%

Reduce (26companies)

What fields will you concentrate efforts on in Japan in future?

47.2%
40.9%

ReduceMaintain the present
level (268 companies)

50.0%Note) The available options in this survey differ from those in the FY 2002 survey, so those whichmatch this year’s options were collated and recalculated.

Sales & Service
R&D

38.5

40

20

42.3

28.7
22.2

22.8
15.4

Management
0

Figure 6 Prospects for Domestic Business Operations
over the Medium Term（by major industry）
100% 3.6%
Underconsideration atpresent

80%
44.6%
Will reduce
domestic business
operations
60%
Will maintain thesize of domestic
business
40%
operations at thepresent level

51.8%

1.6%
4.7%

50.0%

2.8%
3.7%
43.0%

50.5%

3.3%

60.9%

 A trend towards strengthening or expansion in domestic operations as well
When questioned about their stance on domestic business operations over the medium term
(next 3 years or so), 47.2% of the companies in all industries said “Maintain the present level”, and45.2% said “Strengthen or expand”. These two responses each account for nearly half of
respondents, with a mere 4.6% expecting to “Reduce” in scale. (Comparison with FY 2002 survey
results for reference shows that the proportion of companies stating “Strengthen or expand” rose
2.3 points, while those responding “Reduce” fell by 2.2 points).
In major industrial classifications, the proportion choosing “Maintain the present level” in thegeneral machinery and automobiles classifications exceeded the proportion for “Strengthen or
expand”, but in chemicals and electrical equipment and electronics a majority chose “Strengthen or
expand”. In those classifications, the results showed a tendency towards medium-term expansion of
the scale of domestic business operations.

 The area getting the most attention in domestic business operations is “R&D”

43.8%
Will strengthen
Companies which responded “Strengthen or expand”, “Maintain the present level” or “Reduce”
35.9%
20%
or expandfor the scale of their domestic business operations were asked which fields they would concentrate
domestic
their efforts on in Japan. A high proportion in all those groups chose “R&D”, suggesting that abusinesslarge number of companies aspire to raise added value in their domestic business operations.
operations
0%
Chemical General Machinery
Automobiles (n=92)(n=83)(n=64)
Electrical equipment and electronics (n=107)
Copyright © 2004 JBIC Institute. All Rights Reserved.

p.8（4）【 Relationship between Domestic and Overseas Business Operations 】
Figure 8 Relationship between Strengthening or Expansion ofOverseas Business Operations and Exports from JapanAll Industries

16.1%

Chemicals

General Machinery

14.1%

6.7%
10.0%

12.8%

13.3%

49.7%

46.2%

Key

Strengthen or expand
domestic business

68.3%
26.9%

46.7%

Maintain the current size ofdomestic business( n = 60)

45.6%

Automobiles

E&E

20.9%

Export value increased
Export value stayed level
Export value decreased
Export value is unrelated(n=463)15.0%( n = 78)

( n = 541)

Figure 9 Stance on Domestic Business Operations
among companies that chose “Strengthen or expand”
Overseas Business Operations (medium-term outlook)

8.7%

Reduce domestic business 4.8%

11.0%
6.6%

14.6%
53.4%

19.8%

23.3%
( n = 103)

62.6%
( n = 91)Note) Companies which responded “We did not expand overseas business operations in the last three years” were excluded.

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

Note) Overseas business operations are defined as production, sales, researchand development activities in overseas bases, as well as outsourcing of
manufacturing and procurement overseas.

 Exports from the parent company in Japan grow with strengthening or expansion of overseas business operations

Investigation of the relationship between strengthening or expansion in overseas business operations and parent company exports from Japan over the past 3 years
revealed that 49.7% of respondent companies in all industries said their “Exports have increased”, while only 13.3% said “Exports have decreased”. By major industrial
classifications, a majority of companies in the areas of general machinery, electrical equipment and electronics, and automobiles stated that “Exports have increased”,
indicating a deep-rooted relationship between strengthening or expansion in overseas business operations and growth in the parent company’s exports from Japan.
There are some cases here in which reinforcement of marketing overseas has contributed to increased exports from Japan, but there are also many cases of production
expansion overseas leading to export growth. In interviews with companies, there were responses such as “We export thread as a raw material to China, so our exports
were increased by expanding our Chinese operations” (Textiles), “The strengthening or expansion of our overseas business operations increased exports of high-added
value devices” (Electrical equipment and electronics; E&E ), and “Stronger overseas production increased the supply of materials from the parent company” (E&E).
Another response, “We shifted most of our production functions to China and Southeast Asia, but we left R&D and die manufacturing in Japan, so we have a growing
need for the kind of high-added value products which cannot easily be produced overseas” (E&E), indicating a shift to division of production functions between Japanand overseas.

 Companies positive about their overseas business operations are also eager to expand operations in Japan

Examining the outlook for domestic business operations (Figure 5 above) among the companies that chose “Strengthen or expand” their overseas business
operations (Figure 2 above) in this survey, the largest share (46.7%) also chose “Strengthen or expand”, while 45.6% chose “Maintain the present level” and only 4.8%
chose “Reduce”. This result indicates that the largest group among those aiming to expand their overseas business operations aimed to do the same in their domestic
business operations.
Copyright © 2004 JBIC Institute. All Rights Reserved.

p.9（5）【 International Allocation of Production 】
Figure 10 Current Production for Generalpurpose Products (multiple responses)
62.7%
58.5%
51.5%
84.7%

All
Industries
Chemicals

44.3%
45.9%

GeneralMachinery

29.5%

77.3%

E&E

60.0%

( n = 110,108)

19.1%

67.0%

Automobiles

52.3%
61.4%
40.9%

100%

80%

60%

( n = 88,88)

40%

20%

Japan

0%

0%

China

97.6%

11.3%
6.5%
8.1%

( n = 61,62)

42.7%

90.5%

12.9%
17.6%
23.5%

( n = 85,85)

30.6%

95.2%

89.8%

9.1%
14.8%
20.5%

89.8%

20%

40%

60%

80%

100%

Other RegionNote) “ASEAN” in this question refers to the six countries of Thailand, Malaysia, the Philippines, Indonesia, Singapore and Vietnam.

Figure 13 Destinations for the Future
Mass Production of Products
Embodying the Newest
Technologies (multiple responses)

Figure 12 Current Production for Products
Embodying the Newest Technologies(multiple responses)

12.2%
10.1%
10.8%

92.7%

All
Industries( n = 573,539)

98.8%

3.6%
8.3%
11.9%

Chemicals

95.2%

4.8%
8.1%
9.7%

GeneralMachinery

15.6%( n = 62,60)

27.8%

71.1%

41.0%

85.0%

31.3%
23.8%
28.8%

( n = 84,80)

18.3%
13.3%

85.0%

35.0%
56.3%

90.9%

( n = 110,103)

11.0%
12.1%

Automobiles

20%

0%

95.6%
27.5%
100%

80%

60%

40%

E&E

19.1%
14.5%
7.3%

( n = 91,84)

8.7%

Investigation of the allocation of production functions
between domestic and overseas production reveals that
production of general-purpose products is spread evenly
between Japan, China and ASEAN. Japan is the production
center for products of high-added value in any industry,accounting for a 90% share of such production.

 Domestic production leads in shifting hightechnology products to mass production

17.6%
17.6%
14.8%

ASEAN

 Production of high-added value products ismainly in Japan

15.3%
14.9%
15.6%

( n = 569,569)

26.0%

51.8%
50.6%

73.8%

Figure 11 Current Production for High-added
Value Products (multiple responses)

36.9%
31.0%
38.1%
29.8%

68.9%
77.4%

Japan is the manufacturer of most products using thenewest technologies, and is also the destination for their
future mass production. Interviews with companies heard
responses such as “We will shift to mass production in Japan
as well for products which require advanced expertise, toavoid leakage of technology and expertise” (Textiles) and“We can’t and don’t manufacture devices of high-added
value anywhere outside Japan” (Electrical equipment andelectronics), indicating that some companies aim to move tomass production in Japan, regardless of the technologicallevels of other countries, to avoid leakage of technology andexpertise.

 International allocation of production isadvancing in the E&E field

The production destinations for general-purpose electricalequipment and electronics (E&E) are China (77.3%),
ASEAN (60.0%) and Japan (42.7%). The allocation of
production, by which general-purpose products are producedin China and ASEAN, where production costs are low, andhigh- added value products, which require technology, areproduced in Japan, is more advanced in the E&E than inother industries The most common destination for future
mass production of products using the newest technologies is
China (68.9%), followed by Japan (56.3%) and ASEAN(36.9%). Companies in the E&E are more oriented toward
China than ASEAN.
In the Automobile industry, ASEAN is slightly ahead ofChina as a destination for future mass production. Comparedto other industries, many automobile manufacturers put
ASEAN ahead of China at this stage as a production centerfor high-added value products.

0%
20%
40%
60%
80%
100%
Note) Local production to shift to mass production in the next 3 years or so.

Copyright © 2004 JBIC Institute. All Rights Reserved.

