Vol.8. Overseas Infrastructure Development. Special Feature. Supporting the Export of Integrated Systems to Meet Host Country Needs

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1 2011 FEBRUARY Special Feature Overseas Infrastructure Development Supporting the Export of Integrated Systems to Meet Host Country Needs Qatargas 3 Project Completed Contributing to Developing the World s Largest Annual LNG Production Capacity of 77 Million Tons: Part of Supplies to Be Delivered to Japan Vol.8

2 Quarterly Highlights Catalyzing International Finance Overseas Investment Finance Supports Projects Implemented by Japanese Firms in Developed Countries Adding Projects in Developed Countries Eligible for Overseas Investment Finance Following the promulgation and enforcement of the Cabinet Order for Revising Part of the Order for Enforcement of the Japan Finance Corporation Act based on the Cabinet decision on November 19, 2010 the Japan Bank for International Cooperation (JBIC) expanded the scope of financing operations in developed countries. In addition to natural resource development, nuclear power generation and inter-city highspeed train projects, JBIC can provide overseas investment finance for the following projects: railway projects in major cities; water supply and sewage systems, other types of wastewater treatment facility and industrial water supply projects; power generation projects harnessing renewable energy sources; power transformation, transmission and distribution projects; coal-fired power generation projects; coal gas-derived fuel manufacturing projects; large-scale carbon dioxide capture and storage projects; electricity or heat efficiency projects using information and communication technology; and internet and other advanced telecommunications network development projects. Strategic Overseas Investment and Lending as Part of the Comprehensive Emergency Economic Measures in Response to the Yen s Appreciation and Deflation JBIC has been providing loans and guarantees for Japanese firms to finance their business operations in developed countries, as a temporary measure to support Japanese overseas business activities in response to the international financial crisis in Based on the public notice issued by the Ministry of Finance on November 19, 2010, one of the requirements for eligible projects set forth in the provision, business operations being conducted by Japanese firms or their local subsidiaries and affiliates in the regions other than developing countries as of January 27, 2009, was eliminated. This measure has enabled JBIC to provide financing for new Japanese M&A activities in developed countries, following the provision that strategic overseas investment and lending shall be made by using JBIC, as set forth in the Cabinet Decision on the Comprehensive Emergency Economic Measures in Response to the Yen s Appreciation and Deflation made on October 8, (The facility is a temporary measure to be terminated at the end of March 2011.) Environment Strengthening Collaboration to Promote Operations for Preserving the Global Environment Loan to a Turkish Bank to Assist Global Environment Preservation On November 2, 2010, JBIC signed an untied loan agreement totaling up to US$20 million with Denizbank A.S., a private commercial bank in Turkey. This is the first loan that JBIC offered GREEN operations (financing under the GREEN initiative). The loan was cofinanced with three private Japanese financial institutions, with JBIC providing guarantee for the portion cofinanced by them. The Turkish government has been actively promoting various measures to mitigate climate change, including ratification of the Kyoto Protocol in August This loan, made in collaboration with the European Bank for Reconstruction and Development (EBRD), will finance on-lending by Denizbank for the projects that will contribute to reducing greenhouse gas (GHG) emissions. Denizbank MOU with Yokohama City for Cooperation on Environmental and Urban Infrastructure Projects On October 29, 2010, JBIC signed a memorandum of understanding (MOU) with Yokohama City for cooperation on environmental and urban infrastructure projects. Both parties will share information and views on: (1) maintaining and strengthening cooperation for internationally promoting environmental projects as well as water and urban infrastructure projects in Asian cities and elsewhere; (2) utilizing the experience, knowhow and technologies related to the environment and urban infrastructure possessed by Japanese firms, especially those based in Yokohama City; (3) promoting the effective use of the technological capability and human resources possessed by companies located in Yokohama City; and (4) encouraging municipalities and companies overseas to reduce CO2 emissions by effectively utilizing Yokohama City s experience and knowhow. This is the third MOU that JBIC has signed for cooperation on the environment and water with a municipality, following the Tokyo Metropolitan Government and Kitakyushu City. Signing ceremony with Yokohama City 2 JBIC TODAY FEBRUARY 2011

