When ORIX started its international expansion more than 50 years ago, Asia was a logical first move: not only were East and South-East Asian countries on its doorstep and growing rapidly, but management also saw a clear path to developing profitable operations while helping to foster economic development in these emerging markets – very much in keeping with ORIX Group’s recently announced Purpose statement: “Finding Paths. Making Impact.”
“This is a powerful expression of our business philosophy across Asia Pacific,” says Yoshiaki Matsuoka, Head of the Global Business Group at ORIX and the executive in charge of its Asian businesses (excluding Greater China). While ORIX needs to produce returns for its own stakeholders, it has always understood that by bringing new ways of doing business to markets such as those in Asia, it could contribute to local growth as well as its own. “Making an impact locally is good for everyone”, he explains: “Good for the local economy, good for our partners and good for us.”
The key, in each case, was to find the best path to do so: by selecting both the right sector for market entry, such as leasing, where ORIX could contribute expertise gained in Japan; and, critically, to find the right partner: a business that had local knowledge and a good network but, even more importantly, was interested in a long-term relationship and also saw a worthwhile purpose in a collaboration with ORIX.
Fast forward 50 years and ORIX is now established in 14 APAC countries and regions, including India and Pakistan, Greater China, the big ASEAN economies and Australia and New Zealand. As a business segment, Asia and Oceania accounts for a tenth of group profits and assets.
The range of business activities has broadened steadily, guided by the principles outlined in the Purpose statement, namely that impact is best created by combining innovative thinking and diverse expertise.
In the Philippines, for example, ORIX Metro, a leading leasing and financing services company, is a joint venture between ORIX and Metrobank, the second-largest financial group in the country and part of GT Capital, one of the largest conglomerates there. The close partnership with Metrobank has now expanded to another sister company within the GT Capital group, Federal Land, and ORIX and Federal Land are now operating in real estate together by developing and managing luxury hotels and apartments in Manila.
In South Korea also, ORIX is branching out from its original business in leasing and financing into real estate and, in a recent example, has joined forces with leading Korean apparel retailer, TOPTEN, to develop and manage retail spaces there.
In Thailand, Thai ORIX has developed a smart, data-driven approach that is improving customer satisfaction and sales in its vehicle leasing business. ORIX Australia, also has a suite of digital fleet management products that are helping improve measurability and efficiency in Australia.
In Indonesia and Malaysia, both Muslim-majority countries, the local management of ORIX Group companies SMS Finance and ORIX Leasing Malaysia Group are building successful Sharia financing businesses, that operate on Islamic principles.
All of these national operations are forging their own paths but with the common goal of making an impact in their local country and community by combining innovative thinking and diverse expertise, as well as producing good returns for their parent company.
Leasing as the foundation
It all started with leasing, says Mr. Matsuoka. ORIX was a pioneer of the equipment leasing business in Japan, having learned about this new US financing concept in the 1960s. Once the group understood how to run a profitable leasing business at home it became the first to launch the new concept into Asia – initially Hong Kong and Singapore – in the early 1970s.
The original methodology of this rollout into Asia was to leverage the diverse expertise of partnership: ORIX provided the operating knowledge and leasing know-how, ; local partners and the International Finance Corporation, the private-finance arm of the World Bank afforded its in-country knowledge and connections. As the collaboration with the influential local conglomerates, financial institutions, and World Bank group shows, ORIX was looking to make an impact through its expansion plans right from the start.
Another reason for bringing in a domestic partner was that regulations at the time generally prohibited a foreign company from controlling a local business. That has slowly changed and today, ORIX owns a majority stake in eleven of the 14 APAC countries and regions where it has operations.
Ownership structure, however, is a secondary consideration, notes Mr. Matsuoka. “The core of the strategy we have replicated across Asia is to provide financing for SMEs, whether through leasing, hire purchase, commercial mortgages or other means,” he says. “Our purpose is to support the growth of this type of business and where we see such an opportunity, we enter a market.”
And while leasing and financing still constitute 90% of regional profits at this point, that was the case in Japan as well during the group’s early years. Just as that business has steadily diversified into other financial services, including real estate, insurance, asset management and private equity, and from there into exciting new areas such as energy & environment, this process is expected to happen across Asia too.
Learning from Japan and each other
To accelerate that process, there are two kinds of synergies to exploit. The first is tapping into the knowledge and experience of colleagues who run established businesses in Japan. Mr. Matsuoka says that reaching out to these business leaders within ORIX Group for advice has helped him and his executives with everything from initial investment decisions to devising and executing sales campaigns.
Even more important, arguably, is to have the individual Asian operations learn from each other. When he took oversight of ORIX’s Asian business in 2020, Mr. Matsuoka remembers, most of the countries had bilateral relationships with Tokyo but rarely communicated between themselves.
To foster collaboration as well as diverse viewpoints to drive impact, he has made pan-Asian integration his mission, ramping up travel and training as Covid-19 has faded. So, for example, a team from Australia has given a workshop on digital fleet management for other vehicle leasing businesses, while an Indonesian sales team has visited Thailand to learn about computer leasing.
ORIX has also begun a series of visit programs to Japan for rising stars drawn from around the region, with these professionals spending 4-6 weeks at ORIX Headquarters in Tokyo and its main businesses across Japan to learn from ORIX’s expertise in its home market, build relationships, identify growth opportunities, and also to give ORIX’s Japanese employees deeper understanding and exposure to their overseas markets – building a common purpose across the group.
The first such program was held in February 2023, and a second was completed in November 2023. The two programs included participants from South Korea, Indonesia, Australia, India, Malaysia and Pakistan, and plans are underway to continue these visits twice annually going forward. “Our Japanese colleagues also learn from these visits”, notes Mr. Matsuoka, pointing to the prayer room and Halal food they had to organize for Muslim visitors.
Full steam ahead
Looking ahead, Mr. Matsuoka emphasizes that the priority for Asia is less on further geographic expansion than on building out a full range of services in those countries where ORIX already has a presence and an established brand.
This means not only spreading real estate expertise beyond the Philippines and South Korea but also introducing new lines of business such as asset management and perhaps even dipping more than just a toe into consumer finance.
Covid-19 showed that from a risk perspective, the Asian business is already sufficiently diversified. While operations in Southeast Asia and South Asia were hit hard, a steady performance in South Korea and Australia compensated. Now, Indonesia, Malaysia and, indeed, the Indian subcontinent have returned to strong growth while South Korea has slowed.
Standing back, the potential of Asia remains undimmed: it already accounts for 45% of global GDP and with 60% of the world’s population, a rapidly rising middle class and expanding private sector, it is likely to remain the world’s fastest-growing region – and a place where ORIX will continue to find new paths to make an impact.