Japanese Manufacturers List Indonesia and India as Preferred Investment Destinations

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Tatsuhiko Takesada, the Executuve Officer for Asia-Pacific with the Japan Bank for International Cooperation, stated in a keynote speech at the Euromoney ASEAN conference in Jakarta yesterday that Indonesia and India have overtaken China as preferred destinations for overseas investment by Japanese MNCs.

Referring to an extensive recent research report carried out by the bank, he said that Indonesia, followed by India and Thailand, were now more attractive to Japanese investors than China, which slipped to fourth position. Vietnam was fifth, Brazil sixth and Myanmar seventh.

Takesada suggested that recent political conflicts between China and Japan, which tended to be followed by Chinese trade punishments, were impacting Japanese business concerns over the sustainability of performance in the Chinese market.

The survey included 600 Japanese manufacturing companies with three or more overseas affiliates and at least one overseas production base.

Japanese MNCs have long been attracted to infrastructure projects and have been notable in India for taking up a large number of Public Private Partnership projects in the country. The building of roads and other infrastructure is then typically followed by the Japanese auto industry.

Again, using India as an example, Suzuki, Nissan and Toyota all hold dominant JV positions in the Indian auto manufacturing industry, which is itself the sixth largest globally. Indonesia is also a major market for Japanese autos and, like India, is also embarking on significant infrastructure developments, as are Vietnam and Myanmar.

RELATED: Japan Strengthens Relationship With ASEAN

China, which still needs infrastructure improvements, especially in software management, is increasingly seen as being State controlled, competitive, market restrictive and politically difficult for Japanese firms to manage.

Takesada stated that Japan already had extensive supply chain and supporting industries in Thailand and Malaysia, and that these would be leveraged to develop the Indonesian market. He stated that Indonesia, along with Thailand, could serve as destinations for the production of high-end products as investment inflows in the automotive, electronics, petrochemical and machinery sectors increase.

Japan invested US$4.7 billion into Indonesia last year, accounting for about 16.5 percent of Indonesia’s total FDI. The ASEAN-Japan Comprehensive Economic Partnership was also helping to assist Japanese industry invest into ASEAN nations, he mentioned.

Thailand, for instance, received Japanese investment of US$10.15 billion in 2013, an amazing 1,700 percent increase over their 2012 inflows from Japan, making it Japan’s largest investment in the region, according to statistics from the Japan External Trade Organization. Elsewhere in ASEAN, Malaysia received US$1.27 billion in Japanese FDI and Vietnam’s inflows increased to US$3.26 billion by the end of last year.

Japan’s foreign investment into India reached US$2.2 billion in 2013, a slight decrease from their contribution of US$2.8 billion in 2012.

Interestingly, China saw their Japanese investments contract from US$13.48 billion in 2012 to US$9.1 billion last year, a decrease of over 30 percent, reflecting the sentiment found within the Japan Bank of International Cooperation’s survey.

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