3 International Business Development Supporting Japanese Firms Participation in Rail Projects Subway Project in São Paulo, Brazil On November 15, 2010, JBIC signed an untied loan totaling 14.6 billion with the Government of the State of São Paulo for the São Paulo Metro Line 4 Extension Project. The loan was cofinanced with a private Japanese financial institution, with JBIC providing guarantee for the cofinanced portion. São Paulo, which is the center of the Brazilian economy, is plagued by such urban problems as chronic traffic congestion and air pollution. In addition to projected improvements in air pollution, this metro project is also expected to enhance the international competitiveness of participating Japanese firms in the rail transport sector. The terminal station on the São Paulo metro line in Brazil Launching a Financial Feasibility Study on the Florida High-Speed Rail Project in the U.S. In December 2010, JBIC commissioned a study on the financial feasibility of the Florida High-Speed Rail Project in the United States to support Japanese firms seeking to participate in the Project. This study constitutes part of JBIC s effort to contribute to the export of infrastructure, a major pillar of the Japanese government s New Growth Strategy. Among 11 candidate rail lines designated for development by the U.S. Federal Railroad Administration, this high-speed rail project is likely to be approved as the first project. Plans are in place for the initial construction of a line connecting Tampa and Orlando in the state of Florida, with subsequent extension under plan through Miami. Conducting a study in the initial planning stages is expected to identify potential high-quality projects, and, in this instance, could boost an opportunity for Japanese firms to participate in this project. Knowledge Assistance Disseminating JBIC s Knowledge and Study Results JBIC-Sponsored Course at the Graduate School of Management, Kyoto University On October 4, 2010, JBIC and the Graduate School of Management (GSM), Kyoto University, agreed to cooperate in the promotion of analytic research in project financing and established a new project finance visiting chair at GSM in a signing ceremony held in Kyoto University. The new chair will invite practicing professionals and specialists as visiting faculty or researchers and conduct joint research in project financing, including theory, analytics, appraisal, and contracting, for its project operations management course. GSM will also open an international project management course in April 2011 to help nurture highly advanced professionals with an international perspective. Signing ceremony with Graduate School of Management, Kyoto University Report on Overseas Business Operations of Japanese Manufacturers On December 3, 2010, the FY2010 Survey Report on Overseas Business Operations by Japanese Manufacturing Companies was released. In addition to previously examined items, this 22nd survey also polled the participating companies on Competition in Emerging Markets and Domestic and Overseas Profit Trends after the Collapse of Lehman Brothers (Lehman Shock). Major findings are: the profits of Japanese manufacturing companies are showing signs of recovery; China retains its top position as a promising country for investment in the medium term; India has emerged as the most promising country for investment in the long term; intensifying competition in emerging Asian markets; the need to develop products that meet the needs of local customers; and in the wake of the Senkaku Island incident, Japanese companies are becoming increasingly wary of the risks associated with doing business in China. JBIC conducted seminars on the survey in Tokyo, Osaka and Kanazawa. At the seminar in Osaka JBIC TODAY FEBRUARY

4 JBIC TODAY FEBRUARY 2011 Special Feature Supporting the Export of Integrated Systems to Meet Host Country Needs The development of major infrastructure such as high efficiency power plants, intercity high-speed railways, and water supply and sewerage systems, is being planned or already underway in developed countries, emerging countries and developing countries. In these infrastructure sectors, Japanese companies are expected to draw on their advantages in advanced technology and environmental expertise. However, in recent years trends revealed that, when a Japanese company attempted to export advanced stand-alone equipment for an infrastructural development project, it would often run into stiff price competition from companies in other countries. Today, the host country is likely to request a comprehensive proposal that includes cooperation in related sectors, the operation and maintenance of the supplied facilities, and the training of human resources. At a time when many countries are making it a national undertaking to obtain orders for infrastructure projects, it is necessary for Japan to offer effective infrastructure package deals that incorporate cooperation and assistance tailored to the needs of each host country, based on coordination between the public and private sectors. The New Growth Strategy adopted by the Japanese Cabinet in June 2010 embraced the need to develop overseas infrastructure business as an integrated package, professing to take a step forward in this business area. A major long-term infrastructure business involves country risk and is exposed to business-cycle impact. Financing is thus important for addressing such problems. JBIC is involved in the early stages of infrastructure projects and is proactively supporting the participation of Japanese companies in overseas