October 25, 2002

Survey Report on Overseas Business Operations by
Japanese Manufacturing Companies-Results of JBIC FY2002 Survey:
Outlook for Japanese Foreign Direct Investment (14th Annual Survey) 【Contents】

Ⅰ.Overview of the Survey Method
Ⅱ. Summary．．．．．．．．．．．．．．．. . １．．．．．．．．．．．．．．．．．．．．．．．. . . . . . . .

３

Ⅲ. Overview of the Survey Results ．．．．．．．．．．．．．．．．．. .

４〇Current Top Priority Issues for Domestic and Overseas Business Operations．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．． 4〇Prospect for Overseas Business Operations over the Medium Term (next three years or so) and Changing Patterns of the Overseas Production Ratio 5〇Prospect for Domestic Business Operations over the Medium Term (next three years or so) ．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．． 6〇Attitude toward Strengthening and Expanding Overseas Business Operations over the Medium Term (next three years or so): By Region ．． ．．．． 7〇Attitude toward Expanding Business Operations in China and ASEAN ．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．． 9〇Evaluation of Overseas Business Performance 〜Evaluation of Satisfaction with Sales and Profitability〜 ．．．．．．．．．．．．．．．．．．．．．． ．．．． 10〇Approach to Restructuring Business Overseas and Concrete Restructuring Planｓ．．．．．．．．．．．．．．．．．．．．．．．．．．． ．．．．．．．．．．．．．．． 12〇Evaluation of Investment Climate in Major Asian Countries．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．． ．．．．．．．．．．． 13〇Countries with Promising Prospects for Business Operations over the Medium Term (next three years or so) ．．． ．．．．．．．．．．．．．．．．．．．．． 14
15〇Existing Issues in Countries with Promising Prospect ．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．．

＜Ⅰ. Overview of the Survey Method＞
The purpose of this survey is to identify the current and1/
future trends of overseas business operations and foreign
direct investment (FDI) activities of Japanesemanufacturing companies. This year’s survey was the
fourteenth of an annual series that began in 1989.
The survey covered 812 manufacturing companies thathave three or more foreign affiliates, including at least one
manufacturing base, as of November 2001. The
questionnaire was mailed on July 1, 2002. 508 valid
responses were returned over the period from July toAugust. The effective response rate was 62.6%. (In the
FY2001 survey, valid returns were 501 out of 792
companies surveyed, with the response rate of 63.3%)
This year’s survey additionally looked into the “Attitude
toward Expanding Business Operations in China and
ASEAN ,” “Effect of China’s WTO Entry” and ”
Expectations and issues for AFTA ”
Note 1：Overseas business operations are defined as production, sales, researchand development activities in overseas bases, as well as outsourcing of
manufacturing and procurement overseas.

Companies Surveyed, Response Rate andOverseas Affiliates(Unit: Companies, %)Number of companies surveyed
Number of respondent
Response rate
Number of overseas affiliates

FY2002 FY2001 FY2000 FY1999 FY1998
812
792
791
786
749
508
501
469
472
455
62.6
63.3
59.3
60.1
60.7
8,924 7,710 7,285 7,225 6,654

1

Profile of Companies Surveyed(1) Number of respondent companies,
by paid-in capital (Individual company base)
Number ofcompanies%
less than ¥100 million
31
6.1%¥100 million 〜 less than ¥500 million
479.3%¥500 million 〜 less than ¥1.0 billion
21
4.1%¥1.0 billion 〜 less than ¥5.0 billion
109 21.5%¥5.0 billion 〜 less than ¥10.0 billion
70 13.8%
less than ¥10.0 billion or more
230 45.3%
Total
508 100.0%(2) Number of respondent companies,
by annual sales (Consolidated base)
Number ofcompanies%
less than ¥50.0 billion
194 38.6%
86 17.1%¥50.0 billion 〜 less than ¥100.0 billion
79 15.7%¥100.0 billion 〜 less than ¥200.0 billion
33
6.6%¥200.0 billion 〜 less than ¥300.0 billion¥300.0 billion 〜 less than ¥500.0 billion
35
7.0%¥500.0 billion 〜
less than ¥1.0 trillion
31
6.2%¥1.0 trillion or more
44
8.8%
502 100.0%
Tot al※ Six companies did not provide this information(3) Number of respondent companies,
by number of employees (Individual company base)
Number ofcompanies
300 employees or less
301 to 500 employees
501 to 1,000 employees
1,001 to 2,000 employees
2,001 to 5,000 employees
5,001 to 10,000 employees
10,001 to 30,000 employees
30,001 or more employees
Total

71
58
91
124
96
37
21
10
508

%
14.0%
11.4%
17.9%
24.4%
18.9%
7.3%
4.1%
2.0%
100.0%(4) Number of respondent companies,
by industrial classification
Industrial classification
Foodstuffs
TextilesWood and wood products
Paper and pulp
Chemicals[Chemicals (excluding pharmaceuticals)][Pharmaceuticals]Petroleum and rubber
Ceramics, cement and glass
Steel
Nonferrous metals
Metal products
General machinery[Assembled products][Components]
Electrical equipment and electronics[Assembled products][Components]
Transportation (excluding Automobiles)
Automobiles[Assembled vehicles][Components]
Precision machinery[Assembled machinery][Components]
Other
Total

Number ofcompanies

％

24
4.7%
21
4.1%
2
0.4%
4
0.8%
82
16.1%
(70) (13.8%)(12) (2.4%)
12
2.4%
12
2.4%
16
3.1%
19
3.7%
16
3.1%
52
10.2%
(43) (8.5%)(9) (1.8%)
100
19.7%
(34) (6.7%)(66) (13.0%)
11
2.2%
82
16.1%
(10) (2.0%)(72) (14.2%)25
4.9%(20) (3.9%)(5) (1.0%)30
5.9%508 100.0%

2Profile of Companies Surveyed （Continued）(5) Number of overseas affiliates, by type of base and by region

Production bases
Sales bases
R&D bases
Other
Total

NIES

ASEAN4

China

616
766
30
112
1,524

1,067
320
21
90
1,498

890
309
28
65
1,292

(Unit: Companies)

Other Asian
countries

North
America

Latin
America

155
46
2
16
219

752
593
92
337
1,774

197
124
1
56
378

FormerSovietUnion

Central and
Other
EasternEuropean
Europecountries

EU

429
949
70
202
1,650

66
60
3
7
136

15
66
1
9
91

Southeast Middle East
Asia Pacific & Africa

6
15
2
23

53
135
6
46
240

23
61
2
13
99

Total

4,269
3,444
256
955
8,924

※The following is the classification of major regions in this survey:
NIES：
ASEAN4：
North America：
EU：
Central and Eastern Europe：

Korea, Taiwan, Singapore, Hong Kong
Thailand, Indonesia, Malaysia, the Philippines
U.S., Canada
U.K., Germany, France, Italy, Netherlands, Belgium, Greece, Luxembourg, Denmark, Spain, Portugal, Austria, Finland, Sweden, Ireland
Poland, Hungary, Czech Republic, Slovakia, Bulgaria, Romania, Slovenia, Albania, Croatia, Macedonia, Yugoslavia (Serbia, Montenegro), Bosnia and Herzegovina

Changing of Overseas Manufacturing Bases in Major Regions

Changing of Overseas Affiliates in Major Regions(Un it : companie s)(Unit : companie s)

1,200

2,000

EU

N o rthA merica

ASEAN4

1,000

1,500

North
America

800

1,000

600

China

400

Other AsianCountries

NIES

200

EU

NIES

500

Other AsianCountries

ASEAN4

China
0

0

89

90

91

92

93

94

95

96

97

98

99

00

01

02

(Un it : ye ar)

89

90

91

92

93

94

95

96

97

98

99

00

01

02 (Un it : ye ar)

NIES

ASEAN4

Other Asian countries

NIES

ASEAN4

Other Asian countries

China

North America

EU

China

North America

EU※Data for China starts from FY1993. Data for Other Asian countries starts from FY1996.

