jbic fy1999 survey · 5 fdi projected by the respondent companies for fy1999 is to drop by 18.3%...
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NR99-8November 29, 1999
JBIC FY 1999 SURVEY
THE OUTLOOKOF
JAPANESE FOREIGN DIRECT INVESTMENT
－The Japanese manufacturing companies continue their effortsto develop their overseas business operations
by strengthening existing production and sales bases－
The purpose of this survey is to identify the current and future trends of foreign directinvestment activities by the Japanese manufacturing companies which have been operatingoverseas. This year’s survey, taken over from the former EXIM Japan, was the eleventh of anannual series that began in 1989. The survey covered 786 manufacturing companies that have three or more foreign affiliatesincluding at least one production base, as of the end of 1998. The questionnaire was mailed outon July 1, 1999. 472 valid responses were returned over a period from July to August in 1999.The effective response rate was 60.1%. (In the previous year’s survey, valid returns were 455 outof 749 companies surveyed, with the response rate of 60.7%.) The previous year’s survey examined the impact of the Asian economic crisis on the Japanesesubsidiaries operating in the ASEAN4 region (Thailand, Indonesia, Malaysia, and thePhilippines), as a special topic. This year’s survey follows up this approach by posing questionsto the companies, which have bases in ASEAN4, and Korea, about the prospect of businessrecovery and investment strategy after the Asian economic crisis.
For further information, please contact the following address, Research Institute for Development andFinance, Japan Bank for International Cooperation.
Hidehiko Noda Phone: 03-5218-3915E-mail: [email protected]
Satoshi Ikehara Phone: 03-5218-3918E-mail: [email protected]
1
1. Projected Japanese FDI for FY1999 and Medium-Term Outlook
●According to the survey respondents, projected foreign direct investment (FDI) duringFY1999 is down by 18.3% compared to the actual figures for FY 1998, showing consecutivedeclines from the previous year’s survey(figure1-1). The fall in FDI in terms of the amount ismainly due to the factor that “an adequate number of overseas production/sales bases havebeen set up for now”.
●Although FDI shrinks in amount, very few companies foresee they will “withdraw” from theirexisting bases. The companies that “have plans to undertake investment over the medium-term (of three years)” account for about 70% of the respondents, a similar figure as was foundin the previous surveys. This implies that most companies have intentions to sustain theiroverseas operations in the coming years(figure1-4).
●Over the medium-term, the overseas production ratio inches up (from an actual figure of 20.9%for FY1998 to 25.6% planned for FY2002)(figure1-9). Asked about how FDI will impact onthe domestic production, the majority of companies responded that “since FDI is conducted tomaintain and expand overseas market shares, domestic production facilities will remain intact.”This is followed by: “even though the production of domestically manufactured commodityproducts will be shifted overseas, domestic production facilities will focus on themanufacturing of higher quality products,” and “since the contents of overseas manufacturedproducts are different from those of domestically manufactured products, our domesticproduction facilities will remain intact.” These findings indicate that there are clearlydifferentiated functions between overseas and domestic production(figure4-5).
●Having already set up a number of overseas bases, Japanese manufacturing companies areputting more emphasis on “the expansion of the existing production/sales bases” than “theestablishment of new production/sales bases”(figure1-5). This trend is prominent in Asia inparticular. While the share of the companies responding that they will “establish newproduction bases” continues to decline (from 44.9% in FY1995 survey, 33.9 in FY97, to 13.9%in FY99), the share of the companies responding that they will “expand the existingproduction bases” goes up (from 52.3% in FY95, 55% in FY97, to 63.5% in FY99).
●Japanese manufacturers are more positively poised toward investment in the areas deemedpromising in the future(figure1-8). Significance is seen in the case of the investment inCentral and Eastern Europe (“Central Europe” plus “the former Soviet Union and EasternEurope”). In some industries such as electrical equipment and electronics (assembled productand components) and Automobiles (assembled vehicle), respondents show a constant intentionto “establish new production bases.” Despite an overall decline in projected FDI for FY99 asnoted above, by industry the amount of the FDI flow toward electrical equipment andelectronics (components) shows an upturn. By region, FDI toward EU also shows an upturn.
(continued on the next page)
SUMMARY
2
2.Business activities of Japanese manufacturing companies after the Asian Economic Crisis (ASEAN4, and Korea)
●As a whole (averaging across five countries), Japanese affiliates affected by the Asianeconomic crisis expect that their sales will surpass the pre-crisis level around 2002 and profitsin 2004(figure2-1). By industry, firms in chemicals and textiles have favorable prospects,while Automobiles (assembled vehicle) and general machinery are facing a toughsituation(figure2-3).
