Japan Firms Keen On Production Tieups

Japanese firms are looking for closer cooperation with Indian companies as it can be mutually beneficial to enhance market knowledge to compete in the world market, said Kimio Agata, who led here an 18-member delegation from Japan's New Management Club (NMC), a grouping of top executives from more than 500 Japanese companies.

Most of the Japanese firms were initially hesitant to invest in India as Japan's economy had been under recession. But with things changing fast now, India was emerging as the most sought after destination for Japanese companies given its solid industrial base and a stable democracy, Agata said.

 

Japanese investors, he said, had now plenty of capital floating around but without any good outlets for investment. The interest rate is very low (in Japan) with the result that the companies are looking for higher returns elsewhere, Agata said.

Agata, who is the president of NEC Planning Research Ltd, said although Japanese investors were now weary of investing in China, they were not coming to India in more numbers because of their unfamiliarity with the country. We tend to believe more in what we actually see and experience than what the figures or studies suggest about any world market, Agata said explaining the overseas investment mechanism of Japanese businessmen.

Investments are made in countries according to the level of their economic development, he said. Japanese investors come in usually with big investments setting up long assembly lines which obviously requires some scale of production and a potentially large market to sell products, Agata said.

Agata said most of the small Japanese firms follow the big corporate houses to wherever they invest overseas. This herd instinct, he said, was particularly significant as almost all big Japanese business names were already operating in India and therefore a surge in Japanese foreign direct investment was highly plausible.

Japan is presently the fifth largest investor with a 4.2 per cent share in total investment commitments in India. It has invested about $851 million between August 1991 and April 1996, with a major share going to the telecom sector followed by power and transportation sectors, according to the industry ministry.

Agata said India could gain substantially as Japanese investors were shying away from investing in China because policies and conditions change overnight in that country.

He said India had certain inherent advantages over countries like China. Here the governing system, particularly the bureaucracy, is well developed; there is no no dearth of technical manpower and a sophisticated network of financial institutions exists, Agata said.

He cited the language barrier as a major obstacle in the way of closer economic cooperation.

Japanese investors are often fast in implementing projects but were extremely slow in decision making, Agata said, adding that these caused them to lose a lot of investment opportunities worldwide. But this also helps as Japanese firms involve the management at all levels in their decision making and therefore once an investment decision is taken, there is never retracting, he said.

The delegation in an interaction with members of the Confederation of Indian Industry (CII) reposed faith in the new government's commitment to economic liberalisation and said with a pro-active investment policy, the country could attract more Japanese investment.

The delegation will undertake a one year study on India. The purpose is to develop a deeper understanding of India not not just of the economy but also of the country's cultural aspects, Agata said. NMC would pass on to Japanese firms the information on investment prospects in India and help them identify joint venture partners here.