Attracting Japanese Cos from China: India to face competition from Vietnam, other ASEAN countries: JETRO

NEW DELHI: Japan’s apex state-run trade promotion institution the Japan External Trade Organization (JETRO) has said that Japan’s recent decision to move Japanese companies from out of China is the part of the newly-formulated Global Diversification strategy to end supply chain dependency on a single country China.

In an exclusive interview with Asian Community News (ACN) Network, Yasuyuki Murahashi, Chief Director-General, JETRO said that the Japanese companies getting out of China may consider multiple locations across the world, and some of them may set up units in Japan too,

“Relocation of Japanese companies from China to other countries is just a diversification of the supply chain. ​For example, over 70% of​our import ​of masks is from China but now because of the Coronavirus pandemic situation, we cannot import ​enough from China. Resultantly, Japanese companies are facing a shortage of parts and another input material as the supply chain in China has broken. It has caused a shortage of material in the Japanese market. And it is just one example.”

That’s why the Japanese government decided to diversify the source of material and products in all sectors including automobile, engineering, and medical equipment by not limiting its dependence in one country but other countries as well. For that, Japanese companies can go from China to Japan and other countries as well.

JETRO is a government-related organization that works to promote mutual trade and investment between Japan and the rest of the world.

“We can reduce dependency on one country only when Japanese companies don’t produce in one country but other countries too. Japanese investment in China, especially in the manufacturing sector, is huge. So, Japanese companies are thinking of establishing factories in other countries too. This is the global strategy of Japanese companies in which India, Vietnam, Indonesia, Myanmar, and the Middle East and Africa can be the candidates,” said JETRO Chief.

While replying to a question of whether the Japanese government was asking the relocating Japanese companies to move to a particular country, Yasuyuki Murahashi said it was the company’s individual decision as the government could not force them to go to particular a country like India, or Vietnam as it’s not a government policy.

“But if companies want to move from China to Japan or any other country, we as government can support and facilitate their relocation.”

Last month, the Japanese government had announced a stimulus package of $2.2 billion for the Japanese companies wanting to get out of China and move their production basis from there to Japan or any other country.

India stands a good chance but needs to create the conducive environment first

According to JETRO chief DG, the Japanese companies take into consideration many factors while deciding on making investment and these include ease of doing business, cost-effectiveness, land availability at reasonable prices, technology, and red-tapism or bureaucracy interference.

“Even though, It is an excellent opportunity for India to attract Japanese investment for this it will have to create a conducive environment for them. However, India is not very strong on these parameters currently, and therefore has to compete with Vietnam, Indonesia, and other ASEAN countries for attracting Japanese investment. Japanese companies also see economic policies of other countries too, and look for the best place to produce and do business,” said Yasuyuki Murahashi.

JETRO chief DG also cautioned that if the Indian government continued with the same situation before the end of the Coronavirus outbreak, it might not be able to attract japan companies.

“So, in post corona scenario, if they want Japanese investment, Indian central and state governments will have to think of new policies. We look forward to India more.”

When asked whether the Japanese companies planning to move out of China would go back to Japan also, Yasuyuki Murahashi clarified by replying in affirmative and said many would go to Japan too.

“Because of the COVID-19 outbreak, the production in many countries closed and Japanese companies are not able to import or export from other countries. But japan is an open economy and trade is very important for us. Therefore, we think we should produce some amount of pf products in Japan also. It is one of the options with us, and part of our diversification plan and our government policy too,” Yasuyuki Murahashi told ACN Network.

Central government agencies and state governments approaching JETRO

JETRO chief DG also confirmed that post $2.2 billion stimulus package of the announcement, the central government agencies, Invest India, other trade associations like CII, ASSOCHAM, FICCI, etc. as well as many state governments in India had started approaching JETRO to stake their claims for attracting Japanese investment.

Also read: For Japanese companies, India a huge but isolated market: JETRO

“Good thing is that many Indian state governments are very enthusiastic to welcome Japanese companies to their states but nothing seems to have changed. For example, when a Japanese company wants to invest in India, it always looks for a suitable place for them like Rajasthan, Haryana, Maharashtra Telangana, Tamil Nadu, and Japanese investment in India is not very big. And this is the best opportunity for them to attract investment by providing good incentives, better services, and other facilities.”

He said the state governments like Rajasthan through RIICO, Haryana through its investment promotion corporation and Uttar Pradesh also approached JETRO for the same purpose.

When asked Neemrana region in Rajasthan was very popular earlier with many Japanese companies for investment but there was ​not much new Japanese investment going there for ​the ​last  ​few years, the JETRO chief said most of the Japanese investment in Rajasthan, Tamil Nadu​ and other states were in the automotive industry.

Also read: About 5000 Japanese Expats stay back in India to fight against COVID-19, support Indian Government 

“About 70 percent of the Japanese ​industrial investment in India is in the automotive sector but this sector is stressed and not doing well. Sales are ​declining at the moment and there is ​limited room for further expansion in this sector. Because of the under-utilization of existing capacity, we cannot make a new investment in the auto sector,” JETRO chief clarified.

Existing Japanese investment stressed in India

Yasuyuki Murahashi also said that the current Japanese investment in India was facing difficulty because of the lockdown period as they cannot produce and sell anymore, and cannot purchase raw material and Japanese companies were facing the cash flow situation.

“If this situation continues, some of the companies​ need support from the government. That’s why all the companies are thinking about how to go about this situation. No sales means, no income but they are forced to pay salaries to employees. The Indian government has also prohibited layoffs of the employees and workers and pay a huge amount of salary.  Not only Japanese but many other companies in India are facing this crisis,” said Yasuyuki Murahashi.

JETRO had conducted a survey of some of the 1500 Japanese companies to know their feedback on the kind of problems and hardships they are facing in India.

“In the survey, we discovered that majority of Japanese companies in India had no regular income during the lockdown, and they were facing cash flow shortage. They also face issues on the logistics front, with regard to the movement of material through airport or port, railways or roads because of problems in securing permissions for the same. Workers cannot come and join work if we open the factory as borders are closed,” he said.

Also read: Japan to give US$ 3.45 Billion ODA loan to India to boost urban infrastructure