ICRIER-PRI Discussion on Joint Japan-India Workshop Financial Cooperation Enhancing Foreign Direct Investment in India - Focusing on Financial Sector - 9 th February, 2015 Taiju Hisai Regional Executive for India The Bank of Tokyo-Mitsubishi UFJ, Ltd. A member of MUFG, a global financial group
1. Gap between expectations and investment from Japanese Corporates The number of Japanese corporates in India has been steadily growing and now it is more than 1,000. Still, comparing to their expectations to India, the number is still small. WHY?? Promising Countries for Medium-term: 3years Business 1200 1000 800 600 400 # of Japanese Corporates in India 1,072 926 812 725 627 2012 2013 2014 1 China Indonesia India 2 India India Indonesia 3 Indonesia Thailand China 4 China Thailand Thailand/Vietnam 5 Vietnam Vietnam Promising Countries for Long-term: 10years Business 2012 2013 2014 200 0 2009 2010 2011 2012 2013 (Source) Japan Embassy in India 1 India India India 2 China China Indonesia 3 Indonesia Indonesia China 4 Brazil Brazil Vietnam 5 Vietnam Thailand Thailand (Source) 2014 Survey report of JBIC on overseas business operations by Japanese manufacturing companies. 2
2. Portfolio of Japanese Investment [Share of Each Industry: No. of Companies] [Share of Each Industry: Sales Amount] (Note) Share of each industry of Japanese companies in India (Note) Ratio of industries of BTMU s customers based on the sales amount 3
3. Hurdles and Attractions for Japanese Investment Hurdles Need to overcome!!! Lack of Infrastructure 51.6% Severe Competition 36.7% Unclarity of Regulations 35.1% Attractions Complexity of Taxation System 28.2% Labor Issues 24.5% Potential growth of local market 87.0% Security and Social Unrest 24.5% Labor cost 33.7% 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% Size of local market 25.5% Production base 23.1% Export business 13.9% (Source) 2014 Survey report of JBIC on overseas business operations by Japanese manufacturing companies. 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 4 4
4. Challenges in Financial Aspect Lack of Infrastructure Severe Competition Unclarity of Regulations Hurdles Attractions also cannot be improved in a short period, but financial support and successful cases fill the gaps!!! Attractions Complexity of Taxation System Labor Issues Potential growth of local market Security and Social Unrest Labor cost 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% Size of local market Production base Hurdles need to be solved, but it takes time Export business 0.0% 20.0% 40.0% 60.0% 80.0% 100.0% 5
5. Countermeasures and Proposals 1.Relaxation of related regulations of Group Finance 2.Revitalization of Capital Markets 3.Deregulations of ECB Guidelines 6
Thank you for your attention. 7 7
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