infrastructural development. In this process, it will draw on its experience in many major projects in such sectors as natural resources, electric power and transportation and will make the most of the trust that it has earned from the governments and government agencies of host countries. Overseas Infrastructure Development 1. The Changing Environment of Exports Growing Demand for Infrastructure The World Economic Outlook published by the International Monetary Fund (IMF) in October 2010 reported that the average economic growth rate for developed countries in 2009 was negative 3.2%, whereas emerging and developing countries in Asia (developing Asia) maintained a high positive growth rate of 6.9%. The IMF s growth projections for 2010 and 2011 were 2-3% for developed countries, but far higher over 8% to more than 9% for developing Asia. As Asian countries are expected to continue to post these high growth rates, they have to keep up with demand for infrastructure, especially for electric power and transportation. What they need is major infrastructure investment for future growth. According to the forecast of the Asian Development Bank, emerging and developing countries in Asia will require about US$8 trillion in infrastructure investment through In developed countries, the focus is on developing infrastructure that uses energy-efficient technologies and renewable energy to build a low carbon society. One good example is the U.S. Green New Deal policy. Plans have reportedly been drawn up to invest US$150 billion over a period of 10 years for Green New Deal programs such as inter-city high-speed railways, high-efficiency power plants and the greater use of renewable energy. In Europe similar development plans, most notably for railways and power plants, are also well underway. Infrastructure Investment Needs in Asia, (US$ trillion) Water/sanitation IT/communications Transportation Electricity Rising Interest in Infrastructural Development Packages Source: Estimating Demand for Infrastructure in Energy, Transport,Telecommunications, Water and Sanitation in Asia and the Pacific: , Asian Development Bank Institute, September 2010 One might expect that overseas infrastructural development could well provide opportunities for Japanese companies to take advantage of their advanced technologies. However, recent trends indicate that countries implementing development projects are increasingly shifting their needs from stand-alone machinery and equipment to infrastructure that is packaged as an integrated system incorporating business management and maintenance services as well. Emerging and developing countries are developing infrastructure based on their national strategies as a foundation for future growth, but they generally lack experience in operating, maintaining and managing infrastructure facilities. This is why they are now 4 JBIC TODAY FEBRUARY 2011

5 more likely to request comprehensive project proposals that include cooperation in related areas, such as transfers of technology and knowhow for facility operation and human resource training. U.S. and European companies are providing such knowhow, for their focus has been on pursuing various profit opportunities, from infrastructure planning and the delivery of machinery to operating the infrastructure after it is completed, demonstrating their expertise in overseas development programs. In addition, over the last few years the Republic of Korea, China and other emerging economies have also entered this type of international business, and this has also contributed to more intense price competition. Japanese companies are now challenged even to remain dominant in the export of stand-alone products. Japan therefore faces a major challenge. It needs to actively propose infrastructure project packages that meet the needs of host countries, with the core comprising Japan s advanced technologies and knowhow. Of course, such project packages will also face increased competition from experienced U.S. and European companies and from emerging economies whose own governments and companies have formed a strategic alliance. To remain competitive, it is essential that Japan s public and private sectors form a unified front to bring together the required technologies and project management expertise, and to develop comprehensive proposals that offer a wide range of financial instruments and related cooperation for host countries. 2. Effects of Promoting Overseas Infrastructure Development Growing Government Debate and Economic Benefits Against this background, the Japanese government established in April 2010 a meeting of practitioners for promoting the deployment of integrated infrastructure systems. The Cabinet adopted a New Growth Strategy for Japan in June, which referred to the infrastructure package as a vital way to promote Japan s growth. Then in September, the Ministrial Meeting on the Deployment of Integrated Infrastructure Systems was established to discuss infrastructure packages. In such ways, the Japanese government is taking stronger steps to encourage project packaging. Production inducement figures (demand side) in Japan s manufacturing industries show that in 2000, 42.5% of production was driven by domestic consumption, with 27.3% by exports. In 2007 this relationship was reversed: 35.5% of production was driven