White Paper on International Economy and Trade 2013 [Outline]

June 2013 Ministry of Economy, Trade and Industry

White Paper on International Economy and Trade 2013 [Outline]

●A non-statutory white paper published as an annual report concerning Japan’s external economic policy ●This year’s white paper is the 65th annual report since the first publication in 1949.

1. White Paper on International Economy and Trade

2. Major points and composition of the white paper

●Analyze the effects of initiatives to acquire foreign demand from rapidly growing emerging markets (outbound initiatives) and initiatives to attract excellent human resources and companies to Japan (inbound initiatives) in improving Japan’s productivity, and indicate the future course of Japan’s international business development

《Composition》 Part I Productivity Improvement and International Business Development

Chapter 1 Japan’s Current Productivity in Comparison with Other Countries Chapter 2 Roles of International Business Development in Improving Productivity

Part II Future Course of Japan’s International Business Development Chapter 1 Promotion of Economic Partnerships Chapter 2 Acquisition of Growing Markets (Emerging Market Development) Chapter 3 Support for Industries and Companies with the Potential to Expand Business Overseas Chapter 4 Acceptance of Excellent Human Resources and Companies from Overseas

Part III Trends in the World Economy Chapter 1 Outline—World Economy still Showing Fragile Recovery despite the Mitigation of Serious Risks— Chapter 2 Trends in Major Countries and Regions Chapter 3 Trends in Japan’s International Trade and Investment

2

Japan’s Current Productivity in Comparison with Other Countries (1)

In comparison with other countries, Japan’s productivity, which is one of the significant factors for attaining medium- and long-term economic growth, is as low as around 60% of that in the United States and is also lower than that in Germany, France, and the United Kingdom.

3

Comparison of labor productivity (US=100)

Note: Figures are 3-year backward moving averages. Source: Created based on “EU KLEMS”

57.2

85.9

67.476.0

39.0

0

20

40

60

80

100

120

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Japan US GermanyUK France South Korea

(All industries) (Non-manufacturing) (Manufacturing)

69.977.0

63.4

74.3

47.8

0

20

40

60

80

100

120

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Japan US GermanyUK France South Korea

53.9

87.6

67.976.2

36.6

0

20

40

60

80

100

120

1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009

Japan US GermanyUK France South Korea

(year)

(year) (year) (year)

57.2

69.9

63.4 53.9

Japan’s Current Productivity in Comparison with Other Countries (2)

In Japan, sectors with high productivity account for only a small portion in the overall economy, while those with low productivity account for a much larger portion.

Note: Manufacturing industries are shown in red and non-manufacturing industries in blue. Source: Created based on “EU KLEMS”

Vertical axis: Labor productivity level (US=100) (Average between 2003 and 2007)

Japan’s productivity and value-added share by industry

*Transport equipment includes airplanes, ships, and train cars. Only comparing the automobile industry, the labor productivity level improves to 106.1 against the US level.

Horizontal axis: Added value share (Average between 2003 and 2007)

4

128.7

120.2

93.288.7

84.780.4

58.653.5 52.5

45.7 42.9

26.8

50

100

15020% 40% 60% 80%

0

Gene

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Chem

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Meta

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Fina

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Food

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5

Japan’s Current Productivity in Comparison with Other Countries (3)

The overall productivity may be improved by (i) expanding economic activities of the sectors with relatively high productivity and (ii) having all sectors comprising the Japanese economy improve their productivity.

In order to expand economic activities of highly-productive sectors, it is important to promote economic partnerships and strategically approach emerging countries to attract overseas demand. Furthermore, promoting innovation in Japan by actively incorporating excellent overseas human resources and companies is also vital for improving productivity in each sector.

Productivity

Value-added

Expansion of economic activities of highly-productive sectors

Increase in productivity in each sector

Productivity

Value-added

Roles of International Business Development in Improving Productivity (Roles of Overseas Business Expansion in Improving Productivity (1))

If highly-productive companies that have already expanded business overseas (conducting exports and/or FDI) and those that are highly-productive but have yet to expand business overseas make further efforts to improve and maintain their high productivity and expand business size by attracting foreign demand, such efforts will surely contribute to pushing up Japan’s productivity as a whole.

Labor productivity of companies that have not expanded business overseas (manufacturing companies with 50 or more employees)

6

Expansion of business sizes of highly-productive companies that have expanded business overseas will

push up Japan’s productivity as a whole

Note: Apparent labor productivity (ALP) stands for sales per worker. This chart shows the respective distribution of ALP for companies that have not expanded business overseas, exporting companies (not conducting FDI), companies conducting FDI (not conducting exports), and companies conducting both exports and FDI. Source: Created based on “Basic Survey of Japanese Business Structures and Activities,” Ministry of Economy, Trade and Industry

Note: Labor productivity is calculated as sales per worker. Source: Created based on “Basic Survey of Japanese Business Structures and Activities,” Ministry of Economy, Trade and Industry

Roles of International Business Development in Improving Productivity (Roles of Overseas Business Expansion in Improving Productivity (2))

Companies that commenced exports to North America and Europe generally continue to show improvements in their productivity for four years after commencing exports due to the learning effect in highly-sophisticated markets.

