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BW Businessworld

'We Have Competitive Edge Over Korean Products'

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Japan's ambassador to India, Akitaka Saiki spoke to Businessworld's Shrutika Verma about the opportunities for Japanese companies in the Indian market, concerns over China's growing strength and the shift in Japan's diplomatic relationship with India focusing on cooperation in areas of defence and infrastructural development.

How important is India to Japanese private sector companies. Where does it show on your priority graph?
India is a growing economy and I often tell my Indian friends that this country is no longer just a 'potential' but it is a 'reality'. So we have to come into this country for business and otherwise.

The number of Japanese businesses in India has almost doubled in the last three years from 365 to 725 and this number is going to increase in the coming months and years. There is a huge opportunity for Japanese to do interaction or business with this country.

I am very pleased at the cooperation between the two countries at all levels in many sectors. Our two governments are operating very closely even in areas of security. We are intensifying cooperation including joint operations at the coast of Africa; our two navies are operating with each other very intensively to protect the vessels to freely travel between Africa and Asia through the Morocco state into Japan.

China has always been placed higher on Japan's priority graph than India. Do you see that changing in the near future?
For the time being, no, but the fact that the huge delegation from Japan business community is here indicates that they are looking at India as a very promising business partner.

China is still running very fast. India too is pacing up and I am sure soon India will catch up with China because of the population growth. China may face some setback in about 15 years because of its policies. The workforce of China is going to decrease while in India, people who are in the 20s will be about 40 per cent of the population even 20 years from now and this is very important for any country or economy to sustain moving forward. I think population - young population is very important.

What do you think of China's military assertiveness?
We are concerned about China's military and its muscle flexing attitude in the recent months. Their naval powers are now expanding towards the south including the South China Sea and also in the neighborhood waters of India. Their active operations are a matter of concern to the countries in Asia. China insists what they are doing is clearly for their defense purpose and that they have no intentions to intimidate any of the countries in the neighbourhood but their words must be accompanied by their actions. If they want to be friends with countries in Asia, I hope they will be a little more sensitive towards the sentiments or the concerns expressed by many countries in this region including our friends here in South Asia.

Does China or India as a rising power worry Japan?
No, we have comparative advantage in some of the products over Chinese and Indians. Our offerings are different from theirs, so we can manage that.

Japanese FDI in India is largely from auto and consumer electronics... is tough competition from Koreans in this segment a cause of concern?
If you take Sony for example, they have now come back to number 1 position in the electronics market. Of course the Indian consumer firstly looks at price but they are more and more realising the importance of quality of the product.  As long as we are talking about the quality of the product we are number one and we will remain number one.

We have some competitive edge over Korean products and I think it is up to the consumer of India to decide what will they choose.

Is Japanese economic diplomacy shifting away from consumer electronics and auto sector to other areas such as infrastructure and nuclear technology?
Not necessarily. Areas such as consumer electronics we still have a lot of market share so we will continue to maintain that.

Infrastructure opportunity for construction, roads, bridges and urban facilities is huge in India. There is a lot of demand for it and Japan wants to partner in constructing that infrastructure. One example is the Delhi - Mumbai industrial corridor DMIC project which with the assistance from the government in terms of ODA, Japanese private sector wants to keep participating in the project.

Nuclear technology we still have the highest standard in the world. Unfortunately the Fukushima incident gave the impression that even Japan has difficulty about the safety of the nuclear power stations and we have to admit that. But we have to improve and upgrade the safety of the power stations in Japan and that I think we can still offer.

Why has there been a renewed interest in India among Japanese companies?
Japanese market itself is now very small and as businesses need to be expanded, they are going to the markets which are growing and India offers the best opportunity in terms of income level of people. Every year about 12 million to 15 million middle income class people are created in this country and they aspire to buy high quality electronic consumer goods and better automobiles. So we see huge opportunity.

What kind of operational challenges do Japanese companies face in India?
This is not just limited to Japanese investors but many foreign investors in the country face these issues. Every year a wide range of requests are sent to the government of India around the infrastructural improvements. Warehouse, port facilities, electricity and water supply are few elements need to be supplied by the host country on a stable basis. If you are engaged in manufacturing of sensitive electronic products you need to have a very stable supply of electricity. One can not work with time to time power breakdowns during factory production. An improved infrastructure will help the operations in greater roles.

How big a challenge does a strong yen pose?
We are concerned that yen is appreciated too highly and this is now getting reflected in fundamentals of the Japanese economy. It needs to be rectified.

Yen is currently 76 - 77 to a dollar and Japanese companies are already operating around 85-90 yen per dollar. This appreciation of 10 yen is really hurting the Japanese manufacturers and that is why they have to think about shifting their manufacturing base overseas, which is going to be very negative for the Japanese employment situation. If the industries shift abroad the local employment is going to suffer. So how are we going to set the balance between the two is the challenge that the new Japanese government is facing.