1. Japan Bank for International Cooperation (JBIC; Governor: Kyosuke Shinozawa) released today its operational results for fiscal 2004.  For a detailed breakdown by region and financial facility, as well as their chronological trends over the past five years, see Appendix.

I. Overall Operations

In fiscal 2004, JBIC made overall commitments totaling 1,918.9 billion yen for loans, equity participation and guarantees, an increase of 0.4% from the previous year.  The overall volume of commitments has remained almost unchanged since fiscal 2000, when assistance to the countries affected by the Asian currency crisis was completed.
Outstanding loans and equity participation decreased 3% from the previous year to 19,995.4 billion yen as of the end of the fiscal year on March 31, 2005.  Outstanding guarantees rose 21% to 903.5 billion yen, reflecting an increased utilization of the guarantee facility in recent years.
 

1.      International Financial Operations (IFOs)

(1)  Loan, equity participation and guarantee commitments in IFOs, which support Japanese trade and investment activities as well as a stable international financial order, decreased 15% to 1,120.3 billion yen in fiscal 2004.  
(2)  Highlights of IFOs in FY2004

• i.　Overseas Investment Loans, which support overseas business development and participation by Japanese firms, increased 50% from the previous year to 413.1 billion yen, accounting for 37% of the total commitments in IFOs.  This increase is attributable to a growing number of projects utilizing the project finance scheme and large-scale, participatory infrastructure development projects primarily in the Middle East and Latin America.  Major projects include the power and desalination project in the United Arab Emirates, the IPP project in Mexico, and the crude oil transportation project in Brazil.
• ii.  Loans for resource development projects, which support a stable and diversified supply of energy and mineral resources for Japan, decreased 38% from the previous year to 362.2 billion yen (of which overseas investment loans were 303.7 billion yen and import loans were 58.5 billion yen).  The figure accounted for 32% of total commitments in IFOs.  Major projects include the ACG oil field development project in Azerbaijan and the copper mine expansion project in Chile.  In providing these loans, JBIC made active use of structured finance and assumed risks of local companies.
• iii. To complement activities of private financial institutions and mobilize private funds for developing countries, JBIC extensively utilized its guarantee facility. As a result, guarantee commitments amounted to 216 billion yen (of which 132.7 billion yen was for import loans, 39.8 billion yen for overseas investment loans, and 43.6 billion yen for untied loans).  Major guarantees were for Baht-denominated bond issuance by Japanese affiliates in Thailand (7 billion yen) and for Korean collateralized bond obligations (7.7 billion yen), both provided under the Asian Bond Market Initiative.  In addition, a significant amount of guarantee was provided for overseas syndicate loans made by private financial institutions.
• iv. To support efforts to mitigate global warming and improve energy efficiency in Asia, equity participation totaling 2.2 billion yen was made in the Asia ESCO Fund, Japan GHG Reduction Fund (JGRF) and Japan Carbon Finance, Ltd. (JCF).  These 3 investments constitute the first cases of equity participation since JBIC was established.

2.      Overseas Economic Cooperation Operations (OECOs)

(1)Loan and equity participation commitments in OECOs, which primarily consist of concessional ODA loans as part of Japanese Official Development Assistance (ODA) increased 36 percent from the previous year to 798.6 billion yen in fiscal 2004, reflecting diversification of development needs.  

(2) Highlights of OECOs in FY2004

• i. By region, whereas Asia continued to have a dominant 78% share, loan provision increased for non-Asian, non annual-loan-package recipient countries, such as Turkey and Romania.  By country, India topped the list of recipients with loan commitments totaling 134.5 billion yen, followed by Indonesia with 114.8 billion yen, Turkey with 98.7 billion yen and China with 85.9 billion yen. The first ODA loan was extended to Ukraine, making it the 96th ODA loan recipient country. 
• ii. Program loans were provided for the first time in two years, including the Third Poverty Reduction Support Credit for Vietnam, to improve institutional and policy environments in the developing countries.
• iii. Loans to environmental and poverty reduction projects have been on the rise year after year.  In FY2004, 24 loans were provided for environmental projects, including the geothermal project in Indonesia and the afforestation project in India, with their share increasing to 60% of the total volume of ODA loan commitments (from 57% in the previous year).  13 loans were provided for poverty reduction projects, including water supply and sewerage project in India, with their share increasing to 22% of the total (from 8% in the previous year).
• iv. In FY2004, preferential terms were additionally made applicable to ODA loans supporting peace building efforts.  They were first applied to 3 projects in Sri Lanka.  For the projects drawing on superior Japanese technology and knowhow to raise "the visibility of Japan's ODA", The   Special Term for Economic Partnership (STEP) were instituted in FY2004.  These special terms applied to 4 loans with the aggregate total of 83.3 billion yen, including for the port development project in Vietnam.  Their share increased to 10% of the total ODA loan commitments (from 6% in the previous year).
• v. As the result of a growing number of orders won by Japanese firms for large-scale contracts (including in Turkey and Thailand) and procurement in the projects financed by Special ODA loans (including in the Philippines and Vietnam), the share of orders won by Japanese firms in the procurement of ODA loan-financed projects increased to 35% (from 25% in the previous year).  The share of orders won by Japanese firms in the foreign currency portion of the procurement increased even more significantly to 53% (from 37% in the previous year).
• vi. The new 4-level rating system was adopted for ex-post evaluation of individual projects to improve accountability and the quality of operations.
• vii. Evaluation was conducted on the Medium-Term Strategy for Overseas Economic Cooperation Operations prepared in March 2002 and an evaluation report was produced.  In addition, the new Medium-Term Strategy covering a 3-year period from FY2005 was released in April 2005 after inviting public comment to its draft.