As emerging markets become more and more developed, companies may be able to learn from exports to those emerging markets as well.

Note: The coefficient for “3 years later” is not statistically significant. Source: Created based on “Analysis of Learning-by-Exporting Effects: Interaction between Commencement of Exports and Innovative Activities,” (in Japanese)Keiko Ito, 2011

Positive effects of commencement of exports to North America and Europe on growth of total factor productivity (TFP)

+1.6%+2.4%

+3.8%+3.0%

+4.1%

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

輸出開始

当年

輸出開始

1年後

輸出開始

2年後

輸出開始

3年後

輸出開始

4年後

（%）

7

Year of commencing

exports

1 year later 2 years later 3 years later 4 years later

8

Roles of International Business Development in Improving Productivity (Roles of Overseas Business Expansion in Improving Productivity (3))

The following is an example of a company that could have successfully improved its productivity due to learning effects through competition in overseas markets.

○OPTOELECTRONICS Co., Ltd. • OPTOELECTRONICS manufactures and sells bar code readers. In 1984, eight years from its foundation, the company

established a local subsidiary in the United States, the home of bar code technology, and commenced overseas business expansion in earnest.

• At that time, major bar code readers in Japan were CCD scanners, while laser scanners were common in Western countries. Through business expansion to the United States, the company succeeded in specializing in laser scanners.

• In the United States, while competing with Symbol Technologies, Inc. (Motorola, Inc. at present), which held overwhelming market shares at that time, OPTOELECTRONIC made efforts to understand customers’ needs, promoted research and development, and increased value-added through improving technologies and the quality of the laser module scan engine, thereby having succeeded in improving productivity.

• Then, in 1989, the company commenced business in Europe and developed even higher value-added products. The company succeeded in further improving productivity and achieved the level to match Symbol Technologies, Inc. in European markets.

• As a result, the company’s laser module scan engine now has the second largest share in the world market and the top share in the domestic market (over 90%).

Photo: Handy laser scanner Photo: Laser module scan engine

Out of the leading medium-sized and small and medium-sized enterprises (hereinafter SMEs) that have not expanded business overseas, 40% are positive about overseas business expansion. Furthermore, around 60% of SMEs consider that their own products would be accepted in world markets.

Roles of International Business Development in Improving Productivity (Potential of SMEs (1))

9

Evaluation of forecast of overseas sales in five years among the total sales (on a consolidated basis)

(SMEs that have not expanded business overseas)

Source: Created based on “Questionnaire Survey on Japanese Companies’ Overseas Business Strategy for Discussing Trade Policy” (2013), Teikoku Databank, Ltd.

Around 60% of SMEs consider that their own products would be accepted in world markets.

Do you think that your company’s own products and services are accepted in world markets? (SMEs)

Source: Created based on “Questionnaire Survey on Japanese Companies’ Overseas Business Strategy for Discussing Trade Policy” (2013), Teikoku Databank, Ltd.

30.3 30.4 23.4 15.9

0% 20% 40% 60% 80% 100%

Satisfied Somewhat satisfied Somewhat dissatisfied Dissatisfied

40% of SMEs are positive about overseas business expansion.

22.3 39.8 20.2 17.7

0% 20% 40% 60% 80% 100%

Positive Somewhat positiveSomewhat negative Negative

n=1,482

10

Roles of International Business Development in Improving Productivity (Potential of SMEs (2))

Japan also has SMEs that hold excellent technology and business models.

(i) Nippon Kodoshi Corporation The world’s top manufacturer of condenser separators (approx. 60% of the world-market share) with 431 employees ＜Overseas business expansion＞ • The company was founded in 1941 and commenced exports in

1963, delivering its products to famous Japanese-affiliated manufacturers as well as to Chinese, Korean and European manufacturers. The company has its overseas subsidiary only in Malaysia.

＜Specialization of products and R&D＞ • The company specializes in manufacturing condenser separators.

During the era of high growth in Japan, other paper manufacturers started mass production of cardboard and other paper products, but Nippon Kodoshi Corporation focused on separators, a niche area with small market size, specializing in the manufacture of special separators in response to requests from home appliance manufacturers.

• Under the principle advocated by the former chairman, “Do not compete with rival companies. Compete with customers,” the company has developed high-quality products exceeding customers’ expectations. Through such product specialization strategy and steady R&D activities, the company has grown to boast an overwhelming share in the manufacture of condenser separators.

(i) MAYEKAWA MFG. Co., Ltd. A company whose major business is cooling engineering, engaged in the manufacture and sale, etc. of refrigerators for industrial use, with 2,200 employees ＜Overseas business expansion＞ • The company was founded in 1924 and commenced exports in

1961. The company established a plant in Mexico, which was its first overseas business base, and now has 86 bases in 34 countries.

