November 13 , 2001

JBIC FY2001 SURVEY
THE OUTLOOK OF JAPANESE FOREIGN DIRECTINVESTEMENT (13th Annual Survey)【Contents】

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

Ⅱ. Summary ．．．．．．．．．．．．．．．．．．．．．．．. . . . . . . . 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 3 Years) and Changing Patterns of the Overseas Production Ratio．．． 5〇Prospect for Domestic Operations over the Medium Term (Next 3 Years) ．．．．．．．．．．．．．．．．．．．．．．．．． ．．．．．． ．．．．．．．． ．．．． ． 6〇Attitude Toward Strengthening and Expanding Overseas and Domestic Business Operations over the Medium Term (Next 3 Years)．．．．．．．． 7〇Evaluation of Overseas Business Performance 〜Evaluation of Satisfaction with Sales and Profitability〜 ．．．． ．．．． ．．．． ．．． ．． ．．．． ． 9〇Attitude toward Strengthening and Expanding Overseas Business Operations over the Medium Term (Next 3 Years): By Region ．． ．．．．．．． 10〇Evaluation of Investment Climate in Major Asian Countries．．．．．．．．．．．．．．．．．．．．．．．．．．． ．．．．．．．．．．．．．．．．． ．．．．．．．．． 11〇Countries with Promising Prospects for Business Operations over the Medium Term (Next 3 Years) ．．． ．．．．．．．．．．．．．．．．．．． ．．．．． 12〇Attractiveness of China and ASEAN4 as a Production Base over the Medium Term (Next 3 Years)． ．．．．．．．．．．．．．．．．．．．．．．．．．． ．． 13

＜Ⅰ. Overview of the Survey Method＞

1

Profile of Companies Surveyed
The purpose of this survey is to identify the current
and future trends of overseas business operations1/
and foreign direct investment (FDI) activities ofJapanese manufacturing companies. This year’s
survey was the thirteenth of an annual series thatbegan in 1989.
The survey covered 792 manufacturing companies
that have three or more foreign affiliates, including
at least one manufacturing base, as of October 2000.
The questionnaire was mailed on July 1, 2001. 501
valid responses were returned over the period from
July to August. The effective response rate was
63.3%. (In the FY2000 survey, valid returns were469 out of 791 companies surveyed, with the
response rate of 59.3%)
This year’s survey additionally looked into the“Evaluation of Investment Climate in Major AsianCountries” and “Attractiveness of China and
ASEAN4 as Manufacturing Base over the medium
term (next 3 years)”
Note 1：Overseas business operations are defined as production,
sales, research and development activities in overseas bases, aswell as outsourcing of manufacturing and purchasing activities
overseas.

Companies Surveyed, Response Rateand Overseas Affiliates(Unit: Companies, %)FY01 FY00 FY99 FY98 FY97
792
791
786
749
743
Number of companies surveyed
501
469
472
455
445
Number of respondent companies
63.3 59.3 60.1 60.7 59.9
Response rate
7,710 7,285 7,225 6,654 6,978
Number of overseas affiliates(1) Respondents by paid-in capital (Individual company base)
Number ofcompanies%
Less than ¥100 million
33
6.6%¥100 million
less than ¥500 million
40
8.0%
22
4.4%
¥500 million – less than ¥1.0 billion¥1.0 billion – less than ¥5.0 billion
98 19.6%
78 15.6%¥5.0 billion ・ less than ¥10.0 billion¥10.0 billion or more
230 45.9%
Total
501 100.0%(2) Number of respondent companies,
by annual sales (Consolidated base)
Number ofcompanies%
Less than ¥50.0 billion
183 36.6%¥50.0 billion
less than ¥100.0billion
100 20.0%¥100.0 billion
less than¥200.0billion
74 14.8%¥200.0 billion
less than¥300.0billion
36
7.2%¥300.0 billion
less than¥500.0billion
37
7.4%¥500.0 billion
less than ¥1.0 trillion
30
6.0%¥1.0 trillion or more
40
8.0%
Total
500 100.0%※ One company did not provide this information(3) Number of respondent companies, by number of
employees (Individual company base)
Number ofcompanies%
300 employees or less
66 13.2%
301 to 500 employees
48
9.6%
501 to 1,000 employees
101 20.2%
1,001 to 2,000 employees
112 22.4%
2,001 to 5,000 employees
110 22.0%
5,001 to 10,000 employees
31
6.2%
10,001 to 30,000 employees
23
4.6%
30,001 or more employees
10
2.0%
Total
501 100.0%(4) Number of respondent companies, by industrial classification
Number of
Ratio
Industrial classificationcompanies（％）
Foodstuffs
23
4.6%
Textiles25
5.0%
Wood and wood products
3
0.6%
Paper and pulp
7
1.4%
Chemicals
77 15.4%
67 13.4%[Chemicals (excluding pharmaceuticals)][Pharmaceuticals]
10
2.0%
Petroleum and rubber
15
3.0%
Ceramics, cement and glass
12
2.4%
Steel
14
2.8%
Nonferrous metals
17
3.4%
Metal products
21
4.2%
General machinery
55 11.0%[Assembled products]
42
8.4%[Components]
13
2.6%
Electrical equipment and electronics
97 19.4%[Assembled products]30
6.0%[Components]
67 13.4%
Transportation (excluding Automobiles)
10
2.0%
Automobiles
71 14.2%[Assembled vehicles]
10
2.0%[Components]
61 12.2%
Precision machinery
20
4.0%[Assembled machinery]
17
3.4%[Components]
3
0.6%
Other
34
6.8%
Total
501 100.0%

