Osaka – Sunday, September 12, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported on September 10 that the governments of Japan and India reached a broad agreement to conclude EPA (economic partnership agreement), as mentioned in the article Japan and India Reach a Broad EPA. This has much significance to the both countries while at the same time challenges lie ahead.
Top 5 international trade items in 2009
(Source: Nikkei that acquired the information from JETRO (Japan External Trade Organization), translated and edited by the author)
From Japan to India
Item / % of total trade
Iron and steel / 13.0
Components of automobiles / 6.4
Metal working machinery / 4.3
Power engines / 4.1
Organic processed products / 4.0
From India to Japan
Item / % of total trade
Petroleum products / 24.4
Iron ore / 12.1
Non-metal mineral manufacture / 7.5
Sea foods / 7.5
Organic processed products 5.8
1. What does the EPA mean to Japan?
The EPA means that that Japan is closing the gap between Korean in terms of condition of international trade. Korea has already concluded FTA (Free Trade Agreement) with India in January this year; therefore, opinion leaders of Japan such as Mr. Suzuki, CEO/Chairman and President of Suzuki Motors, were extremely worried that Japan has handicap in global competition. With the EPA between Japan and India, they assume that competitive condition for Japanese automobile and consumer electronics compared with their Korean counterparts will improve.
Lowering/minimizing of tariff means so much and should be beneficial to Japanese automobile and consumer electronics. This is because they rely control component and high-precision processing components on import from Japan although they has been making efforts in increasing use of local components to reduce cost because such components are extremely difficult to source locally. Local sourcing to reduce cost is vital to grow business in India where the price range of volume zone is below 1 million yen and price competition is extremely severe.
2. What does the EPA mean to India?
The EPA means that India has made a progress in expanding their business in pharmaceutical (generic drugs). This is because Japan seems to have compromised to study to accelerate approval procedure of generic drugs in Japan. Currently it is difficult for Indian pharmaceutical companies to expand their business in Japan because of the slow speed of approval, which partially attributes to the fact that Japanese doctors and patients request high standard of quality. Some experts expect that cases in which Indian pharmaceutical companies acquire Japanese counterparts will increase in the future.
3. What are the challenges for Japan?
Japan needs to further negotiate with larger countries for EPA agreement such as China, Korea and Australia and catch up with Korea in developing and executing EPA strategy. Japan has only concluded EPA with countries and regions covering 16.5% of the total trade, and it is only 36.5% even if countries and regions in negotiation are included. On the other hand, Korea has already signed FTA with the U.S. and EU, and if countries and regions in negotiation are included it would be as much as over 60%.
The country that Japan seems to be able to agree to conclude EPA in the near future is Peru, whose negotiation is in progress. Mr. Okada, Minister of Foreign Affairs, said that Japan would like to start negotiation with EU and Korea and conclude EPA following agreement with India; however, there is no concrete EPA strategy.
4. Why Japan is behind in FTA / EPA?
It is because Japan has not been able to take bold step for market liberalization in agriculture. This is why in the EPA agreed with India main agriculture products such as rice have been excluded from items whose tariff will be abolished. However, lowering tariff of agriculture products would be inevitable if the Japanese government is to set a target of concluding EPA with the agriculture giants such as the U.S., China and Australia in the basic EPA policy to be drafted by November this year.
Scope of discussion topic of liberalization may expand beyond agriculture. Recently there have been some cases in which liberalization in items of non-tariff barriers such as standardization of safety criteria of products. What is required to initiate EPA is strong leadership of the government (ruling party) to convince stakeholders.
2010年9月12日日曜日
Japan and India Reach a Broad EPA
Osaka – Sunday, September 12, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported on September 10 that the governments of Japan and India reached a broad agreement to conclude EPA (economic partnership agreement). Japan’s EPA has already come into effect with 11 countries and regions, and India is the first country to conclude EPA with the major emerging countries of Brazil, Russia, China and India.
Tariffs of items that equals to 94% of the total trade amount between the two countries will be abolished in 10 years from the point of the agreement coming into effect. This could well drive more Japanese companies entering India market because most items that are exported from Japan such as iron and steel and components of automobiles will be free from tariff. Japan is to accept the request from India and study to speed-up approval of Generic drugs.
The main points of EPA that have been agreed with Japan and India are as below.