Ⅲ．2．Prospects for Overseas Business Operations by Region（1）【Prospects for Overseas Business Operations (all regions)】
Figure 14

FY 2004 Survey(1,027) (968) (1,113) (332) 397 (283) 327
100%

p.10

131

76

81

95

FY 2003 Survey(n = 590)
76 (Companies)

3.0% 3.0% 0.3% 0.6% 1.8% 2.1% 2.4% 0.0% 0.0% 0.0% 0.0% 1.3%

(n = 558)（1,016） （954）（987） （301） 403 157 322 117 77 70 97 (Companies)
100%
3.9% 4.0% 0.2% 2.3% 2.5% 5.1% 3.1% 0.9% 2.6% 0.0% 1.0%

23.2%
35.9%

80%
49.2%
60%

0%

44.3%

63.6%

51.1%

64.5%

61.1%
67.1%

67.1%

40%

20%

47.0%

33.4%

NIES

53.4%
60% 65.9%

44.9%
56.5%

41.0%
50.3%

69.4%

61.4%62.9%

75.3%

40%

76.5%
47.8%

25.9%

80%

37.0%

53.9%
52.4%

64.1%
46.5%

30.7%

73.9%

63.0%

35.5%

38.9%
31.6%

China

North Latin EU15
Russia,AfricaAmerica America
other CISASEAN4
Middle East
Other Asian Countries, Central andOther European
Southeast Asia Pacific Eastern Europe Countries
Will reduce or withdraw from overseas
business operations
Will maintain the size of overseas
business operations at the present level
Will strengthen or expand overseas
business operationsNote) Overseas business
operations are defined as
production, sales, research anddevelopment activities in overseas
bases, as well as outsourcing of
manufacturing and procurement
overseas.

20%

0%

42.7%
30.1%

52.6%
41.2%

58.1%
46.6%

25.5%

38.6%36.1%

22.1%

NIES
China
North Latin EU Central andMiddle East
AmericaAmerica Eastern Europe
ASEAN4& Africa
Other Asian Countries,
Other European Russia,
Southeast Asia PacificCountries
other CIS

※ Individual questions about the NIES, ASEAN4, China and other Asian countries, Southeast Asia Pacific have been included
before the FY2003 survey, and questions about Latin America were added for the first time in the FY2004 survey. Shares of
total values for each country and area in such regions in the figure above have been calculated. In the FY2004 survey, thecategory of “Middle East & Africa” was divided into “Middle East” and “Africa”. This year’s survey has also renamed the“EU” to “EU15”. Figures in parentheses are total numbers of responses for each region.

 Strongly positive stance on China, Central and Eastern Europe and Russia
Asked for their prospects for overseas business operations in the medium term (next 3 years or so), the region for which the highest proportion of companies said
they would “strengthen or expand the size of overseas business operations” are China (76.5%), followed by Central and Eastern Europe Countries (64.1%), Russia,
other CIS (63.0%) and North America (53.9%). Compared to FY2003 survey, this year’s survey shows that companies’ stance on overseas business becomes morepositive in almost all countries and regions. The number of companies citing Russia and other CIS is relatively small, but the proportion of those choosing“Strengthening or expansion” shows the highest growth rate, up 24 points from FY2003 survey, indicating that companies’ attitudes toward business in the region are
becoming more bullish.
Copyright © 2004 JBIC Institute. All Rights Reserved.

p.11（2）【Countries/Regions for Strengthening or Expansion (all regions) 】
Figure 15 Number of Companies forStrengthening or Expansion (ratio)(n = 483)

47.6
44.3

E&E companies choose Eastern China and Thailand in ASEAN

70%

E&E

60%
50%
36.0

45.8

28.9

0%

10.8
4.83.625.3 26.5
15.7

14.5
8.4 8.4

19.3
13.312.0

9.6
3.6

ThailandIndonesia
Malaysia
Philippines

20% 18.1
10%(n = 83)

33.7

Korea
TaiwanSingapore
Hong Kong

Russia, other CIS
Middle East
AfricaEU15

Other Latin Countries

Brazil5.6 5.63.4
Other European Countries

China

2.2

MexicoNortheastern China
Northern China
Eastern China
Southern China
Inland China

ThailandIndonesia
Malaysia
Philippines

Korea
TaiwanSingapore
Hong Kong

6.7

13.5

11.2
6.7
4.5
North America

10%
0%

20.2

18.0
15.7

Other Asian Countries

14.6

50%

30%
20.2
14.6 15.712.4

Automobiles

53.0

40%

32.6

29.2
27.0 25.8

Vietnam
India

20%

36.0

Central and Eastern Europe

40%

60.2

60%

(n = 89)

41.6

66.3

China

8.4 10.8
6.0 7.2

2.4

Russia, other CIS
Middle East
Africa64.0

Other European Countries

70%

80%

EU15

74.2

Central and Eastern Europe

China

80%

Automobile manufacturers have very positive stance on Thailand, North
America and the Southern and Eastern regions of China. In particular, Thailand
had the highest support of all the regions (66.3%), surpassing support for North
America (60.2%). Within China, there is a notable formation of industrial clusters
by Japanese automobile manufacturers as they expand their operations, and thissurvey found that 53% of companies chose strengthening or expansion inSouthern China, exceeding the 45.8% for Eastern China. Among the ASEAN4,
Indonesia is the second strongest, following Thailand, with 33.7% support.

BrazilNorth America

Other Asian Countries

VietnamIndia

Northeastern China
Northern China
Eastern China
Southern China
Inland China

ThailandIndonesia
Malaysia
Philippines

Korea
TaiwanSingapore
Hong Kong

2.7

Automobile manufacturers favor Thailand, North America andSouthern China

Other Latin Countries

7.0 8.3

4.6

30%

10.6
7.7
5.0
5.6

Mexico11.2

North America

10%

17.4

15.9 15.5

Russia, other CIS
Middle East
Africa13.5
12.0

Other European Countries

21.1
15.5
13.7
11.4

Brazil21.3

Other Latin Countries

20%

Mexico24.2

Electrical equipment and electronics (E&E) manufacturers have a very positive
attitude toward Eastern and Southern China, with a preference for Eastern China.
Among the ASEAN4, their attitudes toward strengthening or expansion are thestrongest for Thailand (41.6%) and the weakest for Indonesia (14.6%).

31.5

Other Asian Countries

35.0

EU15

40%

Vietnam
India

47.8

Central and Eastern Europe

50%

0%

When examining the number of companies intending to strengthen or expand
overseas business operations in the medium term, it became clear that large
numbers of these companies in all categories cite as business destinations Easternand Southern China, Thailand and North America. The number of such companies
citing Latin America, the Middle East and Africa are relatively small.

All Industries

60%

30%

Very Active toward China, Thailand and North America in allindustries

68.9

Northeastern China
Northern China
Eastern China
Southern China
Inland China

70%

Copyright © 2004 JBIC Institute. All Rights Reserved.

p.12（3）【Prospects for Overseas Business Operations (major Asian regions)】
Figure 16

NIES

ASEAN4

China

240

291

255

241 (Companies) 338

230

239

161

100% 0.4%

3.4%

3.5%

4.6%

100% 0.3%

4.3%

4.2%

5.0%

80%

80%

50.8%
61.2%

60%

73.7%

60%
40%

20%
0%

Korea

237
100%

1.7%

35.4%

22.7%

Taiwan Singapore Hong Kong

287
5.6%

260
5.0%

64.4%

60.9%

100% 0.9%

0.9%

0.0%
14.4%

0.0%

0.0%

54.4%
66.2%

73.5%

44.3%

31.4%

34.2%

44.3%

228

233

162

1.2%

4.4%

7.3%

72.5%

96

4.3%

1.0%

85.6%

191
0.5%

351

60.5%

40%
20%

43.9%
28.2%

21.5%

28.0%

0%
Korea

Taiwan Singapore Hong Kong

Top Row：FY 2004 Survey
Bottom Row：FY 2003 Survey

262

0.0%

0.0%

17.4%

19.1%

40.8%

40.9%

39.0%

58.3%

61.0%

Vietnam

India

113

107

0.9%

2.8%

49.6%

51.4%

49.6%

45.8%

Vietnam

India

20%
0%

87
0.0%

100%

60%

60%

20%

80%

51.7%

40%
59.2%

0.0%

80%

82.6%
69.6%

20%

Southern Inland
China
China

44.8%
66.5%

0.8%

40%

81.9%
55.7%

29.8%

80%
54.8%

123

60%

20%

100%

60%

40%

40.7%

60%

39.6%
69.0%

26.6%

100%

132

18.1%

58.4%

80%

60%

97

0%
0%
Thailand Indonesia Malaysia Philippines Northeastern Northern Eastern
China
China
China

100%

80%

281

40%

232 (Companies) 331
3.0%

389

68.3%

20%

27.0%

233

80%
51.3%

68.5%

40%
48.8%

31.4%

Vietnam・India

113

54.2%

40%

80.9%
48.3%

20%

35.2%

26.2%
0%
0%
Thailand Indonesia Malaysia Philippines Northeastern Northern Eastern
China
China
China

0%
Southern Inland
China
China

 There are clear differences among the various regions in terms of prospects for overseas business operations.
 Attitudes toward strengthening or expansion are strongest for Korea and Taiwan in NIES, for Thailand in the ASEAN4,
and are particularly bullish in the Eastern and Southern regions of China.

 Stances on business in Vietnam and India are becoming more positive.