●A breakdown by country reveals that, excluding the case of the Philippines because ofrelatively less damage by the Asian crisis, a smoother recovery in sales and profits is expectedin Thailand (profits: actual figure of 71.9% in FY98 compared to the pre-crisis level, 80.0%projected for FY99, 95.2% for FY2002, and 100.9% for FY2004)(figure2-2). Even inIndonesia, which is viewed with some concern because of the delay in economic recovery,expectations are equally high for the recovery of both sales and profits (profits: actual figureof 74.4% in FY98, 80.8% projected for FY99, 95.9% for FY2002, and 101.9% for FY2004).
●When asked about the future investment strategy after the Asian economic crisis, “maintainoverseas bases” is the most numerous response (49.4%), followed by “strengthen overseasbases” (46.9%). Only 3.8% of the companies responded that they will “decrease the numberof overseas bases or shift their focus to other regions”(figure2-4). In respect to the responseof “strengthening overseas bases,” the most often cited reply is “expansion of the existingfacilities”, followed by “diversification of product lineup” and “strengthening of sales bases.”These findings indicate that they will continue to strengthen business activities in the Asianregion.
3. Trends of Medium- and Small-Sized Companies (Supplementary Note)
●When 100 medium- and small-sized companies (with a paid in capital of less than ¥1 billion)are selected from 472 total respondents (hereafter “all companies”) to examine their prospectsfor overseas activities, it is found that they have the tenacity to continue their overseasactivities. Affiliates in the Asian region in particular expect sales and profits to be restored tothe pre-crisis level earlier than all companies(figure3-3). (While all companies expect thattheir sales will return to the pre-crisis level in FY2002, medium- and small-sized companiesforesee sales recovery in FY1999. With regard to profits, whereas all companies anticipaterecovery in FY2002, medium- and small-sized companies anticipate it in FY1999.)
(continued on the next page)
3
4. Conclusion
●Although FDI projections dropped both for FY98 survey and FY99 survey, Japanesemanufacturing companies are by no means turning away from their overseas operations.
●The overseas operations of Japanese manufacturing companies have shifted their focus fromthe previous practice of the “establishment of production and sales bases” to that of the“expansion of the existing production and sales bases” since the mid-1990s. As internationalcompetition intensifies, such moves are expected to accelerate further in the coming yearswith firms in place to make full use of the existing bases. Companies are also positivelyinclined to undertake overseas ventures, including “setting up new overseas bases” inpromising new areas.
●Japanese manufacturers’ affiliates affected by the Asian economic crisis are expected torecover their sales and profits relatively early. They are also trying to strengthen their existingbases, through the diversification of their product lineup.
●It is expected that Japanese manufacturing companies will continue their overseas operations,by means of optimum-site production and sales.
※The definition of main regions ;
NIES ：Singapore, Korea, Taiwan, Hong Kong
ASEAN4 ：Thailand, Malaysia, Indonesia, the Philippines,
EU ：U.K., Germany, France, Italy, Netherlands, Belgium, Greece, Spain,
Luxembourg, Denmark, Portuguese, Austria, Finland, Sweden, Ireland
Central Europe ：Poland, Hungary, Czech, Slovak
Eastern Europe ：Bulgaria, Romania, Slovenia, Albania, Croatia, Macedonia
4
CONTENTS
1. Projected Japanese FDI for FY 1999 and Medium-Term ．．．．．．．5
(1) FDI in FY 1998 and Projection for FY 1999 ．．．．．．．．．．．．．．．．．5 (2) Medium-Term Outlook of Overseas Operations ．．．．．．．．．．．．．．．7 a) Attitudes toward FDI over the Medium-Term ．．．．．．．．．．．．．．．．7 b) Purposes of FDI over the Medium-Term, Changing Pattern over Time ．．．．．．．8 c) The Amount of FDI, Changing Pattern over Time ．．．．．．．．．．．．．． 9 d) Reasons for Decrease in FDI over the Medium-Term ．．．．．．．．．．．．．10 e) The Amount of FDI by Region, Changing Pattern over Time．．．．．．．．．． 11 f) Changing Overseas Production Ratio and Future Plans ．．．．．．．．．．．．12
2.Japanese Overseas Business Activities after the Asian Economic Crisis(ASEAN4,Korea) ．．．．．．．．．13
(1) The Outlook of Sales and Profits over the Medium- and Long-Term (Averaging across 5 Countries) ．．．．．．．．．．．．．．．．．．．．．13 (2) Future FDI Strategies in the Asian Region ．．．．．．．．．．．．．．．．．．16
3. The Case of Small- and Medium-Sized Companies (Supplementary Note) ．．．．．．．．．．．．．．．．．．．．17
(1) Projected Japanese FDI for FY 1999．．．．．．．．．．．．．．．．．．．． 17 (2) Medium-Term Outlook of Overseas Operations ．．．．．．．．．．．．．．． 18 (3) The Outlook of Sales and Profits over the Medium- and Long-Term (Averaging across 5 Countries) ． ．．．．．．．．．．．．．．．．．．．．．19
4. Supplementary Data ．．．．．．．．．．．．．．．．．．．．．20
(1) Financing Sources of FDI, Changing Pattern over Time ．．．．．．．．．．．．20 (2) Evaluation of FDI Performance by Region in FY 1998 ．．．．．．．．．．．．21 (3) Promising FDI Destinations in the Medium Term ．．．．．．．．．．．．．． 23 (4) The Effect of U.S. and European Companies’ Advancement into Asia ．．．．．．24 (5) The Effect of FDI on Domestic Production Facilities ．．．．．．．．．．．．．25 a) General Effect ．．．．．．．．．．．．．．．．．．．．．．．．．．．．25 b) Regional Effect ．．．．．．．．．．．．．．．．．．．．．．．．．．．．26
5
●FDI projected by the respondent companies for FY1999 is to drop by 18.3% compared withthe actual amount during FY1998, showing consecutive declines form the previous year’ssurvey. The rate of decline is down by 5.1 points from 23.4%.
