The Japanese are coming!
In December 2005, noted business and corporate strategist Kenichi Ohmae made some rather prophetic statements before a group of industrialists in Mumbai. He predicted that at least 400 Japanese companies would relocate to India by 2020.
The reason? Japan is ageing. It will not be able to find the people in its home country to manage its burgeoning businesses. So it needs to relocate (Japan, unlike many other countries, does not appear to have warmed up to immigration).
Ohmae expressed his apprehension that with the European markets expected to grow very slowly, and the US markets not holding out that much of a promise, Japan had begun looking towards China and India. It must be remembered that he was saying this before the global economic meltdown of 2008.
Normally, he said at that time, Japan would have opted for China. But the xenophobic riots against Japan in China in early 2005 had shaken the Japanese establishment, and it had begun looking towards India instead. It had earlier looked at the Philippines and at Vietnam where it has substantial interests, but found the countries too small to absorb its investments, and its needs.
“What Japan saw in China in 1998, it has begun to see in India in 2005,” he said then.
He said Japan was looking for a country to part its funds. “It has $14 trillion to part (at that point of time) and currently gets a yield of just 0.1% on this. The Official Development Assistance, or ODA, has begun to look at India, especially for investing in education.”
While investment in education has not yet taken shape as yet, large-scale investment in infrastructure and industries in India has already begun. In 2005, it was Toyota that began looking at India. Now, it is Honda, Nissan, Suzuki, Kawasaki, Mitsui and a host of other companies.
More significantly, Japan is willing to pay top dollar prices for Indian companies. Consider the manner in which the deals with Ranbaxy and Anchor were concluded. Look at the manner in which small pharma companies are being swiftly acquired at very attractive valuations for Indian promoters.
In the next five years, at least 200 Japanese companies will begin investing in the six cities that are slated to come up as part of the first phase of the Delhi Mumbai Industrial Corridor (DMIC). The DMIC is being planned around the dedicated freight corridor (DFC) which is once again being financed by Japan.
The nodal agency for many of such investments is likely to be Sumitomo Bank.
Former railway minister Mamata Banerjee is believed to have delayed this project primarily because she wanted an eastern DFC (EDFC) to be implemented at the same time.
But Japan is reported to have baulked at this suggestion as it did not find the EDFC either attractive or financially viable.
Now, with Banerjee’s party no longer at the helm of affairs in the Railways, the DFC and the DMIC are expected to proceed full steam ahead.
This means one could expect more companies from Japan – from a vast variety of industries – to begin their first steps towards establishing a base in India.
What started as a trickle when Ohmae made his prophetic statements in 2005, became a steady stream by 2012. Once the DMIC begins humming, it should become a flood.