Sources of export financing - Japan Development Bank

Business America, Sept 23, 1991

The U.S. government, foreign governments, and multilateral lending institutions provide billions of dollars annually to support international trade and investment activities. This regular column highlights programs that are available to U.S. companies. It is compiled by Delphos International, a Washington, D.C.-based firm that helps companies obtain government money for international business.

The Japan Development Bank (JDB) was founded in 1951 with the objective of developing and diversifying the Japanese economy. Established by the Japan Development Bank Law as part of the Japanese goverment's post-war reconstruction efforts, JDB is a nonprofit organization owned entirely by the Japanese government. The goal of JDB is to foster economic and social growth through providing financial assistance to the private sector in efforts to promote government policies and initiatives in Japan.

JDB's activities have grown to include projects in urban development, regional development, development and promotion of technology, resources and energy, adjustment of industrial structure, transportation, and improvement of nationa living standards. The Bank has also increased its lending activity to foreign-owned companies in efforts to reduce imbalances both in trade and foreign investment between Japan and its trading partners. U.S. companies may participate in JDB funding activity under the Bank's Loan Division in the International Department. The International Department disburses loans to foreign companies under two primary loan programs: Promotion of Foreign Direct Investment in Japan and Facilities for Import Products. The other loan programs of JDB are also available to foreign-owned companies under the principle of equal treatment of clients regardless of nationality.

Under its program entitled Promotion of Foreign Direct Investment in Japan, JDB offers long-term low-interest rate loans to foreign-owned corporations. Under its Facilities for Imported Products, JDB will provide loans to foreign companies participating in investment projects that involve the purchase or construction of facilities. Foreign companies are defined as firms whose non-Japanese capital ratio is 50 percent or more. Loans to foreign companies accounted for over $200 million of the Bank's lending in fiscal year 1990 and covered a variety of projects, import facilities, manufacturing plants, and research centers. Some specific international projects include: technical center for computers and software, electronics-material research center, medical devices plant, pharmaceutical research facilities, laboratory for biological products, waste disposal facilities, chemical product import facilities, and synthetic rubber plant.

The Bank has identified investment projects in high-technology fields and investment projects that will significantly expand imports into Japan as priority projects. The interest rate of the loan is fixed at the time of contract and remains unchanged throughout the loan period. The maximum amount of a JDB loan is 40 percent of the total investments of the project. The loan period is up to 25 years with a reasonable grace period and repayment is generally set for regular installments with interest payments.

Besides providing financial assistance, JDB offers training courses to foreign business executives. These courses focus on key aspects of development banking and JDB's experience in numerous projects. JDB also actively participates in international conferences and symposia to provide a forum for discussion with other advanced countries.

To facilitate U.S. exports and encourage foreign investment in Japan, JDB has established Centers for Promotion of Direct Investment in Japan in representative offices located in Washington, D.C. and New York. The Bank also has representative offices in London and Frankfurt.

The Centers have three main functions: 1) to supply Japanese market information to foreign companies; 2) to provide consultation on investment projects in Japan; and 3) to facilitate introductions to potential Japanese partners.