＜Ⅱ.Summary＞
１． The most numerous response with respect to the current top priority issues for domestic and overseas
business operations was “strengthen and expand overseas production” (54.6%), followed by “strengthen
and expand customer base by the company’s own efforts” (37.8%). Popular answers and the numbers ofcompanies that responded stayed basically the same in the FY2001 and FY2002 surveys. However,“Review domestic production systems from the viewpoint of total cost” (25.4%) climbed from sixth
place to fourth. The rising need to strengthen price competitiveness due to declining demand worldwide
appears to be forcing these companies to urgently review domestic production.

２． Of the companies that indicated their attitude toward overseas business operations over the medium
term, 79.6% responded they “will strengthen and expand” these operations, whereas 20.0% indicatedthey “will maintain the current level.” Those replying they “will reduce or withdraw from them”
accounted for a minuscule 0.4%. The share of the companies that “will strengthen or expand” overseas
business operations climbed to 79.6% from 71.6% in the FY2001 survey.3/ The respondents generally
showed an increasingly positive attitude toward expanding their overseas business operations.
The overseas production ratio has been on the increase. Its actual figure rose to 24.3% in FY2001 (from23.0% in FY2000), whereas the projection for FY2005 rose to 31.7%.
３． Asked about their medium-term intentions to domestic business operations, 30.2% responded theywould “maintain the current scale of operation but realign/restructure them”, followed by “strengthen
and expand them by actively making capital investment as necessary” (27.1%). Those who replied
they would “ maintain the current status ” decreased slightly from 13.9 % in the FY 2001 survey to10.7 %. Meanwhile, the ratio of respondents stating they would “ reduce domestic business operations”
increased from 3.9% in the FY2001 survey to 6.8%. Asked about the effects overseas business
operations may have on medium-term domestic production, 39.9% of survey respondents specified
that “While the production which was being performed conventionally at home is shifted to overseas,
domestic business operations will focus on other products and product areas.” Asked about theirapproach to domestic business operations, 80.8% of the respondents said they would “specialize inhigher value-added products .” This answer suggests a focus on achieving higher levels of domestic
business operations.

3
６． When asked about AFTA, 53.6% of the survey respondents said they “expect” AFTA to help liberalize trade
within the region covered. The most popular reason cited for their view was “expanding trade within theregion due to reduced tariffs,” followed by “simplifying the customs clearance procedure,” “market expansion”
and so on. A lot of respondents belonging to the materials industry like steel and chemicals expressed
expectations for AFTA. A high ratio of automakers among respondents expressed the same view.

７． Asked about issues following China’s WTO entry, many respondents mentioned, “Intensified competition in
the Chinese market” (56.1%). Respondents expressed concerns about China “observing WTO regulations”(48.0%), and “existing non-tariff barriers” (24.6%). Survey respondents expressed strong hopes that Chinese
authorities will ensure the effectiveness of institutional reforms after China’s WTO entry. While recognizing
certain progress made in “tariff reduction,” they hoped more improvement in “protection of intellectual
property rights” and “abolishment of local content and other business requirements.”

８． The FY2002 survey found the evaluation of satisfaction with sales and profitability declined among

respondents operating in many regions except ASEAN4. The causes of this decline in evaluation ofsatisfaction with profitability are polarized, i.e. “difficulty to obtain customers (intense competition withother companies)” increased among those operating in such regions as China and Latin America, and“shrinking market due to economic downturn” as the cause of the increase in lost satisfaction among those
operating in North America, EU, and Central and Eastern Europe.

９． The necessity to restructuring business operations increased for respondents operating in China to 67.8% from
57.3% in the FY2001 survey. This for respondents operating in ASEAN4 decreased from 58.1% in the
FY2001 survey to 43.4%. This change suggests that operations are being restructured in ASEAN4.

10．When improvement in investment climate was examined among major Asian countries in comparison with thesituation last year, 58.0% of the companies in the FY2002 survey recognized improvements in China’s
infrastructure during the last year. However, companies maintaining bases in China had divided opinions
about “Securing management-class human resources in the local market”. Some 10.0% of those respondents
recognized “improvement” in this situation, but 11.0% of the same group reported encountering difficulties.

４． By region, China was most often cited by the companies responding as the place where they would be“strengthening and expanding overseas business operations” (70.1%), followed by North America(50.3%). In other regions, “maintain overseas business operations” is the most common response. When
asked about fields to be expanded, Companies exhibited a particularly strong willingness to expand
business operations in Eastern China and Southern China, and Thailand in ASEAN4. The preference forthese regions reflects priorities there. Survey respondents appear to realize that there are intra-regional
differences and that they expand operations in the areas selectively.

５． Asked about the priority on expanding operations in China or ASEAN in the future, the majority of
respondents would “expand business operations in a balanced manner by distributing risks (to bothregions)”(53.8%). 26.0% of the respondents would “give priority to expanding operations in China.”

11．Respondents in the FY2001 and FY2002 surveys chose the same four countries as the most promising for
medium-term business. China was the most popular country in the FY2002 survey, followed by Thailand, theUnited States, and Indonesia in that order. Thailand and the United States switched positions from the
FY2001 survey. Many companies in the FY2002 survey expressed the view that China appears “promising.”
Many of these respondents pointed out issues related to the development and application of the legal system
in China. They cited such issues as “local legal system (lack of transparency),” “local legal system(undeveloped legal system),” and “local legal system (frequent and abrupt changes).” More than half of thesurvey respondents who described China as “promising” identified institutional issues, particularly legal ones.

＜Ⅲ. Overview of the Survey Results＞

4【 Current Top Priority Issues for Domestic and Overseas Business Operations】
Figure 1 Current Top Priority Issues for Domestic andOverseas Business Operations 2/

Cf. Results of the FY2001 Survey

Number of companies

Rank

Number of companies

Response
rate(among 489
companies)

Rank

Response
rate(among 485
companies)

1

Strengthen and expand the overseas production

267

54.6%

1

Strengthen and expand the overseas production

264

54.4%

2

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

185

37.8%

2

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

183

37.7%

3

Review and improve efficiency of the management of group companies(sell or spin-off of a unit of existing businesses, etc.)

159

32.5%

3

162

33.4%

4

Review domestic production systems from the viewpoint of total cost

124

25.4%

139

28.7%

5

Strengthen services related to the company’s products

120

24.5%

6

Acquire business resources to strengthen principal business (acquisitions,alliances, mergers, etc.)

117

23.9%

7

Reduce interest-bearing debt

115

23.5%

8

Active expansion into new business areas

87

17.8%

9

Introduce or establish a global supply chain management

81

16.6%

46

9.4%

46

9.4%

12 Strengthen and expand the domestic production

42

8.6%

13 Outsource the activities of production

22

4.5%

9

1.8%

8

1.6%

10 Focus on environment-related business
11

14

Review overseas production systems from the viewpoint of total cost
(reduction in and withdrawal from overseas bases)

Strengthen technology development by utilizing venture companies(alliances, acquisitions, etc.)

15 Expand transactions over the Internet

Review and improve efficiency of the management of group companies(sell or spin-off of a unit of existing businesses, etc.)
Acquire business resources to strengthen principal business (acquisitions,alliances, mergers, etc.)

