For Japanese companies, India a tough place to do business compared to ASEAN

The operations of Japanese companies in India are generally limited to domestic markets than exports, and there is more room for improvement in the way the trade is done in India.

Sanjeev K Ahuja On Nov 29, 2021

NEW DELHI: For Japanese companies, India continues to be a tough terrain to do business. For them, India is a harder place when compared with the ASEAN (Association of Southeast Asian Nations), where Japan has a significant presence.

This is despite the fact that Indian has scaled up to the 63^rd ranking in terms of ease of doing business globally from its previous position at 142^nd in the year 2015.

However, India’s excellent human resources in the area of information technology IT and Japan’s strength in technology, quality, and the fast supply chain it has in Asia could be combined to bring benefit to all the people in the region.

The related concern was raised by Masahide Sato, Chief Consul, Consulate-General of Japan in Mumbai while addressing a virtual session of the Konnichiwa Pune 2021 organised by Indo Japan Business Council (IJBC) recently.

“From the point of view of the business environment in India, very honestly speaking I must say that Japanese companies still feel that India is a harder place to do the business as compared to ASEAN countries in terms of regulations, tax system and labour relations, and so on,” said Mr. Sato.

He advised that Japan and India needed to take advantage of the current post-pandemic recovery phase and bring positive change to the bilateral economic dynamics by strengthening the supply chain and improving the business environment.

“We must admit that the Japanese companies investing in India must have an improvement in their business practices. We often hear complaints from the Indian businesspeople such as Japanese people are not good at English, the Japanese decision-making process is very difficult to understand and taking a lot of time to make the clear decision, so it’s a waste of time, etc. However, on the other hand, the Japanese companies also have the advantage that once they make a decision, they execute it quickly, and their results are achieved,” he added.

It is noteworthy that the number of Japanese companies operating in India was 1441 in the year 2018 and their number has grown marginally by 14 by 2020 when the number reached 1455 companies only.

Masahide Sato said that in order to further promote the Japanese companies advance into the Indian market, both sides have to understand each other better, and Indian businesspeople should give the latest business information on India, especially to the Japanese company’s executive level at their head offices so they could strongly impress the huge future potential of the Indian market and its business environment.

“Indians and Japanese are very cost value and I don’t think there is a decisive difference in the way of thinking between them. It’s true that India and Japan have different customs and languages but in such a situation, we act with each other in a hand-to-hand manner, I believe that all business will succeed,” Mr. Sato added.

He lamented that the Japanese companies in India were more focused on domestic markets than exports, and there was more room for improvement in the way the trade is done in India. The Japanese companies operating in India are exporting merely 18 percent of their products to global markets, and the rest is sold in the domestic markets.

In deep contrast, the export sales to total sales ratio of the Japanese companies operating in other parts of Asia is about 50%, especially those in ASEAN nations. In China, the Japanese companies have registered exports to sales ratio at 33%, almost double that of India.

“The export sales ratio of Japanese companies in many ASEAN countries is in the upper 40% to 50% zone, meaning that they export roughly half of what they produce in these countries. Even Japanese companies in China have a 33% export sales ratio. On the other hand, in India, the export sales ratio of Japanese companies remains at a low of 18% – almost half of that in China,” Mr. Sato added.

He advised that India’s excellent human resources in the area of information technology IT and Japan’s strength in technology quality and the fast supply chain it has in Asia could be combined to bring benefit to all the people in the region.