＜High-quality products and high-value added services＞ • Mayekawa provides high-quality refrigerators for industrial use to a

wide range of customers, including seafood processing companies, low temperature distributors, agriculture and livestock companies, beverage companies, and dairy companies, having the world’s top share (approx. 35%) in this field and boasting over 80% of the world-market share in the manufacture of cooling equipment for refrigerated ships.

• The company’s products are high-quality, long-lasting and extremely strong, showing high durability.

Photo: Condenser separator

Photo: Highly-efficient natural coolant refrigerator

Aluminum lead

Aluminum foil

Condenser separator

• The company also places importance on high-value added services, not only providing prompt after-sales services to deliver parts swiftly by deploying service staff to numerous locations, but also investigating causes of troubles and presenting improvements to prevent recurrences of troubles.

11

Roles of International Business Development in Improving Productivity (Potential of SMEs (3))

German SMEs, called Mittelstand, are representative examples of leading medium-sized enterprises. They are succeeding in the world market with their excellent business models ((i) specializing in specific goods and services, (ii) positively attracting overseas demand, and (iii) meeting customer’s needs through after-sales services).

＜Strategic characteristics of Mittelstand＞ ○Specialization of products ・Companies avoid competition in competitive fields, but

specialize in a specific field and aim to be the leader in that field.

“Don’t dance where the elephants play.” (Slogan liked by Mittelstand) “We only focus on one thing, but we do it better than anyone else.” (Flexi (dog lead manufacturer)) ○Globalization ・Companies try to ensure business size in specialized markets by positively exporting products and expanding business overseas. ・Exporting companies account for a large portion in SMEs in Germany. ○Emphasizing direct sales and after-sales services ○Emphasizing brands and quality ○Innovation and R&D investment ○Long-term relationship with employees

Rational • Rational AG is a German company that manufactures

and sells cooking ovens for business use. The company commenced overseas business in around 1991 and now sells products in over 100 countries around the world, having 54% of the world-market share.

• In order to fully understand customers’ needs, the company employs 250 staff who have worked as chefs and has them engage in marketing, application study, and consulting activities, thereby providing services from the customer’s viewpoint and ensuring prompt responses through such service network when any problem occurs.

• The company succeeded in developing differentiated products by adopting requests from chefs across the world and manufactures many of its products in various versions covering 56 languages, accompanying recipes.

• Production and development are carried out in Germany.

Note: Left chart: Survey on scores of the quality of services provided in the United States, assuming the quality of Japanese services to be 100 [Valid responses: 555 (Japanese) and 500 (Americans)] Right chart: Calculate the differences in prices to be paid for receiving services of the same level in Japan and the United States [below 1.00: Japanese services are comparatively cheap; 1.00: Japanese services are about the same price; above 1.00: Japanese services are comparatively expensive] Source: Reprinted from “Results of Japan-US Comparison on Quality Differences in the Same Service Field,” Service Productivity & Innovation for Growth (March 31, 2009)

The service industry is relatively delayed in overseas business expansion. A questionnaire survey comparing the quality of services provided in Japan and the United States shows that

the quality is generally higher in Japan but that some fields of Japanese service industry are comparatively costly. As there are some fields where companies are providing highly evaluated services both in terms of quality and price, the Japanese service industry may successfully attract overseas demand in such fields.

Roles of International Business Development in Improving Productivity (Potential of the Services Industry (1))

Nominal GDP ratio of service exports around the world (2010)

Comparison of service items between Japan and the US (Japan =100)

Comparative service prices in terms of quality

12

Source: Created based on “World Development Indicators (WDI),” the World Bank

6.1%

3.8%2.6%

11.4%

7.4% 7.5%

12.5%

7.3%

8.6%

2.7%

5.5%

0.0%

5.0%

10.0%

15.0%

20.0%60.0%52.7%

112.8

95.4

106.8

100.2

91.9

82.0

83.8

78.4

99.2

95.5

95.1

93.6

90.0

87.4

86.0

80.0

Hospitals

General supermarkets

Banks

Car rentals

Home-delivery service

Convenience stores

Air passenger service

SubwayJapanese

American

80 90 100 110 120

Japanese services are superior in quality. American services are superior in quality.

0.981

1.076

1.139

1.136

0.973

0.913

0.968

0.912

0.824

1.073

0.969

1.054

0.980

0.930

0.984

0.931

Hospitals

General supermarkets

Banks

Car rentals

Home-delivery service

Convenience stores

Air passenger service

SubwayJapanese

American

0.80 0.90 1.00 1.10 1.20

Japanese services are comparativelycheap for their quality.

Japanese services are comparativelyexpensive for their quality.

13

Roles of International Business Development in Improving Productivity (Potential of the Services Industry (2))

As a case of a service industry that has increased export of goods and has also affected overseas business expansion of other industries, there is a company that has succeeded in increasing sales by providing information on Japanese traditional culture, popular culture and cuisine on an overseas TV show.

