Industrial Zone Development- Key Issues from the Experiences ofJapanese Industrial Zone in India January 2015
Katsuro Igari, Special Advisor
Ministry of Economy, Trade and Industry

Industrial Development in India by region
7th Largest population.
Development ofagriculture and textile
industry.
2nd Largest
population. Largest
port. Gateway toIndia. Developmentof financial sector
and commerce.
5th largest population.
Development of heavy
industry and ICT
industry. ‘India’s siliconvalley’[Toyota, etc.]

Largest population.
Development of various
manufacturingindustries for domestic
market. [Suzuki, Honda,etc.]

Delhi NCR

Ahmedabad

4th largest population.
2nd largest port.
Gateway to southern
India and export base tothe world. “India’sDetroit” [Nissan, etc.]
Japanese companies in India

Mumbai

1072
926

1200
1000
800

550

600

Bangalore

Chennai400

181 183

248 267

627

725

812

362

200
0
2003

2005

2007

2009

2011

2013

Challenges of Japanese Companies for Start-up of factory in India
Difficulty in negotiating with local land owners
Due to inefficiencies in the land registration system, a land owner is identified bya record of sales of specific land. A developer needs to confirm this record of thepast 30 years. A developer may thus confirm ownership of land and finalize
negotiation with land owners after a prolonged period.
Limitation of available land with good infrastructure access at a reasonable cost
Due to an increased demand of land for industrialization, land may bespeculatively purchased by a broker at an exorbitant price. Thus to promoteforeign investment, some developers promise the development of necessary
infrastructure. However, the development of infrastructure may be delayed andadditional cost may be incurred.

Complexity in licensing procedure
Over 20 licenses are required in the licensing process for the construction of afactory. Because of varying application procedures by departments in charge(national or state government), it is difficult to expect a schedule for theoperation of a factory.
Japanese companies prefer to establish a factory in an industrial area
in order to minimize risk and expedite operations of a factory in India.

Key Issues of Industrial Area in India

 Developed by local government- No negotiation with local land owner is needed (although disputes mayarise and claims by local land owners are revealed after the allocationof land)- Ease and speed of investment- Preferable arrangement for licensing procedure by local government- There are few cases where the infrastructure is well established-> Most industrial areas are developed by local government.
 Developed by private developer- Negotiation with local land owner is needed (collaboration with local
partner with strong local network is essential)- Sometimes licensing procedure by local government is delayed (supportby local partner is needed)- Infrastructure and layout can be flexibly designed (at its own cost)-> There are 2 cases Japanese developers participating in industrial area
development

Industrial Area for Japanese Companies in India
Industrial area developed by local government(Industrial Development Corporation, etc.)

Mandal Industrial Area (Gujarat State)- Developer: GIDB (Gujarat Infrastructure
Development Board ) and iNDEXTb (IndustrialExtension Bureau, Government of Gujarat
Org.)*JETRO supports Japanese companies set-up

Delhi NCR

- Developer: RIICO (Rajasthan State IndustrialDevelopment and Investment Corporation)*JETRO supports Japanese companies set-up

Neemrana Industrial Area (RajasthanState)

Ahmedabad- Developer: RIICO (Rajasthan State Industrial
Development and Investment Corporation)*JETRO supports Japanese companies set-up

Spa Panel Industrial Area
(Maharashtra State)- Developer: MIDC (Maharashtra
Industrial Development Corporation)*JETRO supports Japanese companies
set-up

Giloth Industrial Area (Rajasthan State)

MumbaiChennai
OneHub Chennai Integrated Industrial
Township (Tamil Nadu State)

Sojitz Motherson Industrial Area (TamilNadu State)- Developer: Motherson (India) and Sojitz (Japan)- Developer: Ascendas (Singapore), Ireo (India),
JGC Corporation (Japan) and Muzuho Bank(Japan)