1. EPA is targeted to be officially agreed and concluded in October when Prime Minister of India Mr. Singh visits Japan.
Mr. Singh, the Prime Minister of India, is to visit Japan in October. The EPA is to be officially concluded then, and is expected to come into effect in 2011.
2. When the agreement comes into effect, tariffs of items covering 94% of total trade between the two countries will be abolished in 10 years.
According to 2009 statistics of JETRO (Japan External Trade Organization), approximately USD 6.3 billion was exported from Japan to India and approximately USD 3.7 billion was imported from India to Japan. Tariffs of items equivalent to 90% of the USD 6.3 billion from Japan to India and 97% of the USD 3.7 billion from India to Japan will be abolished in 10 years after the agreement comes into effect.
3. Tariffs of most items of iron and steel and automobile components will be abolished.
The two countries agreed to abolish tariffs in most items of the major industries of Japan including components of automobile, iron and steel and electronics. In many cases, 7.5% or 10% tariff is set in exporting these items from Japan to India, which sill be abolished in 10 years. It seems that tariffs of finished products will remain as today.
4. Tariffs of some agricultural items will be abolished but some others remain as today.
As for agricultural items, MAFF (Ministry of Agriculture, Forestry and Fisheries of Japan) announced that curry, tea and logs imported from India to Japan will become free from tariff but other items such as rice, wheat, beef, pork and sugar will remain as today. As for items exported from Japan to India, bonsai, strawberries and peaches will be free from tariff, and rice, milk powder and chicken will remain as today.
5. Items that India has requested will be discussed for crystallization.
Accelerating approval of generic drugs and expansion of working opportunities of India people in Japan will be agreed to further discussed to crystallize collaboration.
Japan also accepted India companies to establish in India call centre(s) targeting Japan market even if the companies do not have a branch in Japan.
Nikkei, Japanese newspaper specialized in business and economy, reported on September 10 that the governments of Japan and India reached a broad agreement to conclude EPA (economic partnership agreement). Japan’s EPA has already come into effect with 11 countries and regions, and India is the first country to conclude EPA with the major emerging countries of Brazil, Russia, China and India.
Tariffs of items that equals to 94% of the total trade amount between the two countries will be abolished in 10 years from the point of the agreement coming into effect. This could well drive more Japanese companies entering India market because most items that are exported from Japan such as iron and steel and components of automobiles will be free from tariff. Japan is to accept the request from India and study to speed-up approval of Generic drugs.
The main points of EPA that have been agreed with Japan and India are as below.
1. EPA is targeted to be officially agreed and concluded in October when Prime Minister of India Mr. Singh visits Japan.
Mr. Singh, the Prime Minister of India, is to visit Japan in October. The EPA is to be officially concluded then, and is expected to come into effect in 2011.
2. When the agreement comes into effect, tariffs of items covering 94% of total trade between the two countries will be abolished in 10 years.
According to 2009 statistics of JETRO (Japan External Trade Organization), approximately USD 6.3 billion was exported from Japan to India and approximately USD 3.7 billion was imported from India to Japan. Tariffs of items equivalent to 90% of the USD 6.3 billion from Japan to India and 97% of the USD 3.7 billion from India to Japan will be abolished in 10 years after the agreement comes into effect.
3. Tariffs of most items of iron and steel and automobile components will be abolished.
The two countries agreed to abolish tariffs in most items of the major industries of Japan including components of automobile, iron and steel and electronics. In many cases, 7.5% or 10% tariff is set in exporting these items from Japan to India, which sill be abolished in 10 years. It seems that tariffs of finished products will remain as today.
4. Tariffs of some agricultural items will be abolished but some others remain as today.
As for agricultural items, MAFF (Ministry of Agriculture, Forestry and Fisheries of Japan) announced that curry, tea and logs imported from India to Japan will become free from tariff but other items such as rice, wheat, beef, pork and sugar will remain as today. As for items exported from Japan to India, bonsai, strawberries and peaches will be free from tariff, and rice, milk powder and chicken will remain as today.
5. Items that India has requested will be discussed for crystallization.
Accelerating approval of generic drugs and expansion of working opportunities of India people in Japan will be agreed to further discussed to crystallize collaboration.
Japan also accepted India companies to establish in India call centre(s) targeting Japan market even if the companies do not have a branch in Japan.