Scheme to increase sales of Momotaro Jeans

○TSS Production, Inc. “Japan in Motion” －Contributed to increasing overseas sales of Momotaro Jeans, etc.－ • A film production company, TSS Production, in Hiroshima

obtained a 30-minute broadcast time (from 19:30 to 20:00 every Tuesday) on a French TV station, NOLIFE, and broadcasts a program introducing Japan, titled “Japan in Motion.”

• The program consists of three slots all approximately nine minutes long: an introduction to various sightseeing spots, cuisine, and festivals across Japan by Japanese idols; an introduction to J-pop album charts in France; and an introduction to Japanese popular culture and traditional culture.

• As a scheme, the company introduces goods in the program, conducts marketing on the program’s website by asking viewers about design, price, and other matters concerning goods, selects goods with strong potential, and makes improvements based on such opinions, and sells the goods at shops and exhibitions with the cooperation of the program.

• The company succeeded in having two major famous shops in Paris carry Momotaro Jeans that are newly developed based on questionnaire results and also presented them at exhibitions held in Paris. Through such efforts, sales channels for Momotaro Jeans expanded not only in France but also in other European countries and further in Asian countries.

• The company significantly contributed to increasing overseas sales of Momotaro Jeans and Otafuku Sauce through the program.

Broadcast a program titled “Japan in Motion”

Marketing with French viewers

Thoroughly cover the manufacturing process that places importance on handcraft under the principle that “the human hand never lies”!

Ask questions as follows upon offering presents for viewers to obtain information for business expansion in France Q How do you like the design? Q Do you think the price range is reasonable?

Commercial film

Shop in Paris Exhibition Commercial film

Participate in an exhibition where people gather from

various European countries Distribute goods to a

shop influential in Paris Make a commercial film

through secondarily using the program clips

Scheme to increase sales of Momotaro Jeans

Roles of International Business Development in Improving Productivity (Acceptance of Excellent Human Resources and Companies from Overseas)

It is important to positively accept excellent companies, human resources, and technologies from overseas to activate innovation in Japan with the aim of improving productivity.

Only a small percentage of Japanese companies have adopted a strategy to cooperate on innovations jointly with foreign partners.

Japan’s inward foreign direct investment balance (against GDP) is low internationally, and Japan needs to make further efforts for attracting excellent companies, human resources, and technologies from overseas.

0

5

10

15

20

25

デンマーク

ルクセンブルク

ベルギー

フィンランド

スウェーデン

ニュージーランド

ノルウェー

オランダ

英国

スイス

フランス

オーストリア

ドイツ

日本

(%)

Only a small percentage of Japanese companies have cooperated on innovation activities with foreign partners.

14

Note: 1. Data are for 2006 to 2008 for Japan, 2003 to 2005 for Switzerland, 2003 to 2005 for New Zealand, and 2002 to 2004 for the others. 2. The used data are the Second Innovation Survey for Japan, and the OECD report, “Innovation in Firms (2009),” for the others. 3. The above surveys, which are the sources of the used data, define the term “innovation activities” as activities for achieving production innovation and process innovation. Source: Created based on “Current Status of Innovation in Japan through International Comparison,” Kohei Nishikawa and Hiroshi Ohashi (2010), Discussion Paper No. 68, September 2010, National Institute of Science and Technology Policy, Ministry of Education, Culture, Sports, Science and Technology

Japan’s inward foreign direct investment balance (against GDP) is low internationally

Den

mar

k

Luxe

mbo

urg

Bel

gium

Finl

and

Swed

en

New

Zea

land

Nor

way

Net

herla

nds

UK

Switz

erla

nd

Fran

ce

Aus

tria

Ger

man

y

Japa

n 3.7

16.9

51.5

36.9 27.1

12.6

191.6

25.9

5.9 7.3

0

20

40

60

80

100

Japan US UK France Germany South Korea Singapore

Inward foreign direct investment/GDP

Inward foreign direct investment from outside of the EU/GDP

Note: Data for Singapore and for “Inward foreign direct investment from outside of the EU/GDP” are all those as of the end of 2010.Source: Created based on the following data<FDI (book value)> Japan: “Statistics on Foreign Assets and Liabilities,” Ministry of Finance; UK, Germany, South Korea, and Singapore: “International Financial Statistics,” IMF; US: “Survey of Current Business,” Department of Commerce; France: “French Balance of Payments and International Investment Position,” Bank of France<GDP and exchange rate> “International Financial Statistics,” IMF

(GDP ratio, %)

Note: Data for Singapore and for “Inward foreign direct investment from outside of the EU/GDP” are all those as of the end of 2010. Data for others are all those as of the end of 2011. Source: Created based on the following data <FDI (book value)> Japan: “Statistics on Foreign Assets and Liabilities,” Ministry of Finance; UK, Germany, South Korea, and Singapore: “International Financial Statistics,” IMF; US: “Survey of Current Business,” Department of Commerce; France: “French Balance of Payments and International Investment Position,” Bank of France <GDP and exchange rate> “International Financial Statistics,” IMF

15

Part II Future Course of Japan’s International Business Development

Japan’s international business development, consisting of outbound and inbound efforts, needs to be promoted, focusing on the following.

