Japanese firms expect lower profits from overseas plants<\/p>\n
TOKYO (Reuter): Japanese firms earn less than they had hoped
\nfrom their factories overseas, the government said in a report.<\/p>\n
Even more galling is that U.S. and British companies are
\nbringing home bigger profits from such operations.<\/p>\n
While cautioning firms to study costs and local labor
\npractices more carefully before setting up plants overseas, the
\nreport also urged them to be more adventurous in going to
\ndeveloping countries and emerging markets.<\/p>\n
After a decade of boosting overseas production, \"profits
\nJapanese firms earn from their direct investment are still less
\nthan those earned by overseas units of U.S. and British
\ncompanies,\" said a Trade White Paper published by the Ministry of
\nInternational Trade and Industry (MITI).<\/p>\n
The yen's sharp rise against the dollar since the mid-1980s
\nand the need to ease trade friction with major partners have
\nprompted firms to move factories to cheaper locations overseas.<\/p>\n
Japanese direct investment is now concentrated in emerging
\nAsian economies and the United States rather than in Europe and
\nother parts of the world. Cumulative direct investment by
\nJapanese firms up to mid-1995 totaled US$485.3 billion.<\/p>\n
\"Expansion of Japanese business through direct investment has
\ncaused a big change in Japan's export and import structures. New
\nproblems associated with direct investment are now emerging,\" the
\nreport said.<\/p>\n
Production shifts overseas have helped curb Japan's exports,
\nresulting in a substantial fall in its trade surplus, which has
\noften been a source of tension with trading partners.<\/p>\n
MITI's survey of 250 Japanese companies found that more than
\n30 percent of them have either withdrawn from overseas production
\nor cut back overseas operations.<\/p>\n
More than half the firms that have withdrawn from overseas
\nproduction said they did so because they could not expect any
\nimprovement in earnings.<\/p>\n
Reforms<\/p>\n
The report called for aggressive reforms in Japanese business
\nstructures so as to promote new industries and thus to create new
\njobs to make up for losses of many jobs in Japan caused by
\nincreased production shift abroad.<\/p>\n
\"It is inevitable for Japan to carry out economic structural
\nreforms to make investment inside Japan more attractive by
\nrectifying its costly system and promoting innovations,\" the
\nreport said.<\/p>\n
Increased overseas production could also create a problem in
\nthe quality of research and development as products which will be
\nmanufactured at overseas plants are still developed mainly at
\nresearch facilities based in Japan.<\/p>\n
\"If relations between overseas production units and
\ndevelopment centers become loose, they could adversely affect the
\nlevel of technology,\" it said.<\/p>\n
The report called on Japanese firms to make more thorough
\nstudies of conditions of other countries before moving to them,
\nincluding local labor practices and suppliers of materials and
\ncomponents needed for production.<\/p>\n
\"It is sometimes pointed out that Japanese firms tend not to
\npay due consideration to local business practices compared with
\nEuropean and U.S. companies,\" it said.<\/p>\n
As an example, it said Japanese firms do not appoint enough
\nlocal people to executive jobs at their overseas units.<\/p>\n
The report also said Japanese direct investment is too
\nconcentrated in a small number of countries in which the presence
\nof other foreign firms shows there is no risk in such investment.<\/p>\n
\"Japanese firms now lag behind European and U.S. companies,
\nwhich have been very active in investing in so-called emerging
\neconomies such as those in central and Eastern Europe, Latin
\nAmerica and India,\" it said.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/japanese-firms-expect-lower-profits-from-overseas-plants-1447893297",
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