The Hindu Business Line : Japanese cos in India upbeat on biz prospects for 2007: Survey

Japan in India
Investments in India so far: $2.5 billion.
Cos across India: over 450, a majority in automobile & auto-component sectors.
Delhi, Gurgaon, Noida have the largest concentration of manufacturing units, including Honda.

Bangalore April 29 Japanese companies in India are upbeat about their prospects in 2007. They find the country favourable for expanding their business, according to a survey conducted by a Japanese Government-related agency.

The comparative survey by the Japan External Trade Organisation (JETRO) shows that between 2006 and 2007, India is top of the list with an index of 67.6, followed by Vietnam and China with 51.5 and 39.9, with regard to the business prospects of the subsidiaries of Japanese companies.

Vietnam also figured high in the ranking after India, while China, along with these two countries, provided better comfort in terms of future prospects than eight other countries in the region.

The stronger preference for the countries compared to the 11 Asian countries — six of whom are Asean members — comes in the wake of cost pressure during 2006 pulling down the business prospects of the Japanese affiliates in the countries. The six members of Asean — Indonesia, Malaysia, the Philippines, Singapore, Thailand and Vietnam — apart from India, China, South Korea, Hong Kong and Taiwan, were covered by the survey.

Response rate

JETRO received response from 1,332 of the 3,337 companies it sent its questions to in the region, with a response rate of 39.9. per cent. According to the survey, 71.5 per cent of the respondents posted a lower operating profit in 2006, down more than 4 percentage points from the previous year, reflecting the struggle the manufactures faced due to rising costs of materials and higher wages, said JETRO.

Regarding the outlook for 2007, the number of respondents projecting worse performance compared to 2006 decreased notably, revealing that firms believed the upward cost pressure would ease in 2007.

According to the survey, those planning to "expand their business scale" in the next few years dipped by 4.2 percentage points from last year's survey to 58.2 per cent while companies planning to maintain the scale of existing business was higher.

China advantage

There was no change in the view of firms with production in China about its cost advantage. China also is seen as the strongest business competitor for Japanese firms in Asean or India, particularly in materials, including plastic. In India, local automobile components and general machinery industries are perceived to be stiff competitions to Japanese companies.

The Japanese companies will target China and India followed by Thailand and Vietnam in the next five to 10 years for marketing their products, with China being preferred for electric and electronic components and India for automobile and motorcycle parts.

Twenty five per cent of the Japanese companies in China felt that the rising Yuan against other currencies would have "large negative impact on their business" (14.5 per cent rise over last year's survey) with almost 60 per cent of the respondents strategising cost reduction to counter any further rise in the currency value.

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