45Strengthen services related to the company’s products

127

26.2%

6

Review domestic production systems from the viewpoint of total cost

114

23.5%

7

Reduce interest-bearing debt

112

23.1%

8

Active expansion into new business areas

102

21.0%

9

Introduce or establish a global supply chain management

57

11.8%

53

10.9%

41

8.5%

23

4.7%

12

2.5%

8

1.6%

10 Strengthen and expand the domestic production11※ 17 companies answered “Other” as a priority issue

Review overseas production systems from the viewpoint of total cost
(reduction in and withdrawal from overseas bases)

12 Outsource the activities of production
13

Strengthen technology development by utilizing venture companies(alliances, acquisitions, etc.)

14 Expand transactions over the Internet※ 25 companies answered “Other” as a priority issue

Note 2: We asked respondents to pick three items irrespective of their ranking and made a simple summation of the responses for each item on
the list of alternatives. We newly added, “Focus on environment-related business” to the list of priority items in the FY2002 survey.

Strengthening and expanding overseas production to increase market share and strengthen price competitiveness
The most numerous response with respect to the current top priority issues for domestic and overseas
business operations was “strengthen and expand overseas production” (267 respondents), followed by“strengthen and expand customer base by the company’s own efforts” (185 respondents). Popularanswers and the number of companies that responded stayed basically the same in the FY2001 andFY2002 surveys. However, “Review domestic production systems from the viewpoint of total cost”(124 respondents) climbed from sixth place to fourth. The rising need to strengthen pricecompetitiveness due to declining demand worldwide appears to be forcing these companies tourgently review domestic production.

Some companies interviewed told us “Our basic policy is to expand local
production and sales in foreign countries with high demand,” and others told
us “Producing goods domestically for mass consumption under increasing pricecompetition is difficult. We must review the domestic production structure and relocate
the production facilities of certain products abroad in order to increase costcompetitiveness.” Relocating production facilities abroad means acquiring anoverseas market share and strengthen price competitiveness.

【 Prospect for Overseas Business Operations over the Medium Term andChanging Patterns of the Overseas Production Ratio】
Figure 3 Changing Patterns of Overseas Production Ratio
Figure 2 Overseas Business Operations over the Medium Term (nextthree years or so), by Major Industries
0.4

2.1

20.0

26.1

33.3

29.1

31.7

24.3

25.0

7.4

15.5

25.5

（Unit：％）

35.0
30.0

(23
(21
(51
(495
(79
(97
(81
(24
(Un it : ％) companies) companies)companies)companies)companies)companies)companies)companies)

100.0

12.5

80.0

23.0
21.7

Will reduce or withdraw fromoverseas business operations

20.0

Will maintain the size ofoverseas business operations
at the present level

15.0Will strengthen or expand
overseas business operations

60.0

5

19.0

20.9

21.1

19.2

17.3
13.7

14.1

15.1

16.1
14.8

10.0

Plannedvalue

Actual
value

5.0

92.6
79.6

40.0

73.9

66.7

70.9

82.5

74.5

87.5

0.0
89

90

91

92

93

94

95

96

97

98

99 20002001※ Overseas Production Ratio = (Overseas production volume)/(Domestic
production volume + overseas production volume)

2005(F iscal ye ar)

20.0

Companies Poised to Strengthen and Expand
Overseas Business Operations

0.0
T extiles

All indust ries
Foodstuffs

General machinery
Chemicals

Aut omobiles

Elect rical equipment& electronics

Of the companies that indicated their attitude toward overseas business operations overthe medium term, 79.6% responded they “will strengthen and expand” these operations,whereas 20.0% indicated they “will maintain the current level.” Those replying they
“will reduce or withdraw from them” accounted for a minuscule 0.4%. The share of thecompanies that “will strengthen or expand” overseas business operations climbed to 79.6%
from 71.6% in the FY2001 survey.3/ The respondents generally showed an increasingly
positive attitude toward expanding their overseas business operations.

Precisionmachinery

Cf. Results of the FY2001 Survey(Un it : ％)

100.0

(20
(70
(94
(25
(490
(23
(75
(55
companies) companies) companies) companies)companies)companies) companies)companies)

0.4
28.0

80.0

1.1

4.0
34.8

28.0

29.3

25.5

10.0

Will reduce or withdraw fromoverseas business operations

26.6
40.0

Will strengthen or expand
overseas business operations

60.0
90.0

40.0

71.6

65.2

68.0

70.7

74.5

72.3
60.0

20.0
0.0

Will maintain the size ofoverseas business operations
at the present level

The overseas production ratio has been on the increase. Its actual figure rose to 24.3% in
FY2001 (from 23.0% in FY2000), whereas the projection for FY2005 rose to 31.7%.
The changing pattern of this ratio by major industries is shown below.

Fiscal 2001
actual value
Electrical equipment and electronics
38.0%
Automobiles
25.3%
Chemicals
19.5%
General machinery
16.7%

Fiscal 2002
estimated
40.6%
27.6%
20.4%
20.0%

Fiscal 2005
plan value
45.7%
34.6%
25.2%
26.9%

Note3: Although it should be noted that the questionnaire before the FY1999 survey asked for “investment relative toactual figures in the past three years or so over the medium term”, the share of the companies indicating a positive
stance for overseas business operations since the FY1997 survey evolved over time as follows.

TextilesGeneral machinery
Automobiles
All industries
Foodstuffs
Chemicals
Precision
Electrical equipment
machinery& electronics

64.6% (FY1997)→38.1% (FY1998)→21.1% (FY1999)→54.5% (FY2000)→71.6% (FY2001)→79.6% (FY2002)

【Prospect for Domestic Operations over the Medium Term (next three years or so)】Figure 4 Prospect for Domestic Operations over the Medium Term (nextthree years or so): Attitude toward Domestic Business Operations

27.1

16.2

2

15.8
13.9
10.7

3

30.7

4

30.2
3.9

5

6.8

FY2001 survey （among 482 companies）

6.4
7.4

6

FY2002 survey （among 487 companies）

0.6
2.1

7
0

5

10

15

20

25

30

35

( Un it： ％)1．Strengthen and expand domestic business operations by actively making capital investment as necessary
2．Strengthen domestic business operations, including entering alliances with other companies
3．Maintain current the status
4．Maintain the current scale of operation but realign/restructure domestic business operations
5．Reduce domestic business operations
6．Currently considering
7．Others

Figure 5 Effect of Overseas Business Operations on Domestic
Business Operations (multiple response)

Asked about overseas business operations and possible medium-term repercussions in Japan, 41.6% of the survey respondents
selected “Since overseas investment aims at maintaining and expanding the market share of sales from (and/or exports andimports from) overseas production bases, there will be no effect on domestic business operations.” The ratio of respondents whopicked this answer rose slightly from 39.1% in the FY2001 survey. The second largest group of survey respondents replied“While the production of product lines that used to be produced domestically is shifting to overseas, domestic production will
focus on other products and product areas” (39.9%). Their ratio increased from 36.2% in the FY 2001 survey. 22.0% of survey
respondents selected “Domestic business operations will be reduced because overseas production will replace domestic
production.” Their ratio fell slightly from 22.5% in the FY2001 survey. On the whole, survey respondents expressed a strong
desire to strengthen and expand overseas business operations and raise levels of domestic production. We found virtually thesame trends in the FY2001 survey.
We asked follow-up questions to survey respondents who said “While the production of product lines that used to be produced
domestically is shifting to overseas, domestic production will focus on other products and product areas.” 80.8% of them
replied, “specializing in higher value-added products”, followed by “Moving to new product areas”(36.3%). Popular answers
and their order did show no big changes from the FY 2001 survey.
The results of our survey and interviews reveal that many Japanese manufacturers are revising and strengthening domestic andoverseas production in line with a policy of manufacturing and selling products in optimum locations. These manufacturers
appear to be dividing production operations into two types: operations that should be maintained in Japan, and operations thatshould be relocated overseas. Moreover, they are focusing on the domestic production of products offering high added value ina bid to make their products more competitive.