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

575
626
15
125
1,341

Manufacturing bases
Sales bases
R&D bases
Other
Total

ASEAN4

China

1,012
234
18
85
1,349

Other Asian
countries

North
America

Latin
America

150
38
2
10
200

692
530
84
295
1,601

176
116
1
65
358

772
159
19
56
1,006

Central-Eastern Other European
Europecountries

EU

396
782
47
183
1,408

38
52
1
8
99

FormerSoviet
Union

8
28
7
43

Southeast Middle East &AfricaAsia Pacific

3
7
3
13

59
112
4
39
214

21
43
2
12
78

Total

3,902
2,727
193
888
7,710

※The following is the classification of major regions in this survey:
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 Herzegovin

NIES：
ASEAN4：
North America：
EU：
Central-Eastern Europe：(Unit：
companies）

Overseas Manufacturing Bases in Major Regions over Time:
based on Past Survey Data

1,200

Overseas Affiliates in Major Regions over Time:
based on Past Survey Data

(Unit：
companies）

2,000

1,000

North
AmericaEU

ASEAN4
1,500

NorthAmerica

800

1,000

600

400

NIES
NIES

200

EU

China

500

Other AsianCountries

Other AsianCountries

ASEAN4

China
0

0

89

90

91

92

93

94

95

NIES

ASEAN4

China

North America

96

97

98

99

00

01 (Unit：year）

Other Asian countries
EU

89

90

91

92

93

94

95

96

97

98

99

00

01 (Unit：year）

NIES

ASEAN4

Other Asian countries

China

North America

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

＜Ⅱ. Summary＞

3

1．The top priority issue for Japanese manufacturing companies in their domestic

5．In contrast to general improvement in almost all the regions in the FY2000 survey,

and overseas business operations was “strengthening and expanding overseas
production” (54.4%), followed by “strengthening and expanding the customer
base by the company’s own effort” (37.7%), “reviewing and improving
efficiency in the management of group companies” (33.4%) and “acquiring
business resources to strengthen principal business” (28.7%). The emerging
stance of business strategy seems to be strengthening overseas production,
while restructuring the existing lines of business.

the evaluation of satisfaction with respect to sales and profitability declined in mostregions in this year’s survey. In the case of China, the evaluation of satisfaction
with profitability itself was not very high despite improvements in sales andprofitability. The reason most frequently cited for the higher evaluation ofsatisfaction with respect to profitability in China was “good sales of the existingproducts,” followed by “satisfactory cost reduction ” and “production facilities are
moving toward full-scale operation.”

2．Of the companies that indicated their attitude toward overseas business6．By region, China was most often cited by the companies responding as the place

operations over the medium term (next 3 years), 71.6% responded, they “willstrengthen and expand” these operations, whereas 28.0% indicated, they “willmaintain the current level,” with a minuscule 0.4% replying, they “will reduceor withdraw” from them. The 71.6% share for the companies that “willstrengthen or expand” was a jump from 54.5% in the FY2000 survey. The
companies showed an increasingly positive attitude toward expanding theiroverseas business operations. The overseas production ratio rose to 23.0% foractual figures in FY2000 (from 21.1% in FY1999), whereas the projection of
the planned value for FY2004 rose to 29.9%.

where they would be “strengthening and expanding overseas business operations,”
followed by ASEAN4 and North America.

3．Whereas the companies that responded, “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
production facilities from overseas business operations,” decreased to 39.1%
from 52.2% in FY2000 survey, those considering, “domestic production will
decrease because overseas production will replace domestic production,” rose
to 22.5% from 13.6% in FY2000. The latter response indicates a move totransfer production and sales bases to overseas locations. At the same time,
however, 36.2% of the companies replied, “domestic production will focus onother products and product areas, filling in the resulting gap,” and many ofthem said they would be “specializing in higher value-added products.”

4．When the attitude toward overseas and domestic business operations over the
medium term was compared with the findings in the FY2000 survey, thegeneral trend was a growing stance for expanding and strengthening overseas
businesses and a weakening stance for strengthening and expanding domestic
operations. By industry this trend was prominent in automobiles and electricalequipment and electronics. On the other hand, chemicals and generalmachinery had a tendency to strengthen and expand both overseas anddomestic business operations.

7．When improvements in investment climate were examined among major Asian
countries in comparison with the situation in 1996 before the Asian crisis, China
and Thailand were most often cited by the companies responding for
improvements in all the areas of “domestic infrastructure”, “legal framework”“domestic political and social situation”.

8．The top four rankings of the countries with promising prospects for overseas
business operations over the medium term (next 3 years) were unchanged from the
FY2000 survey: China ranked first, followed by the U.S., Thailand and Indonesia.
While many companies citing China said they had high expectations for growthpotential of its market, some companies pointed out that a number of problems(“lack of transparency in the application of laws”, “frequent and abrupt changes inlaws and regulations” etc.) remain for business development in China.

9．Comparison of China and ASEAN4 in terms of their attractiveness as a production
base over the medium term found that 56.7% of the companies responding felt
“China is more attractive than ASEAN4,” citing the “potentiality of future market
growth” as the reason. The companies that believed “ASEAN4 is more attractive
than China” accounted for 10.2% of the total respondents, and those respondingthat they were “unable to make any judgment for now” accounted for 33.0%. Thisimplies that the companies seem to be taking a balanced attitude based on risk
diversification without having excessive expectations for China.
In interviews with the respondents that considered China promising, somecompanies also pointed out that they were “considering the next phase of businessdevelopment as the movement to create business bases which has run its course in
ASEAN4, and not that they had shifted weight away from these countries.”

