Bringing  Japan-­‐India  Economic  Relations  to  a  New  Height

-­‐Prospects  &  Challenges  for  the  Future-­‐

September  4,  2014  Embassy  of  Japan  in  India  

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CONTENTS:-­‐      1. Japan-­‐India  Economic  Relations:  Trade,  Investment  

&  ODA  

2. Business  Perspectives  in  Investment  to  India  

3. Concerns  &  Issues  Japanese  Investors  are  facing  

4. Future  of  Bilateral  Economic  Relations  (PM  Modi’s  Japan  Visit)

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1.  Japan-­‐India  Economic  Relations:  Trade,  Investment  &  ODA  

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0

275

550

825

1100

2006 2007 2008 2009 2010 2011 2012 2013

1072

926812

725627

550

362267

(company)

（Source） Survey by Embassy of Japan, New Delhi ( Data for 2006 is as of January, Data for 2007 is as of February, rest of years are as of October)

Bilateral Trade Japanese FDI to India

Japan-India Economic Relations

•　Trade volume expanded from USD 3.7 Bn in FY 2002 to USD 16.3 Bn in FY2013. •　Huge trade potentials in future between Japan and India

Presence of Japanese Company in India

• Japan’s FDI increased steadily and rapidly even post global financial crisis.

（Source） Ministry of Commerce & Industry, Government of India

0

5,000

10,000

15,000

20,000

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

India→JapanJapan→IndiaTrade Total

(USD Million)

（Source） Ministry of Commerce & Industry, Government of India

0

750

1,500

2,250

3,000

FY2008 FY2009 FY2010 FY2011 FY2012 FY2013

Japan USA Germany France(USD  Million)

2972

1718

Presence of Japanese Company in India - Clusters

Delhi-Gurgaon-Noida Region (376 companies) : Automobile, Electric Machinery, Steel, Construction, Steel, Food

Mumbai Region (134 companies) : Financial, Engineering, Food, Chemical, Electric Machinery, Retails goods, Shipping,

Chennai Region (168 companies) ：Automobile, Engineering, Electric Machinery, Shipping

Bangalore Region (154 companies) ： Automobile, Electric Machinery, IT & Telecommunication, Logistics, Food,

Pune Region (38 companies) : Automobile parts, Electronics, Electric Machinery, Communication

Maruti-Suzuki, Honda , Asahi Glass, YKK, Toshiba, Hitachi, Panasonic , NEC, Canon, Nippon Steel & Sumitomo Metal, Yakult , etc.

★　In addition, traditional sectors like general trading company (Sogo shosha) and banks are spread over metros (Delhi, Mumbai, Chennai, Bangalore).

Daiwa Securities, Nomura, Mizuho Securities, Sompo Japan Ins., Kikkoman, Kagome, Suntory, Toray, TOTO, Olympus, K-Line, NYK, Mitsui OSK, etc.

Sharp, Kawasaki Motors, Yazaki, NTT Data, etc.

Nissan, Isuzu, Komatsu, Toshiba, Panasonic, Omron, Terumo, Mitsui O.S.K. etc.

Toyota, Hitachi Construction Machinery, Sony, NTT Data, Kintetsu World Express, Nippon Express, Nissin Foods, etc.5

Accumulation Annual Flow

Overview of the Japan’s ODA Loan

・India is the largest recipient of Japanese ODA loan for the last 10 years (except for FY 2010) ・Committed amount for FY2013 is 365 Bn yen

