MARIA GONZALEZ ECONOMICS CARLOS MARIA 17 JANUARY 2011

JAPAN’S CURRENT TRENDS IN FOREGIN DIRECT INVESTMENTS

FDI 90s
The 1990s witnessed the change for many countries in Latin America. The southern continent
became host to massive flows of FDI including of Japan. Between 1992 and 1998, Japan’s net
FDI flows to Latin America were approximately US$ 32 billion, increasing from US$ 2.7 billion in
1992 to US$ 6.5 billion in 1998. 1 The reason for this is reflected in the responses of Japanese
TNCs (Transnational Corporations); in a 1997 survey, sixty percent of all responding firms noted
that market protection and expansion were they key motives for their FDI. Thirty seven percent
highlighted the importance of the development of new markets. Another survey showed that
Japanese TNCs regard obtaining low-cost labour and international division of production as
main motives as well2.
20TH CENTURY PROGRESS WITH INDIA
Japan and India’s relationship has evolved throughout the decades. Initially, during fiscal Japan,
around the eighties Japan was India’s largest aid donor. More recently however, India is
overtaking China as Japan’s biggest destination for foreign investment. Japan Bank for
International Co-operation made a survey in which India results as the most favoured
destination for long-term Japanese investments over the next decade. India and Japan are
strengthening economic and security ties. As of 2009, Japan sends 30% of its official aid to India
and has promised over $4 billion for a “Delhi-Mumbai industrial corridor”. 3
Not only is India a big player but a member of the BIMSTEC international organization, which is
recently a main destination for Japan’s FDI. Member countries include; Bangladesh, India,
Myanmar, Sri Lanka, Thailand, Bhutan and Nepal.
Traditionally, FDI inflows in BIMST-EC have been directed to the primary and tertiary sectors,
namely oil and gas, agriculture, forestry and tourism services. However, over time, there have
been some inflows to mainly Labour intensive, medium to low-technology manufacturing such
as garments and data processing activities. The sectoral distribution of FDI inflows has,
however, now begun to reflect the international trend with a concentration in the services
sector – primarily financial services. Japan looks at India as a frontier in the future with its
strength in technology. Besides automakers, Japanese investments have diversified to include
areas such as power plant, pharmaceuticals, home electronics, life and non-life insurance and
telecommunication.4
According to DIPP (Department of Policy and Promotion) Japan ranked seventh in terms of
cumulative foreign direct investment (FDI) in India, accounting for US$ 3,714 million in the
period from April 2000 to March 2010, of which US$ 1,183 million came in the period April
2009-March 2010.

1
http://www.unescap.org/tid/publication/chap5_2069.pdf
2
Ibid
3
http://www.economist.com/node/14915094
4
http://www.ibef.org/artdispview.aspx?in=32&art_id=26337&cat_id=559&page=2
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dipp.nic.in/japan/japan.../Indo_Japan_Investment_Relations_08012007.ppt
 References

http://www.economist.com/node/14915094

http://www.unescap.org/tid/publication/chap5_2069.pdf

http://econ.worldbank.org/external/default/main?
pagePK=64165259&theSitePK=469382&piPK=64165421&menuPK=64166322&entityID=000009
265_3961005140924

http://www.ibef.org/artdispview.aspx?in=32&art_id=26337&cat_id=559&page=2

http://actrav.itcilo.org/actrav-english/telearn/global/ilo/globe/japani.htm

dipp.nic.in/japan/japan.../Indo_Japan_Investment_Relations_08012007.ppt
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dipp.nic.in/japan/japan.../Indo_Japan_Investment_Relations_08012007.ppt