●By industry, while a decline continues in such major areas as Automobiles (assembledvehicle and components), electrical equipment and electronics (assembled product) andchemicals, there is a rebound in electrical equipment and electronics (components).
●By region, FDI decreases across most of the regions, however, it increases by a modest 8.5%in EU.
Figure1-1 FDI in FY 1998 and Projection for FY 1999(383 respondents)
1. Projected Japanese FDI for FY 1999 and Medium-Term(1)FDI in FY 1998 and Projection for FY 1999
Actual amount in FY 1998 → Projection for FY 1999 ¥1,530 billion [ ▲18.3% ] ¥1,249.5 billion
FY1993 Survey ▲ 25.2FY1994 Survey 9.3FY1995 Survey 33.4FY1996 Survey 39.1FY1997 Survey 1.4FY1998 Survey ▲ 23.4FY1999 Survey ▲ 18.3
Rates of Increase of ProjectedFDI in the Past Surveys
6
Figure1-2 FDI, Actual Figure in FY1998 and Projection for FY1999(by industries)(383 respondents)
Figure1-3 FDI, Actual Figure in FY1998 and Projection for FY1999(by region)
*Note: Of 383 companies responding actual FDI in FY1998 and projected FDI for FY1999 infigure 1-2, some companies does not respond regional breakdowns for each investment.Therefore, of Figure 1-2 and Figure 1-3 do not correspond each other.
*Note: This survey does not include the large-scale acquisition project by a cigarette companyfor the overseas cigarette business of American company. According to the press release, thetotal amount of the investment is estimated at ¥950,000 million.
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
FY 1998(actual) FY 1999(projection)
62,100 49,200
64,20039,600
204,500 222,000
569,500415,400
30,500
30,100
60,400
46,900
199,800
119,100
84,100
59,900
NIES
ASEAN
China
Other Asian Countries
US-Canada
EU
Latin America
Other regions
(million yen)
0
250,000
500,000
750,000
1,000,000
1,250,000
1,500,000
1,750,000
FY 1998(actual) FY 1999(projection)
294,200207,800
94,400
74,400
627,100
544,000
96,800
135,700
170,600
120,900
37,800
40,200
132,000
96,300
77,300
30,200Textile
Chemicals
General machinery
Electrical equipment & electronics(assembled product)
Electrical equipment & electronics(components)
Automobiles(assembled vehicle)
Automobiles (components)
Others
1,530,000
1,249,500 (18.3%decrease)
(million yen)
7
0 20 40 60 80 100
FY1995 survey
FY1996 survey
FY1997 survey
FY1998 survey
FY1999 survey
73.8
69.6
63.9
73.4
73.3
26.2
30.4
36.1
26.6
26.7
(%)
have plans to undertake investment over the medium-term
have no plans to undertake investment over the medium-term
(2)Medium-Term Outlook of Overseas Operations
a)Attitudes toward FDI over the Medium-Term●Through-out survey findings in the past 4 years with respect to investment plans over thethree-year medium-term (this year’s survey; up to FY 2002), every year about 70% ofcompanies responds that they “have plans to undertake investment over the medium-term.”This shows their attitude that they intend to continue overseas operations.
Figure 1-4 Efforts to Undertake FDI over Medium-Term
408 companies
424 companies
438 companies
455 companies
472 companies
8
The Asian Region The European and NorthAmerican Regions
Figure1-5 Purposes of FDI over the Medium-Term,Changing Pattern over Time(multiple response)
b)Purposes of FDI over the Medium-Term, Changing Pattern over Time●In the Asian region, the focus of FDI over the medium-term has been shifting from setting upnew production bases to expanding existing production bases. In addition to the similar trend,in the European and North American regions, the expansion of sales bases is also observed.
