Japan prefers India to China

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  • Published 3.10.11

Tokyo, Oct. 2: Wary of doing business in China, Japanese investors feel India is their best bet in the long run.

A survey by the Japan Bank for International Cooperation for the country’s Ministry for Economy, Trade and Industry shows around 75 per cent of Japanese businessmen putting India as “the most promising country” ahead of China, Brazil, Vietnam and the US.

“India holds great potential for us (Japanese firms),” said Koji Miyahara, chairman of NYK Line, the 140-year old shipping firm, which has invested heavily in India.

According to Sanjeev Sinha, a Tokyo-based fund manager advising Japanese firms in India, “The top management of Japanese firms recognise India’s strategic importance as an investment destination (which is backed by) commitment from the political leadership starting from the Prime Minister down.”

More than 1,200 Japanese firms have invested in India. A second wave of investment by small and medium enterprises as well as major players has started this year. The Delhi-Mumbai Industrial Corridor, funded by Japanese loans, is expected to attract more Japanese companies.

“The Delhi-Mumbai Industrial Corridor is going to be a game changer for the economic ties with Japan,” said Ravi Mathur, India’s ambassador to Tokyo.

Backing the shift in investment pattern is the Japanese government, which is alarmed by aggressive Chinese naval moves in the East China Sea, where it disputes Tokyo’s control over the Senkaku islands. The island nation has been advising its firms to look westwards to India.

The two main political parties — the Liberal Democratic Party, which ruled Japan for more than 40 years since 1955, and Democratic Party, which rules it now — have both agreed on the need for closer ties with India.

According to Takeshi Iwaya, the Liberal Democratic Party’s shadow defence minister, “Threats surrounding Japan are increasing. China is expanding its military technology and capacity at a ferocious speed. Japanese alliance with the US will remain our cornerstone (but) we have to work out common strategic objectives and economic agenda with India.”

However, the government’s fiats to businesses do not always work. “Japanese firms politely listen and ignore the government’s advice when it does not suit them,” said Masanori Kondo, who teaches at the International Christian University and advises Japanese firms in India.

In this case, the Japanese firms have started to feel they have over-invested in China and there is a pressing need to “put their eggs in other baskets”.

Japanese CEOs are worried over “possible collapse of the Communist one-party rule and the bursting of China’s bubble economy”, Yasukani Enoki, former ambassador of Japan to India and a visiting professor at Soka University, said.