Figure 6 Move for Other Products and/or Product Areas inDomestic Production (194 companies) (multiple response)

39.1

1

Domestic production is expected to shift to High Value-Added Products
Asked about domestic medium-term business plans, 30.2% of the survey respondents said they would “Maintain the current
scale of operation but realign/restructure domestic operations”,followed by “Strengthen and expand domestic operations byactively making capital investment as necessary” (27.1%). Those who stated they would “ Maintain the current status” fell inratio from 13.9% in the FY 2001 survey to 10.7%. Respondents who expressed intent to “Reduce domestic operation” grew inratio from 3.9 % in the FY 2001 survey to 6.8%.

28.2

1

6

41.6
11

2

8.4

FY2002 Survey

36.2

3

39.9
22.5
22

4

0

4.7

2

FY2001 survey (among 481 companies)

36.3

3

FY2002 survey (among 486 companies)

4.2
2.7

5

80.8

1

9.8

4
10

20

30

40

50

(U n i t ： ％ )1. Since overseas investment aims at maintaining and expanding the market share of sales from (and/or exports and imports from) overseas
production bases, there will be no effect on domestic business operations.
2．Since products produced overseas differ from domestically produced products, there will be no effect on domestic business operations.
3．While the production of product lines that used to be produced domestically is shifting to overseas, domestic production will focus on otherproducts and product areas.
4．Domestic business operations will be reduced because overseas production will replace domestic business operations.
5．Others

0.5

5
0

20

40

1．Specializing in higher value-added products
2．Expanding production of standard products
3．Moving to new product areas
4．Currently considering specific measures
5．Others

60

80

100 (Unit : %)【Attitudes toward Strengthening and Expanding Overseas Business Operations over the Medium Term (nextthree years or so) : By Region】
Figure 7 Attitude toward Strengthening and Expanding Overseas Business
Operations: By Region(Unit : ％)
100.0

(372
(837
(822
(83
(163
(289
(94
(865
(50
(69
companies〉 companies〉 companies〉 companies〉 companies〉 companies〉 companies〉 companies〉 companies〉 companies〉

5.0

2.7

1.2

2.4

3.0

6.7

2.8

3.2

2.9

2.0

(％)
100.0

(332
(380
(47
(366
(139
(160
(295
(89
(387
(71
companies〉 companies〉 companies〉 companies〉companies〉 companies〉companies〉 companies〉 companies〉companies〉

1.5

80.0
46.8

53.0
65.1

64.2

Cf. Results of the FY2001 Survey

54.0

50.0

0.7

41.8

3.1

2.7

1.1

57.6

57.3

4.2

47.6

68.0

65.6
73.2

60.0

74.5

80.6

70.1

55.7
50.3

44.2
20.0

2.4

66.2

40.0

40.0

0.5

63.3
68.1

63.8

60.0

2.5

18.9

28.7
80.0

7

30.9

32.5

ＮＩＥＳ

Other
Asian
countries

43.3

46.8

20.0

29.4

29.0

30.0

Latin
America

Central and
Other
EasternEuropean
Europecountries

FormerSoviet
Union

50.0

35.2

33.1

31.3

39.7

41.6
22.5

22.5

Other
Central andEuropean
Easterncountries
EuropeFormerSoviet
Union

0.0

0.0
ＡＳＥＡＮ４

China

Will reduce or withdraw fromoverseas business operations
Will maintain the size ofoverseas business operations
at the present level
Will strengthen or expand
overseas business operations

North
AmericaＥＵ

ＮＩＥＳ

ＡＳＥＡＮ４China※In the FY2001 survey, we added “no plans for launching medium-term overseas business operations” as the fourthchoice stated at left. We added the number of companies that chose this answer to the number of respondents who replied
they would “maintain the size of overseas business operations at the present level” to enable a time-series comparison in
the FY2001 survey. We deleted “no plans for launching medium-term overseas business operations” from the FY2002
survey. We adjusted for the FY2001 figure by deducting the number of companies that chose “no plans for launching
medium-term overseas business operations” to reflect this change.

Other
Asian
countries

North
America

Latin
AmericaＥＵ

In the FY2002 survey, we clearly defined NIES, ASEAN4 and China into smaller regional
units. We defined NIES as Korea, Taiwan, Singapore, and Hong Kong. We defined
ASEAN4 as Thailand, Indonesia, Malaysia and the Philippines. We divided China into
Northeastern China, Northern China, Eastern China, Southern China and inland China.
Figure 7 shows the totale figures for respective regions of operation.

Respondents appear to maintain a positive approach to overseas business operations
By region, China was most often cited by the companies responding as the place where they would
be “strengthening and expanding overseas business operations” (70.1%), followed by North America(50.3%). In the FY2002 survey, respondents indicated a greater willingness to strengthen and expand
operations in EU, and Central and Eastern Europe. This development is one of the features resulting
from the FY 2002 survey. Many of the companies interviewed told us ”We plan to launch business
operations in Central and Eastern Europe because our customers have moved operations there. We
would eventually establish local supply bases and look for new customers.” Many of the firms
interviewed said, “Competition is tough, but we have an intention to boost sales in EU by investing
resources in marketing activities.”
The ratios of respondents intending to strengthen and expand business operations in China and
ASEAN4 dropped from the FY2001 survey. Those who favored expanding operations in China
decreased in ratio from 80.6% in the FY 2001 survey to 70.1%. Those supporting a buildup of
operations in ASEAN4 fell in ratio from 55.7% in the FY2001 to 44.2%.

Differences within respective regions (described on the next page) apparently contributed
to these survey results. Several interviewed companies consider “The potential of theChinese market and low cost of labor there attractive, but legal and taxation systems in
China have many ambiguous areas and there are many local competitors. When we
consider these conditions, it is difficult for us to judge that strengthening business
operations in China will lead to greater profits or not. So we will maintain business
operations at the present level.” Such remarks suggest that some Japanese manufacturers
maintain business operations in China where many Japanese manufacturers expand theiroperation. Many companies operating in ASEAN4 told us “We already have bases andmay change the content of their operations. However, we have no plans to expand
operations in the near future.” Such remarks suggest that major Japanese manufacturers
who have established operations in ASEAN4 are opting to maintain operations at thepresent level.

