PM Modi transforming India into one of the most business-friendly countries: Hiroyuki Ishige, Jetro - The Economic Times on Mobile
With the Narendra Modi government in the saddle, the mood in the corporate world has changed dramatically. The optimism has seeped beyond borders and is perhaps most palpable in Japan. Warm political ties and a great personal rapport between the two country heads, Shinzo Abe and Modi, offer great opportunities for a thriving economic relationship. Japan is expected to play a big role in some of the biggest projects of the Modi government, from the $90-billion Delhi-Mumbai Industrial Corridor to bullet trains, metros and industrial parks. Investments from Japanese firms across the board — Nissan, Toyota, Mitsui, Honda, Uniqlo et al — are expected to surge.
But with a shrinking population and slow domestic market, funds-flush Japanese companies have been scouring the world for new business opportunities. In 2013, Japan Inc emerged as the second largest investor, after the US, in the world for the third successive year. Investments rose 10% to touch a record $135 billion.
The Japan External Trade Organisation (Jetro) is an independent government agency that plays an important role in shaping Japanese business ties globally with its 1,600 employees, 76 offices and presence in 56 countries. Jetro global chairman and CEO Hiroyuki Ishige, who was in India earlier this week — his second visit this year — found time for an exclusive interview with Malini Goyal. Edited excerpts
On the change in mood in India, and about India in Japan
Hiroyuki Ishige: There is a big change in mood, especially in India. Recently when I met top Indian leaders, I felt they have great expectations from the Modi government. In Japan, many Japanese business leaders are today interested in India — very much more than they used to be. The major reason is the new government led by Modi. He is transforming India into one of the most business friendly countries in the world.
On his interactions with Modi before he became prime minister
Hiroyuki Ishige: In 2012, I got to know him when he visited Japan as the chief minister of Gujarat. We had organized conferences in Japan for him and were impressed by him. After the trip, many Japanese auto companies like Suzuki and Honda decided to invest in Gujarat.
On Jetro's role in helping Japanese companies in India
Hiroyuki Ishige: We are getting lots of requests to set up industrial parks for Japanese companies, especially from small and medium enterprises (SMEs); we are setting up such parks in states like Gujarat and Rajasthan. We have set up a project office for the industrial park in Gujarat. We are helping Japanese companies acquire land for factories. We are now looking at setting up an industrial park near Pune in Maharashtra. In Rajasthan, we are setting up a second industrial park in Girot [the first one is in Neemrana].
On the kind of help Japanese firms seek from Jetro in India
Hiroyuki Ishige: Most of them are not as familiar with India as they are with China. We need to conduct lot more conferences etc to help them get familiar with India. They need help in initiating their business here. Japanese companies are realizing their weaknesses. They know that their slow decision-making has to change. If you look at Hitachi you realize that they have changed completely. They have hired foreign directors. Japanese companies are realizing that they need to change their governance and style of management. Problems pointed out by [department of industrial policy and promotion secretary Amitabh] Kant [that Japanese companies have been slow in making investments in local production facility] will be solved. If they do not, we will not be able to compete with foreign companies.
On evolution of Jetro's role in India
Hiroyuki Ishige: While there will not be a significant change in the role we play, the degree and intensity of work will be much higher. Besides the industrial parks, we have been helping Japanese companies with information on the Indian economy and the environment. We dispatch business missions of Japanese companies to invest in India. We try to create a business-enabling atmosphere. All that will continue.
On his organisation's role in India vis-a-vis China
Hiroyuki Ishige: In China, our approach is not so aggressive. Our role is mostly to provide information. India is different. State governments here are so powerful.
On the prospects for more Japanese investments in India
Hiroyuki Ishige: In the past 10 years, the number of Japanese firms in India has gone up from 252 to 1,000 now. But most of them are big companies. We will see more SMEs come to India. But SMEs are constrained. They do not have enough management resources. They do not have enough talent to send here. We have to help them. They need partner companies here. Japanese companies are very good at making products but not selling them. They need to partner Indian firms to secure markets here. They need help in spotting business opportunities.
On some of the biggest problems that Japanese firms face in India
Hiroyuki Ishige: To create manufacturing hubs, which Modi wants, many challenges need to be overcome. Land acquisition here is so difficult. That's why industrial parks are so useful. I also think the tax system here is very difficult. The [decision on] the goods and service tax is pending for a long time. India works like 29 different countries. Retrospective taxes is of great concern. Political stability, certainty and transparency are very important for investment. In China, we have a thick fat book where we keep records of problems we face state by state. When we meet top leaders in China, they often don't know [about those problems]. But once they get to know, they call them [officers] and get them addressed very quickly
On the sectors likely to see more Japanese investments
Hiroyuki Ishige: The auto sector will continue to get investments. So far we have seen tier I and II companies come here. Now we will see the tier III and IV coming. I also see Japanese machinery companies coming to India. I would like to say the electronics sector but Japanese companies in that sector are not in very good shape. But, we might see investments from them.
On his advice to Japanese companies here
Hiroyuki Ishige: Japanese companies should not hesitate in providing opinion to state and central governments. This is important. Some people call it lobbying. And I know it has some strange connotations. Business environment will change slowly and gradually. This is a good time to work with the Indian government.
On competition for business orders from the US, the EU and China
Hiroyuki Ishige: We need to show our capabilities. In the 1970s, Japanese companies were very competitive. In commodity products we are not in a position to be competitive vis-a-vis low-cost countries. There is a shift in priority to infrastructure-related products. Japanese companies are new in this area. They have to redouble their efforts to win business. But in infrastructure the role played by the government is huge. Communication between governments is very important. They [the Japanese companies] will need support from the Japanese government.
