Rare Optimism, Positive Even Under Turmoil



Moriyuki Aida is a sharp-minded Japanese banker. As executive officer of the Japan Bank for International Cooperation (JBIC) in London, he stands at the margin of policy and finance. Educated at Keio University, Japan, and Cambridge University, United Kingdom, Aida has worked through the rank and file of the JBIC, in the Middle East and United States. It is easy to converse with Aida, who displays both the eloquence and analytical approach typical of a banker. In this exclusive interview with GETACHEW T. ALEMU, FORTUNE’S OP-ED EDITOR, conducted on the sidelines of the Japan Africa Business Investment Forum, held at Sheraton Addis from August 31 to September 2, 2015, Aida shared his views on global economic volatility and the perception risk Africa faces within global business circles.


Moriyuki Aida is a sharp-minded Japanese banker. As executive officer of the Japan Bank for International Cooperation (JBIC) in London, he stands at the margin of policy and finance. Educated at Keio University, Japan, and Cambridge University, United Kingdom, Aida has worked through the rank and file of the JBIC, in the Middle East and United States. It is easy to converse with Aida, who displays both the eloquence and analytical approach typical of a banker. In this exclusive interview with GETACHEW T. ALEMU, FORTUNE’S OP-ED EDITOR, conducted on the sidelines of the Japan Africa Business Investment Forum, held at Sheraton Addis from August 31 to September 2, 2015, Aida shared his views on global economic volatility and the perception risk Africa faces within global business circles.
Fortune: One of the issues raised in this Japan Africa Business Forum is differences in terms of perception – the way the Japanese businesses think about Africa and the way the African businesses think about Japan. How much do you think this is a factor in the low level of business relationship between these two regions?
Moriyuki Aida: Every year, we conduct interviews with Japanese companies about foreign direct investment (FDI), and there is the clear tendency that Japanese companies have started to look at the African countries more positively to expand their business in terms of FDI. And in 2013, the number of companies which showed their strong interest was 48.1pc, but in 2014, the number became 58.4pc. The number of companies which were thinking to decrease their investment in Africa was 2.5pc in 2013, but in case of 2014, zero. This really shows the interest of the Japanese companies towards African countries.
Q: So it means Japanese companies are becoming more positive towards Africa?
Indeed. The results of our survey clearly show that Japanese companies have strong intention towards Africa.
Q. Do you see the same interest from the African side towards working with Japanese businesses?
We have not made a survey from the African side, so I do not have any figures. But from the information we get from Japanese companies, we see that there is, of course, strong intention to do business with Japanese companies. Of course, lots of hurdles – lots of inconvenience, same as the other countries, of course. It is a process and we would like to support the Japanese companies, businesses here in Africa as well, and there is a strong commitment from the Japanese government toward African business.
Q. What I often hear from bankers, such as you, when it comes to financing businesses in Africa is inadequate bankable projects. Where do you think is the major problem?
The appropriate risk ceiling is very important. No one can take all the project risks, but the banks have to take some risks. At the same time, governments have to share some risks and also the investors and other stakeholders, and the people here in your country. So we have to take each of those individual risks one by one and find the solutions – so that every stakeholder is happy enough for that scheme. In all aspects, there is risk. And we have to discuss with the related parties, stakeholders, how to solve this. That is the point of the finance – make it bankable.
Q. But obviously, some of these risks are subjective. They cannot be quantified, as such in order to be translated to costs. One of the primary subjective risks that businesses take is a political risk and that is where Africa seems to be disadvantaged. What do you think African governments should do in order to change that perception about Africa?
The risk is diversified from country to country but in general, there are certain points the governments should do. One is to set up appropriate law and regulations, that is stable and predictable. The government shouldn’t change their regulations and the practices too frequently. Those things should be predictable.
And once it is set up, they have to keep the promise. So that is a very important thing, and the government should show the strong commitment on projects. And also, there is some part of the undertaking by the government. Don’t hesitate to take that!
So it is a big risk for the government side, but for the sponsor’s side or for the contractor’s side, it is manageable, if the government is committed like that.
Q. You are actually saying that the government should focus on risk-identification and allocation of risk according to stakeholders?
Yes. That is what we are very, very good at – risk analysis, risk allocations. And the other thing the government should do is to enhance the competition. They have to put some clear measurements to make for good competition. Successful projects demand for governments to have a very clear process to choose the contractors, or the investors. Under transparent bids, the government side can take the best one. That is the good thing here. And for the business side, it is really good because it is transparent. And the last one, not the least, is the skilled and reasonable project preparation. The government side needs some good skills to promote the project.
