JETRO Chief upbeat on Sri Lanka’s hub prospects for Japanese firms
Wednesday, 23 October 2013 00:00
Two biz models and key recommendations for Sri Lanka to lure more FDIs from Japan’s External Trade Organisation following survey of 102 companies
By Nisthar Cassim
Emphasising Sri Lanka’s time has arrived, the Japan External Trade Organisation (JETRO) last week expressed confidence over growth prospects as a strategic hub and called for greater promotion as well as reforms to become successful faster.
JETRO’s Chairman and CEO Hiroyuki Ishige who led a high-powered Japanese business delegation of 40 representatives from nearly 30 companies and institutions last week said he saw for himself the post-war progress and exuberance in Sri Lanka as well as the country’s potential.
“I have heard a lot about Sri Lanka,” the top civil servant from Japan told the Daily FT in an exclusive interview. “During my visit I was able to learn a lot. I was very impressed and was able to see to my own eyes the true advantages of Sri Lanka. The time is right to attract Japanese companies,” he added.
The JETRO Boss said Sri Lanka’s strategic geographical location was a key advantage that the country possesses and was ideally placed to be a competitive hub, especially to the giant Indian market as well as the rest of South Asia.
“The scope for the logistics industry is very promising in Sri Lanka,” added Ishige, who took over as JETRO Head in 2011 following an illustrious career in Japan’s public sector spanning from 1974.
Political and social stability, improving living conditions, high quality workforce and high growth potential in post-war Sri Lanka are some of other unique advantages of Sri Lanka’s investment environment.
His as well as the Japanese delegation’s visit was a follow-up to a State visit made by President Mahinda Rajapaksa to Tokyo in March this year. During President Rajapaksa’s bilateral meeting with Japan’s Prime Minister Shinzo Abe, the two leaders agreed to facilitate a visit by a JETRO-led business delegation.
Another key decision was to enlist JETRO to do a survey on Sri Lanka’s future potential based on the feedback from Japanese companies.
The highly-useful report based on the survey titled ‘Needs and Strategies for Japan-Sri Lanka Business’ was presented to President Mahinda Rajapaksa by Ishige during a courtesy call.
The objective of the survey was how best to attract foreign investment in the manufactured exports sector, which is essential for diversifying Sri Lanka’s export products base and reducing trade deficit.
As part of the exercise, JETRO interviewed 102 Japanese companies and Multi National Corporations (MNCs) in Japan, Singapore, India and Sri Lanka. Inputs from these companies inspired key recommendations for the strategic directions that Sri Lanka should take in luring Japanese companies and other Foreign Direct Investments.
JETRO has suggested two business models that Sri Lanka can adapt or accelerate. One is the maximising Sri Lanka’s potential as the most efficient gateway to India using the existing Free Trade Agreement between the two countries, as well as a slew of other advantages including close proximity and the logistics prowess.
It has been suggested that Japanese or other companies could import raw material from Japan or Singapore, add value and export manufactured products to India using the FTA. An existing Japanese company already successfully engaged in such an operation has been highlighted by JETRO. This Japanese firm manufactures mould parts for precision presses for exports. Based on the success, it plans to expand operations in Sri Lanka to manufacture presses as well.
The business model 2 is maximising search and successful penetration into new export markets. Sri Lanka has been suggested to look the North (India, Pakistan and Bangladesh), East (ASEAN, China and Japan) and the West (Middle East, Africa and Eastern Europe).
Having realised the enormous potential, the JETRO study has also identified several constraints which, if addressed with the recommended solutions, Sri Lanka can convert the opportunity into reality.
JETRO has suggested that a greater pool of industrial human resources such as skilled labour, engineers and managers will address the human talent challenges for foreign investors. A more consistent and clear industrial policy will be useful as well to lure more manufacturing ventures and FDIs. JETRO has also suggested more efficient and effective one-stop services at the Board of Investment for convenience of investors.
Among other actions suggested following inputs from companies interviewed are lowering electricity tariff for peak period and exempting Port and Airport Levy and Nation Building Tax imposed on import of machinery and equipment. JETRO has suggested the BOI could look at Japanese advisors to enhance capacity and streamlining processes. Ishige suggested counterparts in Thailand or Korea could serve as benchmarks for the BOI.
Ishige emphasised that with rising costs and uneasy ties among some Southeast Asian nations, Japanese firms are looking for more competitive and conducive locations for their manufacturing projects and investments.
“Globally Sri Lanka is mostly famous for Ceylon Tea. That apart, Sri Lanka is not well known hence the country’s new profile and opportunity must be marketed more effectively and aggressively,” the JETRO Chief suggested. The onus is on both the Government and the private sector, he added.
Ishige expressed confidence and hope that Sri Lanka would be able to address some of the issues and accelerate a great flow of FDIs from Japanese companies as well as others. JETRO, which will mark 50 years of presence in and support to Sri Lanka next year, is also planning to enhance its efforts for continuous improvement in Sri Lanka.
JETRO is a government-related organisation that works to promote mutual trade and investment between Japan and the rest of the world. Originally established in 1958 to promote Japanese exports abroad, JETRO’s core focus in the 21st century has shifted toward promoting Foreign Direct Investment into Japan and helping small to medium size Japanese firms maximise their global export potential.
With a $ 521 million commitment Japan is Sri Lanka’s third largest donor, whilst the two countries celebrated the diamond jubilee of bilateral ties. Sri Lanka-Japan bilateral trade has been growing and in 2012 it stood at $ 770 million, an increase of 56% from 2002. In the first half of this year alone bilateral trade levels were a promising $ 413 million. As for private investments, 39 Japanese projects are in operation in Sri Lanka.
Among the high-powered Japanese delegation were representatives from Dole International Holdings, Inc., E&T Research Institute, Inc., Electric Power Development Co. Ltd., Hitachi Zosen India Ltd., ITOCHU Corporation Ltd., Ito En, Ltd., Komaihaltec Inc., KWY Co. Ltd., Meditrust Tokyo Co. Ltd., Mitsui & Co (Asia Pacific) Ltd., Muraoka Co. Ltd., Panasonic System Networks Co. Ltd., Rohto Pharmaceutical Ltd., Shiraishi Mfg Co. Ltd., SMS Co. Ltd., Sunhope Co. Ltd., Tau Corporation, The Japan Chamber of Commerce and Industry, The Tokyo Chamber of Commerce and Industry, Japan Steel Works India Ltd., The Nanto Bank Ltd., Tonden Co Ltd., Toshiba Asia Pacific Ltd., Toyo Engineering India Ltd., Wakachiku Construction Ltd. and the Ministry of Economy, Trade and Industry.