Private equity from Japan for ASEAN; Myanmar & Philippines strong contender

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The Japan Bank for International Cooperation  in partnership with a Japanese Bank, Mizuho, is pushing for joint venture between Japan’s and ASEAN‘s SMEs, by providing Private Equity financing.

The Japan Bank for International Cooperation (JBIC) and Mizuho Bank said yesterday, they will form the Mizuho ASEAN Private Equity Fund to support the overseas expansion of Japanese mid-tier and small- to medium-sized enterprises (SMEs).

The Mizuho ASEAN Private Equity Fund will be managed by a subsidiary of Mizuho in Singapore and target investment in companies in the ASEAN region, including Japanese joint ventures. According to The Nikkei, the US$183 million fund will make investments of JPY500 million to JPY1.5 billion.

In a statement, JBIC said the objective of the fund is to support the expansion of Japanese business into the ASEAN region by forming partnerships with Japanese firms to invest in local companies. It will then support those Japanese firms in managing the companies in which they have invested. The fund will also seek out local companies in the ASEAN region that are potential investment targets for Japanese companies.

ASEAN Attractiveness to Japan:

JBIC said the ASEAN region is ranked just after China and India as having the potential for strong and sustained economic growth. This makes it one of the most attractive markets for Japanese firms in search of their next location for overseas expansion. However, some small- and medium-sized enterprises find it difficult to expand overseas, due to such challenges as sourcing local partners, attracting investment, and managing overseas operations. The primary objective of the fund is to help encourage the expansion of Japanese firms, particularly small- and medium-sized enterprises, into the ASEAN region by investing in companies located there.

Specifically, again, the fund will partner with Japanese firms to invest jointly in companies located in the ASEAN region. It will then assist those Japanese firms in managing the companies in which they have invested. The fund will also seek out and invest in ASEAN-region companies that have the potential to be good opportunities for investment by Japanese firms. This will promote the creation of strategic alliances between Japanese firms and those ASEAN-region companies.

Mizuho also, last year, received a US$2 billion credit for Mergers and Acquisition deals from JBIC. Mizuho Bank was set to finance more mergers and acquisitions abroad with a US$2 billion credit line from the government. The loan from the JBIC will go to low-interest loans, helping Japanese firms with M&As abroad. JBIC is the Japanese government’s export credit agency that also plays a major role in promoting Japanese exports and imports.

Mitzuho and JBIC Track in ASEAN:

As of March 2005, the country which had access to the most loans from JBIC was Indonesia, followed by China and the Philippines. Mizuho also has a cooperative MOU with a Philippines bank, where Mitzuho, also late last year, opened a branch in Myanmar.

Again, Mizuho Corporate Bank signed a business cooperation agreement, an MOU, with the Bank of the Philippine Islands (BPI) on December 3, 2012. The agreement covers a wide range of fields including commercial banking business and investment banking business.

The agreement aims to enhance the ability to provide information to Japanese corporations that are considering expanding their businesses into the Republic of the Philippines, and enhance our service structure for them when they do. Specifically, we will (1) offer local currency services, (2) introduce local business partners and local purchasers, (3) cooperate in relation to developing local bond markets, and (4) exchange information regarding local financial markets and regulations.

BPI is part of the Ayala Group, which is a major Philippine conglomerate, and it is the third-largest financial institution in the Philippines in terms of asset size. It has the largest branch network in the Philippines (over 800 branches) and provides a wide range of financial services together with its group securities company.

  • Wikipedia says:

The Japan Bank for International Cooperation (国際協力銀行 Kokusai Kyōryoku Ginkoualso known by its acronym, JBIC, is a Japanese public financial institution and export credit agencythat was created on October 1, 1999, through the merging of the Japan Export-Import Bank (JEXIM) and the Overseas Economic Cooperation Fund (OECF).[1]

JBIC is the international wing of the Japan Finance Corporation (JFC) (日本政策金融公庫 Nihon seisaku kin-yu kohko?) (administered by the Ministry of Finance) established on October 1, 2008.

The bank is wholly owned by the Japanese government, and its budget and operations are regulated by the JBIC law. It is headquartered in Tokyo and operates in 18 countries with 21 offices.

The main purpose of the institution is to promote economic cooperation between Japan and overseas countries by providing resources to foreign investments and by fostering international commerce. It has a major role in promoting Japanese exports and imports, and the country’s activities overseas.

The bank’s presence can be seen both in developed and developing countries. It tries to contribute to the stability of the international financial order and to the promotion of sustainable development. It follows a policy of not competing with ordinary financial institutions. The bank is one of the instruments of Japan’s official development assistance (ODA), which contributes to the execution of the country’s foreign policy.

As it aims at sustainable development, JBIC is concerned about social and environmental issues,[2] and requires environmental impact assessment studies to provide funding to any project.

JBIC has mainly two ways of performing its loans: international financial operations (IFOs) and overseas economic operations (ODA). These operations are independent of each other and are clearly separated in the bank’s financial statements.

The IFO operations include loans and equity participation in overseas projects of Japanese corporations, therefore contributing to Japanese activities overseas. These operations are aimed at both developed and developing countries. As of March 31, 2006, the IFO operations accounted for ¥985.5 billion.[4]

The ODA operations are aimed mainly at developing countries, especially those in Asia, which accounted for 51,8% of the bank’s operations in 2004 fiscal year.[5] These operations provide long-term and low-interest loans to important projects that develop social structure and infrastructure of developing countries. The JBIC’s financial assistance represents 40 percent of Japan’s official development assistance. As of March 31, 2006, the ODA operations accounted for ¥770 billion.[6]

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