Q. JBIC is a public enterprise, owned by the government. So partly, the way you work and the way you operate in other countries and also in Japan, is defined by government policy. But Japan has been experiencing a little bit of instability within government structure – so many frequent changes of the leadership within the Japanese government. It is only recently that frequent change has been stabilised and now there is a stable government. How has that frequent change of government affected your operation?
In our history, there are lots of changes because we are wholly owned by the Japanese government. It is a government decision what type of government agency they need. So we are on the table to be cooked. The former name of the JBIC is the Export – Import Bank of Japan (JEXIM). That was established in 1950 and in October 1999 the former style of JBIC was established. That was the merger between the Overseas Economic Cooperation Fund (OECF), that is, the Overseas Development Assistance (ODA) function, like the Japan International Cooperation Agency (JICA). So the ODA entity and International Financial Operations (IFO) merged together to become the JBIC. This is under the Junichiro Koizumi administration.
And, after that, in October, 2008, we again merged – we were divided so the IFO function, the ODA function and the Export-Import Bank of Japan function were divided again. And the OECF function became part of the JICA. This is the current style, the JICA, and, on the other hand, JBIC became merged into other domestic finance unions – three of them – and in the future, four of them. And it became the big, policy-based financial institution named Japan Finance Corporation (JFC). And in April 2012, the JBIC split out and became independent from this big entity to the original style.
Q. How have all these changes affected your operation?
There are always pros and cons. The ODA and the Import-Export Bank functions are all targeted for the development of the host country. It is good but, on the other hand, this sometimes is criticised, by the (OECD) countries because it seems to be promoting Japan’s exports by ODA as if they are the same entity.
Q. So the separation has in some way helped?
Yes. One of the ways we are thinking, is that the separation is to avoid any criticism from other countries. Because in other countries, you know, US or Europe, they have different entities for the ODA and the export-import functions. So, it is normal to have separate entities. And after that, together with domestic financial union, we became only one entity. It actually became too big and our decision-making takes a little more time because of the process.
So in order to have the quick response, and quick decision-making, the government thought it better to have an independent company like this. And before April 2012, those companies were not incorporated, but after April 2012, this bank became incorporated. And the shareholder is only one person – Minister of Finance. These are big changes. But, basically what we are doing is continuous and we are pretty much focusing on our missions only.
Q. One of the criticisms that I often hear when it comes to Japanese financial institutions is that you are really rigid when it comes to the instruments that you are using. Do you agree with that?
We have to make the facts clear. As an export credit agency, our export loans totally comply with the OECD guideline. The guideline is a consensus among the OECD members. In this sense, our financial terms are in line with a set-up of the minimum requirements.
Q. You always go at commercially viable terms?
Yes. It is always commercial terms, not concessional levels. That is the fact. So in order to promote exports from Japan, the OECD member countries should not compete by the financing law or financing order – concessional financing.
Q: What about your portfolio. Is it as diversified as it needs to be?
Yes, our portfolio is sufficiently diversified in terms of regions. Only one complaint – it is about Africa. Africa is small at this moment.
Q. Do you think that the slice of your portfolio for Africa is going to increase this time?
That is what we are doing now. Following the Japanese government policy, we are launching the JBIC Facility for African Development & Trade Enhancement (FAITH). That is a big, long name but we support trade and investment. And this is good for the Japanese companies as well as the host government. We did 2.7 billion dollars financing already. And this is out of the five billion dollars committed amount for the five-year programme. So at the middle of the five years, we did just over half of the amount.
Q. From your presentation at the Forum, one area where you seem to be working very good is public private partnerships (PPPs). Globally, including in Asia, PPPs are becoming very popular. But the absorption in Africa is not that much strong. What do you think should be done in order to increase the absorbtion of PPPs on this side of the world?
I believe it is a one by one process. We have lots of experience in the Middle East, in Asia and some other countries. But, the risk is diversified, project by project. So, project by project, it is so different. We have to sit down and check all the aspects of the risk, and talk about appropriate risk-sharing among the parties.
And some things should be done well before the start of the project. That is the government’s side. The government side has to set up the appropriate law and registrations and regulatory frameworks. That is the point of the consultation.
Stakeholders, then, need to sit down and study together from the beginning. But all the proper procedures and practices of consultation should be in place.
Q. It means you are optimistic about the future of PPPs in Africa?
Yes, why not?
There is no reason to be negative. I really believe that they can work in African countries.
Q: You are a banker and this is an unfortunate time for bankers because the world is struggling to get out of the Great Recession of 2008. Europe has its problem with Greece as a hotbed of volatility; growth in major economies like China is slowing down and Japan is also struggling in its own way. Where does the hope of a banker, like you, come in this world of ours, with so many problems around?