by domestic consumption, with 37.7% by exports. On another front, of JBIC s total export loans provided for overseas projects during 2006 and 2007, a total of 314 billion was analyzed with an input-output table. The analysis showed that, of this amount, 109 billion went to primary contractors in Japan, 58 billion to secondary contractors (large Japanese corporations), 43 billion to smaller and mediumsize Japanese corporations, and 104 billion to overseas contractors. These figures clearly demonstrate how overseas development projects yield economic effects for a wide range of firms within Japan. Two Promising Sectors for Project Packaging: Electric Power Generation and Transportation Two sectors where project packaging appears especially promising for Japan are electric power generation and transportation. In the electric power generation sector, supercritical pressure technology for coal-fired generating plants makes it possible to generate electricity efficiently with less fuel. An ultra supercritical pressure power plant raises efficiency levels even higher. Japanese companies have registered good performance in products embodying these technologies, primarily in Asian countries. As demand for electric power in emerging countries is projected to expand in the future, there are growing expectations that companies in developed countries will be able to participate in such projects by, for example, operating high efficiency generating stations and adopting smart grids that use digital technology to boost transmission efficiency. In the transportation sector, momentum is building in developed Kazakhstan Export of equipment for gas-fired thermal power plant UAE IWPP project IWPP project Egypt Export of subway rolling stock Qatar IWPP project IPP project Oman Port development project South Africa Port expansion project Electric power transmission and distribution facilities installation project Electric power transmission and distribution facilities installation project JBIC s Support for Infrastructure Projects, 2007 ~ 2010 Maldives Water supply and sewerage system operation project China Monorail project Indonesia Republic of Korea Export of equipment for gas-fired thermal power plant Export of telecommunications equipment IPP project IPP project IPP project Sri Lanka Export of equipment for hydroelectric generating facility Participation in Infrastructure Fund (primarily for Asia) Legend Electricity Water Logistics (port/rail/road infrastructure) Broadcast/communications India Others Delhi-Mumbai project Project for manufacture and sales of thermal power generation facilities Mexico Project for manufacture and sales of thermal power generation facilities Export of coal-fired power generation plant equipment Coal-fired power generation projects Telecommunications network expansion project Project to acquire power assets Panama Canal expansion project Philippines Project facilitating acquisition of interests in IPP plants Singapore Acquisition of power generation company Brazil Columbia Hydroelectric power plant project Beltway project Urban railway and subway project Subway project Freight railway network development project Export of broadcasting equipment for a broadcaster Telecommunications network expansion project JBIC TODAY FEBRUARY

6 Special Feature Overseas Infrastructure Development Supporting the Export of Integrated Systems to Meet Host Country Needs countries for a modal shift from cars to more eco-friendly railway systems. Meanwhile, even in emerging countries, urbanization and economic growth are creating the need for high-speed railways. At the present time, large-scale railway projects are being planned in the U.S., Vietnam, China and elsewhere. Plans for Infrastructural Development in Emerging Asian Countries Major infrastructure projects are being planned in emerging Asian countries. In Vietnam, economic growth rates are projected to average 6.2% per year from 2005 to This growth is rapidly driving infrastructure development. Demand for electric power is expected to increase at an average rate of 6.7% per year up to 2030, in which case power plant capacity is projected to quadruple during the same period. In the transportation sector, there are plans to construct a high-speed railway and expressway linking the country s northern and southern regions. In Indonesia, demand for electricity is forecast to expand by 9% annually. The state-owned power company is planning new electric power supply sources that will generate an additional 55 gigawatts of power by This plan indicated a policy calling for about 40% of this new power to be generated by Independent Power Producer (IPP) projects financed by private capital. The Indonesian government has also set a voluntary target of reducing GHG emissions by 26%. To meet this target, the proposed environmental protection efforts include the promotion of greater efficiency in powergenerating facilities and renewable energy. In India, the Delhi-Mumbai Industrial Corridor (DMIC) Project is being promoted through the construction of a freight railway between Delhi and Mumbai and through development of industrial parks, distribution centers, power plants, roads and other infrastructure along the corridor with private investment. These sub-projects are said to require a total investment of US$90 billion, and the