Doing business in TN is like ‘sushi without sake’

To the Japanese, sushi and sake, their favourite dishes, go hand in hand. But Tamil Nadu laws do not allow restaurants to serve liquor, so we make do without sake in Japanese restaurants here, says Shinya Fujii, Director General, Jetro, regretfully. The dissatisfaction of not being able to take the rice wine with their signature rice and fish dish seems to illustrate the position of Japanese companies who have invested in Tamil Nadu. Somehow, an essential component seems to be missing.

The missing pieces are, physical infrastructure and speedy completion of infrastructure projects.

Whether the road link to Ennore Port, a major export point for Japanese automobile and manufacturing companies, or clearances for projects, or the power situation — a speedy solution seems elusive, he says.

Fujii points out that as of October, over 344 companies have invested in the State against 286 companies in 2011. In 2008, there were just 77 companies. The trend of investments is expected to hold in the coming year. Every month over 300-400 enquiries come to Jetro’s Chennai office with investment plans.

Quoting statistics of the Japanese Chamber of Commerce and Industry in Chennai, of which he will soon be the Secretary-General, he says 120 companies have invested over $203 billion in Tamil Nadu, generated over 52,000 jobs and infused modern technology and skills.

Shifting to south

The investments are led by automobile companies which have also brought in tier-I and -II suppliers. Five major Japanese automobile players have invested in Tamil Nadu or close to the State and have drawn suppliers to invest here.

Apart from Renault-Nissan, Nissan’s joint venture with Ashok Leyland and Toyota, two-wheeler company Yamaha has announced plans to set up a 1.8-million unit production facility near Chennai. Yamaha is to start production in January 2014 and by 2018 will reach full capacity. In North India, its unit will go to 1 million units by then.

Effectively, its production is shifting to the South, he pointed out. Pick-up truck-maker Isuzu plans to set up its headquarters in Chennai. It will finalise a location by next month, he said. Its investment will be comparable with that of other Japanese automobile majors, he said.

Renault-Nissan which started with a production capacity of 1 lakh units in 2010 has quadrupled its output.

So where is the deficiency?

Look at the power shortage, Fujii says. Last year, every day companies had to use diesel generators for at least half a day. Now 3-4 hours daily they depend on generators. The diesel power is 3-4 times costly, and companies are hit by cash losses. There has been a more than year-and-a-half delay in improving connectivity to the Ennore Port. Renault-Nissan, Toshiba and Toyota are impacted by this problem.

We “cannot understand the delay in Government schedules,” he said. Land costs are high and locations near Chennai are not available. Industrial estates in Oragadam and Sriperumbudur area have been sold out.

The Omega Township Project, dubbed a Japanese township, a 1,500-acre industrial township project near Mahabalipuram with 600 acres for industrial units and the balance for an integrated town, is also delayed. The environment impact assessment report has been cleared by the Centre and the State Government approvals are awaited. Developer Ascendas of Singapore has also started presales, he said.

Why Tamil Nadu

In Jetro’s estimate, India scores low as an investment destination in terms of initial costs. In most countries, investors can move in and start work once land is allocated. But here companies need to put in generators, water pipelines and electricity lines. Even Government clearances are delayed. While companies can expect to break even in 2-3 years elsewhere, in India it can take up to 5 years, says Fujii.

Renewal of working visas can take months to be cleared, a process that takes just 2-3 days in the US.

Why then are Japanese companies keen on investing in South India?

There are four to five reasons, he says. Presence of major ports on the East Coast with access to the Asean countries for Japanese companies, presence of other international players which gives Japanese companies a wider client base, skilled human resource, which is a strong feature in Tamil Nadu — when Renault-Nissan called for 800 jobs in 2010, there were 55,000 applications, he said.

Labour is 20-30 per cent cheaper compared with Delhi or Mumbai, he said.

Japanese companies have evolved in India. From the first stage of focusing on the domestic market here, they have gone on to exports and are now setting up technology-development centres. Renault-Nissan has over 5,000 workers in the car plant, but over 2,000-3,000 in the technology centre near Chennai. India is one of the global hubs for technology for Japanese companies, he said.

Japanese companies are looking at the Chennai-Bangalore corridor as “the backbone of Japanese investments.” Last December, India and Japan signed a joint statement on industrial cooperation. As a part of this, the Chennai-Bangalore corridor is to be upgraded with industrial parks and rail connectivity. Next year an initial master plan will be put in place.

The Indian Government announced in its National Manufacturing Policy plans to take the contribution of manufacturing sector to the GDP to 25 per cent from the present 15 per cent. The Japanese Government and companies can help the country achieve this target, Fujii said.

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