The Rising Sun Shines On…India?

Submitted By: Jesse Dundon

From the Economist, the article “Adding Sugar” was an interesting take on the emerging trend of Japanese offshoring to India. While American and European companies have been outsourcing tech work to India in huge volumes over the past years, the Japanese market is just in its infancy. However, the market is growing not only for service outsourcing from Japan to India, but also manufacturing.

Japan’s tiny share of India’s outsourcing revenue is not only because of heavy taxes levied by the Japanese government, but also because of a distinct language barrier between the two nations. It is easy to appreciate the latter, in that service providers surely need to be able to communicate on a wide scale and Japanese and English are not exactly similar languages. To combat this, many Indian firms are making a point of training their employees to be at least somewhat conversational in the Japanese language and culture. This has benefited some companies, as service contracts are beginning to come in from Japan.

We have learned that China has built a reputation for cheap and effective manufacturing while India has built a reputation for cheap and effective services like IT. Like the rest of the world, the land of the rising sun has been offshoring manufacturing to China for years, but has been late to the game with service outsourcing. However, it has become increasingly wary of China’s growing economic and military power, and as such is actually working with India to develop a huge manufacturing zone for Japanese companies. This is part of a larger Japan-India Economic Partnership Agreement, which in turn is just one facet of a recent set of Economic Partnerships that Japan is brokering with the rest of the world. A summary of these agreements can be found here. The Japan-India EPA has gone through a series of negotiation rounds alternating between Delhi and Tokyo, the latest of which was held in January.

If you look at the summaries of these negotiations and those between Japan and other nations (see Japan’s Ministry of Foreign Affairs website Regional Affairs page) you will notice a conspicuous lack of such an agreement with China. Given the sometimes less-than-civil history between China and Japan, it is not at all surprising to notice this preference of India over China. In fact, Japan has been India’s biggest international benefactor since 1986, which speaks a great deal about the partnership between the two nations. As China continues to grow into an economic giant I would expect to see the partnership between Japan and India strengthen, so that when the giant becomes unruly, its eastern and southern neighbors will have more than a fighting chance to compete on the battlefield or the marketplace.

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8 Responses to The Rising Sun Shines On…India?

  1. Matthew Perez says:

    It is easy to understand why there is distrust between China and Japan. As nations, they have conflicted with one another for over 1000 years. Japan probably sees the alliance with India as a way to not only gain a powerful ally in the region but to avoid supporting one of their greatest rivals. Although it would be better for China and Japan to resolve their differences, this seems unlikely in the near future.

  2. William Ary says:

    Japan is expanding into a market where its services are needed. I am sure that there are political and cultural hurdles that must be crossed before China and Japan will be amicable to each other as countries. However, as the Chinese market expands, I am also sure that there will be some intrepid companies in Japan who are willing to forget the past, using huge profits and manufacturing cost savings to produce amnesia. India is an equally attractive market without any socio-political tension so it is only natural that Japan has begun to invest there.

  3. Kirk Story says:

    Japan’s alliance with India is simply geopolitical positioning. Japan’s coalition building ensures a balance of power within the region through the use of soft power. This form of foreign relations is generally viewed as much more efficient and sustainable in comparison to preemptive invasions of third world nations.

  4. This bilateral EPA that was announced in January 2007 led to 2007’s declaration as “Japan-India Friendship Year.” Has the US ever had a “Friendship Year” with anyone? My Google searches on this topic were fruitless…

    In the years leading up to the EPA, the number of students studying Japanese in India nearly doubled between 2005 and 2006. According to Wikipedia, there are 100 jobs available for every 20 candidates that are capable of Japanese translation. Talk about shortages! If I were an Indian, I would jump at the chance to learn Japanese, as that would likely mean a guaranteed job for life!

    I find this post particularly interesting given that we will be visiting Maruti Suzuki in Delhi. They are an Indian automaker with a Japanese majority stakeholder, exemplifying the blend of cultures highlighted in this post.

  5. I would agree with Kirk on the notion that the discussed treaty is how Japan wants to position itself in the region. In terms of security, Japan’s strategy for the last years has been to pull itself closer to the United States by unequivocally stating its alliance commitment in the Asia-Pacific region. Chinas rise in power fuelled fear in countries like Japan and Taiwan and maybe the recent intensified talks with India indicate that Japan wants to add another strong partner to its strategic alliance.

    Ruptures, Rivalries, and Reconciliations in Modern East Asia

  6. Austen Diliberto says:

    My response to this is not going to be exactly on topic, but close enough. I find it interesting that the Japanese are so late to this offshoring practice. I wonder how many other nations missed out early and are going to be joining the game late. With all the countries and languages in the world, I wonder if India will soon become a nation home to the most diverse set of languages in the world. In order to provide customer service to a German homeowner, or receive technical information from a French engineer, Indians might start learning more languages in order to stay competitive.

  7. Stephen Allison says:

    Interesting to see some of the points made in Billions of Entrepreneurs made here, like on India’s strong soft power and “mirror-image” advantages in hard power. On the hard power side, Japan wants the most talented workforce for their software/IT needs and wants to balance China’s power over them by not investing too heavily in China (akin to diversifying investments in a portfolio). On the soft power side, Japan’s past cultural conflicts with China combined with India’s willingness to learn Japanese make India an easy choice as a business partner.

  8. AliyaZ. says:

    It is obvious that Japan has not been too active in the region but has been more focused on “becoming friends” with the United States. Japan realized that it has been missing out on outsourcing to India. But it is better late than never, right? Japan geopolitical movement was to create an alliance with India and catch up with the other countries, which have already, outsources thousands of jobs to India. I’m not surprised that Japan chose India over China. First of all, it is clear due to the history between the two countries. Secondly, Japan realizes that China is growing very rapidly and soon will become much stronger and therefore an alliance between India and Japan will assure Japan’s position in the region.

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