The factors that a Japanese investor looks for in any country or state are trust, transparency, clarity in policy, government’s approach, work standards, business ethics and time-bound clearances.

Ahmedabad/Gandhinagar: Leveraging on its longstanding bilateral ties with Japan, the Gujarat government is developing a Japanese industrial township near Ahmedabad. The move takes forward the ongoing development of the state into a major automobile hub.

Khoraj — 25 km from Ahmedabad — is being planned as a one-of-its-kind township exclusively for Japanese investors and a predominantly Japanese workforce. Prior to this, the Gujarat government had set up a dedicated industrial zone for Japanese ancillary units selling to the automobile sector at the Mandal industrial area near Vithalapur – 90 km from Ahmedabad.

Whether it’s the township at Khoraj or the industrial zone in Mandal, the seed of a country-specific industrial zone was sown more than a decade ago when Prime Minister Narendra Modi was the chief minister of the western state.

The first step was taken way back in 2008 when the state government provided land to Tata Motors’ affordable car project -- the Nano -- at the Sanand industrial area near Ahmedabad, after the fiasco at Nandigram in West Bengal. Despite criticism from various quarters, about the price at which land was procured at Sanand and about the incentives given to the group, Gujarat steadily moved towards its goal. Maruti Suzuki followed the Tatas and set up its car manufacturing unit at Sanand.

The rest is history. At present, Gujarat has in its kitty companies like Suzuki Motors Gujarat (SMG), Honda Motor Corp, Ford, Shanghai Automobile Industry Co-General Motors (SAIC-GM), and an array of Japanese automobile ancillaries. That apart, a host of other companies are in the pipeline, and firms like Tata TIAGO and Jindal South West (JSW) have readied plans to manufacture next-generation electrical vehicles in that state.

The factors that a Japanese investor looks for in any country or state are trust, transparency, clarity in policy, government’s approach, work standards, business ethics and time-bound clearances. Gujarat claims to have provided all of these over the years.

“Trust is the biggest factor that ensured smooth inflow of Japanese investment in Gujarat. Modi from his days as CM had worked hard to establish this trust factor by ensuring a seamless functioning of his government, especially the industries department,” Balvantsinh C Rajput, chairman, Gujarat Industrial Development Corporation (GIDC) told Firstpost.

At present, some 150 Japanese who’re working in Japanese units live in Sanand--Vithalapur--Becharji. “Now, to provide a comfort zone to Japanese investors, we’re going for an industrial township with all kinds of amenities at Khoraj,” he said.

It’s been a journey of nearly two decades for Gujarat to reach this point, of building an exclusive Japanese township.

Gujarat’s strategic moves

Much before 2017 – the year of the Indo-Japan Friendly Exchanges – that further strengthened bilateral ties, it was the Gujarat government’s strategic measures that ensured investment flow from both domestic and Japanese investors in the state

• The state government converted the crisis into an opportunity by offering tax holidays and other incentives to industries after the earthquake at Bhuj, in the Kutch district, in 2001

• Creation of a brownfield Petroleum, Chemical and Petro-chemical Special Investment Region (PCPIR) at the Dahej SEZ, which has logged exports worth Rs 4,000 crore since 2009

• Building 45 ports, including major and minor ones like Kandla, Mundra and Hajira

• Diversification of portfolio

• Handsome compensation to farmers when acquiring land, including a compensation amount, wages for 750 days and a piece of commercial land that is one percent of the total land procured from them

• Strict compliance of Master Plan and regulations

“It was a major decision taken by the then CM Modi, to have strategic moves in order to bring investment in the state. Under diversification strategy, Gujarat expanded itself from being a chemical and pharmaceutical major to an automobile hub,” GIDC vice chairman & managing director, said D Thara.

“Under diversification strategy, GIDC created sector and country-specific industrial estates like in Sanand, Mandal, Bhagapura, etc. Now to get more traction from Japanese companies, the next target is building a dedicated industrial township for Japanese investors at Khoraj. Besides industrial units, it’ll have housing and other facilities,” she added.

