Times of India

India seeks Japanese investment

Sidhartha

Thursday, June 15, 2006

TIMES NEWS NETWORK

TOKYO: If you can’t beat them, join them. That seems to be India’s mantra in its attempt to get more Japanese investments in the manufacturing sector, with some companies using New Delhi’s bilateral trade agreements to use another country as an export base for the Indian consumer.

"By the end of the year, we will have a comprehensive economic partnership agreement (CEPA) with Japan. India had no (trade) agreements earlier, now we are entering that area and an agreement with Japan will help us check the problem," commerce minister Kamal Nath said.

The CEPA with Japan will be on the lines of the agreement with Singapore, which covers investments apart from trade in goods and services.

But Nath may have spoken just a bit too soon since the joint study group, which has met four times so far, is yet to submit its report. Typically, a JSG looks at the pros and cons of an agreement and recommends if a trade pact would help increase trade flows.

The framework agreement with Thailand - which was a precursor to a free trade agreement (FTA) that has not materialised so far - has meant that Japanese electronics and white goods giants ranging from Sony and...

... Toshiba used the deal with Bangkok to export. In fact, Sony went to the extent of winding up its manufacturing facility in India.

Similarly, Japan External Trade Organisation (Jetro) chairman and CEO Osamu Watanabe said Matsushita Electric Company uses Thailand as the base to manufacture picture tubes for TV sets and exports them to India. Toshiba sources its refrigerators and washing machines for the Indian market from Thailand.

If that was not all, the Singapore CECA could mean that another Japanese giant NEC will export unfinished products from the island nation.

While the CEPA may provide a boost to investment from Japan, Watanabe said the electronics and white goods manufacturers, some of whom went to India but withdrew from the markets due to low volumes for high-end products, might return soon.

Besides, cost of labour could be the crucial differentiator, with unskilled labour costing 20 cents an hour in India as against 40 cents in China, he said. "The cost of labour in India is much lower than Thailand or the Asean countries," Watanabe said.