Taiwanese firms invest US$ 800 in Indian electronics and IT sectors

Taiwanese firms are eyeing the Indian market to explore new business avenues. David Hsu, director, Taipei Economic and Cultural Centre, shares his perspective on the current status of India-Taiwan business relations and the scope of India as an investment destination, with Himanshu Yadav of Electronics Bazaar.

Sunday, September 20, 2013: EB: How do you see the electronics business evolving between India and Taiwan?

India is a rising market and holds tremendous potential for Taiwanese firms. It is the largest trade partner for Taiwan in South Asia. The govern­ments of both countries have launched significant efforts in recent times to expand bilateral trade and invest­ments, especially in the fields of infor­mation technology (IT), electronics, telecommunication and energy. Last year, the total amount of India-Taiwan trade registered was US$ 5.34 billion, a rise of 9.5 per cent from that of 2007. As Taiwan is a small island and its local market is very limited, it is our company policy that after establish­ing base in the Taiwanese market, the company has to expand its overseas business in order to survive and also for international trade cooperation. Since the establishment of the Indian Taipei Association (ITA) in 1995, the trade relationship between the two countries has come a long way and will continue to rise in the coming years. However, the investments made by Indian firms in the Taiwan­ese market amount to only $43 million dollars in contrast to the $800 mil­lion dollars pumped in by Taiwanese firms in India. Indian enterprises will certainly benefit more if they invest more in Taiwan.

EB:What are the investments Taiwan­ese enterprises are making in the Indian electronics industry?

India and Taiwan’s bilateral trade rela­tionship has seen a major upsurge in recent times. There are 100 Taiwanese companies involved in business in the Indian market and most of them are catering to the information technol­ogy and electronics segments. Some of the major names that are doing business in India include Hong Hai Precision Industry Co (FoxConn), San­yang Corporation, Gigabyte Technolo­gies, Apache and Feng Tay (shoes), Delta Electronics, D-Link, etc. The total investments made by Taiwanese firms in the Indian market total to ap­proximately US$ 800 million, includ­ing both IT and electronics.

EB: Which are the preferred invest­ment sectors for Taiwanese compa­nies and why?

The most preferred investment sec­tors for Taiwanese enterprises are the electronics and IT verticals but firms are also looking at other sectors like construction, auto components, phar­maceuticals and consumer durables.

EB: What has been the business sce­nario in the Taiwanese market in the past one year? Have Taiwanese com­panies doing business in the Indian market witnessed a slowdown?

The economic downturn has affected every country in almost every aspect. Taiwanese companies have also been impacted as foreign trade comprises almost 76 per cent of our economy but owing to some of our policies, the effect is not too severe. In terms of the Indian market, Taiwanese investors have noticed marginal recessionary aftermath. On a scale of ten, the growth rate might have come down from eight to six per cent but companies are still ex­periencing growth. Other factors like company policies, selection of the right product, educated and technical staff, adequate strategies also play an important role in a company’s success and failure.

EB: Has there been a change in the rate of investments being made by Taiwanese companies in recent times?

Yes. According to our records, sev­eral companies that had planned to invest in the Indian market are now hesitating due to the sluggish world market. Companies who have already invested in India are doing fine as they have acclimatised to the Indian business scenario but potential entrants are waiting till the second quarter to make up their minds regarding investment plans.

EB: How do you compare India with Taiwan, in terms of manufacturing?

In Taiwan, manufacturing is seen as a fundamental element for economic growth. Even though, much of our labour is now moving to the service sector, there is a considerable ascent in our annual output as we keep re-innovating and modernising ourselves to keep pace with changing times. In India, too, companies need to take the route of innovation. South­east Asian countries and China are still deemed preferred options for manufacturing as far as Taiwan is concerned.

EB: Do you assist Taiwanese compa­nies who want to set up their bases in India?
To be honest, if it’s a large enterprise like FoxConn, then they don’t need any assistance. As a matter of fact, they don’t even want the government to intrude upon their business. How­ever, small scale enterprises (SMEs) do need our help, so we furnish them with knowledge about the lat­est economic and trade relationship developments, investments, incen­tives provided by the central or state governments, transport assistance, government related connections, etc. After that, companies come here by themselves, take stock of the situation and make their own decisions.

EB:According to you, which countries are giving competition to India?
China is a major competitor. South­east Asian and European countries, too, pose a threat to India. In the next 10 years, Korea will join the list of competitors, especially for the automobile and IT sectors.

EB: What are the advantages and disadvantages of doing business in India?

As the India market is still in its grow­ing stage, we can advantageously set up factories here because, as per our understanding, there aren’t too many labour intensive industries here which can create job opportunities. Also, there is a requirement for hi-tech companies to boost the indus­try’s ability and morale. Meanwhile, Taiwan has a very good information and communication (ICT) industry from which, Indian enterprises can benefit. In terms of disadvantages, Tai­wanese firms face a cultural and linguistic barrier. For them, it is easier to do business with China or southeast Asian countries like Thai­land, Vietnam, Malaysia and Korea as they are oriental and share the same cultural practices. Furthermore, there are certain government factors, which make procedures complex for foreign investors.

EB: What is your opinion of the Indian bureaucratic system?
Apache (a famous Taiwanese shoe company) had a deal with Andhra Pradesh, for a special economic zone (SEZ). They even had the terms of the contract in writing but shockingly, Andhra Pradesh turned around and sold the land to a British company. Ac­cording to state rules, 200 hectares of land is requisite for an SEZ but since part of the land was already sold, only 120 hectares of land remained. If a state government can break its prom­ise on a whim, foreign investors are left helpless, and will obviously think twice before attempting to establish themselves in India.

Hence, in order to persuade not just the Taiwanese people but inves­tors from all over the globe to invest in India, the Indian government must structure a more staunch and reliable legal system, formulate transparent investment policies and eliminate red tapism.

EB: Do you see a future for Taiwan-India trade?

India and Taiwan have signed the bilateral investment promotion and protection agreement and are also working on two more agreements— double taxation avoidance and ATA Carnet, which are expected to be con­cluded by the end of the year. We are also working on a mutual recognition agreement (MRA) to recognise the past records of electronics products and companies in both countries.  An important annual business and trade activity, Taitronics, will be organised by Taipei World Trade Center Co and the Taiwan Electri­cal and Electronics Manufacturer’s Association, in partnership with the government of Tamil Nadu and the Confederation of Indian Industry. Such events are ideal for showcasing latest technologies and innovations of industries of both Taiwan and India and should be promoted vehemently to further strengthen their bond.

Electronics Bazaar, South Asia’s No.1 Electronics B2B magazine