2010年9月5日日曜日
Automobile Companies Compete to Win Promising India Market
Osaka – Sunday, September 5, 2010
Nikkei, Japanese newspaper specialized in business and economy, reported today that Suzuki Motor, a Japanese automobile company strong in small cars, has made a policy of investing approximately 30 billion yen in India to construct new car plant, with the annual production capacity of 250,000 cars. The plant may start its operation as early as 2013, and the annual production capacity is expected to expand to 1.7 million cars at the maximum, which is far greater than that of Japan.
Suzuki is the leader in India with market share of nearly 50%. Other automobile giants such as Toyota and Nissan are also aggressive in entering India market. Therefore, Suzuki aims to make the most of “first mover advantage” strategy and to establish a system for stable supply in the rapidly growing promising market before the competition gets tough.
1. What is Suzuki’s strategy to remain leading India Market?
Suzuki was the first foreign affiliate company in India to start production in 1983. The company plans to expand its annual production capacity to 1.45 million cars in 2012. With the construction of the new plant, the annual production capacity in India will be the largest in the world, which is much more than the total annual production capacity of 3 plants in Japan combined (1.4 million cars).
The new plant is to be constructed in Manesar in Haryana, the suburb of New Deli. In this area, Suzuki has already constructed the first plant with the annual production capacity of 300,000 cars (to be increased to 350,000 cars by the end of this year) that started its operation in 2007. Suzuki also is constructing the second plant with annual production capacity of 250,000 cars, to start its operation in 2012. Suzuki is to start construction of the third plant simultaneously and to install equipments depending on the demand trend. The types of cars to be produced are assumed to be primarily the best selling line products in the local market.
One main reason for consecutive construction of the plants in Manesar in Haryana is that the plant in Gurgaon in Haryana is getting old, although its annual production capacity is to be increased to 850,000 cars by the end of this year. Mr. Suzuki, the Chairman and President of Suzuki group, says that the company would like to preserve available production capacity in Manesar to establish a network that is capable of stable production and supply even when the Gurgaon plant needs to be renovated.
Suzuki, the pioneer of passenger car market in India, still enjoys market share of almost 50%. Two thirds of Suzuki’s consolidated operating profit is regarded as from business in India. Suzuki would like to make haste in establishing its leading position and improve its profitability in India business when the competition is expected to get tough, and leverage the know how from India business in strengthening businesses in other markets in Asia and Europe.
2. How are other automobile companies doing business in India?
Other global and local automobile companies have recently been entering India market, with their own respective strategy.
1) Toyota (Japan)
Toyota is to start local production and sales of small, strategic cars from the end of 2010.
2) Honda (Japan)
Honda is to start business of small cars with the price range below 500,000 rupee (approximately 900,000 yen) in 2011.
3) Nissan (Japan)
Nissan has started business of small cars with the price range below 400,000 rupee in July this year.
4) Volkswagen (Germany)
Volkswagen started its operation of its new plant with annual production capacity of 110,000 cars in March 2009, and started its business of small cars.
5) General Motors (the U.S.)
GM started its business of small cars with the price of approximately 300,000 rupee in January this year.
6) Tata Motors (India)
Tata Motors started operation of its plant that exclusively produces Tata Nano, its low price range car, in June this year.
3. Why worldwide automobile companies are aggressive in starting and expanding business in India?
The reasons are the fact that India is a promising market and that success in India business will a requisite for global companies to expand their business in other emerging markets.
1) India is a promising market
With its economy growing, India’s automobile market is expected to grow. From statistics, it is generally said that popularization of automobiles start when GDP surpasses 1,000 USD and India is currently at that stage. It is estimated that 4 million cars will be used in India in 2015, when 40% of China’s automobile production capacity is to be excess in 2015, according to the estimation of China government. The pace of automobile market expansion in India is expected to accelerate when middle-income group gets big.
2) Success in India business determines success in other emerging market
In India, approximately 80% of new cars are passenger cars, and over 60% of passenger cars are small cars with engine size below 1200cc. Volume price range in India is 300,000 – 450,000 rupee (approximately 550,000 – 800,000 yen), and is regarded as the most competitive market in the world for cars with low price range.
With this background, India business is the core of their global strategy of small cars, and success of India business is likely to determine their business success in worldwide emerging markets. This is because automobile companies are to accumulate know how of development, production and marketing of low price range cars through their business in India then expand their business in other emerging markets.