My ideas is, as bankers, we should be prepared at any time for the turmoil. Ok, China will slowdown – everybody knew. We did not know when, but at some stage in the future. Of course, Chinese development slowed down.
And why do we have to be upset?
There is no need to be upset. Maybe, there is a risk. We should prepare well in our minds and at the bottom of our hearts. We should just know not to be upset no matter what happens. If something bad happens, we have to think and we have to find a solution. That is the way of our thinking.
If something bad happens, we have to sit down and think. Is there any solution? And if not, we have to wait a little bit longer but that is the way of thinking. Do not exit but to commit to the project, to solve the situation and if there is no solution, maybe we have to give up, but, in many cases of problems, there is a solution. So, we are really happy to face the difficulty.
The investors may have to pay the cost or maybe, the lenders have to give up the date and extend the repayment schedule – we call it reschedule. We sometimes face difficulty, of course, because we are not almighty at the time of the finance decision. It is quite normal to face a difficulty, so don’t be upset when we see the bitter world. We just have to do something.
Q. You are now participating in the Japan Africa Business Investment Forum. That shows that Japanese investors are really interested to come to Africa. If you were to sit as an advisor with an African statesman, what would be the one bit of advice that you give him / her to attract Japanese investment?
It is not such an easy thing – one thing can change just one thing, but not all.
Q. Ok, what would the most important advice you would extend?
It is difficult but it maybe adopting an open mind stance to discuss with the Japanese companies or an intermediary such as the JBIC.
Q: What is the first thing that comes to your mind when you think of Africa?
Opportunity.
Q. If you were given a chance to live in Africa, where would you like to live?
It is a tough question. My experience is very, very limited in Africa. I lived in the Middle East for long, so I have a good knowledge of each of the different countries in the Middle East. But in Africa, no way to judge, because I do not know it very well. And it is a very difficult question for the bankers like me because we have to think on the risk aspects.
Q: Who is the one African that you highly regard?
I am not a very interesting person in things like this. I really hate myself to choose such type of job for my life. I worked like this for 30 years so I have become a not so interesting person. Maybe in two years time I will give you the name.



Published on Sep 07,2015 [ Vol 16 ,No 801]


SHARE :
               


Editorial

Our subscribers to the print edition are entitled to get a bonus in a f...


Agenda

The rapprochement between Ethiopia and  Eritrea has led to the signing...


Fineline

The Revolutionary Democrats concluded their council...


Commentary

The National Bank of Ethiopia needs to take measures to improve the red...


Viewpoint

Our subscribers to the print edition are entitled to get a bonus in a f...


Opinion

Our subscribers to the print edition are entitled to get a bonus in a f...


View From Arada

The rallies of the past weeks are healthy manifestations of citizens’...


Editors Pick
















MEMBERS' LOGIN


ADVERTISEMENT

ADVERTISEMENT

ADVERTISEMENT

 

SUBSCRIBE TO ADDISFORTUNE


//