Japanese companies invested $4.7 billion last year in India, says envoy

Japanese Companies | India, Investment & Acquisition | 07/25/2017

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A file photo of Japanese ambassador to India Kenji Hiramatsu. Photo: Pradeep Gaur/ Mint

Japanese companies invested $4.7 billion last year in India, says envoy

Date: June 27, 2017
Source: livemint by Elizabeth Roche

New Delhi: Japanese ambassador to India Kenji Hiramatsu says that Japanese investments into India are growing steadily with more and more companies setting up base in India. That Japanese companies are not able to make a profit immediately after entering the Indian market is not seen as a deterrent, he says. Hiramatsu also explains the concept behind the Asia-Africa Growth Corridor and does not see it as a counter to China’s ambitious Belt and Road Initiative. Edited excerpts from an interview.

The India-Japan trade figure is around $16 billion. What can be done to improve this?

I think we have room for enhancement of the trade relationship between two countries. We have already signed the Comprehensive Economic Partnership Agreement (CEPA). And I think in this framework we have been having regular discussion to improve our trade relationship. And of course there are some ways to that. I can give you some examples. Like some Japanese companies operating here, and producing their products in India, and now they have started to export their product to Japan, for example Suzuki has started exports of their automobile – Baleno — starting in March last year. And also some Japanese pharmaceutical companies which have their production bases in India are planning to export their products to Japan. So things are now happening.

A file photo of Japanese ambassador to India Kenji Hiramatsu. Photo: Pradeep Gaur/ Mint

But I would like to mention that not only talking about bilateral trade figures but there is also dynamic kind of movement with regard to Japanese investment especially in the manufacturing sector. As you know, Japan maybe one of the biggest investors in the manufacturing sector in India. Last year the total amount of investment from Japan to India was $4.7 billion which was a significant increase compared to the previous year when it was $2.6 billion. It means that many companies are shifting their operation bases or manufacturing bases to India and they are producing their products here and selling them in the Indian market. Also they are developing industries or local part industries, as in they are making spare parts and not importing from Japan. It means that we are not only talking about the bilateral trade figure but in a wider context. Also I would like to say that the products that are produced here are exported to Japan, and some to the wider global market including Africa, Middle East and other neighboring countries, so Japanese companies are looking not only at the Indian market but also at the regional and the global market.

The Modi government is putting a lot of emphasis on improving the ease of doing business. What is the feedback that you have from Japanese companies on the ease of doing business in India?

I think there are a couple of reasons why Japanese companies are looking very positively at the Indian market — one is the very aggressive, positive initiatives taken by the Modi government to make the Indian investment environment better. Also India is a growing market, the growth rate is around 7%-8%. India has also a very stable government, a lot of new initiatives have been taken in regard to reforms, regulation and initiatives to make the business climate easier.

I have feedback from the Japanese companies that the investment, trade environment is better after prime minister Modi came to power. So I think that there is a lot of enthusiasm on the part of Japanese companies, not only in India but also in Tokyo that India is a really, really important market for Japanese business.

Japanese businesses in India don’t seem to be making too much of profits. Isn’t that a deterrent to others planning to come in?

Well, it will take time. I always tell the business people that they should have a medium or longer term perspective if you want to do business here. This is a very big business market so there are a lot of opportunities and a lot of profits you can gain. But it would take some time. Some kind of long term plan, some kind of long term perspective is important. If you want to have a quick return from the operation here, some people are going to be disappointed. People have started to recognize this.

Can you give some details about the Asia-Africa Growth Corridor? What is it all about?

This is a very important project. Prime minister Shinzo Abe announced his initiative for a free and open Indo-Pacific strategy through which Africa and East Asia will be connected. We aim to make this area prosperous and peaceful. So for that we need to have connectivity established. We need to have more high quality infrastructure established in countries in the corridor. Japan and India are working very closely on this. We can collaborate together specially to establish infrastructure in India’s neighbouring countries and we can do business together in Africa. Of course, India has a lot of experience and network especially in East Africa and we would like to make use of this experience for Japanese companies. We have the technology and finance.

So the question is how to connect India’s experience and networking with Japanese capital. This is a good match — that is why you have some dialogue starting at the government and the business to business level. Something concrete I hope will come out. In this way, we have better opportunity, better infrastructure in African countries. We would like to have a peaceful prosperous Indo Pacific region and more people to people exchange, technical cooperation and human resource development programmes. In this way, Japan and India jointly support the development of countries surrounding India, Africa and the Middle East. This is a rather big and ambitious programme. But Japan and India hand in hand can make this happen. This is in synergy with Prime Minister Modi’s “Act East” policy. It is a strategic goal that Japan and India share.

Some people see it as a counter to China’s Belt and Road Initiative. Is that correct?

We are doing what we can do, making use of Japanese technology and financing in order that countries can have better infrastructure. Japan can provide high quality infrastructure. So countries around this region have a lot of alternatives for their development. We are not competing with other initiatives, not countering other initiatives, just doing what we can do for the betterment of people’s welfare and infrastructure of this region.

Comprehensive Economic Partnership Agreement (CEPA) India