1. Promotion of economic partnerships 2． Strategic approaches to emerging countries 3．Acceptance of excellent human resources and companies from overseas

TPP

US

Canada

Mexico

Peru

Chile

Malaysia

Vietnam Singapore

Brunei

Australia New Zealand

Regional Comprehensive Economic Partnership (RCEP)

10 ASEAN countries + Japan, China, South Korea, India, Australia, and New Zealand

Promotion of Economic Partnerships (1) On the premise of ensuring national interests, the government of Japan will multilaterally promote negotiations on TPP, RCEP,

Japan-China-South Korea FTA, Japan-EU EPA and other economic partnerships, aiming to build a network of economic partnerships that covers most of the trade partners.

Japan-China-South Korea FTA Japan-EU EPA

Japan

16

Promotion of Economic Partnerships (2)

By promoting economic partnerships, the following effects can be expected. (1) Liberalization of goods and services trade

• Elimination of tariff barriers and non-tariff barriers (2) Protection and liberalization of investment

• Easing of investment permits and restrictions on foreign investment in business activities after making initial investment and further clarification of related procedures

• Ensuring of liberty in transferring investment earnings, etc. (3) Liberalization of the movement of persons

• Facilitation of approval for visas to business persons (4) Protection of intellectual property rights

• Protection of intellectual property rights by cracking down on counterfeit products and pirated copies

(5) Facilitation of trade • Acceleration of customs clearance procedures by strengthening cooperation among customs

authorities • Enhancement of transparency in regulations and rules relating to trade

When the promotion of economic partnerships leads to elimination of tariff barriers and non-tariff barriers, and enhances the stability of the business environment, it is expected that the promotion of exports and building of efficient supply chains will further activate economic activities of highly productive sectors and this will contribute to improving the productivity of the Japanese economy as a whole.

17

機密性○ Strategic Approaches to Emerging Countries (1)

18

In emerging countries, middle-class people and rich people will increase by around 1.4 billion from 2010 to 2020 and market size is expected to expand.

Looking at each country’s share among imports of emerging countries (India, Russia, and Brazil), Japan falls below such countries as the United States, Germany, China, and South Korea.

1072 1097 1120

774 968 1119340

410 4847921015

1304281

307

336

213

242

258

501

545

583

504

568

683

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2010 2015 2020

Population of middle-class people and rich people

Note: Population based on household budgets by household disposable income, calculated by multiplying the household budget ratio for each income bracket by the population. The household budget ratio for each income bracket for 2015 and 2020 is estimated by Euromonitor. Source: Created based on “Euromonitor International 2013”

(million people) Each country’s share among imports of emerging countries

(excl. food, mineral fuel, and precious metals) (2012)

*“Middle-class people” refers to households with annual disposable income of between 5,000 US dollars and 35,000 US dollars, and “rich people” refers to households with annual disposable income of 35,000 US dollars or more.

アフリカ

中南米

ロシア・CIS中東

南西アジア

ASEAN中国

先進国

An increase of around 1.4 billion people in emerging countries

China26%

US8%

Germany8%

South Korea6%

Japan6%

Others46%

India

China20%

Germany14%

Japan6%Ukraine

6%

US5%South Korea

4%

Others45%

Russia

China20%

US15%

Germany8%

Argentina7%South Korea

5%

Japan4%

Others41%

Brazil

Note: Food: HS codes 1 to 24; Mineral fuel: HS codes 25 to 27; Precious metals: HS code 71 Source: Created based on “Global Trade Atlas”

Africa

Latin America

Russia and CIS

Middle East

Southwest Asia

ASEAN

China

Industrialized countries

Strategic Approaches to Emerging Countries (2)

19

Changes in penetration rates of durable consumer goods in general households in Japan and penetration rates of durable consumer goods as of 2012 in other countries

The following chart shows each country’s penetration rates of durable consumer goods (cars, TVs, refrigerators, etc.) as of 2012 and around what year Japan reached the relevant levels. It is important to understand the timing when penetration rates of durable consumer goods rise sharply in emerging countries. For example, the penetration rate of refrigerators in Indonesia, that of microwave ovens in Turkey, and that of cars, etc. in South Africa are immediately prior to an inflection point, and they are highly likely to increase significantly in the near future.

