Even if Japanese firms seek to expand business into foreign countries, their business projects will not succeed without a sound business environment. The most important factor is infrastructure at the national and/or local level. It is essential to develop such basic physical infrastructure as roads, telecommunications networks, power, water supply and port facilities. As JBIC supports the efforts of Japanese firms to develop international business operations, it is active in financing this sector. The objective of infrastructure development is not simply to draw in investments. Infrastructure will also serve as the underpinnings of economic development. Thus infrastructure projects have to proceed as joint public-private undertaking based on mutual trust between JBIC, host country governments and local firms.

For example, since Japan relies on the Middle Eastern countries for about 70% of its total crude oil imports, their stable political and economic development and stronger ties with them are an increasingly important issue to Japan. The following are a number of projects in the Middle East where JBIC is involved to address this issue.

Port Development in Oman:
Supporting Efficient Business Operations of Local Japanese Affiliates

Ten years ago, Sohar, a major industrial city today in the Sultanate of Oman, located 240km northwest of the capital Muscat, was a fishing town with a small pier on its sandy shore. Its transformation into an industrial hub took place under the country's medium-term national development plan, which was launched by the government in the 1990s in pursuit of industrial diversification. JBIC supported the construction of the Port of Sohar by providing untied loans in March 1999 and in November 2006. In the neighboring industrial estate, Japanese engineering firms are engaging in their work after winning an oil refinery contract in 2003 and a fertilizer plant contract in 2005.

Following this successful project, JBIC has been cooperating with Oman on new projects for diversifying its industrial structure. Since there is a shortage of ports equipped with dry docks for repairing LNG and oil tankers in the Middle Eastern countries, including Oman, the Omani Government has planned to build a new industrial hub with port facilities, including dry docks, in Duqm, some 600km south of Muscat. In September 2007, JBIC offered the Omani Government an untied loan for this port development. This project will help Japanese shippers reduce maintenance costs and ensure more efficient shipping operations.

Such economic support for Oman has significance in terms of its contribution to Japan's energy and natural resource diplomacy. As Oman is just outside the Straits of Hormuz, it has a geopolitical advantage. It is therefore one of the most important suppliers of oil and LNG to Japan. Since Oman is moving to diversify its industrial structure, supporting its infrastructure development for attracting foreign investment will strengthen economic relations between Japan and this resource-endowed country.

JBIC's financial support for Omani projects has multiple implications. Cooperation with Oman to meet its needs of improving the business environment will strengthen the countries' bilateral economic ties, secure access to stable resource supplies and, furthermore, support Japanese firms in their business development.

Untied Loans

Developing Local Supporting Industries:
Helping Japanese Business Operations through SME Development in Thailand

JBIC is extensively supporting small and medium enterprises (SMEs) in Asia. In October 2007, JBIC signed a ¥26 billion untied loan with Kasikornbank in Thailand in cofinancing with eight private financial institutions (Sumitomo Mitsui Banking Corporation (lead bank), the Bank of Tokyo-Mitsubishi UFJ, Ltd., Mizuho Corporate Bank, Ltd., the Bank of Kyoto, Ltd., Higashi-Nippon Bank, Limited, Sumitomo Trust & Banking Co., Ltd. and Nomura Trust and Banking Co., Ltd), with JBIC providing a guarantee for their cofinancing portion.

The objective of this loan is to develop SMEs in Thailand which will constitute supporting industries for local Japanese subsidiaries and affiliates, including those of Japanese SMEs. Kasikornbank will serve as an intermediary, and will on-lend to local SMEs to foster their business development.

In recent years, Japanese firms, especially in the automobile, home appliance and electronics industries, have been making vigorous investments in Thailand in an effort to make the country a hub of their production networks in Southeast Asia. With financial support for local Japanese and Thai SMEs through Kasikornbank, it is expected that Japanese firms doing business in Thailand will be able to build advanced supply chains, expand their markets and improve their international competitiveness.

In view of the importance of close economic ties between Japan and Thailand, which serves as a key base for Japanese business activities, JBIC will make efforts to strengthen co-benefiting bilateral relations by helping improve the country's investment climate for Japanese businesses.