Copyright © 2004 JBIC Institute. All Rights Reserved.

p.13（4）【 Functions for Strengthening or Expansion (major Asian regions) 】
Figure 17
100%

FY04

NIES
100%

ASEAN4
FY03

100%

FY04

100%

China
FY03

Production Functions

100%

FY04

Sales Functions

100%

R&D Functions

Vietnam・India
FY03

100%

FY04

100%

Regional Control Functions

75%

75%

75%

50%

50%

50%

50%

50%

50%

50%

50%

25%

25%

25%

25%

25%

25%

25%

25%

0%

0%

0%

0%

0%

0%

0%

0%

Th

Ind

Th

Vi
etn
am
（55
）
Ind
i a（
48
）

75%

Vi
etn
am
（7
Ind 6）
i a（
75
）

75%

ail
an
Ind d（19
5）
on
esi
a （9
Ma
2）
lay
sia
Ph
（
60
ilip
）
pin
es （
56
No
）
rth
eas
t er
nC
No
hin
rth
ern
a （6
C
5）
Ea
hin
ste
a
（
r
1
n
6
So
uth China 8）
ern
（33
Ch
1）
ina
Inl
（2
a nd
29）
Ch
ina
（5
4）
No
rth
eas
t er
nC
No
hin
rth
ern
a （5
0）
C
hin
Ea
ste
a
（1
rn
30）
So
Ch
uth
i
ern na（2
86
Ch
）
ina
Inl
（2
a nd
1
1
Ch
）
ina
（4
0）

75%

ail
and
（2
29）
on
esi
a（1
Ma
00
lay
）
sia
Ph
（7
ilip
4）
pin
es（
53
）

75%

Ko
r ea
（1
02）
Ta
iw
a
Sin
n（
77
ga
）
Ho pore（
ng
55
）
Ko
ng
（6
2）

75%

Ko
r ea
（1
Ta
17
iw
an（ ）
Sin
1
03
ga p
ore ）
Ho
（
ng
K o 58）
ng
（6
5）

FY03

* Figures in parenthesis for countries and regions in the above figure are numbers of respondent companies. Companies which responded that they would “strengthen or expand” were asked in which functions they
intended to do so, from production, sales, R&D and regional control functions. Multiple options were presented within each function, and a company which selected any one of them was counted as one company inthe corresponding function.

 The share for sales functions is growing in each country and region
The specific functions that are to be expanded in overseas business operations were surveyed and compared to the FY 2003 results. The observed features of eachregion are described as follows. 【NIES】 There is a high share for strengthening or expansion of sales functions, characteristically surpassing the strengthening or
expansion of production functions. That tendency has become more pronounced this year. Production functions have a large role in Korea and Taiwan, while regional
control functions have a large role in Singapore and Hong Kong. 【ASEAN4】 Production functions surpass sales functions in Thailand, Indonesia and the Philippines, but
the share gap between the two functions has become narrower in this year’s survey. In Malaysia, on the other hand, sales functions surpassed production functions, andthe tendency is more pronounced in this year. The role of Malaysian affiliates for Japanese companies is assumed to be shifting. 【China】 Production functions surpass
sales functions in Eastern and Southern China, the reverse of the situation in other regions. The share for production functions in the regions fell slightly in this year’s
survey. The number of companies stepping up their sales functions in the Chinese market is growing. The share having R&D functions in Eastern China is high.
【Vietnam and India】 The relative positions of sales and production functions have reversed from those in last year’s survey. The number aiming to expand theirproduction functions is largely the same as in the last survey, but the number intending to expand their sales functions has increased substantially.
Copyright © 2004 JBIC Institute. All Rights Reserved.

p.14（5）【BRICs】

 Large gap between the business development level in China and levels in

Figure 18 Number of Overseas Affiliates(Unit：Companies）

Brazil, Russia, India

By gathering data from this survey on the BRICs (Brazil, Russia, India and China), which havebeen the recent focus of interest from the world’s investors, we examined the characteristics ofbusiness development in the BRICs for Japanese manufacturers.
The current numbers of overseas affiliates in each country (Figure 18) show that there are 1,998
in China, an overwhelming share. For production bases in particular, China has the largest share, at
1,346 companies, while Russia’s share is very low, at 11 companies. As for the companies’
medium-term outlooks for business operations, stances on China are remarkably positive, and are
relatively positive for Russia and India. For Brazil there is a strong disposition towards
maintaining the current level. Of the fields for strengthening or expansion, sales functions hold ahigh shares in each country, but the production functions is slightly higher in China. In Brazil andIndia, approximately half of companies intend to expand production functions, but the proportion
for Russia is very low.
The BRICs are countries seen as having large growth potential, and they are the subject ofgrowing expectations from Japanese manufacturers, as future destinations for businessdevelopment. However, investment to exploit the large population and abundant resources etc, forboth production and sales in these four countries would have to be enormous. If Japanesemanufacturers, which already have many production bases in regions such as China and ASEAN,
aim to expand their production functions in the BRICs in future, they would have to assign
priorities or limit the scale of their investments. Investments in distribution can be relatively smallin scale, but distribution is an area where competing Western companies are also strong. The
current efforts of Japanese manufacturers differ greatly between the four countries, but theinvestment strategies they adopt in future, faced by the enormous potential of the BRICs, will beclosely watched.

1,346

Production Bases
Sales Bases
R&D Bases
Others

463

150

122
100

83

84

56

50

18
2

0

32

67

25
9

Brazil110
Russia, other CIS

3
India

(159)

(46)

(121)

3

Note) See Survey Overview (2)China(1,998)(Companies)

Figure 20 Functionsfor Strengthening
Figure 19 Prospects foror Expansion
Strengthening or Expansion
100%

2.6% 0.0% 0.0% 0.3%

100%

23.2%
80%
60%

37.0% 39.0%

76.5%
25%

34.5%
Brazil
(116)

68.9%

60%
Production
50% Functions

63.0% 61.0%

0%

80%

75%

62.9%

40%
20%

Figure 21 Number of Companies for Strengthening or Expansion (ratio)

Sales
Functions

Russia, India
other CIS (123)(81)

Note) See Figure 14.

China(1,113)(Companies)

0%

47.6%
40%

R&D
FunctionsRegional
Control
Functions

Brazil Russia, India China(40) other CIS (75) (847)(50)Note) See Figure 17 (Companies)

35.0%

20%
8.3%
0%

10.6%

Brazil Russia,(40) other CIS(51)Note) See Figure 15

15.5%

13.7%

11.2%

India Northeastern Northern Eastern
China
China
China
(75)
(333)
(66)
(169)
China

Southern
China

(230)

InlandChina (Companies)(54)

Copyright © 2004 JBIC Institute. All Rights Reserved.

p.15（6）【Relocation of Overseas Bases 】
Figure 24 Relocated Countries/Regions
and Functions

Among the medium term outlooks for overseas business
operations in each region (Figure 14), 87 companies answeredthat they intended “Reduction or withdrawal”.

To return to Japan
10companies

Moved Out （－）(2)

EasternEuropeNote) 2 companies did not respond.

Figure 23 Table of Origins and Destinations for Relocation
FunctionTo

FromFunctionTo(1) EU15

(24)

(5)

(4)

(3)

Taiwan(2)(1)
Thailand(2)

MexicoNote: Figures in ( ) are numbers of bases.

37companies

From

(1)
Korea

China

Bases

Sales Base

Relocation or division
to a third country

38companies

Moved In （＋）

Base(n = 85)

(1)

Bases

Production

Figure 22 Reasons for Reduction or Withdrawal
Reduction orwithdrawal fromthe businessconcerned

North
AmericaKey(6)Hong Kong(1)
VietnamPhilippines
(1)
(2)

Korea
Sales China
North America Production Philippines
TaiwanProduction China
North America Production China(5)
Malaysia
TaiwanProduction China・Indonesia
MexicoProduction Asia
Singapore(5)
TaiwanProduction China・Thailand
MexicoProduction China
TaiwanProduction China・Thailand
MexicoSales U.S.
Asia
(3)
TaiwanSales China・Hong Kong
Production EU15（Netherland）
EU15（Italy）(5)(1)
Singapore
Sales Thailand
EU15
Production Malaysia
TurkeySingapore
Sales Malaysia
EU15
Production China
Indonesia(2)
EU15
Production Eastern Europe
Singapore
Sales Malaysia・Thailand(1)
Singapore
Sales Malaysia・Indonesia
EU15
Production Eastern Europe・Turkey・China(Unit: number of bases)(4)
Singapore
Sales China
Hong Kong
Sales China
Hong Kong
Sales China
Movements of bases between countries and regions
Hong Kong
Sales China
A total of 87 companies responded “Reduce or withdraw” in their medium-term (next 3 years or so) outlooks for overseas
Hong Kong
Sales China
Hong Kong
Sales China
business operations in each region or country (See Figure 14). Of these, 38 companies gave their reason as ”Reduction orHong Kong
Sales China
withdrawal from the business concerned”, 37 said “Relocation or division to a third country” and 10 said “To return to Japan”.
Thailand
Sales Hong Kong
Indonesia
Production Malaysia
Companies relocating their operations to China are a prominent trend
Indonesia
Production China
When
the 37 companies that chose “Relocation or division to a third country” are investigated further to find which functions
Indonesia
Production China
they are moving, and to where. The most common relocation origins are Hong Kong (6 bases), Taiwan (5), Singapore (5) and theIndonesia
Production China
EU15 (5). Of those, the movement of production functions is more common from Taiwan and the EU15, while relocation of sales
Malaysia
Production Vietnam
functions is the most common from Singapore and Hong Kong. The most common destinations are China (24 bases), followed by
Malaysia
Production China
Malaysia
Production China
Malaysia (5) and Thailand (4). The most common areas relocating to China are sales functions from Hong Kong (6) andPhilippines
Production China
production functions from Taiwan (4). The results of this survey show there is a trend for bases to relocate to China from Asia
Philippines
Production China
and from Europe and North America, but there are also examples of relocation (reorganization) within ASEAN.
(37 respondent companies, some of which had multiple
Copyright © 2004 JBIC Institute. All Rights Reserved.
relocation destinations, so 45 bases are relocated)





p.16

Ⅲ．3．Evaluation of Overseas Business Performance （1）【 All regions and all industries】
Figure 25 Evaluation of Overseas Business Performance (All Industries)
FY 2004 Survey

