Nippon Export Investment Insurance (NEXI), wholly owned by the Japanese government, is set to introduce a new insurance, the Yomiuri Shimbun learned. Loans to companies in emerging nations to pay insurance premiums to NEXI will be covered by the new insurance.
Companies in emerging nations that place orders for infrastructure development with Japanese companies are first required to pay an insurance premium to NEXI. This is because if companies that placed orders become insolvent, the NEXI insurance will compensate for the outstanding payments to save Japanese companies that received orders.
In Central Asia and Africa, however, there are companies with insufficient capital that cannot afford to pay insurance premiums, which could amount to some billion yen, and give up placing orders. No Japanese company will accept orders from foreign companies in developing countries without NEXI insurance.
The new insurance will cover loans from Japanese banks to such companies in emerging nations so that they can pay insurance premium. In this way, the new insurance will encourage more foreign companies to place orders with Japanese companies, which will expand Japan’s infrastructure export.
It seems that the new insurance will be first applied to the construction of a fertilizer plant in Uzbekistan undertaken by Mitsubishi Heavy Industries and Mitsubishi Corporation. The insurance premium that amounts to some billion yen to be paid by the Uzbekistan side will be covered by the new insurance.
The high initial payment involving Japan’s infrastructure exports has been an impediment to emerging nations.
In 2015, Japan lost in the bid for the project for a high-speed railway in Indonesia when China offered zero initial payment by the Indonesian government.