Figure 8 Intentions for strengthening and expanding business operations in respective countries and regions

China 4/
(87

(146

(278

(224

(87

(293

(206

(196

(142

(Unit : ％) companies) companies)companies) companies) companies) (Unit : ％) companies) companies) companies) companies)
0.7
0.9
0.7
1.4
2.3
2.3
100.0
100.0
2.4
3.5
5.6
18.0

80.0

100.0

4.9

6.2

5.3

3.1

63.3

79.5

46.0

64.4
70.8

40.0

48.3

45.1
20.0

31.1

35.2

Inland
China

39.2
29.0

32.5
23.9

0.0

0.0

0.0

20.0

ThailandIndonesia

Korea

Malaysia Philippines

TaiwanWill strengthen or expand
overseas business operations
Note 4: We divided China into five regions (Northeastern China,
Northern China, Eastern China, Southern China, and inland
China) in the FY2002 survey. These five regions consisted of thefollowing provinces and administrative districts:

56.7

20.0

Eastern
Northeastern
China Northern China Southern
China
China

64.7

60.0

40.0

61.6

55.9

61.3

Will reduce or withdraw fromoverseas business operations
Will maintain the size ofoverseas business operations
at the present level

52.4
60.0

60.0

81.3

(204
(194
(241
(226
companies) companies) companies) companies)

80.0

42.7

49.4

51.7

40.0

(Unit : ％)

19.6

37.0

80.0

8

NIES

ASEAN4Singapore Hong Kong

Northeastern China:
Heilongjiang Province, Jilin Province, and Liaoning Province
Northern China:
Beijing, Tientsin, Hebei Province, and Shandong Province
Eastern China:
Shanghai, Jiangsu Province, Anhui Province, and Zhejiang
Province
Southern China:
Fujian Province, Guangdong Province, and Hainan Province
Inland China:
Provinces other than those mentioned above and autonomous
regions

Domestic and intra-regional differences exist in overseas business operations
Survey respondents continued to show a strong willingness to strengthen and expand operations
in major Asian countries like China and ASEAN4. They exhibited a particularly strong
willingness to expand business operations in Eastern China and Southern China, and Thailand in
ASEAN4. The preference for these regions reflects priorities there. Survey respondents realizethat there are intra-regional differences and that they expand operations selectively by area.
Japanese manufacturers operating in China exhibited a tendency to strengthen and expand
business operations mainly in coastal areas. Furthermore, the largest group of respondents
operating in Eastern China cited the “establishment of new bases of production.” Amongrespondents operating in other parts of China, the “expansion of existing production lines” wasthe most common response. This difference suggests that Japanese companies operating indifferent parts of China are adopting different stances. “Expansion of existing production lines”
was the most common response among respondents operating in ASEAN4. Generally speaking,survey respondents operating in ASEAN4 showed a willingness to strengthen and expand the“production function”. Japanese manufacturers operating in ASEAN4 appear less willing toestablish new production facilities.

Survey respondents operating in China and ASEAN4 shared a strong willingness to strengthen andexpand the “production function.”Many of the companies interviewed said, ”We hesitate to launch sales
activities in the Chinese market due to such issues as collecting of receivables and establishing marketingoutlets.” Many companies already marketing products in China explained, “We are dealing mainly withJapanese companies they had done business with before and are planning to expand production according
to customer demands. We have a desire to increase transactions with local customers, however, we are
not doing much business with Chinese companies at the moment in view of the risk of engaging incompetitive pricing.”
The FY2002 survey results indicate that respondents operating in NIES are adopting different approaches
to expanding operations in different countries and regions. Survey respondents expressed a relatively
strong willingness to strengthen and expand business operations in Korea and Hong Kong. Survey
respondents operating in NIES shared a strong willingness to expand “sales function.” Many of thecompanies interviewed told us “Korea and other NIES offer little advantages to manufacturers except forthe capital-intensive industry due to high local labor costs. Some respondents intend to refrain from new
equipment investments in NIES. However, NIES have good administrative reforms, infrastructuraldevelopment, and increasing demand for consumer goods popular.”【Attitude toward Expanding Business Operations in China and ASEAN】
Figure 9 Attitude toward expanding operations in
China and ASEAN (Survey respondents providing
valid responses: 461)
Comparison
not possible
and otheranswers
14.5%

Priority given
to expanding
operations in
China
26.0%

AFTA willoffer noeffect.
35.5%

Priority given
to expanding
operations in
ASEAN
5.6%

Balanced
expansion ofoperations inboth regions
53.8%

Figure 10 Expectations for AFTA (Survey
respondents providing valid responses: 459)

Positive
effects canbeexpected.
53.6%

Positive
effects
cannot be
expected.
10.9%

Expectations for China upon joining the WTO and the statusof progress

107
100
50

Non-tariffbarriers to
trade

Observanceof WTO
regulations

0

200

114

93

150
100

We asked survey respondents whether they place priority on expanding
operations in China or ASEAN in the future. A majority of respondents
said they would “expand business operations in a balanced manner by
distributing risks (to both regions)”(53.8%). 26.0% of the respondents
said they would “give priority to expanding operations in China.” Thisratio sharply contrasted with that of respondents who called China“promising” in response to another question (on page 14). Some 373 of
the total 418 companies answered the question that way, and accounted
for 89.2% of respondents who provided valid responses.

When asked about AFTA (ASEAN Free Trade Area), 53.6% of survey
respondents said they “expect” AFTA to help liberalize trade within theregion covered. The most popular reason cited for their view was“expanding trade within the region due to reduced tariffs,” followed by“simplifying the customs clearance procedure,” “market expansion,” and“greater division of labor within the region” in that order. A lot of
respondents belonging to the materials industry like steel and chemicals
replied they have “expectation” for AFTA. A high ratio of automakers
among respondents expressed the same view.

Issues of post China’s WTO entry
123

74
114

50

139
78

33

14

0

Protection of
intellectual
propertyrights150

250

Tariffreduction

200

300

Abolishmentof localcontent andother business
requirements

209

Numbers of survey respondents providing valid
responses (number of such companies)

250

244

Intensifiedcompetitionin theChinesemarketNumbers of survey respondents providing valid responses(number of such companies)

300

A majority of respondents favor a “balanced
expansion of operations in China and ASEAN”

53.6% of respondent have expectations for AFTA

Figure 11: Issues and expectations of post China’s WTO entry(Survey respondents providing valid responses: 435)
Issues China must address upon joining theWTO

9Difficult to judge
No progress has been made.
Progress has been made.

When asked about issues of following China’s WTO entry, 244
companies (or 56.1% of survey respondents) mentioned, “Intensifiedcompetition in the Chinese market.” The preference for this answer
suggests that markets are being liberalized in China. Some 209
companies (or 48.0% of respondents) expressed concerns about China“observing WTO regulations.” Some 107 companies (or 24.6% ofrespondents) cited “existing non-tariff barriers” as issues following
China’s WTO entry. Survey respondents expressed strong hopes that
Chinese authorities will ensure the effectiveness of institutional
reforms after China’s WTO entry. Respondents recognized certain
progress made in “tariff reduction,” but hoped more improvement in“protection of intellectual property rights” and “abolishment of local
content and other business requirements.”

【 Evaluation of Overseas Business Performance 〜Evaluation of Satisfaction with Sales and Profitability〜 】
Figure 12 Evaluation of Overseas Business Performance
3.2

Evaluation of Satisfaction with Profitability(Fiscal 2001 survey: Evaluation of satisfaction with sales, profitability)

3.1(Fiscal 2002 survey: Evaluation of satisfaction with sales, profitability)(3.10 , 3.06)

NIES

3.0
(3.00 , 2.91)

2.9

ASEAN4 (2.99 , 2.86)

2.7
Central andEastern Europe

2.6
2.5
2.4
2.5

3.2

(3.08 , 2.85)(2.99 , 2.82)

2.8(2.83 , 2.71)(2.83 , 2.70)(2.79 , 2.67)(2.88 , 2.67)(2.62 , 2.60)
Latin
America(3.03 , 2.80)

China

North
AmericaEU(2.69 , 2.45)(2.52 , 2.44)

2.6(2.71 , 2.47)

2.7
2.8
2.9
3.0
Evaluation of Satisfaction with Sales

3.1

3.2

Cf. Results of FY2001 Survey

Evaluation of Satisfaction with Profitability(Fiscal 2000 survey: Evaluation of satisfaction with sales, profitability)(Fiscal 2001 survey: Evaluation of satisfaction with sales, profitability)(3.27 , 3.11)

NIES

3.1
(3.10 , 3.06)(3.25 , 2.99)

3.0(3.39 , 3.04)
ASEAN4
North
America

2.9(3.08 , 2.85)

