FOCUSING ON BUSINESS MATCH-MAKING PROGRAMME
direct two-way investment'
JAPAN’s bilateral relationship with India has been
improving since the Narasimha Rao administration launched economic reforms
in 1991, so feels Mr. Osamu Watanabe, Chairman of the Japan External Trade Organization (JETRO). In a wide
ranging interview with Amitabha Sen, he points out that in the mid 1990s Japan stepped up its
direct investment in India. The JETRO Chairman said that the Japanese government regarded bilateral cooperation in the IT
industry as a particularly important field for future Indo-Japanese
relations. IT investments are relatively inexpensive, and the investment
environment in Japan is improving. He does not think that high cost of
investment should be a barrier to India’s investments in Japan.
JETRO has two offices in India-in Mumbai and New Delhi- and investment
advisor in Bangalore, which provide information on direct two-way
investment. JETRO has opened its "new" Invest Japan Business
Support Center (IBSC) in
Tokyo on May 26, 2003 which is a one-stop centre poviding
investment-related information and services. With staff including advisors
on IT, biotechnology, industries etc. and free of charge office spaces,
the IBSC welcomes to assist Indian companies.
AS: The Indian Prime Minister during his visit to Japan
in 2001 has termed Japan the ‘Sun of the East’. To extend it further,
how do you as JETRO chief find the prospects of East and South-East
Asia’s emergence as a more powerful economic force the rest of world has
to reckon with and what could be the possible role of Japan and JETRO in
particular, in such a scenario?
OW: Up to the 1980s, Japanese businesses exported
directly from their manufacturing bases in Japan. Since the 1990s,
however, on account of the strong yen, not only major corporations but
also small and medium sized enterprises have adopted a more dynamic
corporate strategy and have been expanding their operations to East and
Future economic integration in the region is anticipated,
as can be seen from the recent developments of economic talks such as
practical implementation of the Japan-Singapore Economic Partnership
Agreement (JSEPA); Japan’s consideration of bilateral economic
partnerships with Thailand, Malaysia, the Philippines and ASEAN;
discussions between Japan and Korea on a possible Free Trade Agreement (FTA);
and FTA negotiations between China and ASEAN.
If Japan is to maintain its leadership role in the
prospering the region as well as co-leadership in the global economy, it
must continue its pursuit of structural reform and strive to attract
greater inflows of essential high-level sources including capital,
technologies, know-how, and human talent. JETRO will continue its efforts
to promote further economic development in the region through activities
that encourage direct two-way investment as well as export-oriented and
supporting industries in ASEAN.
AS: JETRO, in today’s globalization perspective, is
acting as a turbo charger not only for the Japanese economy, but it is
being gradually recognized as a stimulator for the global economy as well.
In the East and South-East Asian region in particular, JETRO’s
influencing role to strengthen the regional economy cannot be overlooked
either. Still, Indo-Japanese bilateral relations that spanned over
half-a-century do not reflect that strong and expanded trade structure, if
compared, for example, with Japan-China trade and economic relations. What
do you feel could be the limiting factors that slow the growth of
India’s bilateral trade with Japan?
World War II, India played an important role in the recovery of Japan’s
steel industry as a major supplier of iron ore (mainly from Goa). Also, as
you can see from the fact that Japan’s first postwar yen loan was to
India, the two countries enjoyed a very close relationship in the postwar
But soon after India began adopting a more socialistic and
domestically oriented economic policy, the relationship entered a period
of stagnation that continued for some time.
However, since the Narasimha Rao administration began its
economic reforms in 1991, our bilateral relationship has been improving,
and in the mid 1990s Japan stepped up its direct investment in India. The
Japanese government regarded bilateral cooperation in the IT industry as a
particularly important field for future Indo-Japanese relations – in
2000, then Prime Minister Mori took measures to advance the “Japan-India
IT Promotion and Cooperation Initiative” by facilitating the issue of
multiple visas for IT specialists from India, inviting the IT Minister,
members of the IT Eminent Persons’ Group and IT specialists from
India’s private sector to Japan for the “Japan-India IT Summit,” and
dispatching an IT Mission to observe IT businesses in India.
Indo-Japanese trade has a vertical structure – with
India’s major exports to Japan being fishery products, jewelry and
textile products, while Japan’s exports to India consist mainly of
machinery, electronic products and transport equipment. Sino-Japanese
trade was formerly similar in structure, but Japanese companies with
operations in China are now focused on reverse-imports, manufacturing
products in China for the Japanese market. Moreover, with the increasingly
high quality of such products made in China, Sino-Japan trade has come to
have a complementary rather than a vertical structure.
