Japan’s Outward FDI in Japan’s Outward FDI in Globalization Globalization Daisuke Hiratsuka Director General of Developmen t Studies Center Institute of Developing Econo mies, JETRO 81-43-299-9676, Fax. 81-43-299 -9763 [email protected]25-26 April, 2007
20
Embed
Japan ’ s Outward FDI in Globalization Daisuke Hiratsuka Director General of Development Studies Center Institute of Developing Economies, JETRO 81-43-299-9676,
This document is posted to help you gain knowledge. Please leave a comment to let me know what you think about it! Share it to your friends and learn new things together.
Transcript
Japan’s Outward FDI in GlobalizationJapan’s Outward FDI in GlobalizationJapan’s Outward FDI in GlobalizationJapan’s Outward FDI in Globalization
Daisuke HiratsukaDirector General of Development Studies Center
Institute of Developing Economies, JETRO81-43-299-9676, Fax. 81-43-299-9763
1. What does determine outward FDI?2. New Asian economic landscape3. Distribution of Japan’s outward FDI4. Japan’s outward FDI inside Asia5. Evolution of global presence by Japan
ese firms6. International expansion by Japanese S
MEs7. Perspective of Japanese outward FDI i
n further economic integration
Contents
3
1. What does determine outward FDI?
Presence of transport cost
Country A
Agglomeration Force
(FDI in country A)
Dispersion Force
(FDI in country B)
Increase of factor pricesIn country A
Increase of profits
Decrease of profits
Fall of transport cost
Increase of profits
Increase of factor pricesIn country B
Country B:A new frontier
1. Agglomeration and dispersion forces are sources of FDI.
4
The differences in factor prices makes the “flying geese pattern” in terms of FDI. development
1. What does determine outward FDI?Industry have agglomerated in many Asian countries, and they have been linked to produce a good: most of suppliers are Japanese affiliates.
6
• Production process is becoming sequential stages of production, and instead of final products, parts and components within the same industry are traded.
• Assuming the two country case, a good across border four times: at the exported from the country A; imported into the country B; exported from the country B after processing , and imported back to the country A.
• In the actual sequential production, one good crosses borders many times to produce a final good.
• It implies that the reduction of trade costs, such as trade liberalization and facilitation measures, would develop the sequential production, increasing FDI flows.
2. New Asian economic landscape: trade pattern inside Asia has changed from inter-industry to intra-industry that has traded parts and components.
Note: Asia contains the ASEAN five countries (Indonesia, Malaysia, the Philippines, Singapore, and Thailand), China, Japan, Korea, and Hong Kong. Imports of China are available after 1998. Source: IDE-JETRO/RIETI
8
2. New Asian economic landscape: Import relation between Japan and ASEAN
0
10
20
30
40
50
60
70
1980 1985 1990 1995 2000 1980 1985 1990 1995 2000
Primary GoodsProcessed goodsParts and componentsCapital goodsConsumption goods
(%)
Processed
Capital
Parts
Consumption
Primary
ASEAN→ Japan Japan→ASEAN
Parts
Capital
Consumption
Primary
Processed
9
2. New Asian economic landscape: Import relation between China and ASEAN
0
10
20
30
40
50
60
70
80
1980 1985 1990 1995 2000 1980 1985 1990 1995 2000
Primary goodsProcessed goodsParts and componentsCapital goodsConsumption goods
Notes: 1. Above chart shows results of firms listed on the Tokyo Stock Exchange (TSE), whose fiscal year ends between December to March, and who release sales and operating profits by region. (Firms in banking and insurance industries are excluded.)Note 2: Year-on-year growth rates for sales/operating profits are calculated to include the same group of firms (to allow for comparison).Note 3: “Europe” includes Africa and the Middle East. “Others” includes answers wih multiple regions combined (e.g. “Europe and the US”).Source: prepared by JETRO based on Toyo Keizai Shimposha’s “Kigyo Zaimu Karte 2007”
Table 1 Share of sales for TSE-listed firms (by region)