＜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
and Overseas Business Operations 2/

Cf. Results of FY2000 Survey

Number of companies

Rank(among 485
companies)

Response
rate

N um ber of com panies

R ank
R eview and im prove efficiency of group m anagem ent (sellor spin-off a unit of existing businesses, etc.)
R eview and strengthen m anagem ent m ethods (establishingprocedures such as new financial indicators or operating
perform ance evaluation standards)
R eview overseas production system s from the view point of
total cost
A cquire business resources to strengthen principal business(acquisitions, alliances, m ergers, etc.)(am ong 435
com panies)

R esponse
rate

221

50.8%

213

49.0%

159

36.6%

158

36.3%

1

Expand and strengthen the overseas production

264

54.4%

2

Expand and strengthen the company’s own customers

183

37.7%

162

33.4%

139

28.7%

3

127

26.2%

4

114

23.5%

5

E xpand and strengthen the com pany’s ow n custom ers

137

31.5%

6

E xpand percentage of overseas production

91

20.9%

7

Strengthen service activities related to com pany’s
ow n m anufactured products

82

18.9%

8

Introduce or establish a global supply chain m anagem ent

80

18.4%

9

E xpand transactions over the Internet

39

9.0%

28

6.4%

27

6.2%

9

2.1%

3
4
5
6

Review and improve efficiency of group management (sellor spin-off a unit of existing businesses, etc.)
Acquire business resources to strengthen principal business(acquisitions, alliances, mergers, etc.)
Strengthen service activities related to company’s
own manufactured productsReview domestic production systems from the viewpoint of
total cost (reduction in and withdrawal from domestic

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%

10

Expand and strengthen the domestic production

53

10.9%

11

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

41

8.5%

12

Outsource the activities of production

23

4.7%

13

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

12

2.5%

14

Expand transactions over the Internet

8

1.6%

※ 25 companies answered “Other” as a priority issue

1
2

A ttach im portance to overseas research and developm ent
system s
O utsource the activities of production to com panies such as
11
E M S/O E M m anufacturers
Strengthen technology developm ent by utilizing venture
12
com panies※ 13 com panies answ ered “O ther” as a priority issue10

Note 2:The questionnaire asked the companies surveyed to select three priority issues irrespective of their rankings and make a simple summation of the responses for each item on the list of alternatives. The results for the
FY2000 survey are shown on the right panel for comparison. However, it should be kept in mind that the FY2000 survey gave slightly different alternatives for priority issues. In addition, the FY2000 survey also asked the
respondents to assign rankings in selecting three priority issues, though, similar to this survey, the responses were tabulated by a simple summation for each item on the list of alternatives.

Continuing to Realign Business Operations, while “Strengthening and Expanding Overseas Production”
The most numerous response with respect to the current top priority issue for domestic
and overseas business operations was “strengthening and expanding overseas
production” (264 respondents), followed by “strengthening and expanding thecompany’s own customers” (183). Those who responded “reviewing and improving
efficiency of group management” (162) accounted for 33.4%, compared with 50% plus
in the FY2000 survey.
The responses reveal that the companies were positioning themselves toward overseas
business expansion to obtain earnings, assigning the top priority on “strengthening andexpanding overseas production,” while being pressed to reform business operations
pertaining to the restructuring of their businesses.

In individual interviews, the majority of companies responded “In the past
2-3 years, we had to ensure a solid earnings base, centered on selection andconcentration, to deal with the introduction of consolidated financial
reporting. In these days, however, in addition to proceeding with these steps,
we are focusing our efforts on attractive overseas markets as the next step.”
Many companies also pointed out that “given increasingly tough pricecompetition, it is imperative to further increase production in developing
countries to reduce costs.”【 Prospect for Overseas Business Operations over the Medium Termand Changing Patterns of the Overseas Production Ratio】 Figure 3 Changing Patterns of Overseas Production Ratio 5
Figure 2 Overseas Business Operations 3/ over the Medium Term
(Next 3 Years), by Major Industry(Unit: %)

29.9

30

25

(Unit：％)

100

0.4
28.0

34.8

28.0

21.7

29.3

Will reduce or withdraw fromoverseas business operations

26.6
40.0

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

60
90.0
71.6

65.2

68.0

70.7

74.5

Textiles

72.3
60.0

Automobiles
Chemicals General
Precisionmachinery Electricalequipment &machineryelectronics

Note 3: Overseas business
operations are defined as

production, sales, research anddevelopment activities inoverseas bases, as well as
outsourcing of manufacturing
and purchasing activities
overseas.

Cf. Results of FY2000 Survey(Unit：％)

(440
(23
(22
(71
(38
(78
(68
(20
companies) companies) companies) companies) companies) companies) companies) companies)

100

1.4

80

44.1

1.4
Will reduce or withdraw fromoverseas business operations
34.6
45.1
65.2

59.1

33.8

35.0

55.3

60

65.4

54.5

20
0

53.5
34.8

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

40
40.9

All industries Foodstuffs Textiles

66.2

19.2

16.1

15

13.7

14.1

15.1

14.8

10

Plannedvalue

Actual
value

5

0

20
0 All industries Foodstuffs

20.9 21.1

17.3

10.0
25.5

19.0

20

1.1

4.0

80

40

23.0

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

65.0

89

90

91

92

93

94

95

96

97

98

99

2000

2004

(Fiscal y ear)
※ Overseas Production Ratio = (Overseas production volume)/(Domestic production
volume + overseas production volume)Companies Poised to Strengthen and Expand Overseas
Business Operations
Of the companies that indicated their attitude toward overseas business operations
over the medium term, 71.6% responded they “will strengthen and expand” these
operations, whereas 28.0% 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 the companies that “will strengthen or expand” overseas business
operations jumped to 71.6% from 54.5% in the FY2000 survey.4/ 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 23.0%
in FY2000 (from 21.1% in FY1999), whereas the projection for FY2004 rose to29.9%. The changing pattern of this ratio by major industry is shown below.
FY 2000 actual FY 2001 estimated actual FY 2004 plan value
Electrical equipment& electronics
Automobiles
Precision machinery
Chemicals

33.1%

34.8%

41.2%

25.3%
17.7%
17.7%

27.5%
19.1%
18.9%

34.7%
26.8%
22.9%

44.7
Note 4: Although it should be noted that the questionnaire before the FY1999 survey asked “investment relative
to actual figures in the past 3 years” over the medium term, the share of the companies indicating positive stancefor overseas business operations since the FY1996 survey evolved over time as follows.

