Tokyo (News Today) - While most of Japan Inc. is focused on expanding its reach in China, cash-rich Japanese banks are actively scouring opportunities in two of the region's fastest-expanding economies: Indonesia and Malaysia.Despite the fact that it is still in the shadow of China, Southeast Asia is becoming an investment target for Japanese lenders, given its burgeoning population, natural resources and infrastructure developments.
Others have also seen the region's appeal. Moody's Investors Service on Monday raised its rating on Indonesia by a notch, citing its resilient economy and improving debt.
As a result, Japanese banks are forming tie-ups with local lenders and expanding their own operations to strike loan deals in those two countries and elsewhere in the region.
Japan's Sumitomo Mitsui Financial Group, Japan's No. 2 bank by market cap, said its banking unit plans to increase its staffing in Malaysia to about 100 employees from 30 last spring. It also hopes to add to its employees in Indonesia, currently at about 200.
The lenders see opportunities in project financing and syndicated loans. The amount of syndicated loans -- a type of loan often used for big projects -- in Indonesia and Malaysia totaled $7.7 billion last year, up 15% from the previous year, according to Thomson Reuters, when financial institutions had been reluctant to lend due to the global credit crunch.
Japanese firms are looking to the new markets partly to allocate risk more broadly in Asia. Though China is still a prized market, regulatory hurdles and the presence of strong local lenders have made it difficult for foreign financial institutions to increase their business there.
Japanese industrial companies are beefing up infrastructure investments in the region, actively lobbying to build billion-dollar power plants and high-speed rail lines. Japanese lenders see this as a prime opportunity to issue syndicated loans and become involved in lucrative project financing.
Struggling with low profitability amid weak lending demand and economic stagnation, Japan's top three banks -- Mitsubishi UFJ Financial Group, or MUFG, Japan's largest bank; Mizuho Financial Group; and SMFG -- have all accelerated the expansion of their overseas business in the region.
In Malaysia, the government issued commercial-banking licenses last year to five foreign banks, including arms of Mizuho and SMFG. SMFG and Mizuho aim to start a local unit this spring, joining MUFG's Bank of Tokyo-Mitsubishi UFJ, which has already obtained a banking license.
Business tie-ups are also seen as attractive. Mizuho last year formed a business alliance with Indonesia Eximbank and Malayan Banking Bhd., also known as Maybank, in businesses such as trade finance and infrastructure-related project finance. SMFG strengthened its ties with Malaysia's RHB Capital Bhd. in December. It formed an alliance with Indonesia's PT Bank Central Asia in 2009.
MUFG has an alliance with Malaysian CIMB Group Holdings Bhd. in 2006 and formed a tie-up with Indonesia's CIMB Niaga, a unit of CIMB Group, the following year.
Source : kompas
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