Japanese government and the private sector have teamed up to participate in some of the infrastructural development conceived for DMIC. 3. JBIC in Action Financing to Play a Bigger Role Infrastructure projects are expected to increase in number in the future, requiring a vast amount of capital invested over the long term. For such projects to succeed, it is important that financial plans are structured to withstand exposure to economic fluctua- tions, country risk and other risk events. Needless to say, even when a business is chosen through the bidding process, success is more likely to be assured if suitable financing has been arranged. Through its various loans, guarantee and equity participation instruments, JBIC has supported many large, long-term projects, including projects implementing natural resource development, electric power generation, transportation, and the construction of petrochemical plants. One recent example is JBIC s support for a project in Indonesia in which two Japanese companies have undertaken to provide a project package that covers development, management and operation of a power plant. (See the case study below.) Looking Ahead Prior to the Cabinet Order for Revising Part of the Order for Enforcement of the Japan Finance Corporation Act issued in April 2010, JBIC s overseas investment finance operations were limited to projects in developing countries, except for natural resource projects. However, since this amendment, JBIC can now use overseas investment finance to support inter-city high-speed rail projects in developed countries, in addition to the nuclear power generation projects already permitted. In November 2010, other projects in developed countries became eligible for financing with another revision of the Cabinet Order. Projects that were added include urban railways (including subways), water supply and sewerage systems, industrial water systems, the generation, transmission and transformation of renewable energy, coal-fired power generation, large-scale sequestration of CO2, application of digital technologies for efficient use of electricity and heat, and advanced telecommunications networks. JBIC announced it would study the financial feasibility of a high-speed rail project in Florida in the U.S., a venture in which Japanese firms hope to participate, in December As one of 11 candidate rail lines designated for development by the U.S. Federal Railroad Administration, this high-speed rail project is said to have the highest potential for early commencement. Seizing the opportunity in the early stages of the project, by conducting the study, is expected to boost the Japanese companies chance of participating in the project. (See Quarterly Highlights, page 3.) By becoming involved in such a way during the early stages of project formation, JBIC is in a better position to propose flexible financing measures that can facilitate the continuation of a project and address risks, thereby gaining the trust of the state where the project is planned. JBIC will continue to offer strong support for Japanese participation in overseas infrastructural development, through its financing instruments, by making policy proposals to countries implementing projects, and through partnerships and cooperation with relevant agencies and financial institutions. Case Study The Paiton Thermal Power Plant Expansion Project In March 2010, JBIC signed a project financing loan agreement with PT Paiton Energy (PE), an Indonesian company in which Mitsui & Co., Ltd., and Tokyo Electric Power Company, Inc., have equity stakes. The loan is to fund the Paiton thermal power plant expansion project, and totals up to an equivalent of US$1.215 billion. The expansion will permit the generation of an additional 815 MW of electricity. The currently operating power plant was also financed by JBIC. The plant s expansion will use Japan s supercritical pressure power generation technology. The project is notable in that an agreement has been signed to sell electricity generated Paiton Thermal Power Plant at the plant to a state-owned electricity company for 30 years, and in that the two Japanese companies have provided a project package that covers development, management and operation of the plant. JBIC will not only provide long-term financing for the project but will also offer further, wide-ranging support through its growing relations with the Indonesian government. 6 JBIC TODAY FEBRUARY 2011

7 Infrastructural Development in Developing Countries Significant in Multiple Ways The Industrialization of Developing Countries and Japan Fukunari Kimura Professor, Department of Economics, Keio University Profile Graduated from the Faculty of Law at the University of Tokyo in 1982, and received a doctorate in economics at the University of Wisconsin-Madison in Served as assistant researcher at the International Development Center of Japan from 1982 to Was an assistant professor in the Department of Economics at the State University of New York at Albany from 1991 to Served as associate professor in the Department of Economics at Keio University from 1994 to 2000, and has held the position of professor at the same department and university from 2000 to the present day. Has also served as Chief Economist at the Economic Research Institute for ASEAN and East Asia (ERIA) since Was