Indian states jostle hard to attract Japanese, Korean, Chinese investment

NEW DELHI: Despite being the first state in the country to bag Japanese investment as early as in the 1980s when Japanese multinational Suzuki Motor Corporation set up a car manufacturing plant in Gurugram, Haryana state is fast missing out on the current and potential foreign investment coming from ally Asian nations like Japan and South Korea.

Fast-changing global geopolitical equations especially in East Asia with Japanese and South Korean companies in large number planning to shift their manufacturing facilities from China to India following tense diplomatic relations between Japan, South Korea, and China, a huge amount of foreign investment is destined to come to India in the coming decade.

India and South Korea have already pledged to take bilateral trade from the current US$ 21billion to US$ 50 billion by the year 2030.

Companies from other parts of the world too, those were earlier planning to invest in China, have a change of mind due to ongoing US-China trade war, and are heading towards India for setting up their shops here.

The Indian states like Maharashtra, Tamil Nadu, Karnataka, Rajasthan have stripped Haryana of the status of most-favored investment destinations especially from Asian giants – the position it commanded during 1980-1990. Other states attracted investment and set up manufacturing facilities by Asian countries more than Haryana despite the latter being the early bird.

And now Gujarat and Andhra Pradesh are emerging the most trusted investment destinations for Japanese and South Koreans. The irony is that the multinationals from these countries have their office headquarters and their top executives stay in swanky condominiums in Gurugram (Haryana) only.

Out of a total of 1441 Japanese companies registered in India, Haryana has 609. On the contrary, Maharasthra has emerged as the most favored state with 810 Japanese companies, Tamil Nadu 620, Karnataka 567, Gujarat 383, New Delhi 340, West Bengal 209, and Rajasthan 183.

South Korean companies the total number of which has reached about 700 in India, too skip Haryana for various reasons and prefer to go to South Indian states. The number of Korean companies in India is likely to cross 2000 by the year 2030, according to Korea International Trade Association (KITA), Korea’s largest association that has over 70,000 Korean companies as members worldwide.

Korean multinational Hyundai preferred Chennai to set up its most modern automotive plant but it has its state-of-the-art HQ coming up in Gurugram. KIA again with its HQ in Gurugram, chose to set up its car factory in Anantpur, Andhra Pradesh.

White goods major LG preferred locations like Pune, Noida and Dehra Dun. Samsung set up the world’s largest mobile phone factory in Noida only.

Mini Japan in the Making in Gujarat:

Likewise, Haryana’s ally in progress Suzuki preferred to expand its operation not in Gurugram but in Gujarat. It has not only set up its third plant manufacturing cars and batteries in Hansalpur, about 100 km from Ahmedabad in Gujarat. It also has plans to expand the facility and start manufacturing electric vehicles (EVs) here only for which it has already acquired land.

Likewise, Honda Motorcycle and Scooters India (HMSI) that had set up its first factory in Manesar, Gurugram opted not to expand in Haryana but to Gujarat.

According to highly placed sources, even the Japanese carmaker giants Honda and Toyota too are looking for large parcels of land in the same region.

The region comprising of Vithalapur, Becharaji, Jhalishana and Detraj villages in Taluka Mandal of district Ahmedabad, already has a Japanese Park here, and phase 2 of the project is going to take off soon.  The area about 100 km from Ahmedabad city is fats taking the shape of Mini Japan. And all that came up in less than five years only when Suzuki Motors Gujarat commissioned its operations in 2015

The region is coming up with Japanese restaurants, all-Japanese hotels, Japanese grocery stores, Japanese Park (Industrial) and other urban amenities like shopping malls, office complexes, saloons and games shops for the Japanese nationals with the MNNs and other joint venture companies and OEM suppliers here.

Haryana has failed to sense the FDI potential: 

Haryana that could have maintained its number one position in the tally of FDIs from Asian nations like Japan and Korea in India, however, dropped out of the race and other states took over. The factors like tough labour laws, labour union, industrial unrest and strikes, and red-tapism haunt potential investors from Japan and Korean now.

These Japanese and Korean investors can choose to have their homes and families stay in the swanky condominiums, and their offices on Golf Course Road, in Gurugram but prefer to have their manufacturing facilities elsewhere in India.

The last attempt by the Haryana government to woo Korean companies was made in July last year in Gurugram when it organized India Korea Golf Meet.

The senior-most executives of more than 20 Korean companies like Samsung Electronics, Hyosung Corporation, Hyundai, NongHyup Bank, Posco India, Kia Motors, Lotte Confectionary, Orion, Lotte Chem, CJ India, SK Lubricants,  Amorepacific, Doosan Power Systems, DY Auto, Shinhan Bank, Woori Bank, K.B. Kookmin Bank participated in this Golf Meet.

Haryana chief minister Manohar Lal Khattar had said on this occasion that the state government laid a red carpet for the Korean companies, and assured them that state was number one on the ease of doing business scale.

However, Koreans do not agree with what Haryana CM claimed about the state that has a gory past of industrial unrest and violence in Japanese companies like Honda Motorcycles and Maruti Suzuki in the years 2005 and 2012 respectively that had shocked the entire world.

The Japanese and Koreans fear the possibility of a repeat of the violent events that had attracted the attention of the whole world in Honda Motorcycle & Scooter India and Maruti Suzuki and brought India, and Haryana in specific, the unsolicited notoriety in the corporate world.

Last year again on November 5, Honda Motorcycle & Scooter India was in news for workers agitation when the company management refused entry to 200 laid-off contractual workers following a slump in the production. The same agitation continues undeterred as the Haryana government failed to address the issue effectively.

The world of opportunities emerging from Japan and South Korea:

Following tense relations with China on the issue of nuclearization of North Korea and increasing support of China to North Korea, Japanese and South Korean companies are slowly uprooting from China and planning to move to India in large numbers.

The majority of these companies are small, medium and micro enterprises (SMEs) that had set their plants in China about 4-5 decades back.

“These companies have a very limited option to shift their production bases. They have Vietnam as a choice but it is not the right kind of destination looking at the very nature of the country which is a communist in nature. There are already 7,000 Korean companies operating. The Korean government is telling all such companies to look towards India as a long term decision and set up their business here as the country not has a large market but is also peaceful comparatively,” said a senior Korean trade association functionary.

According to an estimate, China has over 50,000 South Korean companies operating on its soil, and the majority of these are likely to move to India, a great opportunity for India to grab.

Similarly, a huge number of Japanese companies operating out of Chinese soil are planning to move to India.

A new wave of SMEs and Startup ventures is also coming to sweep India in time to come as the nation is fast becoming a favourite destination for the budding entrepreneurs from Japan, Korea and China alike.

However which states the upcoming Japanese and Korean companies choose to start their operations depends upon the sops, peaceful industrial relations and ease of doing business environment the states can offer.

Also read: Red Carpet to replace Red Tapism for Korean Cos in Haryana