The Japanese township

• The country-specific Japanese industrial township will come up at Khoraj, which is five kilometres from Sanand and about 25 km from Ahmedabad

• Township – a subset of urban infrastructure – will be built on a 700 hectare (1500 acre) patch, which is under GIDC

• Besides industrial units, township will host residential buildings, shopping arcades, schools, hospital and banks

• Architecture and town planning will be as per Japanese requirements

• GIDC has begun road construction in the area

• Eight Japanese firms have expressed an interest in setting up units in the township

• Once completed, the township is expected to generate direct employment for 15,000-20,000 people and five times more in indirect employment

• The state is in talks with the Japanese government to jointly develop an industrial park within the township. Japan could engage industrial park developers like Toyota Tsusho for the project

“GIDC will give them land. They, in turn, will develop it and give it to companies. It’ll be on a plug-and-play basis,” Thara added.

Country-specific industrial estate

According to data available with the Industrial Extension Bureau (INDEXTb) – the state government’s body to accelerate industrial development and a single-point contact for investors – Gujarat has received $18.7 billion in foreign direct investment (FDI) between April 2000 and March 2018. Out of the total FDI, over $10 billion was received over the past five years.

During the inauguration of the Japan External Trade Organisation (JETRO) Business Support Centre in Ahmedabad on 5 July this year, Gujarat CM Vijay Rupani said the state aims to garner $3 billion in investments from Japanese firms by 2020, and that these firms will realise Modi’s ‘Make in India’ concept. On the occasion, 15 Japanese firms had signed so-called Interest of Investment MoUs with Gujarat.

Considering the growing interest of Japanese investors in the state and the growth in investment, GIDC created a 120-hectare industrial estate at Mandal. It’s a part of the Mandal-Bechraji Special Investment Region.

With 13 Japanese companies, either operational or under construction, Mandal is already saturated. The next destination is Bhagapura, which hosts 17 vendors acting as ancillaries to Maruti Suzuki.

“Gujarat government’s initiative to create a country-specific automotive industrial cluster has been encouraging. Government’s approach to Japan is very supportive and the trust built over the years has encouraged Japanese companies to set up their units here,” said Kazutatsu Kinoshita, general manager, Toyota Tsusho India Pvt Ltd.

At Mandal, Technotrends Autopark Private Limited is one such company situated on a 70-acre patch that provides plug-and-play facilities to tenants. “We’ve five clients to whom we’re providing all kinds of facilities from land, electricity, water, maintenance to government approvals. We’ve two models – ‘Ready-to-build’ and ‘Ready-to-suit’. On the basis of any of the two, we set up manufacturing units for them. Besides this, we provide skill training facilities,” said Jatin B Patel, Head (Operations), Technotrends Autopark Private Limited.

Small Japanese companies operating at Mandal and Bhagapura act as ancillaries to Suzuki Motors Gujarat, Honda Motor Corp, and other firms. Production is usually need-based and on full capacity. “Under the TS Tech and Honda Motor Corp agreements, we produce 4,850 two-wheeler seats per day. Our expansion depends on Honda. In Japan, we’re in agreement with Suzuki and other companies,” said Fumihiro Nishioka, advisor, TS Tech (Mandal) Pvt Ltd. Roki Minda, Munjal Kiriu, MA Extrusion, among others, are some of the ancillary companies already manufacturing at Mandal.

With over 80 Japanese companies already operating in various sectors, from fabrication, electronics to automobile in Gujarat, and 20 more in the pipeline, the idea of a Japanese township crystallised during Japanese Prime Minister Shinzo Abe’s visit to India in September 2017.

“Business and industry are in Gujarati blood and we’re in a symbiotic relationship. This is the reason for investors’ trust in the Gujarat government. We clearly convey to them our policies, regulations, safety and environment norms. We act as a facilitator and ensure that investors get a comfort zone working here,” summed up Ashwini Kumar, secretary to the Gujarat CM.