Transcript Improve business environment

December 2003
Haruo Shimada
Special adviser to the Cabinet Office
Professor, Faculty of Economics, Keio University
Chairman of the Japan Investment Council Expert Committee
1
Two Messages for European Companies
“The Japanese economy is changing and
reviving through the structural reforms. There are
great chances to invest in Japan.”
“The Japanese government welcomes FDI into
Japan (and local governments, too). We make
every effort to improve business environment of
European companies in Japan.”
2
The Japanese Economy is Reviving
After “The Lost Decade”, there are now many positive signs to reveal the
revival of the Japanese economy.
1. GDP growth
1.2
1
0 .9
0.8
GDP growth continues. It has
exceeded 0% for past 7 quarters.
Annual growth is estimated to be
2.1% (2003FY)
0 .6
0 .6
0 .6
0.4
0.2
0
1Q
2Q
3Q
4Q
1Q
2Q
2 0 0 2 FY 2 0 0 2 FY 2 0 0 2 FY 2 0 0 2 FY 2 0 0 3 FY 2 0 0 3 FY
Source: GDP statistics
Yen
11500
11000
10500
10000
9500
9000
8500
8000
7500
7000
10670
9278
bil. Yen
4800
4600
4400
4200
4000
3800
3600
3400
3200
3000
10847
10361
9612
Source:
Nikkei
Newspaper
8547
7863
May- Jun- Jul03
03
03
3. Profits of listed companies
A total of Consolidated recurring
profits of major listed companies has
grown 25% from 1H 2002FY to 1H
2003FY. Sales are also growing.
0 .8
% 0.6
2. Stock price
The price index of Tokyo stock
exchange market (Nikkei 225) has
grown over 30% for past 7 months.
1
Aug- Sep- Oct- Nov03
03
03
03
4561
3646
1H 2002F Y
1H 2003F Y
Source: Nikkei Newspaper
3
The Structural Reforms has Strengthened the Economy
Prime Minister Koizumi urges structural reforms in many areas. Due to the
reforms, the vicious cycle is changing into the positive cycle.
The Vicious Cycle
Non-profitable
loans
Lack of
finance
Reduction of
business
Bankruptcy
Wage
restraint
Unemployment
Decrease
in stock price
Assess deficit
Decrease
in profit
Deficit
Decrease
in sales
Excess faculties
Consumption
restraint
The Positive Cycle
Restructuring
New
Technology
Increase in
sales
and profit
Increase
in stock price
Revival of the
finance sector
Investment in
faculties, R&D
Consumption
increase
Raise
Employment
Finance to the
growing sector
3
The Structural Reforms Create New Market and Industry
- 5.3 million Employment Creation Plan One main purpose of the structural reforms is to create new market and
industry to meet potential needs or wants of consumers. It will be a great
chance for foreign companies which already established business-models in
foreign countries.
Service for
individuals or families
Service for
companies or parties
Education for
adults
Housing
Child raising
Nursing
Medical service
Legal service
Environment
High Potential for FDI into Japan
Japan has high potential for accepting FDI as below.
10 Advantages of Investing in Japan
（Reference: JETRO brochure “Invest in Japan”）
• The world’s second largest market (about 15% of the world’s GDP)
• The business hub of Asia’s growing economies
( 2 hours to Seoul, 2.5 hours to Shanghai, 5 hours to Bangkok)
• Abundant highly skilled human resources
• Innovative high-level technologies
• Efficient infrastructure for dynamic business activities
• Reformed legal framework for investment
• Successful investment in Japan
• Lowered business costs
• Abundant market opportunities
• Excellent public safety and comfortable living environment
http://www.jetro.go.jp/investjapan/index.html
4
5
The World’s 2nd Largest Market
657
475
422
Kansai Spain Korea
District
(Osaka,
Kyoto,
Hyogo)
174
115
Fukuoka Greece
District
(Fukuoka)
1,440
1,359
1,159
Kanto France
District
(Tokyo,
Saitama,
Chiba,
Kanagawa)
China
※Unit: Billion USD
Japan: 2000 FY,
Europe and Asia economies: 2001CY
• Japan has the world’s
2nd largest market
(about 15% of the
world’s GDP, 4 times as
much as China’s)
• Economic scale of some
local areas are as large
as the Chinese or Korean
economies
• The Japanese consumers
easily accept high-quality
goods which satisfy their
needs or wants.
Improved Investment Environment
through Structural Reforms
Deregulation by Sector
Competitive market brings lowered
business costs
Changes in Price Index
After the latter half of the 90s, entry barriers have been
deregulated in the telecommunications, distribution, 110
100
finance and energy sectors.
Cases of Market Entry
Telecom: Vodafone
Distribution: Calfure, Toys’R’us
Finance： GE Edison Insurance,
Nikko Citigroup
Business Environment Improvement
Finance and
insurance
Real estate
services
Telecom.