2. New Asian economic landscape: overseas market is increasing share in sales and profits.
11
Notes: 1. Above chart shows results of firms listed on the Tokyo Stock Exchange (TSE), whose fiscal year ends between December to March, and who release sales and operating profits by region. (Firms in banking and insurance industries are excluded.)Note 2: Year-on-year growth rates for sales/operating profits are calculated to include the same group of firms (to allow for comparison).Note 3: “Europe” includes Africa and the Middle East. “Others” includes answers wih multiple regions combined (e.g. “Europe and the US”).Source: prepared by JETRO based on Toyo Keizai Shimposha’s “Kigyo Zaimu Karte 2007”
Table 2 Share of profits for TSE-listed firms (by region)
2. New Asian economic landscape: overseas market is increasing share in sales and profits.
Figure 6. Japan's Outward FDI (based on reports and notifications) by Country/Region (Million US$)
Note: Firms with capital more than 100 million yen are to report to the Ministry of Finance, Japan. Source: Original data from the Ministry of Finance of Japan, and converted into from Japanese yen to the US dollar by JETRO.
Inactive up to 1985
1st boom 1985-922nd boom 1993-97
After the crisis
13
3. Distribution of Japan’s outward FDI
Fiigure 7. Share of Japan's Outward FDI (based on reports and notifications) by Country/Region (%)
Note: Firms with capital more than 100 million yen are to report to the Ministry of Finance, Japan. Source: Original data from the Ministry of Finance of Japan, and converted into from Japanese yen to the US dollar by JETRO.
0.0
10.0
20.0
30.0
40.0
50.0
60.0
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
North AmericaAsiaEurope
14
4. Japan’s outward FDI inside Asia
Fiigure 8. Japan's Outward FDI (based on reports and notifications) inside Asia by Country/Region (Million US$)
Note: Firms with capital more than 100 million yen are to report to the Ministry of Finance, Japan. Source: Original data from the Ministry of Finance of Japan, and converted into from Japanese yen to the US dollar by JETRO.
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
the rest of Asia Taiwan Korea Hong Kong ChinaASEAN10
Before the Plaza Accord
After the Plaza Accord Before the crisis
After the crisis
15
4. Japan’s outward FDI inside Asia
Fiigure 9. Share of Japan's Outward FDI (based on reports and notifications) inside Asia by Country/Region (%)
Note: Firms with capital more than 100 million yen are to report to the Ministry of Finance, Japan. Source: Original data from the Ministry of Finance of Japan, and converted into from Japanese yen to the US dollar by JETRO.
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
ASEAN10 China Hong Kong
16
4. Japan’s outward FDI inside Asia
Fiigure 10. Share of Japan's Outward FDI (based on reports and notifications) inside ASEAN 6 (Million US$)
Note: Firms with capital more than 100 million yen are to report to the Ministry of Finance, Japan. Source: Original data from the Ministry of Finance of Japan, and converted into from Japanese yen to the US dollar by JETRO.
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
1965
1966
1967
1968
1969
1970
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
Viet Nam Thailand Singapore Philippines Malaysia Indonesia
After the crisis
Before the crisis
After the Plaza Accord
Before the Plaza Accord
17
4. Japan’s outward FDI inside Asia: the rise of China
Figure 11 Japan's outward FDI inside Asia (based on balance of payments basis, net flow, US$ million)
Sources: Prepared by JETRO from Ministry of Finance Balance of Payments Statistics and Bank of Japan foreign exchange rates
1. In the mid 1980s, SMEs who afforded enough had in human resources and capitals, went to overseas, in particular to ASEAN, exporting back goods to Japan.
2. SMEs have suffered from the decreasing demands. As a breakthrough in severe business environments, Japanese SMEs have advanced to operate in Asia, in order to participate in the production networks.
3. After the China’s entry in WTO in 2001, a large number of SMEs have advanced to China, seeking market.
4. SMEs have at least two overseas production sites; one in ASEAN and another in China.
20
6. Perspective in further economic integrationn
1. Japan will increase investment in Japan; the so-called “return to Japan.”
2. Production and distribution networks have been self-organizing, meaning that Japan will continue outward FDI at high level.
3. But, the presence of Japan’s FDI in Asia will be down, because most of Japan’s FDIs are the expansion of existing facilities, meanwhile FDIs by other Asia are new investments.
4. Japan will increase FDIs in the new frontiers such as Vietnam, India, and other emerging economies.