（Source） Ministry of Foreign Affairs, Government of Japan

Rank FY 2004 FY 2005 FY 2006 FY 2007 FY 2008

1 India 134.5 India 155.5 India 184.9 India 225.1 India 236.0

2 Indonesia 114.8 Indonesia 93.0 China 137.1 Iraq 160.6 Indonesia 120.6

3 Turkey 98.7 Viet Nam 90.8 Indonesia 125.2 Indonesia 106.0 Viet Nam 83.2

4 China 85.9 Thailand 35.5 Viet Nam 95.1 Viet Nam 97.9 Thailand 63.0

5 Viet Nam 82.0 Sri Lanka 31.6 Iraq 79.8 Thailand 62.4 Pakistan 47.9

Rank FY 2009 FY 2010 FY 2011 FY 2012 FY 2013

1 India 218.2 Viet Nam 86.6 India 289.8 India 353.1 India 365.1

2 Viet Nam 145.6 Philippines

50.8 Viet Nam 270.0 Viet Nam 202.9 Viet Nam 202.0

3 Indonesia 113.9 India 48.0 Indonesia 73.9 Myanmar 198.9 Indonesia 82.2

4 Iraq 87.8 Indonesia 43.9 Philippines

68.3 Bangladesh 166.4

Philippines

68.7

5 Philippines

68.0 Turkey 42.1 Bangladesh 60.0 Iraq 67.0 Costa Rica 56.1

(Note: E/N base amount in BnYen)

（Source） Ministry of Foreign Affairs, Government of Japan

(Note: Calculated based on E/N base amount among top 30 ODA recipient countries)

Others  21.3%

Bangladesh  3.2%Sri  Lanka  3.2%Pakistan  3.3%Malaysia  3.3%

Thailand  7.4%Vietnam  

7.7%Philippines  8.2%

China  11.2%

India  15.1%

Indonesia  16.0%

・India is the second largest recipient of Japanese ODA loan(totaling 4,456 Bn Yen) in total accumulation .

2.  Business  Perspectives  in  Investment  to  India

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2013 2012(Total) 488 514

1 � 3 Indonesia 219 215 44.9 41.82 � 2 India 213 290 43.6 56.43 4 Thailand 188 165 38.5 32.14 1 China 183 319 37.5 62.15 � 5 Vietnam 148 163 30.3 31.76 � 6 Brazil 114 132 23.4 25.77 � 7 Mexico 84 72 17.2 14.08 � 10 Myanmar 64 51 13.1 9.99 8 Russia 60 64 12.3 12.5

10 9 USA 54 53 11.1 10.311 15 Philippines 39 21 8.0 4.112 � 11 Malaysia 37 36 7.6 7.013 12 Korea 28 23 5.7 4.514 � 14 Taiwan 23 22 4.7 4.314 12 Turkey 23 23 4.7 4.516 � 16 Singapore 19 16 3.9 3.117 � 17 Cambodia 12 13 2.5 2.518 20 Germany 10 6 2.0 1.218 23 South Africa 10 3 2.0 0.620 23 Laos 9 3 1.8 0.6

2012

PercentageShare(%)

No. ofCompaniesRanking

2013 2012← 2013Country/Region

Rankings of Promising Countries for Business Operations

Medium-Terms Prospects (next 3 yrs. or so)

Q : Name the top 5 countries that you consider to have promising prospects

Survey targets: Manufacturing companies that have three or more overseas affiliates

※ Percentage share =　　　　　　　　

No. of respondents citing country/regionTotal No. of respondent countries

Long-Terms Prospects (next 10 yrs. or so)

No. ofrespondentcompanies

Change fromlast survey

Change(Total 360) (companies)

1 India 191 53.1% ▲ 602 China 139 38.6% ▲ 793 Indonesia 135 37.5% ▲ 144 Brazil 114 31.7% ▲ 265 Thailand 99 27.5% ▲ 46 Vietnam 96 26.7% ▲ 147 Myanmar 75 20.8% 108 Russia 65 18.1% ▲ 139 Mexico 47 13.1% 19 USA 47 13.1% 13

CountryRankPoint

gainingratio

・In the long term, India has been in 1st place since FY2010

・In the medium term, China falls to 4th place for the first time since this survey began in 1992.

(Source) Results of the JBIC FY2013 Survey: -Outlook for Japanese Foreign Direct Investment (25th Annual Survey)

Copyright  ©  2013  JBIC    All  Rights  Reserved.