3.00●FY 2004 Survey▲FY 2003 Survey(3.14 2.98)
NIES(3.05 2.92) (3.06 2.90)
ASEAN４ (3.03 2.87)(3.07 2.90)
China(2.94 2.83)

2.90
2.80
Central andEastern Europe(2.72 2.65)

2.70
2.60

North America(2.65 2.55)

2.50(2.65 2.43)
2.40
2.50

2.60

(2.90 2.80)(2.85 2.75)(2.83 2.69)
EU15(2.80 2.61)(2.81 2.60)

Latin America
2.70

2.80

2.90

3.00

3.10

3.20

Evaluation of Satisfaction with Sales （n = 560）

Evaluation of Satisfaction with Profitability

Evaluation of Satisfaction with Profitability

3.10

3.10

FY 2003 Survey

3.00●FY 2003 Survey▲FY 2002 Survey* Evaluation standards:
Compared to initial objective
1 Unsatisfactory
NIES (3.05 2.92)(3.00 2.91)

2.90(2.94 2.83)
2.80

China

(3.03 2.87)(2.99 2.86)
ASEAN４2 Somewhat unsatisfactory
3 Can’t say either way
4 Somewhat satisfactory
5 Satisfactory(2.83 2.71)※ Evaluation of satisfaction
with sales means evaluation ofCentral and (2.72 2.65)
the portion excluding sales toEastern EuropeEUthe parent company. Evaluation
(2.80
2.61)
(2.62 2.60)
2.60
of satisfaction with profitability
North (2.65 2.55)
means evaluation of return on
America
investment. These evaluations
2.50 Latin (2.65 2.43)(2.71 2.47)
are of the head office’s
Americasatisfaction with business in(2.52 2.44) (2.69 2.45)
2.40
2.40
2.50
2.60
2.70
2.80
2.90
3.00
3.10 each country. They do not
express simple falls or rises in
Evaluation of Satisfaction with Sales （n = 529） sales volume or profitability.
2.70

Evaluations have improved in all regions, but profitability levels are still unsatisfactory
Respondent companies’ evaluations of sales and profitability satisfaction in their overseas business operations show an improving trend in each region andcountry, building on the rising trend in the FY 2003 survey. Business performance evaluations for the NIES, ASEAN4 and China show relatively high levels ofsatisfaction, and there has been some improvement in Central and Eastern Europe, Latin America and elsewhere, so business evaluations for Europe and North
America have also risen relatively.
However, this year’s survey found issues remaining for the improvement of profitability:[1] The levels of profitability in all countries and regions are still unsatisfactory (satisfaction below medium level (3) ).
[2] Business performance evaluations for North America are the lowest.
[3] The satisfaction with profitability is smaller compared to the margin of growth in satisfaction with sales in China and North America.
Evaluation of business performance in China rose in this year’s survey, as it did in last year’s, but the level of profitability is still unsatisfactory. Manycompanies aim for strengthening or expansion of the production and marketing sides of their business in China, but if they are to raise the profitability of thatbusiness, it is increasingly important for them to make efficient investments, well tailored to the market, as they open up and secure market positions.
Copyright © 2004 JBIC Institute. All Rights Reserved.

p.17（2）【Time series comparison of evaluation reasons by major region 】
Figure 26 Reasons for Evaluations of Satisfaction (satisfactory or somewhat
satisfactory), as a time series comparison of major regions (multiple responses)
Successful sales activities in the
country or region concerned
Successful cost reductions (personnel costs,
raw materials costs, etc.)
90.0%

ASEAN4(n =260)

China

Successful cost reduction through theconsolidation of production

Full operation of production facilities
Successful exports from the country or
region(n =147)

 Features for profitability evaluations(n =108)

N. America

EU15(n =81)

60.0%

30.0%

0.0%
FY00 FY01 FY02 FY03 FY04

FY00 FY01 FY02 FY03 FY04

FY00 FY01 FY02 FY03 FY04

FY00 FY01 FY02 FY03 FY04

Note) “Successful sales activities in the country or region concerned” and “Successful exports from the country or region” were added in the 2003
survey, thus they have no chronological continuity with previous items. The □ (empty square) in the figure for 2000~2002 indicates “successful
sales of existing products ” and O (empty circle) indicates “successful sales of new products”.

Figure 27 Reasons for Evaluations of Satisfaction (unsatisfactory or somewhat unsatisfactory),
as a time series comparison of major regions (multiple responses)

60.0%

Difficult to obtain customers (intensecompetition with other companies)

Shrinking market due to economic downturn

Overseas exchange losses

Yet to reach full operation as the company
has been set up recently

Cost reductions are difficult (personnel expenses,
raw materials costs, etc.)

Demand by customers to
reduce sales prices

ASEAN4(n =284)

China(n =155)

N. America(n =196)EU15(n =126)

30.0%

0.0%

FY00 FY01 FY02 FY03 FY04

FY00 FY01 FY02 FY03 FY04

FY00 FY01 FY02 FY03 FY04

FY00 FY01 FY02 FY03 FY04

Looking at the main reasons companies gave for
their assessments of profitability in each region andtheir relative satisfaction with profitability as a timeseries over the last five years (Figure 26), the mostcommon reasons in all four regions is “Successful
sales activities in the country or region concerned”,
but “Difficult to obtain customers (intensecompetition with other companies)” is the mostcommon reason given by companies that see theirprofitability as relatively unsatisfactory there(Figure 27). In this year’s survey, the proportion ofcompanies answering “Successful sales activities in
the country or region concerned” or “Difficult toobtain customers” in all four regions is up
compared to last year, indicating that theperformance of sales activities in local markets is a
key factor in assessing the profitability of business.
The proportion of companies choosing“Shrinking market due to economic downturn” as areason for a low-level of profit satisfaction
declined recently in all countries and regions. That
trend is particularly pronounced in the ASEAN4and North America, and the proportion choosingthat reason in China is extremely low. The
percentage of companies saying “Cost reductions
are difficult” is growing, notably in the ASEAN4
and China.

 Full operation of equipment andprofitability in Chinese operations

In this year’s survey, “Yet to reach fulloperation”, which occupied a high share of
responses in the last survey, declined, while “Fulloperation of production facilities” rose. Fullequipment operation is one factor raisingprofitability, but on the other hand, “Difficult toobtain customers” and “Cost reductions are
difficult” are taking an increased share of responses.
To secure satisfactory profitability in China infuture, it appears that market strategies and costmeasures aimed at maintaining the competitivenessof the company or its products will be increasingly
important for companies, beyond just expanding
the scale of sales and production.
Copyright © 2004 JBIC Institute. All Rights Reserved.

p.18

Ⅲ．4．Topics （1）【Chinese Operations and Risks (1) 】
Figure 28 How long will China’s economic growthcontinue (all industries)(Unit: Number of company)
200

Figure 29 How long will China’s economic growthcontinue (by major industry)(n = 555)(Unit: Number of company)
40

174
160

30

80

Within thenext 3 years

Until 2008
(Beijing
Olympics)

Until 2010
(Shanghai
Expo)

Continue
beyond 2010

No consideration

Insufficient electrical
60% power supply
56.5

24

Generalmachinery

18

Until 2008

Until 2010

19

14

15
10
6

13
Continue
beyond 2010

No consideration

When companies are asked how long they anticipate economic (high) growthin China to continue, as they draw up their business plans, the most common
answer is “Until 2010 (the Shanghai Expo)” (174 companies), followed by“Until 2008 (the Beijing Olympics)” (150). Among the major industries, “Until2008” is the most common response for Electrical equipment and electronics (34companies), while “Until 2010” is the most common response in the automobile
industry (38). Thus, views of economic growth vary between industries.

Insufficientindustrial
water supply
3.5

20%

13.4
33.4

1.8

(n = 536)(n = 457)

29.3

11.8

17.0
Insufficienttransport capacity
and logistical delays

Future risks

Infringement ofintellectual
property rights

36.5

0%
20%

Risks faced now

Rising prices forenergy and raw
materials

40%

80%

24

(n = 81)Figure 30 China Risks (multiple responses)

80%

60%

(n = 90) Economic growth in China to continue until 2010

39

40

1
Within thenext 3 years

Chemicals29(n =60)

6
4

0

67

Automobiles

25

8

10

38

34

21
17

20

120

40%

(n = 105)

150
125

0

Electrical equipment
and electronics

38.2

32.5
33.8
Economic recession
andmarket contraction

8.5

Alteration of
investment
promotion policies
9.2

40.9
67.7
Revaluation of the Yuan

 Insufficient electrical power supply andrevaluation of the Yuan are grave risks
The risks that could have a grave impact on
operations in China were investigated separately as“Risks faced now” and “Future risks”.
The results show that the risks named as “Risks
faced now” are “Insufficient electrical power supply”(56.5%), “Rising prices for energy and raw materials”(36.5%) and “Infringement of intellectual property
rights” (29.3%).
As “Future risks”, the most common response was“Revaluation of the Yuan” (67.7%). Company
interviews heard that, in addition to decreased export
competitiveness due to a revalued Yuan, concerns
included economic slowdown due to a rising Yuan andincreased economic uncertainty caused by exchange
rate fluctuations.