*Asian Region: NIES, ASEAN4, China and Other Asian countries European and North American Regions: EU, US-Canada
010203040506070
Set up production bases
Expand production bases
44.952.3
33.9
55.0
13.9
63.5
(%)
010203040506070
Set up production bases
Expand production bases
17.8
53.7
14.0
55.5
12.4
48.1
(%)
FY1995 survey
FY1997 survey
FY1999 survey
010203040506070
Set up sales bases
Expand sales bases
11.1
27.212.8
26.8
8.4
31.6
(%)
010203040506070
Set up sales bases
Expand sales bases
16.3 16.414.1 13.99.8 16.0
(%)
9
c) The Amount of FDI, Changing Pattern over Time●Over the three-year medium-term, the share of companies that intend to “increase the amountof FDI over the actual amount in the previous 3 years” drops to 21.1% from 38.1% in theprevious survey. This decline reflects that fewer firms have a positive attitude toward scalingup the amount of investment. The share of companies that will undertake investment but“decrease the amount of FDI compared with the actual amount in the previous 3 years”increases to 39.0%.
●As mentioned above, the focus of FDI over the medium-term has been shifting from settingup new bases to expanding existing bases. Therefore, taking this trend into consideration, itmay be natural to expect a reduction in the amount of FDI over the medium-term comparedwith the high level of FDI in FY 1995 which was attributable to a lot of setting up of newbases. It is anticipated that overseas business operations will be strengthened in the comingyears through making use of the existing bases.
Figure1-6 The Amount of FDI, Changing Pattern Over Time
0 20 40 60 80 100
FY1995 survey
FY1996 survey
FY1997 survey
FY1998 survey
FY1999 survey
70.1
71.2
64.6
38.1
21.1
21.5
19.2
26.0
42.6
39.9
8.4
9.6
9.4
19.2
39.0
(％)Increase FDI
Maintain the current level
Decrease FDI
10
d) Reasons for Decrease in FDI over the Medium-Term●Of the companies responding that they will decrease FDI over the medium-term, the factorfor “an adequate number of overseas bases have been set up for now” accounts for the largest63.0%, posing an increase over 57.6% in the previous survey. In the previous survey, a largeproportion of companies, particularly in the ASEAN4 region, cited the reasons for thedecrease that “the local market shrank due to the recession of the economy in the recipientcountry” (50.0%) and “Uncertainty over the local currency” (33.3%) as their affiliates wereaffected by the Asian economic crisis. However, companies citing these reasons in thisyear’s survey decline even in the ASEAN4 region.
●In the previous year’s survey, drastic changes in investment climate, such as adverse effectsof the Asian economic crisis, brought a large effect on the investment minds of theresponding companies. In this year’s survey, there is a greater sentiment that the stage ofsetting-up of new overseas bases is in nearly completion.
Figure1-7 Reasons for Decrease in FDI over the Medium-Term(multiple response)
（％）
FY1998Survey
FY1999Survey
FY1998Survey
FY1999Survey
So far not achieved the expected resultsfrom operating overseas
14.8 15.8 13.0 14.7
An adequate number of overseas baseshave been set up for now
57.6 63.0 50.0 68.0
The local market shrank due to recessionof the economy in the recipient country
24.0 14.5 50.0 21.3
Uncertainty over the local currency 14.4 7.9 33.3 13.3
Uncertainty over the local political andsocial situation
8.3 5.8 16.7 12.0
Restructuring of existence productionbases
10.5 11.5 11.1 4.0
Given economic downturn, a focus is onstrengthening domestic bases
10.0 11.8 11.1 13.3
ASEANAll regions
11
Figure1-8 The Amount of FDI by Region, Changing Pattern over Time
e) The Amount of FDI by Region, Changing Pattern over Time●When the prospect of FDI over the medium-term is broken down by region, the share of“increase the amount of FDI” differs from region to region. In particular, the share in Centraland Eastern Europe (“Central Europe” plus “former Soviet Union and Eastern Europe”)accounts for 44.4%. Thus, more positive attitudes are observed for FDI in promising areas.
164 companies
218 companies
183 companies
52 companies
224 companies
72 companies
171 companies
36 companies
0 20 40 60 80 100
NIES
ASEAN
China
Other Asian countries
US-Canada
Latin America
EU
Central and Eastern Europe
18.3
26.6
35.5
21.2
25.4
26.4
31.0
44.4
53.0
36.2
29.0
40.4
49.1
41.7
42.7
41.7
28.7
37.2
35.5
38.5
25.4
31.9
26.3
13.9
Increase FDI
Maintain the current level
Decrease FDI
(%)
12
f) Changing Overseas Production Ratio and Future Plans●The overseas production ratios have kept rising, and this trend will not change in future plans(20.9% in actual FY1998 to 25.6% projected for FY2002). Companies’ efforts to developoverseas business may well continue into the coming years.