With the Narendra Modi government in the saddle, the mood in the corporate world has changed dramatically. The optimism has seeped beyond borders and is perhaps most palpable in Japan. Warm political ties and a great personal rapport between the two country heads, Shinzo Abe and Modi, offer great opportunities for a thriving economic relationship. Japan is expected to play a big role in some of the biggest projects of the Modi government, from the $90-billion Delhi-Mumbai Industrial Corridor to bullet trains, metros and industrial parks. Investments from Japanese firms across the board — Nissan, Toyota, Mitsui, Honda, Uniqlo et al — are expected to surge.
But with a shrinking population and slow domestic market, funds-flush Japanese companies have been scouring the world for new business opportunities. In 2013, Japan Inc emerged as the second largest investor, after the US, in the world for the third successive year. Investments rose 10% to touch a record $135 billion.
The Japan External Trade Organisation (Jetro) is an independent government agency that plays an important role in shaping Japanese business ties globally with its 1,600 employees, 76 offices and presence in 56 countries. Jetro global chairman and CEO Hiroyuki Ishige, who was in India earlier this week — his second visit this year — found time for an exclusive interview with Malini Goyal. Edited excerpts
On the change in mood in India, and about India in Japan
Hiroyuki Ishige: There is a big change in mood, especially in India. Recently when I met top Indian leaders, I felt they have great expectations from the Modi government. In Japan, many Japanese business leaders are today interested in India — very much more than they used to be. The major reason is the new government led by Modi. He is transforming India into one of the most business friendly countries in the world.
On his interactions with Modi before he became prime minister
Hiroyuki Ishige: In 2012, I got to know him when he visited Japan as the chief minister of Gujarat. We had organized conferences in Japan for him and were impressed by him. After the trip, many Japanese auto companies like Suzuki and Honda decided to invest in Gujarat.
On Jetro's role in helping Japanese companies in India
Hiroyuki Ishige: We are getting lots of requests to set up industrial parks for Japanese companies, especially from small and medium enterprises (SMEs); we are setting up such parks in states like Gujarat and Rajasthan. We have set up a project office for the industrial park in Gujarat. We are helping Japanese companies acquire land for factories. We are now looking at setting up an industrial park near Pune in Maharashtra. In Rajasthan, we are setting up a second industrial park in Girot [the first one is in Neemrana].
On the kind of help Japanese firms seek from Jetro in India
Hiroyuki Ishige: Most of them are not as familiar with India as they are with China. We need to conduct lot more conferences etc to help them get familiar with India. They need help in initiating their business here. Japanese companies are realizing their weaknesses. They know that their slow decision-making has to change. If you look at Hitachi you realize that they have changed completely. They have hired foreign directors. Japanese companies are realizing that they need to change their governance and style of management. Problems pointed out by [department of industrial policy and promotion secretary Amitabh] Kant [that Japanese companies have been slow in making investments in local production facility] will be solved. If they do not, we will not be able to compete with foreign companies.
On evolution of Jetro's role in India
Hiroyuki Ishige: While there will not be a significant change in the role we play, the degree and intensity of work will be much higher. Besides the industrial parks, we have been helping Japanese companies with information on the Indian economy and the environment. We dispatch business missions of Japanese companies to invest in India. We try to create a business-enabling atmosphere. All that will continue.
On his organisation's role in India vis-a-vis China
Hiroyuki Ishige: In China, our approach is not so aggressive. Our role is mostly to provide information. India is different. State governments here are so powerful.
On the prospects for more Japanese investments in India
Hiroyuki Ishige: In the past 10 years, the number of Japanese firms in India has gone up from 252 to 1,000 now. But most of them are big companies. We will see more SMEs come to India. But SMEs are constrained. They do not have enough management resources. They do not have enough talent to send here. We have to help them. They need partner companies here. Japanese companies are very good at making products but not selling them. They need to partner Indian firms to secure markets here. They need help in spotting business opportunities.
On some of the biggest problems that Japanese firms face in India
Hiroyuki Ishige: To create manufacturing hubs, which Modi wants, many challenges need to be overcome. Land acquisition here is so difficult. That's why industrial parks are so useful. I also think the tax system here is very difficult. The [decision on] the goods and service tax is pending for a long time. India works like 29 different countries. Retrospective taxes is of great concern. Political stability, certainty and transparency are very important for investment. In China, we have a thick fat book where we keep records of problems we face state by state. When we meet top leaders in China, they often don't know [about those problems]. But once they get to know, they call them [officers] and get them addressed very quickly
On the sectors likely to see more Japanese investments
Hiroyuki Ishige: The auto sector will continue to get investments. So far we have seen tier I and II companies come here. Now we will see the tier III and IV coming. I also see Japanese machinery companies coming to India. I would like to say the electronics sector but Japanese companies in that sector are not in very good shape. But, we might see investments from them.
On his advice to Japanese companies here
Hiroyuki Ishige: Japanese companies should not hesitate in providing opinion to state and central governments. This is important. Some people call it lobbying. And I know it has some strange connotations. Business environment will change slowly and gradually. This is a good time to work with the Indian government.
On competition for business orders from the US, the EU and China
Hiroyuki Ishige: We need to show our capabilities. In the 1970s, Japanese companies were very competitive. In commodity products we are not in a position to be competitive vis-a-vis low-cost countries. There is a shift in priority to infrastructure-related products. Japanese companies are new in this area. They have to redouble their efforts to win business. But in infrastructure the role played by the government is huge. Communication between governments is very important. They [the Japanese companies] will need support from the Japanese government.