appointed President of the Japan Society of International Economics in 2010, and currently serves in that position. Most of the developing regions of the world enjoyed unusually high growth from around 2000 until the Lehman shock. Although the global financial crisis slowed growth temporarily, many countries in these regions have since recovered, and are now well back on track to further growth. However, it is widely recognized that the underdeveloped nature of their economic infrastructure remains a restraining factor on their economic growth in the future. During these times of globalization, East Asian countries hoping to enhance their economic development through dedicated promotion of industrialization as opposed to dependence on natural resources face the following issues: (1) how can they take advantage of international production networks? and (2) how can they promote the development of industrial clusters and encourage innovation? Much depends on whether their economic infrastructure needs are adequately addressed. The construction of roads, ports, airports and other logistics infrastructure reduces service link costs between production blocks, making it possible to expand production network frontiers and improve connectivity between industrial clusters. Another key to ensuring the effective location of economic infrastructure is to expand the supply of electric power to that location. Also, enhanced urban functions, which can be achieved through the development of urban transportation, for example, are needed to raise the effectiveness of industrial clusters and foster a positive growth cycle that satisfies the requirements for the supply and demand of human resources. In the scenario where a developing country advances to a middle-income state, then takes another step to become fully developed, infrastructural development is seen as being absolutely necessary. Why is project packaging for infrastructural development becoming more common? First of all, a developing country most likely lacks the ability to coordinate an infrastructural development project. This is generally a greater hurdle than investment capital management issues. Precisely because the country is in the developing stage, it is critical that the project s various processes and tasks be set in motion simultaneously. Project delays and failures are frequently due to improper sequencing. It is often more effective to include related projects in a package and bring in outside expertise that is capable of performing all coordination functions. Secondly, business enterprises in developed countries want to avoid submitting segmented bids for a specific component of a project, since it could entangle them in harsh price competition with an emerging country enterprise. Selling an entire system that offers excellence is preferable. In the case of a project requiring comprehensive environmental protection, for example, a far-reaching package exhibits much more potential. And if it is a public-private partnership (PPP) project, packaging is even more necessary. Government involvement in a project package makes sense from an economic point of view if the involvement simplifies coordination. Of course, excessive government interference should be avoided, and rumors about upper-echelon government officials promoting sales would create problems. It may be necessary to try drawing up international competition regulations that encourage emerging entities to take advantage of opportunities to participate. Japan is limited in its capacity to promote packaged projects mainly because it does not have enough human resources with the experience and ability to coordinate them. However, JBIC coordinators have accumulated considerable experience in overseas projects, so their role has become increasingly important. Hopefully even business enterprises with experience only in Japan will become active in other countries, provided they have the required expertise. On the other hand, if an enterprise is not competitive, having it participate in an overseas project would be counterproductive, since the end-effect would be a general loss of competitiveness. The important thing is for Japan to develop highly effective packages without solely trying to involve only Japanese entities in all of the project components. The benefits of infrastructural development in developing countries are felt not only by private enterprises directly involved in the development, but also by private-sector economic entities that will use the infrastructure. The development is also significant as it can support Japan s manufacturing companies, especially in East Asia. To ensure that growth in East Asia brings positive effects to Japan, it is crucial that Japan exhibits leadership in the region s infrastructural development. JBIC TODAY FEBRUARY

