India Most Attractive for Japan Inc.

Nov. 30, 2007
Survey says India will be desirable manufacturing base in 10 years.

India has surpassed China for the first time as the most attractive long-term manufacturing base for Japanese companies, which are particularly keen on the auto sector, a survey by Japan Bank for International Cooperation said Nov. 30.

Asia's largest economy has warming political and commercial ties with India, although its operations in South Asia are only a fraction of its investment in China, Japan's largest commercial partner. But the survey said 70% of companies believed India would be a desirable manufacturing base in 10 years, up from 67% in the annual survey last year. The government-backed bank carried out the survey of 970 Japanese manufacturing firms.

"In particular, firms in the auto sector appear positive," the survey said. "Great attention has been paid to India, which has taken over from China as the most desirable destination for long-term investment for the first time." Japanese automakers have recently launched a series of new investments in India, mostly around the southern city of Chennai, earlier known as Madras.

But Japan's investment in China was nearly 40 times as much as that in India in 2005, according to Tokyo's official figures. Many Japanese businesses have spoken of feeling more comfortable in China with its communist government and cultural linkages to Japan. Japanese leaders have tried to move closer to India in recent years amid frequent diplomatic spats with China. Last week the Japanese and Indian premiers agreed in a meeting in Singapore to try to conclude a free trade pact by mid-2008.

China came a notch down, with 67% saying it would be a good place for investment in 10 years. China held the top spot last year at 74%. Russia ranked third this year at 37% followed by 28% for Vietnam and 21% for Brazil. However, when asked which countries were desirable in the short term, China remained at the top with 68% followed by India at 50%.

Copyright Agence France-Presse, 2007

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