10

Respondents are not making satisfactory profits in China
The FY2001 survey found evaluation of satisfaction with sales and profitability declined among
respondents operating in many regions. As in the FY2001 survey, evaluation dropped among respondents inall regions except ASEAN4 in the FY2002 survey. The causes of such a decline in evaluation of satisfaction
with profitability are polarized. Survey respondents who cited “difficult to obtain customers (intensecompetition with other companies)” increased among those operating in such regions as China and Latin
America. Meanwhile, respondents who cited “shrinking market due to economic downturn” as the cause oflost satisfaction increased among those operating in North America, EU, and Central and Eastern Europe.
We interviewed respondents operating in China to find factors that caused their evaluation of satisfaction
with profitability to decline. Many interviewees told us “We cannot compete with Chinese companies thatsell goods for mass consumption at unprofitable low prices, and intense competition among Japanesecompanies is narrowing profit margins on some value added items.” Such remarks suggest that Japanesecompanies operating in China are not achieving profits considered satisfactory by their headquarters homeoffices. We also found through interviews that, in North America, the sluggish performance of electricalequipment and electronics manufacturers has contributed significantly to declining evaluation of satisfaction
with profitability among respondents operating there. Many interviewees told us “Last year’s terrorist
attacks on the United States did not have a lasting impact on business, but demand is unlikely to recover due
to the ongoing IT recession. Layoffs and consolidating operations are not effective in recovering profits
quickly.”
The FY2002 survey found that evaluation of satisfaction with profitability rose among respondents
operating in ASEAN4. Specifically, evaluation of satisfaction with profitability rose among survey
respondents operating in Thailand. The favorable performance of the auto-industry contributed to this result.
The evaluation of satisfaction with profitability among respondents operating in other ASEAN4 nations,however, leveled off or declined. This finding reflects that ASEAN4 is also affected by declining demand in
the United States and Japan. Companies that selected “cost reductions are difficult (personnel expense, rawmaterials costs, etc.)” increased among survey respondents operating in ASEAN4. Several companies
interviewed said, “It is difficult to sell products a lot in the ASEAN region because business conditions have
not returned to levels before the currency crisis. We are securing profits by cutting such expenses as for
inviting workers from Japan, however it is difficult to reduce further cost.” These issues will be very
important in the near future because Japanese manufacturers operating in ASEAN4 are facing intensifying
price competition with their Chinese counterparts.

(2.99 , 2.82)

2.8(2.93 , 2.73)(2.83 , 2.70)

2.7(2.79 , 2.67)

2.6
2.7

(3.05 , 2.81)

Central andEastern Europe(3.03 , 2.80)

China(2.89 , 2.68)(3.03 , 2.75)
EU

Latin
America(2.88 , 2.67)

2.8

2.9
3.0
3.1
Evaluation of Satisfaction with Sales

3.2

3.3

3.4

※ Evaluation standards: (Compared to initial objective)
1．Unsatisfactory 2．Somewhat unsatisfactory 3．Can’t say either way 4．Somewhat satisfactory 5．Satisfactory※ Evaluation of satisfaction with sales refers to the assessment of sales “excluding sales to theparent company”.
Evaluation of satisfaction with profitability refers to the assessment of “return on
investment”.
Evaluation of satisfaction with sales and profits is based on business performance in respective
overseas regions as evaluated by the parent companies in Japan. These evaluations do notreflect increases or decreases in sales or profits.

11

Figure 13 Reasons for low (“Somewhat unsatisfactory”, “Unsatisfactory”) evaluation ofsatisfaction with profitability (multiple responses)
North America

China
60.0%

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

50.0%

Difficult to obtain customers (intensecompetition with other companies)

40.0%

Shrinking market due to economic
downturn

30.0%

60.0%

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

50.0%

Difficult to obtain customers (intensecompetition with other companies)

40.0%

Shrinking market due to economic
downturn

30.0%

Foreign exchange losses

Foreign exchange losses
20.0%

20.0%
Demand by customers to reduce sales
prices10.0%

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

0.0%
FY2000FY2001

Demand by customers to reduce sales
prices10.0%

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

0.0%
FY2000FY2002

FY2001

FY2002EU

ASEAN460.0%

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

50.0%

Difficult to obtain customers (intensecompetition with other companies)

40.0%

Shrinking market due to economic
downturn

30.0%

60.0%

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

50.0%

Difficult to obtain customers (intensecompetition with other companies)

40.0%

Shrinking market due to economic
downturn

30.0%

Foreign exchange losses

Foreign exchange losses
20.0%

20.0%

Demand by customers to reduce sales
prices10.0%

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

0.0%
FY2000FY2001

FY2002

Demand by customers to reduce sales
prices10.0%

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

0.0%
FY2000FY2001

FY2002

【 Approaches to Restructuring Overseas Business Operations and Concrete Restructuring Plans 】
Figure 14 Changes in ratios of respondents who consider restructuring
overseas business operations necessary
58.1
ASEAN4

43.4
57.3

China

67.8
53.8

North
America

FY2001
FY2002

56.9
52.5

EU

52.5

0.0

20.0

40.0

60.0

80.0 （Unit : ％）Figure 15 Concrete plans for restructuring overseas business operations（Unit : ％）

70.0

63.9

63.0

60.0
50.0

40.2

40.0
30.0
20.0

52.9 52.9

52.5

45.3

Review of the management system

Review of the sales system

34.2
29.5

26.4

Review of the distribution system

18.8

18.0

13.5

12.2

10.0
0.0

Review of the production system

38.5

ASEAN4

China

North
AmericaEU

Respondents in China who consider the restructuring ofbusiness operations urgent
The ratio of companies that selected the answer “restructuring of business operations isnecessary” was highest among survey respondents operating in China. Those selecting thisanswer accounted for 67.8% of all respondents operating in that country. Their ratio
increased from 57.3% in the FY2001 survey. This increase suggests a growing need for
restructuring operations among Japanese manufacturers operating in China. When asked
about concrete methods of restructuring business, 77.7% of survey respondents selected“review of the production system.” Several companies interviewed stated an intention toreconstruct operations to strengthen business, and said “We will expand production lines
and change products to cope with the need for increasing output and establish new bases ofoperation according to demand.” Other companies revealed plans to salvage unprofitabledepartments and told us ”We will stop making products that are losing pricecompetitiveness with Chinese companies and switch to manufacturing new products.”
The ratio of respondents operating in ASEAN4 who selected “restructuring of business
operations is necessary” decreased from 58.1% in the FY2001 survey to 43.4%. Thisdecrease suggests that operations are being restructured in this region. Survey respondents
operating in ASEAN4 told us through interviews ”We have maintained bases of operationin the ASEAN region for many years and intend to review bases of operation to cope with achanging business environment. We will review bases of operation as required, and we aretaking a wait and see stance at the moment.”
The ratio of respondents operating in North America who selected “restructuring of business
operations is necessary” grew slightly from 53.8% in the FY2001 survey to 56.9%. The
ratio of respondents operating in North America who advocated “review the management
system” as a concrete method of restructuring surpassed that of counterparts operating inother regions. Many of the companies interviewed stated, ”We must initiate drastic
management reforms for restructuring because local subsidiaries have matured.”