It should also be noted that Japanese investment in India
is driven by Indian domestic demand, and that for reasons such as
geographical factors, high tariffs and other regulations, it would be
difficult to expect the same level of growth as in Sino-Japanese trade.
AS: As Japan’s trade partner how do you rate India
today vis-à-vis its position in
early 90s when the country launched the economic reforms?
OW: As already mentioned, the consistency of India’s
economic reforms initiated by the Rao administration (Congress Party) in
1991 and continuing in the present Vajpayee administration (Bharatiya
Janata Party; BJP) is greatly appreciated.
is now carrying out structural economic reforms, and it is our hope that
the government of India will likewise continue its programme of economic
reforms, which are crucial to economic development.
We also view as significant the fact that privatization has
progressed in recent years under the leadership of the Minister of
Disinvestment, Communication & IT, Dr. Arun Shourie. This is a clear
indication of the direction of Indian government measures in economic
reform. The latest selling off of government holdings at Maruti Udyog, and
the fact that they were sold out in just three hours, are ample proof of
the Indian people’s concern for privatization.
Additionally, the Indian government is currently working on
the establishment of closer economic relations with ASEAN – for example,
by considering the possibility of FTAs with Singapore, Thailand and ASEAN.
On the basis of past precedents, we can anticipate facilitation of
structural reforms through FTAs.
However, India’s insufficiency in the area of general
infrastructures (ports, roads and power) places huge restrictions on the
country’s economic development. The power situation in particular, with
its frequent blackouts and high cost of industrial electricity, is in
urgent need of reform.
There is also the issue of fiscal deficit – central and
state government deficit totals approx. 10% of India’s GDP. Measures for
a sound fiscal budget are urgently required. Economic disparity is also an
issue that needs to be dealt with, possibly through expansion of the
overall size of the economy.
AS: Indian government has opened up many sectors like
infrastructure, telecommunications, information technology, energy and
textiles and textile machinery but the response in terms of foreign
investment is not too encouraging. Is it because the foreign investors
including Japanese corporations would like to wait and watch more before
they decide to step up their investment in over a billion market? As JETRO
chief, do you think the Indian government’s policies are stable ones to
instill the required amount of confidence in foreign investors or is there
a gap between the government’s good intention, honest endeavors on the
one hand and socio-political compulsions in executing them on the other?
OW: Although investments in IT and automobile
industries are increasing thanks to deregulation, further economic reform
and deregulation are required to attract foreign investment.
Specifically, the retail and real estate industries are
still closed to foreign investors, and respective deregulation measures
are urgently needed. While there have been governmental efforts to reform
inflexible labor laws, implementation is still to be seen.
We greatly appreciate the establishment by the Ministry of
Commerce and Industry of the Foreign Investment Implementation Authority (FIIA)
to facilitate smooth procedures after approval of direct investment
projects. However, we also hope that the Indian government will use
currently available channels (such as the Japanese Chamber of Commerce and
Industry in India, India-Japan Investment Dialogue etc.) to directly
obtain feedback from Japanese businesses in India, and that it will
respond to their requests in a positive manner. Such governmental actions
will enhance the trust of foreign investors.
AS: Maruti, Haldia Petrochemicals or Delhi Metro Rail
are the symbols of a very strong commitment of Japan to building up a
strong India. Still when compared with other neighbouring countries like
China, the achievements do not look impressive. It is strongly felt that
JETRO has a very big role to play to bring greater momentum in
Indo-Japanese trade and economic relations. Could you kindly share some of
your thoughts that aim at strengthening Indo-Japanese bilateral trade and
economic relations in coming years?
OW: JETRO has in the past conducted various programmes
focusing on the highly competitive Indian IT industry – by organizing
exhibitions, receiving/dispatching related missions to and from India,
etc. – with the object of increasing packaged software exports and
outsourcing orders for system development and customization. Our latest
endeavour is the “India IT Exhibition,” to be held from June 24 to 27
in Tokyo, co-organized by the Confederation of Indian Industry (CII).
Approx. 30 exhibitors from 20 companies and six organizations are
scheduled to participate, while Dr. Arun Shourie, Minister of
Disinvestment, Communication & IT will be visiting Japan specifically
for this event. A seminar will be held concurrently with the exhibition,
aiming to promote Indian exports to Japan and two-way investment between
the two countries.
Additionally, new India-Japan business matchmaking events
have been scheduled this fiscal year in the biotechnology industry. We
will focus particularly on bio-informatics, for which there is a great
demand by Japanese companies. Specialists will be dispatched to India
where they will meet with related organizations/companies and research
centres to provide information on Japanese industry/market trends, while
specialists from India will likewise be invited to Japan. Through this
programme we ultimately hope to invigorate the Indian industry, promote
exports to Japan and lead the way to bilateral technical tie-ups.
