JBIC vows to help companies regain global edge

by Toru Fujioka and Kyoko Shimodoi

Bloomberg

The Japan Bank for International Cooperation will take more risks to help companies win overseas projects after they lost bids in Abu Dhabi and Vietnam, the head of the state-run lender said.

“We are going to take risks that cannot be taken by the private sector,” Hiroshi Watanabe, president and chief executive officer of JBIC, said in an interview last week in Tokyo. If the government decides JBIC needs to do more, “we’re ready for that and we’re going to take necessary action.”

Japanese firms lost out to South Korea and Russia for projects in developing nations, a blow to a country that is trying to expand business abroad to offset declining demand at home. Prime Minister Yukio Hatoyama wants the lender to increase the chances of companies including Central Japan Railway Co. (JR Tokai) to win business for U.S. President Barack Obama’s railway project.

Expanding the role of JBIC is “the right thing to do, given the unpleasant experiences in Abu Dhabi and Vietnam,” Watanabe, 60, said. “If we keep losing and companies can’t use their technologies and sustain profits, that will have a negative impact on Japan’s economy and employment.”

The Democratic Party of Japan-led government plans to pass legislation this month that will allow JBIC to support projects in developed nations, a departure from the lender’s role of providing financing to emerging economies.

South Korean President Lee Myung Bak helped his country win a $20 billion contract for four nuclear plants in the United Arab Emirates in December. Hatoyama, who didn’t travel to the Gulf to support Japan’s bid, has since stepped up calls on his Cabinet members to promote the nation’s technology.

Finance Minister Naoto Kan said he discussed Japan’s technologies in a meeting with Chinese Premier Wen Jiabao on April 3. Transport minister Seiji Maehara is planning to meet his U.S. counterpart, Ray LaHood, to discuss high-speed railway projects within a month.

A swelling public debt burden has forced the government to cut back on official development assistance, reducing its presence overseas. The government is devoting ¥619 billion to ODA this year, about half the 1997 peak, Foreign Ministry data show.

“Hatoyama’s government is more willing to work with companies because it knows Japan has to find an impetus for growth, given domestic demand is unlikely to spur the economy,” said Masamichi Adachi, senior economist at JPMorgan Chase & Co. in Tokyo. “Japan can’t afford to hand out money to developing nations anymore because its debt problem is so deep. We’re going to see more use of JBIC.”

Kan has signaled he is shifting away from former Prime Minister Junichiro Koizumi’s aim to privatize JBIC.

Obama said in January that he will spend $8 billion in economic stimulus money for 13 U.S. high-speed railway services. Yoshiyuki Kasai, president of JR Tokai, said last month his chances of winning the business are “50-50″ amid competition from France’s Alstom SA and Germany’s Siemens AG.

In other signs of increased interest in overseas projects, Watanabe met with business executives of Japan’s largest trade companies this week to discuss tripling the country’s share of global irrigation works to 6 percent in 15 years.

Watanabe said Asia will be the key area as the Asian Development Bank estimates nations will need to spend $8 trillion for infrastructure development in the next decade.

“There is no doubt that Japan’s economy is deeply intertwined with Asia’s,” said Watanabe, who directed the nation’s currency policy at the Finance Ministry from 2004 to 2007. “Asia will make up the majority of our financing,” he said, noting JBIC has been receiving funding requests for electric power projects in the region.

Watanabe said being more proactive about lending wouldn’t put JBIC at odds with banks in the private sector because the state-run lender can support initiatives that may take too long or are too risky for banks to undertake.