Japan’s Prime Minister Shinzo Abe ‘s declaration of a proposed $2.2 billion plan to transfer Japanese supply chain factories from China to Japan and other countries has captured the attention of the business world. Concern regarding the risks associated with over-concentration in China in the Covid period is understandable.Yet, fine printing has revealed that 91 per cent of the capital is to move Japanese factories back to Japan, with just 9 per cent or 200 million dollars required to attract factories to be based in partner countries. This, in itself, was identified as missing the mark by Shigenobu Nagamori, founder of Japanese precision engine manufacturer Nidec, among the few self-made billionaires, because Japan is an earthquake-prone island and therefore not ideal for the concentration of manufacturing facilities , particularly given its declining population. Nidec has invested in India, but over the last decade several Japanese businesses have opted to be headquartered over Vietnam , Cambodia, the Philippines , Thailand, which are far smaller economies than India.
Japan and India have much in common, with schoolchildren being able to identify the ties between Buddhism from the 6th century onwards, the heroics of Netaji Subhas Chandra Bose, whose Indian National Army was among the very few allies in Asia that Japan had in the World War against European imperial forces, later headed by the US.In addition, they should talk eloquently of the philosophy of Indian Justice Radhabinod Pal in the Tokyo Tribunal, who laid forth the theory that victors in battle can not determine the defeated, but that there should be an autonomous operating foreign judiciary, in particular to investigate nuanced aspects of the roots of the conflict. Post-Independence India ‘s reluctance to recognize Japanese war reparations also tempted it. It was to India that Japan made its first post-War Yen loan in 1958, being the biggest bilateral lender and the largest provider of humanitarian aid, both explicitly and indirectly, by multilateral agencies. Even today, loans for the Delhi Metro, Bullet Train, and other ventures are among the lowest interest loans provided by Japan to any country, and well below the interest rate demanded by another large Asian lending government. The Prime Ministers of Japan and India meet annually and exchange a great deal of warm wisdom.
As far as foreign direct investment ( FDI) is concerned, aside from the automotive industry that Japan controls and a few others including video cameras, there is no Japanese leadership. Japan has had huge surpluses for decades and has massive international reserves. And their businesses are hesitant to spend and seem to take an infinite period of time to determine,despite hoarding large retained earnings. The deflation and downturn of the Japanese stock market after 1989 and the crash of the asset price bubble in 1992 seem to have taken a toll. PM Abe has tried hard to use his ‘Abenomics’ approach to fiscal easing, and the Japanese Central Bank has been very cooperative with monetary policy. The true execution of “Abenomics” is left to Japan ‘s strong bureaucracy. Until recently, they mainly concentrated on funding and helping big corporations, often at the detriment of small enterprises or subcontractors of large companies, assuming that wide-scale industrial policy firms would secure Japan’s broad job base. Such firms, though, are frequently heavy-handed and mostly stacked with confident bureaucratic officials who have been risk-averse and are more worried with defending themselves from scrutiny. Indeed, it is also the case in Japan that government officials are more successful in encouraging risk-taking by supplying more risk capital than private-sector business officials. It’s a long way from the immediate post-War period, where the destruction triggered by the falling of nuclear bombs on Hiroshima and Nagasaki, and the carpet fire-bombing of major cities like Tokyo and Osaka left the Japanese with both an unsettling foreboding and a feeling that there was no place to go except to continue to recover. And they rebuilt the century. To the point that in the 1970s and 1980s, there was a great deal of concern in the US and Europe that the Japanese would take over any industry.
It is also important to note that Japan has thousands of mid-size companies with excellent technology, but they are not actually well advertised worldwide. These innovations, coupled with Indian manufacturing, will lead to the base of a new uptick in both Indian and Japanese production.
It is also a reality that international investors are faced with Indian infrastructure, which is still in the phase of being developed with several noticeable lacunae, but also large highways in some areas, a few new airports and maritime ports, and national fibre-optic connectivity, which have become priorities for both the NDA and the former UPA governments. There is still a great deal of uncertainty of Indian land-access and labor problems that aliens consider baffling. Land bought by a “master” or also from a state entity eventually is a subject of contention, with a lawsuit raised by a variety of suspected relatives. Clarity on these basic issues is important. Indian exports are profitable, but exporters face numerous obstacles and a great deal of inefficiency, and there are recorded instances of what seems to be abuse. A drastic change to productivity will awaken the business world — for example, the elimination of income tax would be a positive start, as proposed by the dominant party’s leadership for decades, accompanied by a broad-based simplification of procedures.One aspect that Japanese corporate executives are obsessed about is the high unit price that obstructs the investment decision to locate in India. In hyper-mega-scale markets such as India (10 times the population of Japan), research does not simply use the unit amount, but instead multiply it by large amounts, and thus, business logic needs volume discounts. It is a fact that business schooling in Japan is a more recent development, and most executives have been educated at home in companies since graduating from college, meaning that western concepts of risk-reward strategy have not yet been articulated.
Investment choices are reached using a combination of considerations, including economic prosperity and development, labor costs, construction costs, local support infrastructure, reward programs and strategic position. Many considerations include quality of life for expatriate executives and their friends, exposure to affordable education, technical and blue-collar skills, reputation of local collaborators and co-financing, cultural connection, personal partnerships, creativity, dynamism and versatility. Attracting big , medium and small businesses needs radically different strategies and types of funding. This covers fields such as defense, telecommunications, medical technology, forestry, etc.
Having been responsible for the usage of the Internet by the World Bank Group’s first program to facilitate foreign direct investment since 1993, because of my previous experience with the Internet in the ‘Young Scientists’ Network’ which used the Internet to communicate between American universities in the 1980s,It is interesting to see the degree of confidence put by the Indian government officials in the much later “Doing Business” annual report of the World Bank. It’s as as though officials demand a cascade-flow spending unexpectedly any time the government scales a few ladders around the world. At all, rating is only one consideration in investment decision-making.
In the case of NIDEC, unlike other Japanese firms with fragmented leadership, Shigenobu Nagamori took full responsibility for decision-making and engaged directly with key Indians, creating his own degree of ease, trust, and guiding the team to develop a successful $100 million investment strategy in India. He has provided encouragement and help from Japanese government officials, who usually follow the lead of Prime Minister Abe in promoting investment in India. However, there are not that many related diverse personalities and sources.
He has provided encouragement and help from Japanese government officials, who usually follow the lead of Prime Minister Abe in promoting investment in India. However, there are not that many related diverse personalities and sources. In the midst of inspiring slogans of self-reliance, domestic monopolies and monopsonies were promoted. Since the 1991 changes, there was a change, but even then the outreach to surplus-capital Japan , for example, was inadequate, possibly owing to language and similar factors. In the meantime, the level of comfort has increased amongst Japanese businessmen and Thais, Vietnamese, etc., who have not yet grown with Indians in general. Meanwhile, the infrastructure deficits in India, the lack of representation of Indian businesses of all sizes in Japan, and the speed of decision-making , especially in comparison with some East Asian nations, are still crumbling.
All of the above leads to the need for comprehensive, multi-systemic big changes, not just one-off developments celebrated by the political establishment and the twitterati. This will take exceptional leadership, comparable to what India brought together in 1991 to establish a tectonic shift vital to the upward economic future of millions of young ambitious Indians hungry for change.