Chemicals General
Electrical Automobiles Precision
machinery equipment &machineryelectronics

71.2% (FY1996)→64.6% (FY1997) → 38.1% (FY1998)→ 21.1% (FY1999) →54.5% (FY2000)→71.6%(FY2001)

【Prospect for Domestic Operations over the Medium Term (Next 3 Years)】
Figure 4 Prospect for Domestic Operations over the Medium Term
(Next 3 Years): Attitude toward Domestic Business Operations
34.8

1

28.2

14.5

2

16.2
13.9
26

4

30.7
1.8

5

3.9
5

6

FY 2000 survey (442 companies base)

6.4
0.9

7

FY 2001 survey (482 companies base)

0.6

0

5

10

15

20

25

30

35

Domestic Production is Shifting to High Value-Added Products

When the medium term attitude toward domestic business operations was compared with the findings in the
FY2000 survey, there was a weakening stance for strengthening and expanding domestic operations (from 34.8%
in FY2000 survey to 28.2%), inclining more toward realignment and restructuring of domestic operations (from26.0% in FY2000 survey to 30.7%).
As for the medium-term effect of overseas business operations on domestic production facilities, thecompanies that responded “Since overseas investment aims at maintaining and expanding the market share ofsales from (and/or exports and imports from) overseas production bases, there will be no effect on domestic
production facilities from overseas business operations” decreased to 39.1% from 52.2% in FY2000, while theshare of those observing “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, filling in the resulting gap”5/fell slightly from 40.7% to 36.2%. On the other hand, those considering “domestic production will decrease
because overseas production will replace domestic production” rose to 22.5% from 13.6% in FY2000. Thesefindings imply increasing attitude toward strengthening and expanding overseas business operations.

17

3（Unit：%)

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

When the companies that replied “while the production of product lines that used to be produced domesticallyis shifting to overseas, domestic production will focus on other products and product areas, filling in the
resulting gap” about how they would convert domestic production, the most numerous response was“specializing in higher value-added products” （79.9%), followed by “moving to new product areas” （42.5%）.
Many companies are shifting production and sales bases to overseas locations to maintain and strengthen
competitiveness, while moving domestic production to higher value-added products, accelerating efforts toengage in production and sales activities in an optimum location.

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

Note 5: In FY2000 survey, a slightly different alternative, “while the production of product lines that used to be
produced domestically is shifting overseas, domestic production will shift to high value-added products,” was used in thequestionnaire. Its findings were used for the purpose of chronological comparison with the response to this alternative.

Figure 6 Move for Other Products and/or Product Areas inDomestic Production (174 companies) (multiple response)

52.2

1

39.1
13.6

2

79.9

1

11

FY2001 Survey

40.7

3

6

36.2

2

FY 2000 survey (450 companies base)

3

5.2

13.6

4

22.5

FY 2001 survey (481companies base)

2.7
4.2

5

42.5

9.8

4

（Unit：%)
0

10

20

30

40

50

60

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 production facilities.
2．Since products produced overseas differ from domestically produced products, there will be no effect on domestic production facilities.
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, filling in the resulting gap.
4．Domestic production will decrease because overseas production will replace domestic production.
5．Others

2.3

5

0

10

20

30

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

50

60

70

80

（Unit：%)

【 Attitude toward Strengthening and Expanding Overseas andDomestic Business Operations over the Medium Term (Next 3 years) 】
Figure 7 Attitude toward Strengthening and Expanding Overseas andDomestic Business Operations over the Medium Term (Next 3 years)○（FY 2000 survey：(Strengthen/Expand Domestic Operations over the Medium Term , Strengthen/Expand Overseas Operations over the Medium Term )△（FY 2001 survey：(Strengthen/Expand Domestic Operations over the Medium Term , Strengthen/Expand Overseas Operations over the Medium Term )When the attitude toward overseas and domestic business operations overthe medium term was compared with the findings in the FY2000 survey,
all the industries showed a growing stance for expanding and strengthening
overseas business operations (from 54.4% in FY2000 to 71.0% in FY2001)
and a somewhat weakening stance for strengthening and expanding
domestic operations (from 49.9% to 44.8%).

(41.6 , 89.2)
Automobiles

80.0(46.2 , 73.1)

Major industries where this trend was apparent were automobiles andelectrical equipment and electronics. On the other hand, chemicals andgeneral machinery revealed a dual intention of strengthening andexpanding overseas as well as domestic operations.

(62.2 , 70.3)

Electrical equipment
and electronics(40.9 , 72.0)

70.0（1）. Varying Attitudes toward Overseas and Domestic
Operations among Major Industries(44.8 , 71.0)(56.0 , 65.3)(52.9 , 66.2)
All industries

60.0

Chemicals

General machinery(49.9 , 54.4)

100
（%）

(60.8 , 53.6)

50.0(37.1 , 42.9)

40.0
35.0

40.0

45.0

50.0

55.0

60.0

65.0

Strengthen/Expand Domestic Operations over the Medium Term
【Fiscal 2001 survey】
All industries Chemicals General machinery
Number of companies

476

74

52

Electrical equipment
and electronics
93

Automobiles
65【 Fiscal 2000 survey 】
All industries Chemicals General machinery
Number of companies

425

69

35

Electrical equipment
and electronics
75（％）

Strengthen/Expand Overseas Operation

Strengthen/Expand Overseas Operations over the Medium Term

（％）

90.0

7

Automobiles

Cf. How to Interpret Figure 7 to 9
Expand mainly
overseas operations

Expand overseas anddomestic operations

Reduce overseas operations andreduce or maintain domestic
operations

Expand mainly
domestic operations

68※Figure 7 to 9 were based on the responses of the companies replying to both questions regarding “Prospect for Overseas Business Operations over
the Medium Term” and “Attitude toward Domestic Business Operations over the Medium Term.” Thus percentage figures for “Strengthen/Expand
Overseas Operations over the Medium Term” in Figure 7 are not compatible with those of “will strengthen and expand overseas business operations”
in page 5.
The percentage figures on the vertical and horizontal axis indicate the following.
＜ Strengthen/Expand Overseas Operations over the Medium Term＞
The sum of shares of those that responded “Strengthen and expand overseas business operations”＜Strengthen/Expand Domestic Operations over the Medium Term＞
The sum of shares of those that responded “Strengthen and expand domestic operations by actively making capital investment as necessary”
and “Strengthen domestic operations, including entering alliance with other companies”