II. Other Activities

1.        As part of efforts to address global issues, following entry into force of the Kyoto Protocol in February this year, JBIC signed cooperation agreements with a total of 7 governments, government agencies and regional multilateral financial institutions mainly in the Latin American, Caribbean and Central and Eastern Europe regions, to support increased implementation of greenhouse gas (GHG) emissions reduction projects, and acquisition of emissions reduction credits by Japanese firms.  JBIC also participated in the Finance Initiative of the United Nations Environmental Programme (UNEP-FI).

2.        In response to the disaster caused by the great earthquake off the coast of Sumatra and the tsunami in the Indian Ocean, JBIC, the World Bank and the Asian Development Bank (ADB) conducted joint needs assessment in Indonesia, Sri Lanka and Maldives immediately following the disaster.  Discussions and planning with other governments are underway to draw up rehabilitation/reconstruction plans and provide emergency assistance.  In the United Nations World Conference on Disaster Reduction (WCDR) held at Kobe in January 2005, JBIC held a symposium on international cooperation mobilizing the knowledge and expertise of local governments on disaster prevention and reduction.  JBIC signed the agreements on environmental assessment with a total of 10 private financial institutions in addition to 8 institutions in the previous year. These agreements aimed at supporting increased private-sector efforts to integrate environmental considerations in their financing operation, under which JBIC provides them with knowledge and knowhow on the environmental review.  

3.        To secure stable supplies of natural resources to Japan and support Japanese plant exports, JBIC signed cooperation agreements with a total of 4 official financial institutions and a resource company in Latin America and Central Asia, including Companhia Vale do Rio Doce (CVRD) in Brazil, the worldfs largest iron ore supplier, and the International Bank of Azerbaijan (IBA), the official financial institution in Azerbaijan.


4.        Based on the Japan-ASEAN Action Plan launched in December 2004, JBIC collaborated with the United Nations Conference on Trade and Development (UNCTAD) and provided concrete proposals for improving the investment climate to the Cambodian and Laotian governments to promote foreign direct investment in the Greater Mekong Subregion.

5.        The investment and loan consultation service and information service were enhanced as part of efforts to increase support for small and medium enterprises as well as mid-tier firms.  These efforts included setting up the "Ota-JBIC Discussion Meeting for Supporting Monozukuri" in cooperation with the Chamber of Commerce and Industry in Ota City, Gunma Prefecture.  

6.        JBIC further expanded partnership ties with universities, nongovernmental organizations (NGOs) and local governments to mobilize Japanese knowledge, knowhow and expertise and increase civil society participation in economic cooperation operations.  Aside from signing new cooperation agreements with a total of 6 universities, including Yamaguchi University and Waseda University, JBIC accepted students from these partnership universities under the newly instituted internship program.  In the area of partnership with local governments, JBIC cooperated with local governments in the formation stage of human resource development, environmental conservation, and regional development projects to provide Japanese expertise and experience including efforts to promote the tourism of Buddhist historic sites, "Michi-no-Eki", and public health.

7.        JBIC is exchanging views and information from the project formation and preparation stages through country-based ODA task force and other means for effective and efficient implementation of economic cooperation operations.  In FY2004, the collaborating expert program was launched, and the partnership with JICA's schemes was strengthened in the each stage of the project, including implementation and operations and maintenance (O&M), which led to acceptance of an increased number of collaborating trainees.

8.        As part of active efforts to forge an alliance with multilateral institutions, JBIC carried out jointly with the World Bank and ADB a study on the "Connecting East Asia: New Framework for Infrastructure", which aimed at identifying what role infrastructure development plays in economic growth.  JBIC signed cooperation agreements with the UNESCO World Heritage Center to realize poverty reduction through the protection of World Heritage, and with the African Development Bank to effectively address economic development in the African region, respectively.  JBIC also strengthened information dissemination and intellectual alliance in and outside of Japan, including "Tokyo Forum on the Operational Dimensions of Supply Regional Public Goods through Regional Development Assistance " jointly with the Inter-American Development Bank(IDB) and ADB.

 

III. Other Highlights in Overall JBIC Activities

1.        In an effort to seek public understanding for its operations and to further increase transparency, JBIC has continued to release interim and term-end financial statements in accordance with the generally accepted accounting principles and practices for Japanese private corporations (Japanese GAAP).

2.        JBIC released the Annual Business Performance Report for FY2003, in accordance with the "Performance Measurement for Strategic Management" system.  Under this system, JBIC's business performance is monitored in light of operational direction and targets set in advance.  JBIC evaluated the mid-term operational strategy drawn up in March 2002 and compiled the findings in the Operational Strategy Evaluation Report for FY2002-2004.  It also solicited public comments on its operational strategy, identified changes in requests of the general public and needs of clients and beneficiaries, and then, reflecting those changes, prepared and announced the new operational strategy covering FY2005 and years beyond.
 

(See Appendix)