8 PROJECT Qatargas 3 Project Completed Contributing to Developing the World s Largest Annual LNG Production Capacity of 77 Million Tons: Part of Supplies to Be Delivered to Japan A Talk with Moriyuki Aida, Chief Representative in JBIC s Representative Office in Dubai A ceremony held on December 13, 2010 celebrated the completion of construction of the liquefied natural gas (LNG) plant undertaken by Qatargas 3*, a Qatar company in which Japanese and other leading companies have equity stakes. Full-scale operations are scheduled to commence in * Qatar Liquefied Gas Company Limited (3) February 2011 Vol.8 Japanese-led LNG Development in Qatar Qatargas 3 is a joint venture company with investment from Mitsui & Co., Ltd., in Japan Qatar Petroleum, and ConocoPhillips Company in the U.S. With financial support from JBIC and other lending institutions in 2005, the company undertook the development of the North Field and the construction of a liquefaction plant in Ras Laffan Industrial City. Moriyuki Aida, Chief Representative in JBIC s Representative Office in Dubai, has a longstanding connection with this project. He was Division Chief in JBIC s Energy and Natural Resources Finance Department when the loan was committed for Qatargas 3. And since his posting in this position in 2007, he has monitored the project s onsite progress. Aida commented, What gave me the deepest impression in the completion ceremony was the heartfelt appreciation expressed by His Highness Sheikh Hamad Bin Khalifa Al Thani, Emir of the State of Qatar, for Japan s participation and cooperation in the development of LNG in Qatar from the early stages. While large-scale natural gas fields were discovered in Qatar in 1971, they were for the most part left untouched due to the lack of transportation infrastructure. With the participation in development activities by Japanese companies starting in the latter half of the 1980s, and the decision by Chubu Electric Power Co., Inc., to purchase LNG in Moriyuki Aida, Chief Representative, 1992, JBIC has been directly Representative Office in Dubai involved from the early stages. During this period, considerable effort was made to build a comprehensive LNG value chain, including the use of Japanese technology in gas field development, the construction of a liquefaction plant, and port development. The bloodless coup that broke out in 1995 resulted in the withdrawal of private-sector funds and created an emergency situation where construction payments had to be deferred. At that time, JBIC continued to extend loans and support Qatar in response to the request from H.E. Abdullah Bin Hamad Al-Attiyah, then Minister of Energy and Industry of Qatar and current Deputy Prime Minister. After overcoming these hurdles, LNG shipment to Japan commenced in Since then, LNG development in Qatar has progressed at a considerable pace and, after a short 14-year period of participation by Japanese companies, has reached an annual production capacity of 77 million tons, the largest in the world. Forming a Comprehensive Partnership The Qatargas 3 Project is one component of the national goal of achieving an annual production capacity of 77 million tons. Aida explained, From the perspective of global environmental protection, natural gas is a vital source of energy that generates less CO2 and air pollution than oil. For this and other reasons, countries around the world are making considerable efforts to gain access to this resource. In addition, since this was a project on which the future of Qatar hinges, negotiations have been challenging throughout. Even after approving financial support for the project, JBIC has worked to further bolster mutual trust with the Qatar government in various ways, including support for thermal power generation, desalination plant and associated projects. Looking to the future, Aida further remarked, The basic approach to resource diplomacy is to form a two-way and multi-tiered relationship. Accordingly, in this project, we placed priority on providing solutions for meeting various needs of the Qatari nation, including domestic infrastructure development, provision of advanced environmental technology and industrial and funding diversification. In order to deepen friendly ties and make them more durable, it is imperative to build sound human relationships that will be handed down to the next generation. I believe that steady efforts to promote ongoing long-term exchange are particularly essential with the Arab people to fostering strong bonds of friendship. In addition, as the host of the 2022 FIFA World Cup, momentum will gather in earnest in Qatar for the construction of large-scale infrastructure in such sectors as electric power, transportation and water. Building on the relationship of trust JBIC has built with the Government of Qatar through wide-ranging support for LNG, power generation and desalination projects, we will now step up support for industrial diversification and Japanese firms participation in infrastructure development. Funding for the Qatargas 3 Project In December 2005, JBIC signed a loan agreement with Qatargas 3. This loan agreement, totaling up to US$1 billion, formed part of an approximate US$4 billion project finance loan co-financed by numerous financial institutions including 21 Japanese lenders and the Export-Import Bank of the United States. Press and External Affairs Division, Corporate Planning Dept., Japan Bank for International Cooperation 4-1, Otemachi 1-Chome, Chiyoda-ku, Tokyo, Japan Tel URL Cover: The Corniche Skyline, Doha City, Qatar JBIC is the international wing of Japan Finance Corporation. 8 JBIC No TODAY part of this FEBRUARY magazine may be 2011 reproduced without the written permission of JBIC. JBIC publishes this magazine quarterly. This magazine is printed using environmentally-friendly soy ink. Printed in Japan