*“Risks faced now” are those which have already occurred or are thought very likely to occur within the next 1 year.
“Future risks” are those which have not yet emerged, but could occur within the coming 1~5 years.
Copyright © 2004 JBIC Institute. All Rights Reserved.

p.19

Ⅲ．4．Topics （1） 【Chinese Operations and Risks (2)】Figure 31 Risks Viewed as Most Serious
in Chinese Operations

 “Economic recession and market

25%(n = 501)

20.2%

20%

18.8%

17.0%

16.8%

15%

11.0%

10%

9.6%

5%
0%

Key
Demand improvements
be madeby local governments oragencies

Move part of theoperation to Japan
Move part of theoperation to ASEAN
etc.
Cease operations(withdraw)

0

Insufficient Revaluationelectricalof the Yuan
power supply

9

45

3
52

60
80

24

28
6

49

22
100

24

120

6

3

21

・

(Unit: Number of companies)

6
10

10

4
3

20
8

24
1
1
5

11

5
1
2

10

2
1
1

4

12

11
15

11

Alteration of
investment
promotion
policies

23

35

10
7
6

160

13
35

5

40

140

Rising prices Infringement
for energy andof IPR※raw materials

26

20

OthersDon’t know

Among the current and future risks in China (Figure 30
above), the ones viewed as most serious are “Economic
recession and market contraction” (20.2%), “Insufficientelectrical power supply” (18.8%) and “Revaluation of theYuan” (17.0%). While the most common view is that
China’s economic growth will continue until 2010,
company interviews also heard of concerns such as an
earlier economic recession and slow growth beyond 2010.

 Countermeasures against risks
Economicrecession andmarketcontraction

Make improvements atthe company’s expense

Move part of theoperation within
Chinacontraction” is viewed most seriously※ IPR: Intellectual Property Rights

2
3

Figure 32 Countermeasures against the Risks Viewed
as Most Serious (multiple responses)

The survey investigated the countermeasurescompanies plan to take if the performance of their Chinese
operations falls far short of initial plans due to the impactof the most serious risks. The most common result is [1]“Make improvements at the company’s expense” (45companies) as a measure against “Economic recession andmarket contraction”, and so the companies’ main response
is to adjust the scale of their operation. by their own
efforts. [2] Against “Insufficient electrical power supply”,“Demand improvements be made by local governments oragencies” (52) and “Make improvement at the company’s
expense” (49) are common. In company interviews, many
companies in Eastern and Southern China, which suffered
severe power shortages in the summer 2004, took steps
such as switching factory working days to holidays, in linewith planned power cuts, and installing their own
generators, as well as calling for improvements inelectrical power infrastructure and systems. Against casesof “Economic recession and market contraction” and“Revaluation of the Yuan”, common countermeasures are
to relocate part of the business to Japan, ASEAN or
elsewhere outside China, and a number responded “Cease
operations (withdraw)” if the former occurred. These
countermeasures were selected as one of the possibilities,
and are not certainties. But in any case, it is important forthe companies to go beyond discussing the existence ofrisks, and prepare countermeasures in anticipation of eachof them.
Copyright © 2004 JBIC Institute. All Rights Reserved.

p.20

Ⅲ．4．Topics （2） 【Free Trade Agreements（FTAs）】
 Diversifying content expected from FTAs

Figure 33 Expectations Held for theFormation of FTA

In recent years, FTAs (Free Trade Agreements) and EPAs (Economic Partnership Agreements) havecome to include high-level content and not only trade liberalization, such as rules for investment,
movement of personnel, intellectual property rights (IPR) and competition policies, and liberalizing awide range of economic activities. This survey, showed functions of FTAs and asked companies todetail their expectations from them.
First, 72.3% of all respondents have expectations from the formation of FTAs with Japan.
Options were prepared for China, Korea and Thailand, and China received the largest number of
responses (381 companies), followed by Thailand (236) and Korea (179). Among the specific content,
the most common selection for each country was “Expanded trade due to the tariffs reductions”, but“Expanded sales activities” and “Expanded investment due to lifting of restrictions on foreign capital”
are also common choices. A characteristic for China is that a relatively high proportion of companies
chose “Expanded production and R&D through the strong protection of intellectual property rights(IPR)” (47.0%) and “Lifting of restrictions on foreign capital” (41.7%). These results indicate thatmany companies expect FTAs to include diverse content, besides tariff measures.

( n = 541)

No

27.7%
72.3%

Have
expectations

Figure 34 Expectations from the Formation of FTA (multiple responses)
(%)
80.0

80.5
72.2

72.6

China (n=381)

Thailand (n=236)

Korea (n=179)

62.6
60.0
50.147.5

47.0
41.7

40.0
23.7
20.1

20.0
11.4

26.5
21.3
13.112.8

13.4

15.7

13.4

18.6
15.3 15.6
2.6 2.1 3.9

0.0

Expanded
trade due tothe tariffs
reduction

Expandedsales
activities

Expandedproduction
and R&D
through thestrongprotection of
IPR

Expanded
investment
due tolifting ofrestrictions
on foreign
capitalStimulation
Smootherof exchange movement ofand capital personnel due
transactions to easing visa
or permit
requirements

Expandeduse oflogistics
services

Expandedparticipationingovernment
procurement(Other than the three
countries above)
Countries/regions where
FTA is desired

No. ofresponding
companies

India

6

Indonesia

4

Vietnam2

Mexico

2

EU

2

ASEAN

1

Malaysia1

Brazil1

Russia1

Middle East1

Note: Companies wrote in countries orregions other than China, Korea andThailand, where they would like to see
FTAs.

Copyright © 2004 JBIC Institute. All Rights Reserved.

Ⅲ．5．Promising Countries/Regions for Overseas Business Operations（1）【Ranking and the existence of business plans 】
Figure 35 Promising Countries/Regions for Overseas
Business Operations over the Medium Term (multiple
responses) （⇒See Appendix 1 for results of the FY 2002 and previous surveys)

p.21

Figure 36 Existence of Concrete Business
Plans for Promising Countries/Regions(Unit: Number of responding companies)

Rank

1
2
3
4
5
6
7
8
9
10
11
11
13
14
14
16
17
18
19
19

FY 2004
SurveyChina
ThailandIndia
VietnamU.S.
RussiaIndonesia
Korea
Taiwan
Malaysia
Singapore
Germany
BrazilPhilippines
FranceCzech
Australia
PolandMexico
U.K.

No.of
（％）
Companies

497
453
151
117
110
100
49
48
44
41
28
17
17
16
15
15
12
11
10
9
9

FY 2003
Survey91 China
30 Thailand
24 U.S.
22 Vietnam
20 India
10 Indonesia
10 Korea
9 Taiwan
8 Malaysia
6 Russia
3 Singapore
3 Philippines
3 Czech3 Hong Kong
3 Mexico
2 Brazil
2 Germany
2 France
2 Australia
2 PolandNo.of（％）
Companies

490
456
143
106
88
70
63
44
35
31
25
23
18
17
15
12
11
11
10
9
9

93
29
22
18
14
13
9
7
6
5
5
4
3
3
2
2
2
2
2
2

Notes)(1) In this survey, respondent companies cited the top 5 countries that they saw as having
promising prospects for business operations in the medium term (next 3 years or so). Tallies
were made based on the number of times each countries/regions was cited and the countries
were listed according to that number.
(2) Other than the countries/regions listed above, North America (listed by 44 companies, 8.9%
share) and the EU (listed by 29 companies, 5.8% share) gathered some votes.

318 323

Plan Exists

300

50

Right column

Left column

100

83

70

58 54

China
Thailand

FY2003

FY2004

23 23

16

U.S.

0

India
50
64 63
100

150

9 5

Vietnam

20
38

45
77

68

44

TaiwanIndonesia

30

38

Russia

23 24

25 21

25

24

18

16

34

23

Korea

14

11 11

21

17 20

Malaysia90
126 121

No Plan Exists

 India and Russia rise in ranking, but expectations surpass businessplans
In the countries and regions that companies view as promising for business developmentin the medium term (next 3 years or so), the top ten countries/regions are unchanged in thisyear’s survey, but India, ranked the fifth last year, rose to the third place, while the tenthplace Russia rose to the sixth. Vietnam gathered more votes than in the last survey. These
results imply that Japanese companies’ interest in these countries is growing. However, thenumber of companies with no specific business plans for these countries exceeds thenumber of companies that actually have such plans. This is not the case for China, Thailand
and the U.S.. Therefore, the ranking is considered to be a reflection of expectations for
future potential, rather than realistic investment possibilities. Among the countries andregions that fell in the ranking from the last survey, Indonesia had the largest drop in votes.
Copyright © 2004 JBIC Institute. All Rights Reserved.

p.22

Promising Countries/Regions for Overseas Business Operations （2）【Reasons for promising prospect 】
Figure 37 Main Reasons for Selection of the Top Ten Most Promising Countries/Regions （⇒See Appendix 2 for details）
１．China (448companies)① Growth potential of the market② Inexpensive labor force③ Supply base for assembly manufactures

２．Thailand （146companies）
83.3%
66.1%
28.6%

① Growth potential of the market② Inexpensive labor force③ Stable political and social conditions

75.9%
48.1%
35.2%

① Present local market size
② Growth potential of the market③ Developed infrastructure

68.9%
62.2%
26.7%

① Growth potential of the market② Present local market size
③ Excellent human resources③ Developed infrastructure

４．Vietnam （108companies）① Inexpensive labor force② Growth potential of the market③ Excellent human resources① Growth potential of the market② Inexpensive labor force③ Excellent human resources

66.3%
49.0%
38.8%

① Growth potential of the market② Inexpensive labor force③ Excellent human resources

63.6%
56.8%
18.2%
18.2%

① Growth potential of the market② Present local market size
③ Developed infrastructure

５．U.S. （98companies）

７．Indonesia （45companies）① Inexpensive labor force② Growth potential of the market③ Bases for export for the third countries

３．India （112companies）
56.8%
49.3%
39.7%

６．Russia （49companies）

８．Korea （44companies）

95.9%
18.4%
14.3%

９．Taiwan （41companies）

１０．Malaysia （26companies）① Stable political and social conditions② Growth potential of the market③ Inexpensive labor force③ Developed infrastructure

82.1%
56.3%
37.9%

58.5%
46.3%
29.3%

Figure 38 Reasons Why Each Country is
Viewed as Promising (shares)

38.5%
30.8%
26.9%
26.9%

100%

80%

* Figures in parentheses are numbers of responding companies.