0100（%）
Strengthen/Expand Domestic Operation

Figure 8 Attitude for Strengthening and Expanding Overseas and Domestic Operations
6/
over the Medium Term for Companies with High Overseas Production Ratio

Figure 9 Attitude for Strengthening and Expanding Overseas and Domestic Operations
6/
over the Medium Term for Companies with Low Overseas Production Ratio○（FY 2000 survey：(Strengthen/Expand Domestic Operations over the Medium Term , Strengthen/Expand Overseas Operations over the Medium Term )○（FY 2000 survey：(Strengthen/Expand Domestic Operations over the Medium Term , Strengthen/Expand Overseas Operations over the Medium Term )△（FY 2001 survey：(Strengthen/Expand Domestic Operations over the Medium Term , Strengthen/Expand Overseas Operations over the Medium Term )△（FY 2001 survey：(Strengthen/Expand Domestic Operations over the Medium Term , Strengthen/Expand Overseas Operations over the Medium Term )

（%）

（%）

Strengthen/Expand Overseas Operations over the Medium Term

(35.5 , 87.1)

80.0(31.7 , 76.5)(45.4 , 81.8)(37.5 , 79.2)(27.9 , 76.7)

Electrical equipment
and electronics(58.0 , 74.2)

70.0
All industries

Chemicals

Automobiles(42.9 , 60.7)

60.0(62.5 , 58.3)
Generalmachinery(47.4 , 56.5)

50.0(45.5 , 45.5)

40.0
25.0

30.0

35.0

40.0

45.0

50.0

55.0

60.0

65.0 （%）

Strengthen/Expand Domestic Operations over the Medium Term

Strengthen/Expand Overseas Operations over the Medium Term

90.0

100.0
(53.9 , 92.3)

90.0
Automobiles

80.0(45.0 , 70.0)(62.9 , 70.4)(53.5 , 69.3)(70.4 , 70.5)

70.0(56.5 , 69.6)

Electrical equipment
and electronics

60.0

50.0

(55.3 , 60.5)
Gneralmachinery

Chemicals

All industries(51.4 , 51.8)(62.1 , 48.6)(35.0 , 40.0)

40.0
35.0

40.0

45.0

50.0

55.0

60.0

65.0

70.0

75.0 （%）

Strengthen/Expand Domestic Operations over the Medium Term

（2）. Polarized Attitude toward Domestic Operations in Chemical and General Machinery Industries Depending
on High or Low Overseas Production Ratio
To look further into the findings of （1） in the previous page, major industries were broken
down into two groups, those with a high overseas production ratio and those with a low
overseas production ratio. Then it was found that in chemicals and general machinery,companies with a high overseas production ratio showed a strong inclination to strengthen andexpand overseas business operations, whereas those with a low overseas production ratio
showed a strong inclination to strengthen and expand both overseas and domestic operations.
【Chemicals】＜Companies with a high overseas production ratio＞
Many companies belong to the downstream segment of the business process (e.g.: plastics, synthetic
fabric, synthetic rubber, etc.). They have been vigorously conducting overseas as well as
domestic operations, given the particular characteristics of their products. They have to strengthen
and expand overseas operations as they follow their customers, such as electrical and automobile
manufacturers (parts and assembled product), who have been vigorously developing overseas business.

【General Machinery】＜ Companies with a high overseas production ratio＞
Many companies belong to construction machinery and heavy industrial machinery. They have been
vigorously conducting overseas as well as domestic operations, given the particular characteristics of theirproducts, and in response to growing demand overseas . They have to strengthen and expand overseas
operations in pursuit of additional sales markets amid lagging domestic public works and large-scale
infrastructure projects.
＜ Companies with a low overseas production ratio＞
Many companies belong to the machine tool and bearing industries. As their main customers such as
electrical and automobile manufacturers expanded their overseas operations, they have to produce and sell
their products in or near the overseas market. While domestic investment centers around rationalization, it isalso indispensable to move to high value-added products embodying advanced functions and high tech,creating the need to strengthen and expand domestic operations.

＜Companies with a low overseas production ratio＞
Many companies belong to the upper and middle stream of the business process (e.g.: polyethylene,
phenol, etc.). They used to focus on domestic business development, influenced by Japanese industrial
policy. However, increasing competition with U.S. and European chemical manufacturers is foreseen asa result of staged reduction in import tariffs on general-use chemical products by 2004, which will takeplace as part of deregulation policy. They have to strengthen and expand overseas operations to increase
production and sales at locations in and near the market and in response to the move of downstream
companies, which constitute their primary customers. There are not a few cases where it makes sense to
keep using the existing domestic facilities, as theirs is a capital facility-dependent industry. In addition,
there is enduring domestic demand (including for export purposes). Thus these companies showed an
inclination to strengthen and expand domestic operations as well.

Note 6: Companies with a high/low overseas production ratio are defined as those whose actual overseas production ratio ishigher/lower than the average of the actual overseas production ratios in the industry where they belong in FY2000 (see thetable below). Similarly, figures in FY2000 survey are based on comparable actual ratios in FY1999.