0

1961

1964

1967

1970

1973

1976

1979

1982

1985

1988

1991

1994

1997

2000

2003

2006

2009

2012

0102030405060708090

100

ChinaCars6.1%

ChinaMicrowave ovens33.7%

ChinaRefrigerators77.0%

ChinaAir conditioners53.0%

ChinaColor TVs96.8%

IndonesiaCars7.4%

IndonesiaMicrowave ovens3.0%

IndonesiaRefrigerators30.6%

IndonesiaAir conditioners7.6%

IndonesiaColor TVs71.5%

IndiaCars4.4%

IndiaMicrowave ovens8.4%

IndiaRefrigerators20.7%

IndiaAir conditioners9.6%

IndiaColor TVs67.3%

BrazilCars36.8% Brazil

Microwave ovens38.5%

BrazilRefrigerators95.9%

BrazilAir conditioners13.3%

BrazilColor TVs95.7%

South AfricaCars28.3%

South AfricaMicrowave ovens44.2%

South AfricaRefrigerators68.2%

South AfricaAir conditioners17.4%

South AfricaColor TVs76.2%

RussiaCars49.8%

RussiaMicrowave ovens50.7%

RussiaRefrigerators98.0%

RussiaAir conditioners8.5%

RussiaColor TVs98.0%

TurkeyCars30.5%

TurkeyMicrowave ovens10.7%

TurkeyRefrigerators98.6%

TurkeyAir conditioners12.8%

TurkeyColor TVs95.3%

乗用車

カラーテレビ

エアコン

冷蔵庫

電子レンジ

Cars

Color TVs

Air conditioners

Refrigerators

Microwave ovens

Source: Created based on “Consumer Confidence Survey,” Cabinet Office and “Euromonitor International 2013”

20

Strategic Approaches to Emerging Countries (3)

米国・カ

ナダ企業13%

欧州企業45%

中国企業20%

韓国企業4%

日本企業9% その他

9%

米国・カ

ナダ企業13%

欧州企業57%

中国企業9%

韓国企業3%

日本企業1% その他

17%

米国・カナ

ダ企業8%

欧州企業35%

中国企業40%

韓国企業4%

日本企業2%

その他12%

米国・カナダ

企業16%

欧州企業30%

中国企業13%

韓国企業21%

日本企業5%

その他15%

アジア 中南米

中東アフリカ

Cities with a population of over one million are expected to increase, mainly in emerging countries, and demand for infrastructure will be boosted accordingly. However, Japan has lagged behind overseas competitors in receiving infrastructure orders in various areas.

Shares in each region of companies receiving infrastructure orders by their nationality (2011)

Source: Created based on “Survey on Support for Export Diversification,” Plant Engineering (PE)

0

100

200

300

400

500

600

700

800

2010 2025

Changes in the number of cities with a population of over one million

Source: “World Urbanization Prospects, the 2011 Revision,” United Nations

449 cities 668 cities＋49%

Emerging countries339→535（＋58%）

Industrialized countries110→133（＋21%）

0

2000

4000

6000

8000

10000

12000

2001 2005 2010

(100 million dollars)Sales of the world’s top 225 contractors from orders received

overseas and orders received domestically

Orders received overseas

Orders received domestically

10,730

5,620

3,550

Source: “Top 225 International Contractors 2011,” ENR

Approx. 40%(384.0 billion

dollars)

Approx. 60%(689.0 billion

dollars)

European companies

European companies

European companies

European companies

Chinese companies

Chinese companies

Chinese companies

Korean companies

Korean companies

Korean companies

Korean companies

Japanese companies

Japanese companies

Japanese companies

Japanese companies

Chinese companies

Others Others

Others Others

US and Canadian companies

US and Canadian companies

US and Canadian companies

US and Canadian companies

Asia

Africa Middle East

Latin America

Strategic Approaches to Emerging Countries (3 Categories of Emerging Markets)

Efforts for market development need to be made strategically by classifying emerging markets into three categories as follows.

21

(1) China and ASEAN(2) Southwest Asia, Middle East, Russia and CIS,

and Latin America (3) Africa

Japanese-affiliated companies: Approx. 30,000

Japanese-affiliated companies:Approx. 3,000

Japanese-affiliated companies:Approx. 500

Japanese-affiliated manufacturing companies havecreated industrial clusters and have strong marketpresence, but Chinese and Korean companies havebeen catching up.

These regions have an increasing number of richpeople and middle-class people, with their marketsizes being large with high growth rates, but notmany Japanese companies have expanded businessyet.

Population increase and market expansion arehighly expected and early business expansion isrequired, but Japan has been losing by default.

Full Business Expansion Reaching Critical Mass Creation of successful cases(i) Further strengthen competitiveness of thebusiness fields where companies have alreadyexpanded business in these regions(ii) Capture the market not only in themanufacturing industry but also in widerindustries (such as industries relating to the CoolJapan initiative)

(i) Expand business in earnest in promising fields toacquire certain levels of market share and presence(ii) Strengthen relationships with resource-richcountries through expanding investment andpromoting technical cooperation

(i) Create as many successful cases as possible(ii) Acquire (carry out) individual projectsrelating to resources and infrastructure

Support overseas business expansion of Japanese companies (excellent SMEs and the services industry)

Support for export of infrastructure systems and strategic economic cooperation

Ensuring supply of resources from partner countries

Strategic Approaches to Emerging Countries (Basic Policy for Supporting Overseas Business Expansion)

22

(1) China and ASEAN (3) Africa

○Initiate the interest of companies, create opportunities for business expansion, and support such efforts・Enhancement of JETRO’s local systems・Hands-on support for individual projects

○Promote Japanese companies’ acquisition of emerging markets through the introduction of energy conservation standards・Support for the establishment of standards and systems for ecologically-friendly cars and home appliances (in Vietnam, Indonesia, etc.)・Support for the development of legal systems concerning sales finance

○Specify promising fields (such as cars and daily necessities) for each country and provide support for full-fledged business expansion・Strengthening of networks with local industrial circles, etc.

