Abe: Pleasant surprise
New Delhi, Jan. 21: Japanese Prime Minister Shinzo Abe, who will be the chief guest at this year’s Republic Day parade, is likely to announce a 40-billion yen ($390 million) India-specific investment fund, which will put in money in Japanese factories planning to set up shop here.
Japan is being courted by India both as a strategic Asian ally as well as a major economic partner. Sources said the investment fund had been planned by the Japan International Cooperation Agency.
The fund will help Japanese entrepreneurs with seed money to set up projects here. With reinvestments, the fund can help projects worth several tens of billions of dollars, analysts said.
Over the last few years, Japanese firms have either been shifting or planning to shift their manufacturing facilities out of China. India and South East Asia have emerged as the favoured destinations. South East Asia offers cheap labour, while India provides skilled workers and trade links with emerging markets in Africa and Central Asia.
Much of the investment is expected to flow into the Delhi-Mumbai Industrial Corridor (DMIC), where Japanese anchor clients such as Suzuki and other auto firms as well as IT, semi-conductor and logistics companies have shown interest.
Through the 1990s and early 2000s, Japanese investments in China by firms such as Panasonic, Toyota and Nissan saw around $1 trillion being pumped into that country, creating some 1.6 million jobs. However, higher wages in China, toughening of the state’s stance towards Japanese firms, lack of transparency in rules and intellectual property rights have made Japanese companies wary of further investments.
Japanese firms are the largest foreign investor in China’s $5-trillion economy.
Two years back, a survey by the Japan Bank for International Cooperation showed about 75 per cent of the Japanese businessmen placed India as “the most promising country” ahead of China, Brazil, Vietnam and the US.
Automobiles are expected to be biggest draw for Japan in India. Suzuki is planning a $1.3-billion plant in Gujarat on the DMIC corridor. Nissan, Honda and Toyota along with a clutch of auto parts makers are also expected to be major investors in India over the next four years as they step up production and introduce models.
In all, Japan has invested around $16 billion in FDI and portfolio investment in the country between 2005 and 2013.