Figure1-9 Changing Overseas Production Ratio and Future Plans
*The overseas production ratio = overseas production/(overseas production + domestic production)
0
5
10
15
20
25
30
FY88 FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY2002
(%)
13
2. Japanese Overseas Business Activities after the Asian Economic Crisis(ASEAN4,Korea)(1) The Outlook of Sales and Profits over the Medium- and Long-Term (Averaging across 5 Countries)
●As a whole (averaging across 5 countries), Japanese affiliates affected by the Asian economiccrisis expect that their sales will surpass the pre-crisis level around FY 2002 and profits in FY2004.
●No significant difference is observed across the countries in the prospect of sales and profits.
●The Automobiles (assembled vehicle) especially indicate a severe outlook for profits,followed by the general machinery. On the other hand, the chemistry and textile industriesshow a steady recovery in profits. The electrical equipment and electronics (components) alsoindicates a relatively bright outlook.
Figure2-1 The Outlook of Sales and Profits over the Medium- and Long-Term(Averaging across 5 Countries)
*Note:(each figure) averaging across 5 countries, Thailand, Malaysia, Indonesia, andPhilippine.
0
20
40
60
80
100
120
FY1998actual
FY1999projected
Medium-Term(FY2002)
Long-Term(FY2004)
(％)
Sales Profits
Pre-crisis level
14
Figure2-2 The Outlook of Profits over the Medium- and Long-Term by Countries
Figure2-3 The Outlook of Profits over the Medium- and Long-Term byIndustries*(notes) (Averaging across 5 Countries)
0
20
40
60
80
100
120
Thailand Malaysia Indonesia Philippines Korea
FY1998actual
FY1999projected
Medium-Term(FY2002)
Long-Term(FY2004)
(％)Pre-crisis
level
0
20
40
60
80
100
120
All
Indu
stri
es
Che
mic
als
Ste
el
Gen
eral
mac
hine
ry
Ele
ctri
cal e
quip
men
t &
elec
tron
ics
(ass
embl
ed p
rodu
ct)
Ele
ctri
cal e
quip
men
t &
elec
tron
ics
(com
pone
nts)
Aut
omob
iles
(ass
embl
ed v
ehic
le)
Aut
omob
ile
(com
pone
nts)
FY1998actual
FY1999projected
Medium-Term(FY2002)
Long-Term(FY2004)
%Pre-crisis
levelBright
prospectsSevere
prospects
15
*Note: Effects of the Local Content Ratio and the Export Ratio on Profitability
●Industries with the lower export ratio (local market oriented) and the lower local contentratio are expected to suffer from adverse effects on their profitability.(e.g., Automobiles (assembly vehicle) and steel)
●Industries with the higher export (export oriented) and the higher local content ratio areexpected to enjoy relatively good effects on their profitability. (e.g., electrical equipment and electronics (assembled product) and textiles)
Effects of the Local Content Ratio and the Export Ratio on Profitability
*Export Ratio: (exports to non-ASEAN4 regions from the ASEAN4 affiliates) / (total sales of the ASEAN4 affiliates) Local Content Ratio: (procurement of parts in the ASEAN4 markets) / (total procurement of parts)
0.0
50.0
100.0
0 50 100
(%) ASEAN4
Positive effects for profitability
Adverse effects for profitability
Electrical equipment & electronics (assembled product)
Textile
Precision machinery
All industries
General machinery
Automobiles (components)
ChemiicalsSteel
Automobiles(assembled vehicle)
Exp
ort
Rati
o
Local Content Ratio
Electrical equipment & electronics
(components)
16
(2)Future FDI Strategies in the Asian Region
●Over half of the respondents cite “strengthen overseas bases” or “maintain overseas bases” asfuture FDI strategies in the Asian region. Few respondents cite “decrease the number ofoverseas bases or shift their focus on other areas.”
●In respect of the actual measure to “strengthen overseas bases,” most companies cite“expansion of existing facilities.” The number of companies to “establish new production base”is low. Further, many companies respond to the measures for “diversification of productlineup”, “strengthening of sales base.” These findings clearly indicate that the investmentstrategy after the Asian Crisis is to maintain or expand their business activities in the localmarkets.