○Strengthen Japanese companies’ production system through the reinforcement of supply chains

・Reduction of tariffs and facilitation of trade by establishing the RCEP

・Analysis of problems in regional integration and recommendations by ERIA

・Development of major distribution routes and power networks (across ASEAN countries)

・Support for facilitation of distribution and customs procedures (across ASEAN countries)

・Involvement in the development of an industrial complex (in Myanmar) and the capital sphere (in Indonesia)

・Support for fostering supporting industries (cooperation for industrialization, etc.) in less-developed countries in the region

○Strengthen economic relationships and back up business expansion through offering cooperation for making development plans or in energy-related fields・Cooperation for making regional development plans and development of industrial complexes (for example, in India)・Holding of energy forums (for example, in India)

○Develop a favorable business environment・Response to labor problems and intellectual property-related problems, and development of the cyber security environment

○Develop an environment where companies can make investment at ease・Conclusion of investment agreements (at present, concluded only with Egypt)

○Develop a favorable business environment through such means as concluding economic partnership agreements・Conclusion of economic partnership agreements (in Turkey and Columbia)

(2) Southwest Asia, Middle East, Russia and CIS, and Latin America

Efforts for attracting demand of rapidly growing markets in emerging countries should be made strategically for each country by classifying them into three categories based on levels of economic development, status of Japanese companies’ business expansion, and the environment for competition with foreign rival companies in respective countries, while taking into consideration local needs for infrastructure and the perspective of ensuring the supply of resources.

Strategic Approaches to Emerging Countries (Ensuring Supply of Resources)

23

・Strengthening of a relationship with Russia in the energy field, etc. <diversification of supply sources>・Strengthening of a relationship with UAE in wide-ranging fields <ensuring of own interests>・Strengthening of a relationship with Saudi Arabia in wide-ranging fields <largest oil producing country>

(1) China and ASEAN (3) Africa

・Strengthening of a relationship with Mozambique in the energy field <diversification of supply sources>

・Strengthening of a relationship with Mozambique in the coal field and ensuring of infrastructure

・Strengthening of a relationship with Russia in the energy field, etc.

・Strengthening of a relationship with Mongolia in the coal field and ensuring of infrastructure

Oil and natural gas

Mineral resources

Coal

・Strengthening of relationships with Kazakhstan, etc. in the field of mineral resources <diversification of supply sources>

Diversify supply sources, ensure own interests, and maintain relationships with major supplying countries

Diversify supply sources <in particular, rare earths and rare metals> and ensure supply from Africa, the last frontier

Diversify supply sources <in particular, ensure excellent coking coal>

・Strengthening of relationships with Vietnam, Myanmar, etc. in the field of mineral resources

・Strengthening of a relationship with Indonesia <ensuring of own interests>

・Strengthening of relationships with African countries at the Japan-Africa Ministerial Meeting for Resources Development (May 2013)

(2) Southwest Asia, Middle East, Russia and CIS, and Latin America

Strategies for ensuring resources need to be established in accordance with the characteristics of each of the three categories of emerging countries.

According to a questionnaire survey on risks that Japanese companies consider problematic in conducting business overseas, the most common answer for China was the “deterioration in people’s feelings towards Japan” (91.6%), followed by “changes in labor environments (upsurge of personnel cost and frequent labor disputes)” (65.0%).

According to a questionnaire survey conducted after the protests against Japan that occurred in China in September 2012, 63.3% responded that they need to review their business in China or to act cautiously. Out of these companies, 74% consider it important to diversify risks to other countries and regions, while continuing business in China into the future.

24

Strategic Approaches to Emerging Countries (Risks in Business Expansion to Emerging Countries—China)

Risks that Japanese companies consider problematic in conducting business

overseas (China) Forecast of business in China and the Chinese market in the future,

and changes in awareness towards business in China

Source: Created based on “Questionnaire Survey on Japanese Companies’ Overseas Business Strategy for Discussing Trade Policy,” Teikoku Databank, Ltd.