Copyright  ©  2013  JBIC    All  Rights  Reserved.

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Positive and Negative Factors

Positive (2013)

Negative (2013)

(Source) Results of the JBIC FY2013 Survey: -Outlook for Japanese Foreign Direct Investment (25th Annual Survey)

Indonesia  (No.1) India  (No.2) China  (No.4)

1 Future  Growth  Potential  of  local  market

Future  Growth  Potential  of  local  market

Future  Growth  Potential  of  local  market

2 Inexpensive  source  of  labor Inexpensive  source  of  labor Current  size  of  local  market

3 Current  size  of  local  market Current  size  of  local  market Supply  base  for  assemblers

4 Supply  base  for  assemblers Supply  base  for  assemblers Concentration  of  industry

5 Concentration  of  industry Base  of  export  to  third  countries Base  of  export  to  third  countries

Indonesia  (No.1) India  (No.2) China  (No.4)

1 Rising  Labor  costs Underdeveloped  infrastructure Rising  labor  costs

2 Underdeveloped  infrastructure Intense  competition  with  other  companies

Intense  competition  with  other  companies

3 Execution  of  legal  system  unclear Execution  of  legal  system  unclear Execution  of  legal  system  unclear

4 Intense  competition  with  other  companies

Labor  problems Insufficient  protection  for  intellectual  property  rights

5 Difficult  to  secure  management-­‐level  staff/Labor  problems

Complicated  tax  system Security/social  instability9

Ongoing and Planned major ODA Projects

DFC  East  Corridor

Gas-Fired IPP Project

INDIA

Pakistan

Delhi

Mumbai

Chennai

Bangalore

Hyderabad

Ennore  Port

Chennai  Port

Kolkata

Sri  Lanka

Bhutan

Bangladesh

Nepal

Maldives

Ahmedabad

<Dahej>Seawater Desalination

Project

DMIC  (Delhi-­‐Mumbai  Industrial  Corridor)  Project

<Neemrana> Solar Power Project

DFC  West  Corridor

High  Speed  Rail

CBIC  (Chennai-­‐Bangalore  Industrial  Corridor)  Project

Regional  Economic  Cooperation  Project

Myanmar

Thailand

DEDICATED FREIGHT CORRIDOR (DFC) ◆In October 2009, yen loan to Western Corridor commenced. As of today, the total disbursed amounts to 231 Bn yen.

CHENNAI-BANGALORE INDUSTRIAL CORRIDOR (CBIC) ◆JICA is developing a Master Plan.

HIGH SPEED RAIL ◆ The Joint Feasibility Study on Ahmedabad-Mumbai route is ongoing.

DELHI-MUMBAI INDUSTRIAL CORRIDOR (DMIC) ◆In December 2011, USD 9 Bn Japan-India DMIC facility was launched. ◆In November 2012, Japan and India agreed on 19 prospective projects for Japan's USD4.5 Bn DMIC facility.

Regional economic cooperation (Enhancing Connectivity) ◆ In September 2014, two PMs placed special emphasis on Japan’s cooperation for enhanced connectivity and development in Northeast India and linking the region to other economic corridors in India and to Southeast Asia.

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3.  Concerns  &  Issues    Japanese  Investors  are  facing

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Tax & Other Issues Related to Investment

Tax

 Other Issues

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Examples:  

4.  Future  of  Bilateral  Economic  Relations  (PM  Modi’s  Japan  Visit)

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PM Modi’s Japan Visit

 

Tokyo Declaration for Japan-India Special Strategic Global Partnership (Excerpt From “Partnership for Prosperity” )

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Future of Bilateral Economic Relations

   -­‐ “Vibrant  India”  &  Japan’s  revitalization  

-­‐ Complementarity  &  Synergy  

-­‐ Holistic  approach  encompassing  private  initiatives  &  gov’t  support

Bilateral  Relationship  with  a  greatest  potential  “Special  Global  &  Strategic  Partnership”

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धन्यवाद्Thank  you