Sales aspects

40%

Production aspects

Malaysia

Taiwan

Korea

Indonesia

RussiaU.S.

0%Vietnam

20%

India

The reasons for promise in Figure 37 show that “Growth potential of themarket” is the most common reason for all countries and regions. Although themain objective of overseas business operations differs for each company, thepossibility of market growth is an important factor in attracting the interest of
many companies.
Vietnam and Russia increased their votes sharply in this year’s survey.
Vietnam rose due to production-related reasons such as “Inexpensive labor force”
or “Excellent human resources”, while expectations for Russia, which are
dominated by “Growth potential of the market”, are overwhelmingly on the sales
side. China and India are valued for both production and sales reasons.

60%

Thailandfor sales

Infrastructureand systems

China Vietnam is viewed as promising for production and Russia

Copyright © 2004 JBIC Institute. All Rights Reserved.

p.23

Promising Countries/Regions for Overseas Business Operations （3）【 Issues 】
Figure 39 Main Issues for the Top Ten Most Promising Countries/Regions
１．China (423companies）① Unclear operation of legal system② Insufficient protection of IPR*
③ Difficulty in collecting receivables

２．Thailand （102companies）

３．India （95companies）

63.4%
52.0%
42.8%

45.1%
① Intense local competition
40.2%② Increase in labor costs③ Difficulty in securing local managers 27.5%

43.2%① Under-development of infrastructure② Insufficient information on investment climate 34.7%③ Instability of security and social conditions 33.3%

40.2%
36.6%
32.9%

① Intense local competition② Increase in labor costs③ Local labor problems

４．Vietnam （82companies）① Under-development of legal system② Unclear operation of legal system③ Under-development of infrastructure

５．U.S. （74companies）

７．Indonesia （38companies）① Instability of security and social conditions 45.2%② Insufficient information on investment climate 42.9%
38.1%③ Under-development of legal System

９．Taiwan （27companies）

55.6%
22.2%

※ Figures in parentheses are numbers of responding companies.

64.3%
42.9%
32.1%

① Intense local competition② Local labor problems③ Increase in labor costs

１０．Malaysia （18companies）

66.7%
40.7%
18.5%
18.5%

① Intense local competition② Increase in labor costs③ Insufficient protection of IPR*
③ Increase in tax burden

Figure 40 Issues Characteristically Indicated for China, India and Vietnam
3.5
3※ IPR: Intellectual Property Rights

2.5

 China, India and Vietnam

2have unresolved issues fortheir investment environments

1.5

China
Vietnam:Underdevelopment oflegal system

China:
Legal, tax andexchange
restrictions

India:
Importrestrictions

India

VietnamChina:
Problems of collecting
receivables

China:
Problems of IPR

India and Vietnam:
Under-development of
supporting industries
and lack of information1

Insufficient information on
investment climate

Security and social onditions

Infrastructure

Supporting industries

Instability of local currency
and price

Local procurement of funds

Collecting receivables

Intense local competition

Local labor problems

Increase in labor costs

Securing local managers

Anti-dumping measures

Insufficient protection of IPR

Immigration or working visas

Investment permit procedures

Import restrictions

Local restrictions on currency
exchange and remittance（See Appendix 3 for details）

Restrictions on foreign capital

Increase in tax burden

Operation of taxation system

Note) The proportionsof respondents
indicating each issue
was averaged overall
and that value
assigned as 1 togenerate the issue
indication ratio.
(multiple responses)

Tax collection systems

0Operation of legal system

0.5

Legal system

In countries such as Thailand, theU.S. and Korea, the highest ranked
issue in terms of investment
environment is “Intense local
competition”, but in China, India andVietnam, the issues most commonly
cited by companies are legal systems,
infrastructure, security and social
conditions, and other basic aspects of
the investment environment.
Particularly in China, companies
indicate such issues more than average.

６．Russia （42companies）
68.9%
32.4%
23.0%

８．Korea （28companies）① Instability of security and social conditions 57.9%
31.6%② Intense local competition
28.9%③ Difficulty in securing local managers① Increase in labor costs② Intense local competition（⇒See Appendix 3 for details）

Copyright © 2004 JBIC Institute. All Rights Reserved.

Promising Countries/Regions for Overseas Business Operations（4）【From reasons for promising prospect and issues 】

p.24

Figure 41 Incentives for Corporate Investment

Figure 42 Issues for Corporate Investment
6

100
90

Indonesia

Average number of issues

Low production costs

80

(%)

China

VietnamLow production costs

70
60

Thailand

India

50
40

Malaysia

30
20

10

20

30

40

50

Korea
60

70

Figure 43 The Appeal of the Inexpensive Labor Force andConcern over Rising Labor Costs
80%
60%
40%

20%

Korea
Malaysia2

Vietnam

China

Indonesia

India

ThailandTaiwanThailandU.S.

Intensecompetition

0

0

10

20

30

40

50

60

70

80

“Intense local competition with other firms” (%)Note) The proportions naming “Inexpensive labor force” and “Inexpensive components and raw materials” asreasons for promise have been combined as “Low production costs”.

Risinglabor costs

Indonesia

India

3

U.S.

Present market scale (%)

Inexpensive 20%
labor force 0%

RussiaVietnam

4

China

1

Taiwan0

5Present market scale

Russia100

Under-development ofinvestment environment

RussiaMalaysia

40%60%Note) The proportion indicating “Inexpensive labor force” as a reason for promise is on the upper level
and the proportion indicating “Rising labor costs” is on the lower level.

Note) Average number of issues: Average number of issues indicated per country.

 China, Thailand are attractive with their low production costs,
but there are concerns over rising labor costs

Besides the growth potential of their local markets, the main reason for thepromise of these countries is usually low production costs (production-oriented) or
the present size of the local market (market-oriented). Figure 41 classifies the top ten
countries/regions according to shares of those two reasons. Issues can be broadly
divided between those that can be diminished by the efforts and management ofgovernments, and those that increase in accordance with the expansion of corporate
activity (normally, a shift from the former to the latter is expected in the course of
economic progress). Figure 42 plots the top ten countries/regions according to“Average number of issues” and share of “Intense local competition”.
In countries/regions where the market is already attractive, companies may faceintense competition, while most of the investment environments of countries/regions
where low production cost is expected are under-developed. In China, even though
the investment environment is under-developed, companies face intense competition
in its market. In Thailand, low production costs are expected, while there are few
problems in the investment environment.
In China and Thailand, although production costs are expected to be low, there is aconcern over increases in labor costs. This evaluation is diverging from theevaluation for Vietnam and India (Figure 43).
Copyright © 2004 JBIC Institute. All Rights Reserved.

Appendix 1 【 Changes and Details for Promising Countries/Regions for Overseas Business Operations 】

p.25

Changes for promising countries/regions over the medium termNote) “Medium term” means the next 3 years or so.

Rank

1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20

FY2004

No. ofcompanies

SurveyChina
ThailandIndia
VietnamU.S.
RussiaIndonesia
Korea
Taiwan
Malaysia
Singapore
Germany
BrazilPhilippines
FranceCzech
Australia
PolandMexico
U.K.