Nikkei, Japanese newspaper specialized in business and economy, reported today that Suzuki Motor, a Japanese automobile company strong in small cars, has made a policy of investing approximately 30 billion yen in India to construct new car plant, with the annual production capacity of 250,000 cars. The plant may start its operation as early as 2013, and the annual production capacity is expected to expand to 1.7 million cars at the maximum, which is far greater than that of Japan.
Suzuki is the leader in India with market share of nearly 50%. Other automobile giants such as Toyota and Nissan are also aggressive in entering India market. Therefore, Suzuki aims to make the most of “first mover advantage” strategy and to establish a system for stable supply in the rapidly growing promising market before the competition gets tough.
1. What is Suzuki’s strategy to remain leading India Market?
Suzuki was the first foreign affiliate company in India to start production in 1983. The company plans to expand its annual production capacity to 1.45 million cars in 2012. With the construction of the new plant, the annual production capacity in India will be the largest in the world, which is much more than the total annual production capacity of 3 plants in Japan combined (1.4 million cars).
The new plant is to be constructed in Manesar in Haryana, the suburb of New Deli. In this area, Suzuki has already constructed the first plant with the annual production capacity of 300,000 cars (to be increased to 350,000 cars by the end of this year) that started its operation in 2007. Suzuki also is constructing the second plant with annual production capacity of 250,000 cars, to start its operation in 2012. Suzuki is to start construction of the third plant simultaneously and to install equipments depending on the demand trend. The types of cars to be produced are assumed to be primarily the best selling line products in the local market.
One main reason for consecutive construction of the plants in Manesar in Haryana is that the plant in Gurgaon in Haryana is getting old, although its annual production capacity is to be increased to 850,000 cars by the end of this year. Mr. Suzuki, the Chairman and President of Suzuki group, says that the company would like to preserve available production capacity in Manesar to establish a network that is capable of stable production and supply even when the Gurgaon plant needs to be renovated.
Suzuki, the pioneer of passenger car market in India, still enjoys market share of almost 50%. Two thirds of Suzuki’s consolidated operating profit is regarded as from business in India. Suzuki would like to make haste in establishing its leading position and improve its profitability in India business when the competition is expected to get tough, and leverage the know how from India business in strengthening businesses in other markets in Asia and Europe.
2. How are other automobile companies doing business in India?
Other global and local automobile companies have recently been entering India market, with their own respective strategy.
1) Toyota (Japan)
Toyota is to start local production and sales of small, strategic cars from the end of 2010.
2) Honda (Japan)
Honda is to start business of small cars with the price range below 500,000 rupee (approximately 900,000 yen) in 2011.
3) Nissan (Japan)
Nissan has started business of small cars with the price range below 400,000 rupee in July this year.
4) Volkswagen (Germany)
Volkswagen started its operation of its new plant with annual production capacity of 110,000 cars in March 2009, and started its business of small cars.
5) General Motors (the U.S.)
GM started its business of small cars with the price of approximately 300,000 rupee in January this year.
6) Tata Motors (India)
Tata Motors started operation of its plant that exclusively produces Tata Nano, its low price range car, in June this year.
3. Why worldwide automobile companies are aggressive in starting and expanding business in India?
The reasons are the fact that India is a promising market and that success in India business will a requisite for global companies to expand their business in other emerging markets.
1) India is a promising market
With its economy growing, India’s automobile market is expected to grow. From statistics, it is generally said that popularization of automobiles start when GDP surpasses 1,000 USD and India is currently at that stage. It is estimated that 4 million cars will be used in India in 2015, when 40% of China’s automobile production capacity is to be excess in 2015, according to the estimation of China government. The pace of automobile market expansion in India is expected to accelerate when middle-income group gets big.
2) Success in India business determines success in other emerging market
In India, approximately 80% of new cars are passenger cars, and over 60% of passenger cars are small cars with engine size below 1200cc. Volume price range in India is 300,000 – 450,000 rupee (approximately 550,000 – 800,000 yen), and is regarded as the most competitive market in the world for cars with low price range.
With this background, India business is the core of their global strategy of small cars, and success of India business is likely to determine their business success in worldwide emerging markets. This is because automobile companies are to accumulate know how of development, production and marketing of low price range cars through their business in India then expand their business in other emerging markets.
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