8

【 Evaluation of Overseas Business Performance 〜Evaluation of Satisfaction with Sales and Profitability〜 】
Figure 10 Evaluation of Overseas Business Performance
3.2
Evaluation of Satisfaction with Profitability(Fiscal 2000 survey：Evaluation of satisfaction with sales, profitability)(Fisca l2001survey：Evaluation of satisfaction with sales, profitability)(3.27 , 3.11)

3.1
NIES
(3.10 , 3.06)(3.25 , 2.99)

3.0(3.39 , 3.04)
ASEAN4
North
America

2.9(3.08 , 2.85)(2.99 , 2.82)
CentralEastern
Europe2.8(3.05 , 2.81)

China(3.03 , 2.80)(2.93 , 2.73)(3.03 , 2.75)(2.83 , 2.70)

2.7(2.88 , 2.67)

Latin
America

2.6
2.5

2.6

EU

(2.89 , 2.68)(2.79 , 2.67)

2.7
2.8
2.9
3.0
3.1
Evaluation of Satisfaction with Sales

3.2

3.3

3.4

Cf. Results of FY2000 Survey

Companies are Less Satisfied with Business Performancein Most Regions
In contrast to general improvement in almost all the regions in the FY2000 survey, the evaluation ofsatisfaction with respect to sales and profitability declined in most regions (North America, NIES,
ASEAN4, EU, and Central and Eastern Europe) in this year’s survey. The common reasons often cited
for this phenomenon are, in descending order of responses, “difficult to obtain customers” (due tointense competition), “shrinking market amid economic downturn” and “pressure to reduce prices fromthe customers”. When interviews were conducted with the respondents regarding a decreased
evaluation of satisfaction with profitability in North American operations, many of them observed that“behind this result was the steadily exacerbating economic slowdown in the United States since thesecond half of 2000.” The decline in the evaluation of satisfaction with operations in NIES and
ASEAN4 was attributable to “the slowdown in the United States whose final demand is of central
importance to their products affected exports to the U.S.,” according to a number of respondents.
In the case of China, however, there was an improvement in the evaluation of satisfaction on bothaccounts, following the similar results in the FY2000 survey. The reason most frequently cited for
improvement in the evaluation of satisfaction with profitability were “good sales of the existingproducts,” followed by “satisfactory cost reduction” and “production facilities are moving toward fullscale operation.”
The common problem across all the regions in this survey was that the satisfaction with profitability
remained low (Evaluation standards 3:Can’t say either way, 2:Somewhat unsatisfactory).

3.2

Evaluation of Satisfaction with Profitability(Fiscal 1999 survey：Evaluation of satisfaction with sales, profitability)(Fiscal 2000 survey：Evaluation of satisfaction with sales, profitability)(3.27 , 3.11)※Central Europe in the FY2000 survey corresponds to Central - Eastern Europe and US-Canada to North America in the FY2001 survey.

3.1
NIES

(3.12 , 3.07)

U.S. &
Canada(3.39 , 3.04)(3.07 , 3)

3.0

(3.25 , 2.99)(3.21 , 2.97)
CentralEurope2.9

ASEAN42.8(3.05 , 2.81)(3 , 2.78)
EU(3.03 , 2.75)(2.89 , 2.74)(2.93 , 2.73)

2.7

China

(2.59 , 2.61)(2.89 , 2.68)(2.81 , 2.67)

Latin
America

2.6
2.5

2.6

2.7

2.8

2.9

3.0

9

3.1

3.2

3.3

3.4

Evaluation of Satisfaction with Sales※ 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 the parent company”.
Evaluation of satisfaction with profitability refers to the assessment of “return on investment”

【Attitudes toward Strengthening and Expanding Overseas Business Operations over the Medium Term (Next 3 Years) : By Region】
Figure 11 Attitude toward Strengthening and Expanding Overseas Business Operations: By Region(Unit：％)

1.4

100.0

2.3

0.5

0.4

1.9

2.3

0.5

2.3

1.4

Positive Attitude for Overseas Business
Operations in China, ASEAN4 and North America

23.2
80.0

46.2

49.4
63.7

66.7
80.9

60.0

79.1

By region, China was most often cited by the companies responding as
the place where they would be “strengthening and expanding overseas
business operations” (76.3%) followed by ASEAN4 (51.5%) and North
America (48.3%). Compared with the results of the FY2000 survey,
which revealed business development in multiple regions, the move tostrengthen and expand operations was concentrated in these regions this
year.

82.2
90.9

94.1

7.7

5.9

Other
Europeancountries

FormerSoviet
Union

76.3

40.0
51.5
20.0

48.3
34.0

32.0
19.0

18.7

17.3

0.0
NIES

ASEAN4

China

Will reduce or withdraw fromoverseas business operations
through FDI

Other
Asian
countries

North
America

Latin
America

EU

Central・
EasternEurope※In this year’s survey, the question asking the scale of overseas business operations over the
medium term included a new alternative, 4. “have no plan to expand operations overseas”, wasadded to the previous set of alternative answers, 1. “will strengthen and expand (overseas business
operations)”, 2. “will maintain the current level”, 3. “will reduce or withdraw”. However, for the
purpose of comparison over time, the alternatives 2. and 4. were combined and indicated as “willmaintain the current level”.

