Feature Article TOP 10 PROMISING COUNTRIES 3
Continuing with a look at the 3rd to 10th ranked promising countries for investment, which followed India and Vietnam. The features, strengths, and challenges of four of these countries—Indonesia, Mexico, the Philippines, and Germany—that are attracting attention, and JBIC's respective initiatives are summarized here.
Despite its obscure legal system, Southeast Asia’s largest market is attractive
Indonesia has a population of over 275 million, the largest in Southeast Asia, and enjoys stable economic growth. Against the backdrop of its growing purchasing power, it is also expanding from a production base to a consumer market, with many companies seeing strong growth potential in the local market. Japanese companies have been setting up operations in the country since before World War II, a history that is longer than that of other ASEAN member states.
On the other hand, the obscure legal system and rising labor costs present challenges. JBIC is providing support to enhance the resilience of supply chains for the still robust motorcycle and automobile industries, and also bolstering support for the energy transition to carbon neutrality.
Despite security issues, its location next to the U.S. gives it a geographic advantage
About half of the companies that listed Mexico as promising were automobile related. In addition to inexpensive labor costs, the advantage of geographical proximity to the U.S. has made it a North American supply base for assembly manufacturers. There are also high expectations for it as a near-shoring destination for the U.S. market, where labor costs continue to rise. With the U.S. market shifting to EVs, there are plans to sell gasoline-powered vehicles in Mexico.
Although labor costs are low due to about half of the working population being non-regular employees, challenges remain around public safety and securing talent. JBIC will continue to support the development of automobile part manufacturing and sales.
Despite human resources issues, its labor costs are low and growth prospects are high
The geographical proximity of the Philippines to Japan and the fact that many Japanese companies have been establishing operations in the country since shortly after WWII are advantages in terms of market entry. The country has an established reputation for low labor costs and market growth potential.
On the other hand, skill shortages and the income gap as well as concerns about public safety due to conflict in the Mindanao area are cited as challenges to market entry. Due to these reasons, it has not yet become a destination for production bases and other risk diversification. JBIC is currently working to expand support for energy transition.
Despite the economic impacts from the invasion of Ukraine, it has an established reputation for technology and quality
Germany has a high reputation for firmly honoring business commitments such as price negotiations, and has gained the strong trust of Japanese companies, especially those in the manufacturing industry. Its technology and quality of workmanship are also high.
Due to the strong impact of Russian invasion of Ukraine, its growth is currently lower than Japan’s and economic recovery cannot be expected for some time to come. Although this presents a challenge, its decarbonization measures are the most ambitious in Europe. It is also the only major European country that ranked in the top 10 promising countries. JBIC is providing support for the expansion of manufacturing facilities for EV parts and the production of automotive and exhaust system parts.