77.7

80.0

12

The ratio of respondents operating in EU who selected “restructuring of business operations
is necessary” amounted to 52.5% in both surveys conducted in the FY2001 and 2002. The
largest group of survey respondents operating in EU cited “review of the sales system” as aconcrete method of restructuring. Many companies interviewed specified “We intend tostrengthen marketing networks in this region, though we have been unable to increase EU
market share until now because local manufacturers have strong marketing our capabilities.”【Evaluation of Investment Climate in Major Asian Countries】 （Evaluation of changes occurring during FY2000 to FY2001）
Figure 16 Domestic Infrastructure ( including Power,
Telecommunications and Transport) ＜All Industries＞
Thailand

21.6

78.0

0.4

Figure 18 Domestic Political and Social Situation ＜All Industries＞＜ 282
companies＞

Thailand10.5 0.7＜ 218
companies＞

Indonesia

13.9

Malaysia

Indonesia

11.0

6.4

Malaysia

12.8

0.0

87.2

＜ 219
companies＞

Philippines

8.4

2.2

89.3

＜ 178
companies＞ Philippines

82.6

China

58.0

India

11.9

Vietnam

0.6

85.2

3.0

22.2

0.0

41.4

0.0

77.8

20.0

40.0

60.0

80.0

構成比
worsened

improved＜ 333
companies＞

China

＜ 135
companies＞

India

＜ 144
companies＞

Vietnam

100.0 (Unit : ％)remain the same

92.1

＜ 278
companies＞

91.2

＜ 215
companies＞

7.6

Indonesia

4.7 4.2

Malaysia

4.2

0.9

94.9

＜ 215
companies＞

Philippines 2.3

2.8

94.9

＜ 176
companies＞

India

25.6

2.9

Vietnam

1.5

12.1

0.0

＜ 332
companies＞

71.4

3.0

＜ 136
companies＞

95.6

＜ 141
companies＞

87.2

0.7

20.0

improved

40.0

構成比
worsened

60.0

80.0

remain the same

1.1

＜ 177
companies＞

80.2

18.6

0.6

73.2

＜ 332
companies＞

70.5

＜ 139
companies＞

28.8

10.6

0.0

＜ 213
companies＞

93.9

1.9

26.2

0.7

＜ 216
companies＞

58.3

27.8

＜ 141
companies＞

89.4

0.0

20.0

40.0

構成比
worsened

60.0

80.0

100.0 (Unit : ％)remain the same

Respondents who recognize improvement in investment
conditions in China, Vietnam and Thailand

Thailand

China

4.2

＜ 277
companies＞

88.8

improved

Figure 17 Legal Framework (including Transparency and
Fairness) ＜All Industries＞
0.4

13

100.0 (Unit : ％)When improvement in the investment climate was examined among major Asian countries incomparison with the situation last year, 58.0% of the companies in the FY2002 survey
recognized improvements in China’s infrastructure during last year. However, companies
maintaining bases in China had divided opinions about “Securing management-class humanresources in the local market”. Some 10.0% of survey respondents maintaining bases ofoperation in China recognized “improvement” in this situation. Meanwhile, 11.0% of the samegroup reported encountering difficulties.
Survey respondents recognized improvement in investment conditions in Vietnam andThailand as well.
Many surveyed companies expressed a view that the “ Domestic Political and Social Situation”
were subject to aggravation in Indonesia, India, and the Philippines. Many others recognizedimprovement regarding the same conditions in Indonesia, however. Business conditions were
subject to constant change in all regions. Such divided opinions apparently reflect different
points of evaluation by survey respondents.

【Countries with Promising Prospects for Business Operations over the Medium Term (next three years or so)】
The four most promising countries remain thesame in the FY2001 and FY2002 surveys

Figure 19 Promising Countries for Overseas Business Operations over
the Medium Term 5/ （multiple response）

Rnak

Countries with promising midium-term (next three years) overseas development prospects
Number of
Number of
Number of
fiscal 2000
fiscal 2001
companies
companies
Ratio (%)
Current fiscal companies Ratio (%)
surveysurvey(firms)(firms)(firms)year survey
418
100
401
100
372

Promising destinations for investment over the midium-term (next three years
Number of
fiscal 1998 Number offiscal 1999
companies Ratio (%)
companies Ratio (%)
surveysurvey(firms)(firms)
100
278
100
299
100

Ratio(%)

1

China

373

89

China

327

82

China

242

65

China

153

55

China

163

55

2

Thailand

118

28

U.S.

127

32

U.S.

154

41

U.S.

108

39

U.S.

124

41

3

U.S.

108

26

Thailand99

25

Thailand88

24

Thailand76

27

Thailand

68

23

4

Indonesia

63

15Indonesia

56

14Indonesia

54

15

India

42

15

Indonesia

49

16

5

Vietnam

62

15

India

52

13

Malaysia

43

12Indonesia

41

15

India

46

15

6

India

54

13

Vietnam48

12

Taiwan41

11Vietnam30

11Philippines

43

14

7

Korea

34

8

Taiwan

44

11

India

37

10

Malaysia

25

9

Malaysia

42

14

8

Taiwan

34

8

Korea

33

8

Vietnam35

9Philippines

25

9Vietnam41

14

9

Malaysia

33

8

Malaysia

32

8

Korea

32

9

U.K.

25

9

Brazil34

11

10Brazil19

5Singapore

24

6Philippines

30

8Brazil

21

8

U.K.

31

10

Figure 20 Reasons for Considering Top 5 Countries Promising（multiple response）

Potentiality of future market growthInexpensive labor force
Supply base for final assembly manufacturers
Present masrket size
T hird-country export baseLow-cost parts and raw materials
Export base for Japan
Excellent human resources
Product development suits the local market
G ood infrastructure
Favorable investment policies and deregulation
policies in the target country
B ecause other companies in the same industry
are advancing there
Progress towards regional integration
Acquisiton of local technology, know-how, etc.
O ther14

China
T hailand
U .S.
Indonesia
V ietnam
N umber of firms
N umber of firms
N umber of firms
N umber of firms
N umber of firms
373
Percent
112
Percent
108
Percent
61
Percent
54
Percent
322
86.3%
61
54.5%
43
39.8%
29
47.5%
30
55.6%
257
68.9%
54
48.2%
1
0.9%
45
73.8%
38
70.4%
107
28.7%
37
33.0%
29
26.9%
13
21.3%
5
9.3%
64
17.2%
11
9.8%
67
62.0%
6
9.8%
1
1.9%
94
25.2%
36
32.1%
3
2.8%
22
36.1%
13
24.1%
112
30.0%
11
9.8%
3
2.8%
10
16.4%
6
11.1%
100
26.8%
24
21.4%
15
24.6%
4
7.4%
41
11.0%
9
8.0%
18
16.7%
18
33.3%
37
9.9%
7
6.3%
30
27.8%
3
4.9%
3
5.6%
21
5.6%
8
7.1%
10
9.3%
1
1.6%
2
3.7%
27

7.2%

13

11.6%

-

-

1

1.6%

2

3.7%

34

9.1%

8

7.1%

5

4.6%

3

4.9%

2

3.7%

5
2
1

1.3%
0.5%
0.3%

6
1
-

5.4%
0.9%
-

16
2

14.8%
1.9%

4
1

6.6%
1.6%

-

-

Note 5：As a calculation method, the companies surveyed were asked to vote for the top five promising countries for business operations over the medium term
(next three years or so). The responses were tabulated for each country and ranked according to the number of the votes received
From the FY2000 survey, the focus was shifted from foreign direct investment (the flow concept) to overseas business operations (the stock concept).
Therefore, the title of Figure 19 changed from “promising destinations for foreign investment over the medium term” to “the promising countries for overseas
business operations over the medium term.”

Respondents in the FY2001 and FY2002 surveys chose the same four
countries as the most promising for medium-term business (next three
years or so). China was the most popular country in the FY2002 survey,
followed by Thailand, the United States, and Indonesia in that order.
Thailand and the United States switched positions from the FY2001
survey.
The increased level of expectation for China is one development thatcharacterizes the results of the FY2002 survey. The ratio of respondents
who called China “promising” grew from 82% in the FY2001 survey to
89%.

