‘A lot of Japanese SMEs are keen to come to India.’

The Japan External Trade Organisation (JETRO), which works to promote mutual trade and investment between Japan and the rest of the world, is celebrating its 50th anniversary in India. Hidehiro Ishiura, JETRO’s director general in Chennai, speaks to Kiran Bajad on the many initiatives it is driving and why India needs to work on the ease of doing business and basic infrastructure to attract more Japanese companies, especially SMEs.

Can you detail the various initiatives of JETRO in India?

The Japan External Trade Organisation (JETRO) is celebrating its 50th anniversary in India this year. Globally, we have 75 offices in 55 countries. In Japan, we have 43 domestic offices to promote trade and investments between Japan and rest of the world. In India, we have offices in Delhi, Mumbai, Chennai, Bangalore and one project office in Ahmedabad.

Currently, we have three pillars of our engagement in India, firstly to help Japanese companies, especially small and medium enterprises (SMEs) to invest in India. Secondly, helping Japanese agriculture and food industry to export from Japan to India; the third pillar is investing foreign direct from India to Japan.  

The Japanese government has identified 12 industrial townships in India, of which four are in south India. They are Tumkur in Karnataka, one in Tamil Nadu (OneHub Chennai, 50km away from Chennai city), third is SojithMotherson Industrial park (near the auto belt of Kanchipuram in Tamil Nadu) and one at the border near Sri City between Tamil Nadu and Andhra Pradesh. 

In Bangalore, big Japanese companies like Honda and Toyota and their large vendors have set up a manufacturing base. Similarly, in Chennai, Nissan, Yamaha and a number of automotive vendors are present. In Sri City, Isuzu has recently opened its plant as have other companies like Kobelco. There is a lot of Japanese automotive and construction machinery investment in India besides Tier 1 and Tier 2 vendors.

To serve the Indian market better, we help companies overcome bottlenecks in any of these industrial areas and, also in talks with the local government in fulfilling the promises made to these companies.

Do you see India evolving as an investment destination for Japanese companies?

In South East Asian countries like Thailand, Vietnam, Malaysia or Indonesia, readymade industrial areas with the necessary infrastructure are available. The basic infrastructure need of companies is taken care by the local government or private sector investment.

This is not the case in India. Therefore, we have come up with this initiative of industrial clusters. We have also identified industrial states and promote and facilitate Japanese companies to invest. We provide reliable information to Japanese companies, especially Tier 2 and Tier 3, as these small companies lack the resources that big corporations like Toyota or Honda have access to. 

Over the past five decades, how has JETRO helped expand business ties between India and Japan?

I believe we have played a significant role in promoting business between the two countries, not just in automotive but several other industries including infrastructure, electric and electronics.

At present, the automotive industry including two-wheelers is driving industry between the two countries.

The leading industries between the two countries in terms of trade are automotive, electric and electronics, information technology, pharmaceutical and chemicals. There are over 3,000 companies present in India in various industries. Maharashtra with 712, Tamil Nadu with 577 and Haryana with 487 top in the number of registered companies.

What are the factors that attract Japanese automotive investment
in India?

I see two key reasons. Firstly, India has a very vast and big domestic market, the income levels are rising very fast, and the next decade will see India become one of the biggest automotive markets globally. India is already the largest two-wheeler market globally. Secondly, companies have found that India can be a good export base. For example, Nissan which manufactures cars locally, exports more than it sells in the domestic market. Also, the quality of India-manufactured parts is accepted globally. Japanese companies don’t manufacture certain models in India but parts are manufactured here and then exported to the US, Mexico, Europe, Japan and China.  

How is JETRO helping SMEs set up a manufacturing footprint in India?

I am very sure that a lot of Japanese companies, especially SMEs, want to come to India provided some basic infrastructure and ease of doing business is improved. These SMEs in Japan always compare the business environment with Vietnam, Thailand, Malaysia or Indonesia, where they also have customers. India needs to work on the ease of doing business and basic infrastructure to attract more Japanese companies, especially SMEs. SMEs bring not just investment but also help generate a lot of jobs. India being one of the big automotive markets has a lot of potential to attract not just large OEMs but SMEs too.  

In Japan more than 90 percent employment is generated by SMEs; big companies like Toyota, Nissan and Honda employ a lot but SMEs are huge in numbers with many layers, which is supporting the industry. In India, big OEM investments are welcome but the layer of SMEs is very competitive in human resource and not much well developed and I hope this will change. If more and more SMEs start investing and more independent suppliers increase in India, employment will also rise significantly.

How do you see the India-Japan business partnership growing in the near future?

The Indian-Japanese business partnership has been growing over the years. The number of companies investing between both the countries is increasing steadily and will remain for years to come. Also, the numbers of Indians visiting or living in Japan is increasing rapidly.

Five years ago, only 10,000 Indians were living in Japan; today this number has reached  30,000. We didn’t have Indian curriculum in schools in Japan in the past. Today there are three such schools and similarly many Indian restaurants are coming up. This indicates the engagement between the two countries has been increasing significantly. This is a good sign for business and I think the business future of both the countries is very bright.

Do you foresee specific areas where both countries need to work to further leverage the business partnerships?

India is still far away for Japan as compared to Korea, China or other South East Asian countries. If we bring more and more people here from Japan and help them get familiar with Indian culture and business customs, this will help increase the business engagement. I hope a number of Japanese visit India and the countryside and see the reality and how to deal with local population.

Can you list a few initiatives which JETRO has taken to engage the automotive industry of both countries?

The automotive industry is consistently changing and moving ahead with things like artificial intelligence and autonomous driving. Considerable knowledge of artificial intelligence, sensor and information and technology and some basic mechanical engineering is needed.

This is a new area where both countries can work together to better produce these latest vehicles at very competitive prices in the coming years. This type of engineering is currently being done in the US, Europe or Japan and there are a lot of Indians working on these technologies. This may happen here in India in the near future with collaboration between Japanese and Indian companies, where India becomes a base for development of autonomous driving and other new areas.