Will maintain the size ofoverseas business operations
through FDI at the present level
Will strengthen or expand
overseas business operations
through FDI

Cf. Results of FY2000 Survey(Unit：％)
100.0

(323
(339
(321
(149
(361
(156
(293
companies) companies) companies) companies) companies) companies) companies)
3.1

1.8

1.6

2.7

1.4

3.2

0.7

(80
(96
(82
companies) companies) companies)
0.0

0.0

0.0

38.9

80.0

50.7

51.3
61.9

60.1
68.6

69.8

76.2

70.8

60.0

90.2

40.0
59.5
47.9

46.9
20.0

10

(366
(396
(409
(246
(393
(263
(344
(214
(208
(205
companies) companies) companies) companies) companies) companies) companies) companies) companies) companies)

39.2

35.0

28.2

27.5

23.8

29.2
9.8

0.0

NIES

ASEAN4

China

Other
Asian
countries

North
America

Latin
America

EU

CentralEuropeOther
Europeancountries

Former Republicsof the Soviet
Union, andEastern Europe

【Evaluation of Investment Climate in Major Asian Countries】

11（Comparison with the Situation in 1996, Shortly before the Asian Crisis ）Figure 12 Domestic Infrastructure ( including Power,
Telecommunications and Transport) ＜All Industries＞
Thailand

37.9

Malaysia

28.4

26.1

Indonesia

12.9

Philippines

10.6

33

12.5

28.4

13.5

Vietnam

18

19.3

13.8

0

22.5

Malaysia

40.5

＜ 311
companies＞

Indonesia 2.6＜ 282
companies＞

Philippines 2.5

0.5

19.8

＜ 378
companies＞

China

68

＜ 266
companies＞

India

0.7

66.2

＜ 269
companies＞

Vietnam

40

60

100 （Unit：%)80

構成比 worsened
remain the same

13.6

Malaysia

5.6

Indonesia

3.6

45

7.5

3.6

32.3

China

1.7

41.2

3

Vietnam9.4

0

improvement

16.1

20

＜ 302
companies＞

47.7

＜ 306
companies＞＜ 279
companies＞

4.5

44.1

22.1

47.7

61.6

22.7

India

＜ 337
companies＞

38

＜ 374
companies＞

28.6

0.4

74.5

＜ 267
companies＞

0.7

73.8

＜ 267
companies＞

40

60

構成比 worsened
remain the same

80

100

unknown

51.8（Unit：%)

6.6

50.3

5.3

10.7

23.5

4.1

10.2

0

2.2

1.1

40

＜ 281
companies＞

45.9

28.2

20

＜ 308
companies＞

31.5

51

31.5

＜ 300
companies＞

37.3

28.1

26.7

＜ 332
companies＞

29.2

55.2

improvement

unknown

0.3

48.1

Philippines 2.5

7

＜ 306
companies＞

Figure 13 Legal Framework (including Transparency and
Fairness) ＜All Industries＞
Thailand

12.3

0.4

20

improvement

Thailand

39.2

54.6

6.4

57.1

India

＜ 338
companies＞

31.7

1.6

34.1

China

2.1

Figure 14 Domestic Political and Social Situation ＜All Industries＞＜ 367
companies＞

20.2

63.3

＜ 267
companies＞

61.7

＜ 266
companies＞

60

構成比 worsened
remain the same

80

100 （Unit：%)

unknown

Improving Investment Climate in China and Thailand
When improvements in investment climate were examined amongmajor Asian countries in comparison with the situation in 1996, an year
before the Asian crisis, there were improvements in China and Thailand
in the area of “domestic infrastructure” “legal framework” and “domestic
political and social situation”.
It should be kept in mind, however, that this sanguine evaluation was
based on the comparison with the investment climate in 1996, which was
not particularly favorable, particularly in China. There were also
improvements in Thailand and Malaysia in the area of infrastructure.
There were concerns over investment climate in Indonesia and thePhilippines in the area of the “domestic political and social situation.”
Since both countries are making efforts to stabilize the internal politicaland social situation, there is hope for some improvement in this area.

【Countries with Promising Prospects for Business Operations over the Medium Term (Next 3 years)】

12

Figure 15 Promising Countries for Overseas Business Operations
over the Medium Term 7/ （multiple response）
Countries with promising medium-term overseas business development
prospects
Number of
Current fiscal companies
year survey(firms)Ratio (%)

401

100

Rank
1
2
3
4
5
6
7
8
9
10

China

327

U.S.
ThailandIndonesia
India
VietnamTaiwan
Korea
Malaysia
Singaporefiscal 2000
survey82 China

127

32

99

25

56

14

52

13

48

12

44

11

33

8

32

8

24

6

Promising destinations for investment over the medium term (next three years)

Number ofcompanies(firms)Ratio (%)

372

242

U.S.
ThailandIndonesia
Malaysia
TaiwanIndia
Vietnam
Korea
Philippines

Number ofcompanies(firms)Ratio (%)

100

278

65 China

153

108

39

76

27

42

15

154

41

88

24

54

15

43

12

41

11

37

10

35

9

32

9

30

8

Fiscal 1999
surveyU.S.
ThailandIndia
Indonesia
Vietnam
Malaysia
Philippines
U.K.
BrazilNumber ofcompanies(firms)Ratio (%)

100

299

100

55 China

163

55 China

124

41

68

23

49

16

41

15

30

11

25

9

25

9

25

9

21

8

Fiscal 1998
surveyU.S.
ThailandIndonesia
India
Philippines
Malaysia
VietnamBrazil
U.K.

46

15

43

14

42

14

41

14

34

11

31

10

Fiscal 1997
surveyU.S.
Indonesia
ThailandIndia
VietnamPhilippines
MalaysiaBrazilTaiwanNumber ofcompanies(firms)Ratio (%)

342

100

219

64

123

36

97

28

84

25

77

23

66

19

47

14

46

13

28

8

28

8

Figure 16 Reasons for Considering Top 5 Countries Promising（multiple response）
China
U.S.
ThailandIndonesia
India
Number of firms
Number of firms
Number of firms
Number of firms
Number of firms(324)
Percent
Percent
Percent
Percent
Percent
(125)
(96)
(56)
(50)
Potentiality of future market growth