Respondents adopt different criteria, such as costand market potential, for judging prospects forbusiness in each region“Potentiality of future market growth” (86.3%) was cited as theoverwhelming reason for selecting China as most promising. This
overwhelming response suggests that the companies surveyed havehigh expectations for China’s market potential. Other respondents
cited “inexpensive labor force” (68.9%) and “low-cost parts and raw
materials” (30.0%) as reasons for favoring China. These answers
reflect a view among Japanese manufacturers that production costs arelower in China.
Respondents who called Thailand promising expressed opinions
similar to those of companies that selected China. They cited“potentiality of future market growth” (54.5%) and “inexpensive labor
force” (48.2%) as reasons for preferring Thailand. Other respondents
expected Thailand to become a “supply base for assembly
manufacturers” (33.0%) and a “third-country export base” (32.1%).
These answers apparently reflect a view among respondents that
Thailand has a promising cluster of industry.
Some 62.0% of survey respondents who called the United Statespromising attributed their choice to “present market size,” followed by“potentiality of future market growth” and “product development suits
the local market” in that order. These survey results suggest thatJapanese manufacturers have high expectations for the huge U.S.
market even in this period of prolonged business stagnation.

【Existing Issues in Promising Countries】

The great majority of respondents who named “promising” countries for business pointed out “issues” in the same countries. (We allowed
survey respondents to select as many answers as desired from multiple choices.) For example, 356 of 373 companies that called China“promising” cited issues of some kind in that country. The number of issues identified by survey respondents in China they consider“promising” averaged 5.5 per company.

Figure 21: Numbers of issues identified by survey
respondents in promising countries
Companies

IssuesIssues/Company

2500

Many companies in the FY2002 survey expressed the view that China appears “promising.” Many of these respondents pointed out
negative issues related to the development and application of the legal system in China. They cited such issues as “local legal system (lackof transparency),” “local legal system (undeveloped legal system),” and “local legal system (frequent and abrupt changes).” More thanhalf of the survey respondents who described China as “promising” identified institutional issues, particularly legal ones. Many
respondents expressed a view that the investment climate in China was improving, and apparently have growing expectations for businessin China. However, these companies must carefully consider the many issues that exist in China. We classified companies that identified
issues in China as those with bases of operation in China and those without such facilities, and then we compared the answers provided byboth groups. Many companies maintaining bases of operation in China considered that the “local tax system” has troubles. Meanwhile, a
relatively small number of respondents with no base of operation in China identified the “local tax system” as a issue.

6.0
5.5
5.0
4.2

4.0

4.0
1500

3.0

2.8
1000

2.2
1.8

500

356
252

252

89

132
73

Thailand

U.S.

60

Issues/Company

Number of Companies& Issues

2000

1948

The largest group of respondents cited “unstable local (intra-regional) currency” as a problem in Thailand. This opinion was shared by
46.1% of all respondents. Other companies pointed out issues in Thailand related to such intensifying competition as “intense local
competition with other firms,” “difficulty in securing local personnel,” and “increase in local labor costs.” When asked about issues in the
United States, the largest group of respondents cited “intense local competition with other firms” (68.5%). Many other respondents
identified the “difficulty in securing local personnel” and “increase in local labor costs” as issues in the United States. These answers
suggest intensifying competition in the United States. Japanese manufacturers operating in the United States are apparently encountering
increasing pressure to become more competitive in an established business environment. The great majority of respondents (81.7% of all
respondents) cited “local political and social conditions” as a problem in Indonesia, followed by “unstable local (intra-regional) currency”
named by 58.3% of survey respondents. These common responses suggest that basic conditions for investment remain a big problem inIndonesia.

2.0

1.0
170
43

28 62

0

0.0
China

15

Issues and tendencies in promising countries

Indonesia Vietnam Korea

Figure 22 Contents and tendencies of Issues (with survey respondents selecting many answers as desired from multiple choices)
IssuesLocal legal system (lack of transparency in applying
Local legal system (undeveloped legal system)
Local legal system (frequent and abrupt changes)
Complicated administrative procedure
Local tax system (lack of transparency in application of
the tax system)
Local tax system (frequent and abrupt changes)
Local deregulation towards foreign capital (increase inpermitted percentage of foreign ownership, relaxationof industry restrictions, etc.)
Local tax system (high customs duties)
Local tax system (complex tax collection system)
Local legal System （Other）
Local tax system (Other)
Competi Increase in local labor costs
Intense local competition with other firms
tionDifficulty in securing local personnel (managementlevel)
Infrastru Local political and social conditions
Local infrastructure
cture
Local procurement of raw materials, parts, etc.
and
Local
labor difficulties (labor and management
Financerelationship, etc.)
Level of local workers (worker class)
Undeveloped supporting industry
Insufficient information concerning the investment
destination
Unstable local (intra-regional) currency
Local financing
Other
SystemChina
ThailandU.S.
Indonesia
Vietnam
Korea
Number of companies Number of companies Number of companies Number of companies Number of companies Number of companies
356
Ratio (%)
89
Ratio (%)
73
Ratio (%)
60
Ratio (%)
43
Ratio (%)
28
Ratio (%)
198
55.6%
9
10.1%
0
0.0%
14
23.3%
12
27.9%
0
0.0%
165
46.3%
4
4.5%
0
0.0%
5
8.3%
20
46.5%
0
0.0%
184
51.7%
4
4.5%
0
0.0%
6
10.0%
5
11.6%
1
3.6%
146
41.0%
7
7.9%
1
1.4%
8
13.3%
7
16.3%
1
3.6%
133
130

37.4%
36.5%

9
3

10.1%
3.4%

0
0

0.0%
0.0%

6
2

10.0%
3.3%

4
5

9.3%
11.6%

1
1

3.6%
3.6%

98
71
63
2
5
57
98

27.5%
19.9%
17.7%
0.6%
1.4%
16.0%
27.5%

10
12
5
0
0
23
23

11.2%
13.5%
5.6%
0.0%
0.0%
25.8%
25.8%

0
2
5
0
0
15
50

0.0%
2.7%
6.8%
0.0%
0.0%
20.5%
68.5%

3
5
6
0
0
12
14

5.0%
8.3%
10.0%
0.0%
0.0%
20.0%
23.3%

9
5
5
2
1
2
4

20.9%
11.6%
11.6%
4.7%
2.3%
4.7%
9.3%

4
1
1
0
0
6
18

14.3%
3.6%
3.6%
0.0%
0.0%
21.4%
64.3%

92
99
87
73

25.8%
27.8%
24.4%
20.5%

27
10
11
18

30.3%
11.2%
12.4%
20.2%

18
2
0
4

24.7%
2.7%
0.0%
5.5%

18
49
16
11

30.0%
81.7%
26.7%
18.3%

7
14
18
11

16.3%
32.6%
41.9%
25.6%

5
1
0
3

17.9%
3.6%
0.0%
10.7%

42
46
36

11.8%
12.9%
10.1%

7
8
7

7.9%
9.0%
7.9%

12
7
0

16.4%
9.6%
0.0%

15
7
9

25.0%
11.7%
15.0%

3
1
9

7.0%
2.3%
20.9%

7
1
0

25.0%
3.6%
0.0%

34
31
55
3

9.6%
8.7%
15.4%
0.8%

5
41
9
0

5.6%
46.1%
10.1%
0.0%

0
7
6
3

0.0%
9.6%
8.2%
4.1%

3
35
8
0

5.0%
58.3%
13.3%
0.0%

8
12
5
1

18.6%
27.9%
11.6%
2.3%

1
5
4
1

3.6%
17.9%
14.3%
3.6%