497
453
151
117
110
100
49
48
44
41
28
17
17
16
15
15
12
11
10
9
9

（％）

FY2003

No. ofcompanies

Survey

490
456
143
106
88
70
63
44
35
31
25
23
18
17
15
12
11
11
10
9
9

91 China
30 Thailand
24 U.S.
22 Vietnam
20 India
10 Indonesia
10 Korea
9 Taiwan
8 Malaysia
6 Russia
3 Singapore
3 Philippines
3 Czech3 Hong Kong
3 Mexico
2 Brazil
2 Germany
2 France
2 Australia
2 Poland（％）

FY2002

No. ofcompanies

Survey

418
373
118
108
63
62
54
34
34
33
19
18
17
16
15
13
11
11
10
9
9

93 China
29 Thailand
22 U.S.
18 Indonesia
14 Vietnam
13 India
9 Korea
7 Taiwan
6 Malaysia
5 Brazil
5 Singapore
4 Philippines
3 Germany
3 Mexico
2 Czech
2 U.K.
2 Russia
2 Poland2 Hong Kong
2 Hungary（％）

FY2001

No. ofcompanies

Survey

401
327
127
99
56
52
48
44
33
32
24
22
19
18
18
17
15
14
12
11
8

89 China
28 U.S.
26 Thailand
15 Indonesia
15 India
13 Vietnam
8 Taiwan
8 Korea
8 Malaysia
5 Singapore
4 Philippines
4 Germany
4 Brazil
4 Mexico
3 France
3 Czech
3 U.K.
2 Hungary
2 Poland2 Hong Kong

Promising countries/regions for SMEs
over the medium term

Rank

1
2
3
4
5
6
7
8
9
10

FY 2004
SurveyChina
Thailand
VietnamIndia
Indonesia
U.S.
Malaysia
Korea
RussiaTaiwan

104
94
35
35
25
11
11
9
7
6
5

（％）

FY 2003
Survey90 China
34 Thailand
34 Vietnam
24 Indonesia
11 India
11 U.S.
9 Korea
7 Taiwan
6 Hong Kong
5 Singapore
Malaysia

FY2000No. ofcompanies（％）

Survey

372
242
154
88
54
43
41
37
35
32
30
28
25
25
21
18
17
10
8
8
8

65
41
24
15
12
11
10
9
9
8
8
7
7
6
5
5
3
2
2
2

82 China
32 U.S.
25 Thailand
14 Indonesia
13 Malaysia
12 Taiwan
11 India
8 Vietnam
8 Korea
6 Philippines
5 U.K.
5 Singapore
4 Germany
4 Brazil
4 Mexico
4 France
3 Spain3 Canada
3 Hong Kong
2 Australia

Promising countries/regions
over the long termNote) “SMEs” are companies with paid-in capital under ¥1 billion.
No. ofcompanies（％）

No. ofcompanies

（％）

105
95
36
30
18
16
11
10
7
5
4
4

90
34
29
17
15
10
10
7
5
4
4

Note) “Long term” means the next 10 years or so.

Rank

1
2
3
4
5
6
7
8
9
10

FY 2004
SurveyChina
India
Thailand
VietnamU.S.
RussiaIndonesia
BrazilKorea
TaiwanNo. ofcompanies

403
341
164
87
84
82
82
39
37
28
17

（％）

FY 2003
Survey85 China
41 India
22 U.S.
21 Thailand
20 Vietnam
20 Russia
10 Indonesia
9 Korea
7 Brazil
4 Malaysia

No. ofcompanies

（％）

407
356
123
88
84
83
43
39
24
23
17

87
30
22
21
20
11
10
6
6
4

Copyright © 2004 JBIC Institute. All Rights Reserved.

Appendix 2 【 Promising Countries/Regions for Overseas Business Operations~Details of Reasons for Promising Prospect ~ 】
FY 2004 Survey

1. Excellent human resources
2. Inexpensive labor force
3. Low-cost parts and raw materials
4. Supply base for assembly manufacturers
5. Industrial cluster
6. Risk diversification
7. Base for exports to Japan
8. Base for export to the third countries
9. Present local market size
10. Growth potential of the market
11. Product development for local needs
12. Developed local infrastructure
13. Tax incentives for investment
14. Stable policies to attract foreign capital
15. Benefits from regional integration
16. Stable political and social conditions

FY 2003 Survey
1. Excellent human resources
2. Inexpensive labor force
3. Low-cost parts and raw materials
4. Supply base for assembly manufacturers
5. Industrial cluster
6. Risk diversification
7. Base for exports to Japan
8. Base for export to the third countries
9. Present local market size
10. Growth potential of the market
11. Product development for local needs
12. Developed local infrastructure
13. Tax incentives for investment
14. Stable policies to attract foreign capital
15. Benefits from regional integration
16. Stable political and social conditions

p.26

4
5
6
7
8
9
10
1
2
3
Indonesia
VietnamU.S.
RussiaKorea
Taiwan
Malaysia
China
ThailandIndia
No. ofNo. ofNo. ofNo. ofNo. ofNo. ofNo. ofNo. ofNo. ofNo. of% companies % companies % companies % companies % companies % companies % companies % companies % companies %companies
98 10049 100 45 100
44 10041 10026 100448 100 146 100 112 100 108 100
15 15.3
7 14.32 4.4
8 18.24 9.8
2 7.7
85 19.0
27 18.5
41 36.6 38 35.2
2 2.0
9 18.4 31 68.9
2 4.5
2 4.9
7 26.9296 66.1
72 49.3
63 56.3 82 75.9
1 1.0
1 2.0
4 8.9
1 2.3
1 2.4
1 3.8
96 21.4
19 13.0
6 5.4 10 9.3
24 24.5
5 10.28 17.8
6 13.6
10 24.4
6 23.1
128 28.6
44 30.1
18 16.1 13 12.0
5 4.6
18 18.4
4 8.9
5 11.410 24.4
3 11.572 16.1
34 23.3
2 1.8
2 2.0
2 4.1
4 8.9
1 2.3
1 2.4
5 19.212 2.7
17 11.6
2 1.8 27 25.0
7 15.6
1 2.3
2 4.9
4 15.487 19.4
19 13.0
3 2.7 20 18.5
2 2.0
1 2.0 12 26.7
4 9.1
6 14.6
7 26.993 20.8
40 27.4
12 10.7 22 20.4
7 6.5
65 66.3
5 10.2
9 20.025 56.8
19 46.3
6 23.1
107 23.930 20.5
19 17.0
48 49.0
47 95.9 28 62.2
28 63.6
24 58.5
8 30.8373 83.3
83 56.8
92 82.1 52 48.1
1 0.9
12 12.2
1 2.0
3 6.8
5 12.21 3.8
30 6.7
7 4.8
2 1.8
7 6.5
38 38.84 8.2
2 4.4
8 18.212 29.3
7 26.915 3.337 25.3
3 3.1
4 8.9
1 2.3
2 4.9
6 23.178 17.4
36 24.7
4 3.6 25 23.1
5 4.6
5 5.1
1 2.2
2 4.5
2 4.9
3 11.5
19 4.230 20.5
1 0.9
4 3.7
3 6.7
1 2.3
1 2.4
3 11.55 1.1
13 8.936 36.7
1 2.0
1 2.2
6 13.6
6 14.6
10 38.5
19 4.258 39.7
3 2.7 22 20.4

1
2
China
Thailand447 100 141 100
108 24.2
26 18.4
335 74.9
81 57.4
153 34.2
16 11.3
128 28.6
48 34.0
64 14.3
30 21.3
20 4.518 12.8
100 22.4
28 19.9
98 21.942 29.8
88 19.7
24 17.0
368 82.3
72 51.1
35 7.89 6.4
42 9.433 23.4
78 17.4
35 24.8
20 4.521 14.9
6 1.3
13 9.218 4.048 34.0

54VietnamIndia
69 100 85 100
21 30.4 30 35.3
41 59.4 63 74.1
10 14.5 11 12.9
17 24.6 12 14.1
2 2.4
2 2.9
3 4.3 27 31.8
7 10.1 21 24.7
12 17.4 18 21.2
5 5.9
13 18.8
53 76.8 35 41.2
1 1.2
2 2.9
4 4.7
2 2.9
3 4.3 12 14.1
6 7.1
1 1.4
2 2.4
1 1.4
1 1.4 17 20.0

3
U.S.
103 100
25 24.3
2 1.9
1 1.0
27 26.2
20 19.45 4.9
4 3.963 61.2
50 48.5
17 16.5
37 35.93 2.9
6 5.8
39 37.9

10
6
RussiaIndonesia
25 100 62 100
1 4.0
3 4.8
2 8.0 42 67.7
1 4.0
8 12.9
1 4.0 17 27.4
1 4.0
7 11.31 4.0
5 8.1
9 14.5- 17 27.4
4 16.0 11 17.7
23 92.0 35 56.5
2 3.2
1 4.0
4 6.5
4 6.5
2 3.2
6 9.7
-

7
Korea
42 1009 21.4
3 7.1
3 7.1
2 4.8
8 19.0
3 7.1
1 2.4
4 9.5
17 40.5
28 66.7
4 9.5
15 35.7
2 4.8
3 7.1
5 11.98
9Taiwan
Malaysia
33 10030 1006 18.25 16.7
1 3.0
12 40.0
2 6.1
4 13.3
5 15.2
7 23.38 24.21 3.3
2 6.1
7 23.31 3.0
7 23.3
6 18.2
4 13.319 57.6
2 6.7
10 30.3
9 30.0
2 6.1
2 6.7
6 18.28 26.72 6.1
7 23.31 3.0
7 23.32 6.7
6 18.210 33.3

Copyright © 2004 JBIC Institute. All Rights Reserved.

p.27

Appendix 3 【 Promising Countries/Regions for Overseas Business Operations ~Details of Issues~ 】
FY 2004 Survey

1
China
No. ofcompanies

1. Under-development of local legal system
2. Unclear operation of local legal system
3. Complex local tax collection systems
4. Unclear operation of taxation system
5. Increase in tax burden
6. Restrictions on foreign capital
7. Complex and vague investment permit procedures
8. Difficulty in obtaining immigration or working visas
9. Insufficient protection of intellectual property rights
10. Local restrictions on currency exchange and remittance
11. Import restrictions
12. Anti-dumping measures
13. Difficulty in securing local personnel (management level)
14. Increase in labor costs
15. Local labor problems
16. Intense local competition
17. Difficulty in collecting receivables
18. Difficulty in local financial access
19. Under-development of local supporting industries
20. Instability of local currency and price
21. Under-development of infrastructure
22. Unstable local security and social conditions
23. Insufficient information on investment climate

