Japan banks lay groundwork for business growth in Southeast Asia

The aim is to help Japanese companies increase their foreign exports and penetrate Southeast Asian markets. With China’s economy slowing, a sizable number of Japanese companies have begun shifting their business operations to Southeast Asian nations, partly because many of these nations belong to the Trans-Pacific Partnership (TPP) free trade pact. As these small and midsize enterprises develop, the banks plan to increase their loans to them.

 

In late July, Bank of Tokyo-Mitsubishi UFJ held a business conference with Vietnam Joint Stock Commercial Bank for Industry and Trade (Vietin Bank) in Hanoi. MUFG had contributed capital to the Vietnamese bank in 2013. 

 

At the conference, in which about 50 Japanese companies participated, Osaka-based Kyoeiseicha Co. attempted to sell ingredients for making green tea puddings to a local company. An executive of the company said, “The response was good and we prepared an estimate for them in the sales negotiations.”

 

MUFG has also contributed capital to Security Bank Corp. in the Philippines and Bank of Ayudhya Public Co. in Thailand. In cooperation with the local banks, it plans to hold business conferences in those countries as well.

 

Other banks also plan to strengthen collaborations with local banks in countries in which they contribute capital.

 

Sumitomo Mitsui Banking Corp. has introduced Japanese companies to the clients of several local banks in the region, including BTPN bank in Indonesia and Vietnam Export Import Commercial Joint Stock Bank.

 

Mizuho Financial Group has formed a tie-up with Bank for Foreign Trade of Vietnam. In Indonesia, Resona Bank cooperates with Bank Resona Perdania, a local joint venture.

 

Small and midsize companies have increasingly felt the pinch of Japan’s declining population. “It is necessary to exploit overseas markets,” an official of a food maker said.

 

With the future of the Chinese economy uncertain, the companies are placing their expectations on Southeast Asian nations, which continue to enjoy economic growth.

 

In 2004, the Chinese units of Japanese small and midsize companies accounted for 67 per cent of all overseas units, while those in Southeast Asia comprised 13 per cent. In 2013, however, Southeast Asian units grew to 43 per cent of the total, while those in China shrank to 27 per cent.

 

Major banks assist small and midsize companies’ business activities abroad because, according to one SMBC official, “doing so will lead to opportunities to extend more loans for capital investments and operating funds,” at a time when the Bank of Japan’s negative interest rate policy is driving down the profits of Japan’s banks.

 

To achieve success, megabanks must provide Japanese small and midsize companies with more than connections. Sustained assistance, including keeping them informed of local legal systems and business practices, is also required.