Report on Japanese Manufacturers' Overseas Business Operations
FY2007 (the 19th) Survey on Foreign Direct Investment
- Area: Others
- Manufacturing and Services
- Japan Bank for International Cooperation (JBIC; Governor: Koji Tanami) released today the results of a survey on Japanese manufacturers' overseas business operations. The survey, titled "Survey Report on Overseas Business Operations by Japanese Manufacturing Companies," was conducted from July through August, 2007, covering 970 companies, of which 600 returned effective responses. The effective response rate was 61.9%. Its purpose is to identify the current trends as well as future outlooks of the overseas business operations of Japanese manufacturing companies engaging in business operations abroad. This year's survey is the 19th of an annual series that began in 1989.
- In this year, the survey examined "competitors in the global sales market" and "important domestic and overseas efforts to maintain/improve international competitiveness," in addition to "medium-term prospects of business operations," "evaluation of overseas business performance" and "promising countries and regions for overseas business operations."
The highlights of this year's survey are as follows. (For the full document, please click here)
- (1) Overseas production and sales are on the rise, expanding to one-third of the total production and sales.
The overseas production ratio reached 30.5% during fiscal 2006. This is the first time it exceeded 30% since this survey series began. The respondents expected that this ratio would continue to rise to 31.6% in fiscal 2007. The overseas sales ratio during fiscal 2006 was 33.2% and the projection for fiscal 2007 continued to expand further to 34.6%. Thus, overseas business operations have expanded to account for one-third of the total business operations of Japanese manufacturing firms. An active stance also continued on future overseas operations.
- (2) As investment destination, an interest previously concentrated in China continued to diversify into other emerging market countries.
While China has ranked first as a promising country for overseas business operation over the next three years, its percentage of votes has fallen for four consecutive years since its peak in the ranking. However, given that about 80% of the respondents have production bases in China, it continues to be important for Japanese firms in their overseas business operations.
Increasingly, firms "have business plans" in India. This finding is even more closely linked to actual investment performance. Further growing interest in India was indicated by the fact that it passed China for the first time to become the most promising destination for overseas business operations over the long term ( the next 10 years or so).
- (3) Change is underway from FDI seeking low costs to FDI focusing attention on growth potential in emerging market countries.
As a main reason for considering a promising country for overseas operations, the citation of "inexpensive labor force" and other items related to low-cost operation decreased, while citations related to the local market such as "growth potential of the market" increased. This indicates changing motives of Japanese manufacturers for moving operations overseas.
- (4) Focused efforts in the areas of development, production and sales are respectively important to maintain/improve international competitiveness.Furthermore, a pressing challenge for them is to recruit and train competent personnel.
The development of new products was cited as the most important effort to maintain and improve international competitiveness. However, efforts in the areas of production and sales, including cost reduction, expansion of overseas production and strengthening sales forces, were also recognized as important factors.
As emerging market countries are gaining increasing weight in the world economy, the survey found a corporate stance of seeking to increase competitiveness by customizing their products and/or the sales drive to the characteristics of these markets. However, there is a shortage of personnel who can enable firms to effectively manage development, production and sales cycles for this purpose.
- JBIC will draw on the findings of the survey to provide well-tuned support for overseas business activities of Japanese companies, which are exposed to increasingly intense global competition, and to improve the investment climate in individual countries and regions by working on and conducting a dialogue with foreign governments and their agencies.
Appendix: Promising Countries/Regions for Overseas Business Operations over the Medium Term.