FY 2003 Survey
1. Under-development of local legal system
2. Unclear operation of local legal system
3. Complex local tax collection systems
4. Unclear operation of taxation system
5. Increase in tax burden
6. Restrictions on foreign capital
7. Complex and vague investment permit procedures
8. Difficulty in obtaining working visas
9. Insufficient protection of intellectual property rights
10. Local restrictions on currency exchange and remittance
11. Import restrictions
12. Anti-dumping measures
13. Difficulty in securing local personnel (management level)
14. Increase in labor costs
15. Local labor problems
16. Intense local competition
17. Request for technology transfer and performance
18. Difficulty in collecting receivables
19. Difficulty in local financial access
20. Under-development of local supporting industries
21. Instability of local currency and price
22. Under-development of infrastructure
23. Unstable local political and social conditions
24. Insufficient information on investment climate%

2
ThailandNo. ofcompanies%

423 100 102 100
124 29.3
2 2.0
268 63.48 7.878 18.4
8 7.8
163 38.5
8 7.8
83 19.6
17 16.7
137 32.4
11 10.8
87 20.6
9 8.8
4 0.9
2 2.0
220 52.0
5 4.9
176 41.6
8 7.8
39 9.25 4.9
15 3.54 3.9
120 28.4
28 27.5
137 32.4
41 40.2
71 16.8
13 12.7
177 41.8
46 45.1
181 42.8
2 2.0
41 9.74 3.9
42 9.96 5.9
31 7.34 3.9
166 39.2
9 8.8
40 9.54 3.9
14 3.3
2 2.0
1
2
China
Thailand427 100 106 100
128 30.0
4 3.8
280 65.6
10 9.4103 24.1
9 8.5
175 41.0
10 9.467 15.7
15 14.2
141 33.0
12 11.3
115 26.9
8 7.5
15 3.5
5 4.7
197 46.1
11 10.4
175 41.0
4 3.8
70 16.4
5 4.7
19 4.4
1 0.9
111 26.0
39 36.8
85 19.9
31 29.2
60 14.1
12 11.3
159 37.2
47 44.3
34 8.0
6 5.7
176 41.2
2 1.9
38 8.93 2.8
54 12.6
5 4.7
17 4.0
6 5.7
67 15.7
9 8.5
47 11.0
3 2.8
21 4.9
4 3.8

3
India
No. ofcompanies%

4
VietnamNo. ofcompanies%

95 10082 10028 29.5
33 40.2
23 24.2
30 36.67 7.4
8 9.8
17 20.7
10 10.5
8 8.4
6 7.3
19 23.2
15 15.8
14 14.7
9 11.02 2.1
16 19.5
16 16.8
11 11.6
15 18.3
13 13.7
2 2.4
22 26.8
12 12.6
6 6.3
7 8.5
17 17.9
11 13.4
18 18.9
11 13.4
16 16.8
9 11.04 4.9
4 4.2
19 20.0
20 24.4
9 9.5
9 11.027 32.9
41 43.2
32 33.7
3 3.7
33 34.7
25 30.5
5
4
India
Vietnam
60 10071 10026 36.6
15 25.0
17 28.3
28 39.4
9 15.0
4 5.6
12 20.0
12 16.9
5 8.3
5 7.0
8 13.319 26.8
10 16.7
18 25.4
4 6.7
1 1.4
10 16.7
14 19.7
9 15.010 14.1
7 11.7
11 15.5
1 1.4
1 1.7
7 11.725 35.2
6 10.0
3 4.2
16 26.7
8 11.3
13 21.7
6 8.5
5 8.3
4 5.6
9 15.07 9.9
2 3.3
8 11.3
13 21.7
20 28.2
5 8.3
5 7.0
27 45.0
33 46.5
11 18.3
5 7.0
13 21.7
27 38.05
U.S.
No. ofcompanies%

74 10013 17.6
1 1.4
13 17.6
1 1.4
1 1.4
2 2.7
16 21.6
12 16.2
24 32.4
17 23.0
51 68.9
2 2.7
2 2.7
3
U.S.
78 100
1 1.3
9 11.5
1 1.3
11 14.1
1 1.3
10 12.8
9 11.525 32.1
12 15.4
57 73.1
2 2.6
1 1.3
1 1.3
-

6
RussiaNo. ofcompanies%

7
Indonesia
No. ofcompanies%

42 10038 10016 38.1
4 10.515 35.7
8 21.1
4 9.5
7 18.4
5 11.99 23.72 4.8
4 10.5
7 16.7
4 10.5
8 19.04 10.54 9.5
1 2.6
7 16.7
4 10.5
7 16.71 2.6
4 9.5
6 14.3
11 28.9
5 11.97 18.4
6 14.38 21.1
9 21.412 31.6
10 23.8
1 2.6
6 14.3
1 2.6
8 19.04 10.5
10 23.8
9 23.7
7 16.7
8 21.119 45.2
22 57.9
18 42.9
3 7.9
10
6
RussiaIndonesia
22 10052 1006 27.38 15.412 54.5
13 25.0
1 4.5
5 9.6
5 22.75 9.6
4 7.7
3 13.6
1 1.9
1 4.5
4 7.7
1 4.5
4 7.7
2 9.1
10 19.2
1 4.5
1 1.9
1 4.5
3 5.8
1 1.9
2 9.1
12 23.1
10 19.2
1 4.5
20 38.5
4 18.214 26.9
3 5.8
4 18.2
1 1.9
3 5.8
1 4.5
11 21.2
5 22.717 32.7
4 18.213 25.0
7 31.828 53.8
7 31.8
3 5.8

8
Korea
No. ofcompanies%

28 1001 3.6
2 7.1
4 14.32 7.1
1 3.6
7 25.02 7.1
1 3.6
3 10.7
9 32.1
12 42.9
18 64.3
2 7.1
3 10.71 3.6
1 3.6
4 14.3
2 7.1
7
Korea
31 100
1 3.2
2 6.5
2 6.5
3 9.7
1 3.2
5 16.1
4 12.9
1 3.2
2 6.5
3 9.7
11 35.5
8 25.822 71.0
2 6.5
2 6.5
2 6.5
2 6.5
2 6.5

9
TaiwanNo. ofcompanies%

10
Malaysia
No. ofcompanies%

27 10018 100
2 7.4
1 5.6
1 3.7
1 5.6
2 11.1
3 11.1
1 5.6
5 18.5
2 11.1
3 16.7
2 11.1
5 18.51 5.6
4 14.8
3 16.7
3 11.1
4 14.8
3 16.7
11 40.7
10 55.6
3 11.1
3 16.718 66.7
4 22.2
2 7.4
1 3.7
1 5.6
1 5.6
1 3.7
1 3.7
1 5.6
4 14.8
1 5.6
1 3.7
8
9
Taiwan
Malaysia
24 10021 100
2 8.3
1 4.2
1 4.2
4 19.05 23.81 4.8
5 20.8
3 12.5
4 19.03 12.52 9.5
6 25.05 23.82 8.3
3 14.3
14 58.3
10 47.6
1 4.8
2 9.5
2 9.5
1 4.8
1 4.8
1 4.2
-

Copyright © 2004 JBIC Institute. All Rights Reserved.

Appendix 4 【 Reasons for Evaluations of Satisfaction with Profitability~Comparison by Major Region and Major Industry~ 】
NIES(Unit: Number of responding companies)
50

ASEAN444

Chemicals

40

p.28

North
America

China

EU15

(Unit: Number of responding companies)
40

39

30
25

30
24
20

Reasons for “satisfactory" or“somewhat satisfactory” profitability

10

6

4

0

1

1
4

10
14

15

2 1

2
7

7

5 5

4

4
1

16

19

20
9
5

1
0

1

7
13

17

16

3

1 1
1 0

4

10

7
2

0

7

4
0

0

0

10

5

6

8

25

Successful cost
reductions/Cost
reductions are
difficult

Full operation of 29 Success/Failure in
production
domestic
facilities/Yet tomarketingreach fulloperation(Unit: Number of responding companies)
70

Success/ Failure inexports from thecountry

6

1

1 1

4

6

68

E&E

60

Successful cost
reductions/Cost
reductions are
difficult

5

2

0 0

8

9

9
12

20

12

3 3
0

2

18 10

9

Reasons for “unsatisfactory" or “somewhat unsatisfactory” profitability
30

GeneralMachinery

Full operation of
production
facilities/Yet toreach fulloperation

0 0
0 1

12 11

Success/ Failure inexports from thecountry

Success/
Failure indomestic
marketing(Unit: Number of responding companies)
50

1

1

Automobiles

46

40

50
30

40
32

30
20
10

13
6

18 16

11
3

0
10
20
30

6 6

14 13
17
7

2

0
7

2

3

2

4

1

1

0
0

11

11

Full operation of
production
facilities/Yet toreach fulloperation

8
1

0
0

25
40

8

5

4

3

0
10

1

6

4
1

6

8

10 9

9

8

2

2

3

2

4

14
10

4
9

10

7

6

0

0
0 0 0

2
0

8

20

18

Successful cost
reductions/Cost
reductions are
difficult

10
12 12

8
1

11

20

22

21

20

25

23

22

Success/
Failure indomestic
marketing

Success/ Failure inexports from thecountry30

Successful cost
reductions/Cost
reductions are
difficult

Success/ Failure in
Success/
Full operation ofexports from the
Failure in
production
country
domestic
facilities/Yet tomarketingreach full
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operation