We also think there will be opportunities for Japanese
environment-related companies, with their leading technology/products, to
make contributions in India’s current endeavours to deal with
has identified certain sectors like IT, Biotechnology, Medical Care and
Environment for greater private sector and foreign participation. How do
you find the response from India? Could you tell us specifically areas
where Indian corporations could play a much better and effective role?
Could JETRO identify the reasons of slow investment flow from India to
Japan? Is it the size of investment requirement that is largely limiting
Indian investment in Japan or are there some other reasons behind it?
OW: India’s exports of IT software/services in fiscal
year 2002 totaled US$ 9.5 billion. Although India’s exports to Japan in
this field came 4th, they account for a mere 3%. There is still room for
potential growth in this area. At present, 50 to 60 IT companies from
India already have offices established in Japan. We think that through
technology developments and joint research projects for the Japanese
market, there are possibilities for increased investments by Indian IT
companies in Japan.
We also anticipate that more Indian companies in the
bio-informatics industry will make use of JETRO’s business-matchmaking
programme to enter the Japanese market.
IT investments are relatively inexpensive, and the
investment environment in Japan is improving (for example, land costs in
the metropolitan area have been falling in the past ten years) – so I do
not think that high cost of investment should be a barrier to India’s
investments in Japan.
AS: In India, as you are aware, there are hundreds of
small and medium sized companies in the manufacturing and other sectors.
How can JETRO help those Indian SMEs contribute to the industrial growth
of Japan as a whole in their own way?
OW: JETRO currently has two offices in India – in
Mumbai and New Delhi – and a foreign investment advisor in Bangalore,
which provide information on investment in Japan.
JETRO has also opened its
"new" Invest Japan Business
Support Center (IBSC) in Tokyo on May 26, 2003, which is a one-stop
centre providing investment-related information and services. A staff of
36 including 11 advisors (special advisory staff on legal, accounting and
labour matters; advisors on IT, biotechnology industries etc.) are
available to assist companies with investment-related inquiries. The
facility also has 24 individual office spaces that can be made available
to applicants free of charge for up to two months. Indian companies are
naturally welcome to make full use of these spaces. As of May 2003, 105
Indian companies have used our facility (out of a total 2,675 companies
globally, and 439 companies from Asia), which is the largest number in
Asia. Some examples of investment in Japan by Indian IT companies are:
(1) Patni Computer Systems Ltd : After making use of the BSC (precursor of
IBSC) facility twice and participating in JETRO’s Invest Japan
Individual Program (IJIP), it successfully established a computer software
development/technology assistance service operation in Tokyo.
(2) Polaris Software Lab Ltd: After using the BSC’s free office space
for three months in 2001, it successfully established a Tokyo Branch near
JETRO Headquarters. (Details will be provided during the India IT
Investment Seminar, to be held concurrently with the India IT Exhibition
on June 25.)
JETRO also provides an online service, known as “Trade
Tie-up Promotion Program (TTPP),” that allows companies to search for
potential business partners. As
of June 12, 2003, 754 Indian companies (out of a total 45,131 companies
globally and 6,829 companies in Asia) have registered in the TTPP –
India has the third largest number of registrations in Asia, following
China and the Republic of Korea.
An important point to bear in mind is that communicating in
Japanese brings huge advantages when conducting business in Japan or with
Japanese people. We strongly recommend foreign businesspeople to make the
extra effort – the JETRO Business Japanese Proficiency Test (JETRO Test)
is provided to assist and assess proficiency in the language. The
opportunity to take the JETRO Test is offered in 15 countries and 26
cities worldwide, and the number of applicants from India is the largest -
approx. 30% of examinees outside Japan last year (547 out of a total
1,902) were from India. This year’s JETRO Test will be conducted in two
cities – Mumbai (jointly held by the Indian Merchants’ Chamber) and
Bangalore (jointly held by the Greater Mysore Chamber of Industry) on Oct.
18. (Details concerning the JETRO Test are available on the JETRO website
A considerable number of Indian businesspeople who have
taken the JETRO Test are currently working in Japanese branches of Indian
companies, conducting business in fluent Japanese.
As you can see, JETRO through its various activities is
providing continuous support for economic, trade and investment promotion
between Japan and India. 50 years have now passed since the establishment
of diplomatic relations, and we hope that the ties linking our two
countries will continue to grow stronger in the years to come.
June 23, 2003