Case Study: Neemrana Industrial Area (Rajasthan State)- History: Developed by RIICO (Rajasthan State Industrial Development andInvestment Corporation Ltd.). RIICO and JETRO concluded an MOU in 2006 tofacilitate Japanese companies’ set up of industrial establishments.
- Number of Japanese companies: 46 (Start operation: 37, Reserved or underconstruction: 9, approx. 80 % has been allocated)(Daikin, Mitsubishi Chemical, Unicarm, Nippon Steel & Sumitomo Metal, etc.)- Access: 105 km frominternational airport- Area: 1,167 acres (467ha)- Selling price: 3,000
INR/m2 (approx. 5060USD/m2) for 99 years
lease- Utility: Basic powertransmission is prepared- Incentive: Exemption ofVAT and electricity tax,etc.

JETRO’s support for Japanese companies’ start-up in India
 In India, many industrial areas are developed by local government (IndustrialDevelopment Corporation, etc.). Because of the complexities in land purchasing
and challenges in licensing procedures by local government, Japanese developers
hesitate to participate in industrial area development. Unlike the Japaneseindustrial area in south-east Asian countries, support by Japanese-speaking
people is limited.
 Under such circumstances, JETRO concluded an MOU with local government tofacilitate Japanese companies’ set-up in the industrial area.
- An MOU with RIICO (Rajasthan State Industrial Development and Investment
Corporation Ltd.) in 2006
- An MOU with Gujarat Industrial Development Corporation (GIDC), Gujarat
Infrastructure Development Board (GIDB) and INDEXT-B in 2011
- An MOU with MIDC (Maharashtra Industrial Development Corporation) in 2013
 JETRO has invited Japanese companies to set-up factories through the provisionof information and support for negotiation with local government.

Case Study: OneHub Chennai Integrated Industrial Township(Tamil Nadu State)- History: Currently under development by Ascendas (Singapore), Ireo (India),
JGC Corporation (Japan) and Muzuho Bank (Japan). Phase I will be completed
in early 2015.
- Investment by some Japanese companies for manufacturing facility is expected(Hitachi Automotive Systems, Ajinomoto, Takasago, etc.)- Access: 50 km from
Chennai central- Area: 130 ha forindustry area (total586 ha, includingcommercial andresidential area)- Selling price: N.A.
(approx. 115-130USD/m2)- Utility: In-house
power generation isequipped because ofinstability of power.

Collaboration with all stakeholders (foreign and local partners,Japanese government) – OneHub Chennai
 In Sep. 2010, the Singaporean government requested the Japanese governmentfor cooperation on Japanese industrial area development in Chennai. METI
offered some Japanese companies . Mizuho Bank and JGC Corporation decided toparticipate in the project after completion of the feasibility study on demand andrisk analysis. The Japanese government (METI, MOFA, JETRO, JICA) and Japan
Chamber of Commerce and Industry provided support in obtaining the necessary
licenses from local government.
 OneHub Chennai will be a good precedent for collaboration with foreign andlocal partners.
- Ascendas (Singaporean government related developer) has plenty of experience
in industrial area development in China, India and other Asian countries.
- Ireo (Indian leading real estate provider) has strong networks with localgovernment.
- JGC Corporation (Japanese leading engineering and construction company) canprovide reliable facility depending on request by Japanese company.
- Mizuho Bank (Japanese leading bank) can provide financial and administrative
support for investment.
 OneHub Chennai is an ideal opportunity for Japanese companies because it
comprises of industrial, commercial and residential areas.

Key Issues for success Full support from local government and Japanese
government
 Collaboration with reliable local and foreign partners

 Business and risk analysis (labor cost, labor productivity,
infrastructure, logistics, incentive, rent, market forecast,foreign currency control, exchange rate change, land
expropriation risk, country risk, etc.)
 Marketing and sales promotion to Japanese companies

 Support for set-up and information provision byJapanese speaking person (including visa application,accommodation, restaurant, transport, etc.)