Figure2-4 Future FDI Strategies in the Asian region
（multiple response）
0 20 40 60 80
64.9
7.8
1.3
49.6
34.6
5.4
strengthening of sales bases
diversification of product lineup
establish new production base
expansion of existing facilities
(%)
0
20
40
60
80
100
3.8
49.4
46.9
Shar
e
(％)
strengthen overseas bases
maintain overseas bases
decrease the number of overseas bases or have a shift in focus
17
3. The Case of Small- and Medium-Sized companies (Supplementary Note）(1)Projected Japanese FDI for FY 1999
●Looking at the case of 100 small-and medium-sized companies (with a paid-in capital lessthan ¥1billion, hereafter, SMSCs) to examine their prospect for overseas activities, it is foundthat projected FDI for FY1999 is down by 22.2% from actual FDI in FY1998. In spite of thefact that the decrease in the amount of FDI is smaller compared with the figures in the past twosurveys, the level of decrease in SMSCs’ FDI is larger than that of the “all companies”..
Figure3-1 Projected Japanese FDI for FY 1999(82 respondents)
Actual amount in FY 1998 → Projection for FY 1999 ¥25.7billion [ ▲22.2% ] ¥20.0billion
FY1996 Survey 7.4FY1997 Survey ▲ 53.7FY1998 Survey ▲ 51.9FY1999 Survey ▲ 22.2
Rates of Increase of ProjectedFDI in the Past Surveys
18
0 20 40 60 80 100
53.8
48.0
66.2
65.0
46.2
52.0
33.8
35.0
have plans to undertake investment over the medium-term
have no plans to undertake investment over the medium-term
(Unit:%)
(2) Medium-Term Outlook of Overseas Operations
●In respect of the investment plan over the three-year medium-term (up to FY 2002), 65.0%of companies responds that they “have plans to undertake investment in the medium-term.”This figure is 8.3% lower than that of the “all companies”.
Figure3-2 Medium-Term Outlook of Overseas Operations
FY1996 survey 78 companies
75 companies
80 companies
100 companies
FY1997 survey
FY1999 survey
FY1998 survey
19
(3)The Outlook of Sales and Profits over the Medium- and Long-Term (Averaging across 5 Countries)
●Regarding the prospect of business recovery in crisis-affected ASEAN4 countries(Thailand, Indonesia, Malaysia, the Philippines) and Korea, SMSEs’ affiliates are in aposition that both sales and profits are expected to return to the pre-crisis levels in thenext 3 years (up to FY 2002). SMSEs foresee early recovery than the all companies.
Figure3-3 The Outlook of Sales and Profitsover the Medium- and Long-Term
Note : (this figure) averaging across 5 countries, Thailand, Malaysia, Indonesia, thePhilippines, and Korea.
0
20
40
60
80
100
120
FY1998actual
FY1999projected
Medium-Term(FY2002)
Long-Term(FY2004)
(Unit:%) Pre-CrisisLevel
Sales Profits
20
4.Supplementary Data(1)Financing Sources of FDI, Changing Pattern over Time
●In FY 1998 in terms of actual amount, “remittance from the parent company” and “localfinancing” increased in share, while “reinvestment” decreased.
Figure4-1 Financing Sources of FDI , Changing Pattern over Time
FY1994(actual)
FY1995(actual)
FY1996(actual)
FY1997(actual)
FY1998(actual)
0 20 40 60 80 100
41.1
54.2
51.1
47.1
52.6
34.8
25.9
27.5
26.0
19.6
24.1
19.9
21.5
26.8
27.8
(Unit:%)Remittance from parent company
Local reinvestment
Local financing
21
(2) Evaluation of FDI Performance by Region in FY 1998
●In the ASEAN4 region, because of the negative impact by the Asian economic crisis, noimprovement is observed this year, with scores in sales and profitability remaining as low asthose of the previous survey.
●Scores continue to be low in China.
●The U.S.-Canada post slightly lower scores this year compared with the results of theprevious survey, in which an improvement was observed. EU also has lower scores in salesand profitability. Severe price competition in North America and EU may have brought aboutthese results.
Figure4-2 Evaluation of FDI Performance by region in FY 1998
(In relation to the initially set goal) 1.Insufficient 2.Somewhat insufficient 3.In-between 4.somewhat sufficient 5.Fairly sufficient
Profitability
Sales
Localization
Overall performance
2.61
2.59
3.01
2.72
ChinaOrigin:2.0Scale:0.2Profitability
Sales
Localization
Overall performance
2.74
2.89
3.27
2.96
FY98survey
FY99surveyASEAN4
22
Note: The following is a comparison of self-evaluation of investment performance in theASEAN4 region before and after the Asian economic crisis.
