NEW DELHI: What should have been China’s loss and India’s gain has turned into a gain for Vietnam, with companies that are leaving China due to the ongoing US-China trade war, shifting to Vietnam and other countries rather than moving to India.
According to a study done by Japan-based Nomura, the oldest brokerage firm in Japan, in the 16-month period between April 2018 and August 2019, of the 56 companies that relocated their production facilities from China, only three are planning to come to India.
A large number of them (26) are going to or have shifted to Vietnam, followed by Taiwan (11), Thailand (8) and Mexico (6), as per the note prepared by Nomura that The Sunday Guardian went through.
The note suggests that companies engaged in primarily three sectors of electronics, apparel, shoes and bags and electrical equipment have shifted from China in the time period when the study was undertaken. Interestingly, in 16% of the cases, the relocating companies are Chinese companies that have decided to set up new factories outside of China.
The note, authored by Sonal Verma, chief economist for India and Asia (excluding Japan), and economist Michael Loo, Nomura was released on 4 September.
The three companies that have moved/planning to move to India include Foxconn, Wistron and toymaker Hasbro.
Those who moved to other countries in the same period include well-known brands like Puma, Steve Madden, Mitsubishi Electric, cycle maker Giant Manufacturing Company, Panasonic, TCL, Toshiba Machine, GoPro, Casio, HP, Dell, Google, Amazon and Nintendo.
As per the “Ease of Doing Business” ranking (2019) given by the World Bank, out of 190 countries, Vietnam is at the 69th position, while India, which has improved its position vastly in the last two years, is in the 77th position. It was at the 142th position in 2015, 130th in 2016, 130th in 2017 and at the 100th position in 2018.
As per the World Bank, out of the 10 broad parameters that are used to determine the “Ease of Doing Business”, India is yet to make substantial progress when it comes to the issue of registering of property, protection of the interest of minority investors, enforcing of contracts and resolving insolvency.
However, companies overlooking India while making such strategic decisions and preferring its Asian neighbours like Vietnam and Thailand are likely to cause serious concerns among policymakers in the North Block who are burning the midnight oil to attract foreign investors.
It was expected that India would be the biggest beneficiary of the trade war between China and the United States as officials in the Ministry of Corporate Affairs and Ministry of Finance believed that they had done the best they could to create an environment to welcome the companies leaving China.
One major problem these companies face, as stated by a corporate lawyer who is with a firm that advises multinational companies (MNCs) looking to set up investments in India, is the procedural delay. “Despite the government focusing on a ‘single-window’ process, it is still multiple doors that big investors and MNCs’ representatives have to go through. When someone is bringing money to your country, you do not sit on his proposal, waiting for him to approach you again and again; you just decide and convey a yes or no. It should be that simple. But that is not the case right now. Even if a ‘yes’ is given, the company’s representatives have to go to multiple offices, meet several officials, host them for lunch, dinner so that their work is done quickly. This kind of work culture puts off investors who want the work to begin within days and a few months,” the lawyer said.