Services
Mobile telecom.
Services
Electricity
90
80
70
60
Gas
50
1995 1996 1997 1998 1999 2000 2001 2002
Accelerate corporate
realignment through M&A
Consumer Price
Index
(Source: Bank of Japan/
Ministry of Public Management ,Home Affairs, Post and Telecommunications)
Cases of M&A in Japan
200
175
180
Amendment of the Commercial Code (e.g.,
introduction of corporate divestiture system)
and insolvency laws to promote business reform
in industry
6
158
160
140
129
129
120
100
85
80
51
60
40
31
20
0
1996
1997
1998
1999
2000
2001
2002
(Source: RECOF)
Consistency with International
Accounting Standards & Auditing
System
Implement measures consistent with International Standards
to ensure greater accounting transparency and reliance
1999
2000
2005
Under examination
Reduce due diligence costs by
developing consistency with
international evaluation criteria
Review the consolidation range, introduce cash-flow statement and
tax-effect accounting, and review R&D expenses.
Introduce retirement-benefit accounting and financial-instruments
fair value accounting.
Introduce impairment accounting.
Business-combination accounting.
Labor Mobility
(%)
The Labor Standards Law has been revised
to promote a more flexible employee system
and the Defined Contribution Pension system
has been started to ensure further labor
mobility.
Ratio of Job Change by Sector
8.0
2002
7.0
6.0
5.0
4.0
1995
1990
3.0
2.0
1.0
0.0
All Industries
Agriculture
Transportation Retail,
Service
&
&
Distribution
Construction Manufacture
Forestry
Telecommunication &
s
Restaurant
Source: Ministry of Health, Welfare and Labor
The improved visibility of prompting labor
mobility and foreign capital companies
leads to foreign businesses being able to
recruit human resources more easily.
Number of foreign companies in
the top 100 popular companies
for university students in Japan
Humanities Students
1995: 1 → 2002: 12
Science Students
1995: 9 → 2002: 24
Source: Mainichi Communications
7
8
Japan Welcomes FDI into Japan
Government Policy:
Doubling the cumulative amount of FDI
in the next five years
General Policy Speech by Prime Minister Koizumi
(January 2003)
“FDI in Japan will bring new technology and innovative
management methods, and will also lead to greater
employment opportunities. Rather than seeing FDI as a threat,
we will take measures to present Japan as an attractive
destination for foreign companies with the aim of doubling the
c u m u l a t i v e a m o u n t o f F D I i n f i v e y e a r s .”
8
JICEC: Collecting broad opinions
JICEC (The Japan Investment Council Expert Committee) plays a main role to
consider policies to increase FDI.
JICEC consists of various members related to FDI and they discuss hotly about
“How to invite foreign companies to Japan?” or “What is the obstacle for foreign
companies to entry into Japan?”
JICEC members
23 members from professors, managers, lawyers, governors of local
governments, etc.
14 members from related ministries (Director General, etc)
(Number of foreigners among the members is 10)
Through 10 times of meeting, JICEC drew up a report named “The Program for
Promoting FDI into Japan” (See next page)
The
Program
for
Promoting
FDI
into
Japan
～Japan will develop into an attractive country for foreign businesses～
The Program for Promoting FDI: 5 Priorities, 74 Measures
(1) Reviewing Administrative Procedures
Make the administrative procedures simpler, faster and clearer
clarify legal interpretation.
(2) Improve business environment
•Facilitate cross-border M&As
•increase entry by the private sector to public services.
(3) Improve employment and living environments
•Meet the need for diverse ways of working
•improve systems related to entry and residence of foreign nationals
(4) Development of local and national framework
•Support local governments' autonomous efforts to attract FDI
•provide information and support procedures by JETRO.
(5) Disseminate information within Japan and abroad
Promotion by national leaders, diplomatic missions abroad, foreign press.
http://www5.cao.go.jp/access/english/jic_main_e.html
9
One-stop Support System
10
• In May 2003, JETRO established the Invest Japan Business Support Center (IBSC)
as a one-stop office to provide foreign companies with comprehensive information
regarding investment into Japan.
• The Japanese Government also established “Invest Japan Offices” in each ministry,
which cooperate with JETRO’s IBSC.
Ａ
Ｂ
MINISTRIES
Response and
introduction of specialists
Advice on administrative
procedures
Consultations and
inquiries
JETRO
Foreign Companies
Provide comprehensive
information
Ｃ
http://www.jetro.go.jp/investjapan/index.html
Major Progress in the Program
• Major items are below.
(1) Introduction of flexible merger techniques
(2) Enable operation of public institutions by private sector
(3) Enhance foreign law firms’ activity in Japan
(4) Enhance letter ruling system of National Tax Agency
(5) Enable easier TOB procedure
11
The End
We make every effort to improve
business environment of
European companies in Japan.
Thank You!