(In relation to the initially set goal) 1.Insufficient 2.Somewhat insufficient 3.In-between 4.somewhat sufficient 5.Fairly sufficient
Origin: 2.0 Scale: 0.2
Pro f i tab i l i ty
Sa l e s
Loca l i z a t i on
Overa l l pe r f o rmance
2.74
2.89
3.27
2.96
FY97survey
FY98survey
FY99survey
ASEAN4
Profitability
Sales
Localization
Overall performance
2.97
3.21
3.57
3.19
FY1998survey
FY1999surveyUS-Canada
Profitability
Sales
Localization
Overall performance
2.78
3.00
3.50
3.09
EUOrigin:2.0Scale:0.2
23
(3) Promising FDI Destinations in the Medium Term
●The number of companies citing ‘the promising FDI destinations in the medium termcontinues to decrease’: 342 in the FY 1997 survey, 299 in the FY 1998 survey, 278 in the FY1999. In addition, the total number of countries cited as a promising FDI destination alsocontinues to decrease: 1015 in the FY 1997 survey, 839 in the FY 1998 survey, 740 in the FY1999 survey.
●Under these circumstances, despite a decrease in its share of the countries cited, Chinacontinues to receive the largest votes and thus ranks first as a promising destination, followedby the United States.
●There is no significant change in the rankings of among ASEAN4 countries. Morecompanies cite Thailand than that of the previous year, showing a relative increase in theinterest in the country as a promising investment destination.
Figure4-3 Promising FDI Destinations in the Medium Term(multiple response)
Promising FDI Destinations on the Medium-Term
FY99 SurveyRespondents Share(%)
FY98 SurveyRespondents Share(%)
FY97 SurveyRespondents Share(%)
Rank 278 100 299 100 342 1001 China 153 55 China 163 55 China 219 642 U.S.A 108 39 U.S.A 124 41 U.S.A 123 363 Thailand 76 27 Thailand 68 23 Indonesia 97 284 India 42 15 Indonesia 49 16 Thailand 84 255 Indonesia 41 15 India 46 15 India 77 236 Vietnam 30 11 Philippines 43 14 Vietnam 66 197 Malaysia 25 9 Malaysia 42 14 Philippines 47 148 Philippines 25 9 Vietnam 41 14 Malaysia 46 139 U.K. 25 9 Brasil 34 11 Brasil 28 8
10 Brasil 21 8 U.K. 31 10 Taiwan 28 8
FY96 SurveyRespondents Share(%)
FY95 SurveyRespondents Share(%)
Rank 351 100 336 1001 China 240 68 China 248 742 Thailand 126 36 Thailand 122 363 Indonesia 119 34 Indonesia 110 334 U.S.A 112 32 U.S.A 108 325 Vietnam 96 27 Vietnam 95 286 Malaysia 71 20 Malaysia 73 227 India 64 18 India 57 178 Philippines 45 13 Philippines 52 159 Singapore 34 10 Singapore 32 10
10 U.K. 23 7 U.K. 24 7Taiwan 23 7
24
(4) The Effect of U.S. and European Companies’ Advancement into Asia
●Companies responding that “Advancement by US and European companies into Asia haseffects on the market activity” is the highest for Thailand and Korea at 19.4% and 18.8%respectively.
●By industry, the share of companies responding that “Advancement by US and Europeancompanies has effects on the market activity” is high in the chemicals (Thailand 45.8%,Malaysia 50%, Korea 27.8%), the electrical equipment and electronics (components)(Malaysia 29.4%), and the Automobiles (Thailand 30%). (Graph not available.)
Figure4-4 The Effect of U.S. and European Companies’Advancement into Asia
(multiple response)
0.0
20.0
40.0
60.0
80.0
100.0
2.1
15.2
41.5
26.5
14.7
Shar
e
(Unit:%)
Advancement by US and European companies into Asia effects on the market activity
Advancement by US and European companies into Asia does not effects on the market activity
There is not remarkable advancement by US and European companies into Asia
There is no effect because our affiliatesare oriented to the export activities
Others
0 10 20 30
19.4
8.2
13.5
10.5
18.8
(Unit:%)
Thailand
Indonesia
Malaysia
Philippines
Korea
25
(5) The Effect of FDI on Domestic Production Facilities
a) General Effect●The effect of FDI on domestic production facilities is represented by the response that “sinceFDI is conducted to maintain and expand overseas market shares, domestic productionfacilities will remain intact,” which accounted for 66.6% of the respondents. “Though theproduction of domestically manufactured commodity products will be shifted overseas,domestic production facilities will focus on the manufacturing of higher quality products”accounts for 20.3%. On the other hand, “Domestic production facilities will be downsizedbecause of replacement by overseas production” accounts for only 9.6%. In general, overseasproduction seems to have little effect on domestic production facilities.
Figure4-5 The Effect of FDI on Domestic ProductionFacilities(multiple response)
1.Since FDI is conducted to maintain and expand overseas market shares,domestic production facilities will remain intact.
2.Since the contents of overseas manufactured products are different from thoseof domestically manufactured products, our domestic production facilities willremain intact.
3.Though the production of domestically manufactured commodity productswill be shifted overseas, domestic production facilities will focus on themanufacturing of higher quality products.