263

81.2%

55

44.0%

47

49.0%

28

50.0%

38

76.0%

Inexpensive labor force

231

71.3%

0

0.0%

53

55.2%

41

73.2%

23

46.0%

Present market size

54

16.7%

81

64.8%

12

12.5%

3

5.4%

10

20.0%

Third-country export base

74

22.8%

4

3.2%

33

34.4%

26

46.4%

6

12.0%

Supply base for final assembly manufacturers

67

20.7%

32

25.6%

26

27.1%

6

10.7%

8

16.0%

Low-cost parts and raw materials

95

29.3%

3

2.4%

14

14.6%

16

28.6%

8

16.0%

Excellent human resources

39

12.0%

19

15.2%

16

16.7%

1

1.8%

11

22.0%

Export base to Japan

73

22.5%

4

3.2%

23

24.0%

9

16.1%

0

0.0%

Product development suits the local market

30

9.3%

40

32.0%

9

9.4%

4

7.1%

3

6.0%

Favorable
investment
policiesandderegulation policies in the target country
Because other companies in the same industry
are advancing there

24

7.4%

1

0.8%

5

5.2%

2

3.6%

0

0.0%

21

6.5%

7

5.6%

3

3.1%

1

1.8%

4

8.0%

Progress towards regional integration

2

0.6%

4

3.2%

4

4.2%

0

0.0%

1

2.0%

Acquisition of local technology, know-how,
etc.

1

0.3%

11

8.8%

0

0.0%

0

0.0%

0

0.0%

Other

2

0.6%

0

0.0%

0

0.0%

0

0.0%

1

2.0%

Note 7：As a calculation method, the companies surveyed were asked to vote for the top 5 promising countries for business operations over the medium term
(next 3 years). 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 1 changed from “promising destinations for foreign investment over the medium term” to “the promising countries for overseas
business operations over the medium term.”

Top four Promising Countries for Business
Operations over the Medium Term (next 3
years) are Unchanged from Last Year’s
Results
The top four rankings of promising countries for overseas
business operations over the medium term were unchanged
from the FY2000 survey: China came first, followed by the
U.S., Thailand and Indonesia.
This year’s survey found ever increasing expectations for
China. In FY2000 survey, 242 out of 372 companies
responded (65%) they looked on China as promising. In
this year, comparable figures were 327 out of 401 (82%).
The most often cited reason for considering China
promising (with multiple response) was the “potentiality of
future market growth” (81.2%). This may be attributableto such factors as “business climate is expected to improvewith China’s membership in WTO,” “deregulation willallow setting up of foreign-owned sales affiliates,” thereby
raising the expectations of the prospect for the Chinese
market. Other reasons cited include “inexpensive labor
force” (71.3%), “Low-cost parts and raw materials”(29.3%). As companies are pressed to produce goodquality and affordable products in the environment of
increasingly intensive price competition, they may wellregard China as a promising country whose cost is lessrelatively to other areas. On the other hand, there werecompanies expressing that a significant number ofproblems remain for business development in China,
including “lack of transparency in the application of laws”
and “frequent and abrupt changes in laws and regulations”.

【 Attractiveness of China and ASEAN4 as a Production Base over the Medium Term (Next 3 Years)】
Figure 17 Attractiveness as a Production Base over the Medium Term
(Next 3 years): Comparison of China and ASEAN4

C h in a is m o re a ttra c tiv e th a n A S E A N 4
A S E A N 4 is m o re a ttra c tiv e th a n C h in a
U n a b le to m a k e a n y ju d g m e n t fo r n o w

N u m b e r o f c o m p a n ie s(a m o n g 4 6 9 R e s p o n s e
c o m p a n ie s )R a te266
5 6 .7 %48
1 0 .2 %155
3 3 .0 %(multiple response)T h e re a s o n s fo r C h in a b e in g m o re a ttra c tiv e N u m b e r o f c o m p a n ie s(a m o n g 2 6 6 R e s p o n s e
th a n A S E A N 4
c o m p a n ie s )R a teP o te n tia lity o f fu tu re m a rk e t g ro w th230
8 6 .5 %In e x p e n s iv e la b o r fo rc e
189
7 1 .1 %L o w -c o s t p a rts a n d ra w m a te ria ls
84
3 1 .6 %A v a ila b ility o f s u p e rio r p la n t w o rk e rs
45
1 6 .9 %A v a ila b ility o f s u p e rio r m a n a g e ria l
24
9 .0 %O th e rs5
1 .9 %(multiple response)T h e re a s o n s fo r A S E A N 4 b e in g m o rea ttra c tiv e th a n C h in a
P o te n tia lity o f fu tu re m a rk e t g ro w th
In e x p e n s iv e la b o r fo rc e
L o w -c o s t p a rts a n d ra w m a te ria ls
A v a ila b ility o f s u p e rio r p la n t w o rk e rs
A v a ila b ility o f s u p e rio r m a n a g e ria l
O th e rs

N u m b e r o f c o m p a n ie s(a m o n g 4 8 R e s p o n s e
c o m p a n ie s )R a te22
4 5 .8 %19
3 9 .6 %13
2 7 .1 %12
2 5 .0 %10
2 0 .8 %9
1 8 .8 %13

Attractiveness of China and ASEAN4 as a
Production Base
When asked to compare China with ASEAN4 in terms of
attractiveness as a production base over the medium term (next 3
years), 56.7% of the companies replied, “China is more
attractive than ASEAN4.”
The reason most often cited by these companies was“potentiality of future market growth.” This reflects rising
expectations for China in view of its WTO membership andhuge potential demand from the Chinese market. The second
numerous response for the reason was “inexpensive labor force,”
followed by “low-cost parts and raw materials.” These findings
revealed that the companies found China promising inconsidering the production activities in the optimum location
given its low production cost. However, in the interviews, somecompanies indicated that they were “considering the next phaseof business development, as a movement to create business bases
has run its course in ASEAN4, not that they shifted weight awayfrom these countries.”
The companies that replied “ASEAN4 is more attractive thanChina” accounted for 10.2% of the total respondents, and those
replied “unable to make any judgment for now” accounted for
33.0%. This implies that the companies seem to be taking abalanced attitude based on risk diversification without having
excessive expectations for China.
In interviews with the respondents, some companies observed,“Having excessive expectations for China is dangerous. We aretaking a well-balanced approach to diversify risks.”