Source: Created based on “Report on Japanese Manufacturing Companies’ Overseas Business Development—Results of FY2012 Survey: Outlook for Japanese Foreign Direct Investment (24th Annual Survey),” JBIC 3.0%

35.3%

46.9%

41.0%

65.0%

58.9%

60.9%

91.6%

35.4%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

Others

Exchange fluctuations

Risks concerning tariffs and customs clearance

Risks concerning taxation

Changes in labor environments (upsurge of personnel cost and frequent labor disputes)

Undeveloped systems to protect intellectual property rights and arbitrary implementation of

the systems

Undeveloped legal systems (other than systems to protect intellectual property rights) and

arbitrary implementation of laws

Deterioration in people’s feelings towards Japan

Terrorist attacks, conflicts, insurgency 今後の中国事業への取組みについて意識の変化が生じましたか。（回答社数：327社）

今後の中国事業･市場に対する見通しについて、貴社の考えに最も近いものをお選び下さい。（回答社数：207社）

7.6%

55.7%

23.2%

13.5% ■何らかの見直しが必要と感じるようになった。

■方向性は決まっていないが、状況を見極めつつ慎重な対応が必要と感じるようになった。

■特に変わらない。

■現時点では分からない。

6.3%

74.4%

11.6%

7.7%■中国事業には大きなリスクがあると認識し、中国事業・市場への依存度を下げるなど見直しを行うとともに、他国・地域での取組を強化する。

■中国事業への取組みは、今後も続けるが、一方で他国・地域へのリスク分散が重要と認識している。

■中国は、ビジネス相手先や市場として重要であり、従来どおり積極的に事業に取り組む。

■現時点では分からない。

Are there any changes in your awareness towards future business in China? (Responses from 327 companies)

Choose one that is closest to your opinion concerning your business in China and the Chinese market in the future (Responses from 207 companies)

Came to feel it necessary to somewhat review our business in China

Have not decided our future direction, but came to feel it necessary to act cautiously, while assessing the situation

No particular change

Do not know at present

Do not know at present

We consider China to be significant as a business partner and a promising market, and will proactively conduct business in China as we have thus far.

We will continue business in China into the future, but are aware of the importance of diversifying risks to other countries and regions.

Recognizing that business in China involves high risks, we will review our strategy such as to decrease dependence on business in China or on the Chinese market and will strengthen our activities in other countries and regions.

Strategic Approaches to Emerging Countries (Africa TICAD V)

25

1. Promotion of Japanese companies’ business expansion to and investment in Africa Hold business exchange events (such as the J-SUMIT (finished) and African Fair) Double the number of JETRO offices in Africa (from five to ten) Offer 2 billion-dollar financial support by JOGMEC

(presented at the Ministerial Meeting for Resources Development) Ease policies for underwriting trade insurance (19 countries)

2. Promotion of infrastructure development Focus on fields where Japan has an advantage

(power supply, railway systems, water supply, and ports and harbors)

3. Job creation and human resource development Resource development (1,000 jobs in five years; presented at the Ministerial Meeting for Resources

Development)⇒ Japanese companies have created 200,000 jobs in Africa. The number will be doubled to 400,000

by the next TICAD meeting.

4. Cooperation in the environmental field and co-existence with local communities Support for countermeasures against climate change by fully utilizing Japanese technology

(establishment of a bilateral offset credit system in Kenya and Ethiopia)

Catch up withChina and

European countries

Differentiate Japan from China

and European countries

Sub-Saharan Africa (the Sahara and southward), where people have suffered from ethnic conflicts and poverty, is expected to sustain a high growth rate into the future. For Japan, African countries are no longer targets of assistance but are attractive investment destinations.

The Tokyo International Conference on African Development (TICAD), which started in 1993, is an international conference led by the government of Japan, holding a summit meeting once every five years. At the fifth meeting held in May 2013, Japan presented the following measures in order to continue our contribution to the further development of Africa as a reliable business partner.

Measures for contribution unique to Japan, which consider Africa as an investment destination, respect the region’s self-reliance and independence, and prioritize growth, are expected to produce a synergy effect on economic growth in both Africa and Japan.

Acceptance of Excellent Human Resources and Companies from Overseas

The number of foreign nationals newly entering Japan with a status of residence of “Engineer” declined sharply after the Lehman Shock and has yet to recover to the prior level.

Looking at the number of foreign-affiliated companies’ bases for governing the Asia and Oceania regions, the number of those established in Japan is only 152, significantly falling short of the numbers in China (350), Singapore (343), and Hong Kong (286).

In order to attract excellent human resources and companies from overseas, Japan needs to develop a better business environment through strengthening and utilizing a preferential immigration system and International Strategic Comprehensive Special Zone system, and through promoting regulatory reform.

Number of foreign nationals newly entering Japan with a status of residence of “Engineer”

26

Number of foreign-affiliated companies’ bases for governing the Asia and Oceania regions

2,759 2,6433,506

4,718

7,715

10,959

9,212

3,3632,852

4,1785,216

0

2,000

4,000

6,000

8,000

10,000

12,000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

資料：法務省公表資料から作成。

（人）

（年）

(persons)

(year)

Source: Created based on data released by the Ministry of Justice

050

100150200250300350400

Japan China Singapore Hong Kong

Australia Taiwan South Korea

India

Non-manufacturingManufacturing

(companies)

Source: Created based on “2011 Survey of Trends in Business Activities of Foreign Affiliates (FY2010 performance),” Ministry of Economy, Trade and Industry