4.Domestic production facilities will be downsized because of replacement byoverseas production
5. Others
0
10
20
30
40
50
60
70
1 2 3 4 5
(％)66.6
11.3
20.3
9.6
2.8
26
Figure4-6 The Effect of FDI on Domestic Production Facilities byregion(multiple response)
b)Regional Effect●By region, the ratio of companies responding “ domestic production facilities will bedownsized” is higher in share in ASEAN4 and China than elsewhere (18.8% for ASEAN4,15.7% for China). “Domestic production facilities will focus on the manufacturing of higherqualities products” is also higher than elsewhere. Production was being shifted from Japan tothe Asian region, and domestic focus is on high value added products. There is an indicationthat the functional division between Asia and Japan in production activities has becoming tobe obvious through the shift of production from Japan to the Asian region by focusing on themanufacturing of the high value added products in Japan.
(unit:％)
NIES ASEAN China US-Canada EU
1.FDI is conducted to maintain and expandoverseas market shares. 69.4 54.8 57.0 76.7 73.2
2.The contents of overseas manufacturedproducts are different from that ofdomestically manufactured products. 9.5 12.0 7.6 11.4 13.1
3.Domestic production facilities will focus onthe manufacturing of higher qualityproducts. 25.9 29.8 32.0 9.4 12.4
4.Domestic production facilities will bedownsized. 6.1 18.8 15.7 4.0 4.6
5. Others2.7 1.0 3.5 3.5 3.3
27
The Profiles of the Respondent Companies
FY89 FY90 FY91 FY92 FY93 FY94 FY95 FY96 FY97 FY98 FY99Number of Firms Surveyed 437 506 551 614 652 700 718 722 743 749 786Number of Firms Responded 247 277 298 314 338 382 422 432 445 455 472Response Rate 56.5 54.7 54.1 51.1 51.8 54.6 58.8 59.8 59.9 60.7 60.1Number of Overseas Affiliates 3,950 4,594 4,617 5,269 5,428 5,385 6,496 6,730 6,978 6,654 7,225
(1)Paid-in Capital of Respondents (2)Annual Sales of Respondents
No. ofCompanie
s %
No. ofCompanie
s %35 7.4% 206 43.8%46 9.7% 73 15.5%19 4.0% 62 13.2%
101 21.4% 38 8.1%65 13.8% 30 6.4%
206 43.6% 30 6.4%472 100.0% 31 6.6%
470 100.0%(3)Number of Employees of Respondents Note: Two companies don't respond this figure
No. ofCompanie
s %＜= 300 people 58 12.3% (4)Number of Respondents by Industry
301 to 500 41 8.7%501 to 1,000 95 20.1% Foodstuffs 25
1,001 to 2,000 97 20.6% Textiles 182,001 to 5,000 102 21.6% Chemicals 685,001 to 10,000 40 8.5% Petroleum & rubber 14
10,001 to 30,000 29 6.1% Ceramics, cements, & glass 15＞= 30,001 10 2.1% Steel 17
472 100.0% Nonferrous metals 16Metal products 23General machinery 44 ［Assembled product］ 33 ［Components］ 11Electrical equipment & electronics 87 ［Assembled product］ 30 ［Components］ 57Automobiles 76 ［Assembled vehicle］ 12 ［Components］ 64Precision Machinery 19Others 50Total 472
(5)Number of Overseas Affiliates by Type of Base/Region
NIES ASEAN China Other Asian Countries US-Canada
LatinAmerica ＥＵ
Former SovietUnion and
Eastern Europe
Central Europe
Others Total
Production bases 525 927 628 127 677 190 384 8 18 74 3,558(Joint venture) 297 589 484 102 168 67 102 5 6 32 1,852Sales bases 559 253 135 41 580 122 790 34 28 135 2,677R&D bases 18 17 10 3 90 4 38 0 0 4 184Others 112 80 35 6 286 49 186 4 5 43 806
Total 1,214 1,277 808 177 1,633 365 1,398 46 51 256 7,225Note: NIES: Singapore, Korea, Taiwan, Hong Kong
ASEAN：Thailand, Malaysia, the Philippines, IndonesiaCentral Europe：Poland, Hungary, Czech, Slovakia
￥500 billion ＜ ￥1,000 billion
￥300 billion ＜ ￥500 billion
￥100 billion ＜ ￥200 billion
￥50 billion ＜ ￥100 billion
＜ ￥50 billion＜ ￥100 million
￥100 million ＜ ￥500 million
￥500 million ＜ ￥1 billion
Industry No. of Companies
Total
￥200 billion ＜ ￥300 billion￥1 billion ＜ ￥5 billion
￥5 billion ＜ ￥10 billion
＞＝￥10 billion
Total
Total
＞＝￥1,000 billion