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Abstract
The purpose of this paper is to show how the Indian IT industry could position itself in the Japanese market. But in order to accomplish this, it is necessary to identify the key challenges and opportunities the Indian IT industry faces in the Japanese market. The opportunities for India, as well as other IT-strong developing countries, are to supply technical talent, whose availability in Japan is constrained by the secular demographic crisis and changing educational and occupational preferences. The challenges for India are the institutional barriers, in particular, Japanese business practices that act as significant barriers to the entry of foreign skilled professionals. The paper brings out the source and pattern of foreign professionals and students in Japan as a proxy for talent. Though India’s presence in Japan is currently limited, its share of technical professionals to the total number of Indians in Japan is the highest. Also, the preconditions in the Japanese economy suggest a historic opportunity to forge a long-term, mutually beneficial, bilateral partnership between the two countries. For India, this means reducing its dependence on the US market and availing new learning opportunities. For Japan, it means access to technical professionals and managed interfacing with the global economy.
Acknowledgements
Initial research for this study was funded through an Abe Fellowship of the Japan Foundation and the Social Science Research Council, New York and the initial writing by a Senior Visiting Fellowship of the Asia Research Institute, National University of Singapore. Various versions have been presented in Copenhagen, Delhi, Kolkata, Vancouver, Toronto, Seattle, Sendai, Tokyo, Nagoya and Kyoto. Tomoko Nakamura helped with Japanese statistics, Janette Rawlings provided considerable editorial assistance and Kathryn Ibata-Arens with the financial support from Center for Global Partnership, Japan Foundation for organizing the AAS Toronto panel. I am solely responsible for all errors and omissions.
Notes
1. Keiretsu structure refers to the loose but effective diversified corporate networks based on limited cross-ownership and group membership. Each group comprises an assortment of manufacturing firms, suppliers, a trading company (sogososha) and a bank. Examples include Sumitomo, Mitusbishi and Mitsui groups.
2. In the United States, an outsourcing surge would be a typical response under recessionary conditions as firms would try to reduce costs.
3. Leng (Citation2002) documents the flows of IT talent between Taipei, Shanghai, and Silicon Valley, with the United States and Taiwan driving China. The emergent regional division of labour that I foresee would be China and India driving Japan.
4. For a critique of the neoclassical interpretation, relying on economistic pull and push factors of international migration, see Massey et al. (Citation1998).
5. Wang (Citation2008) shows that Taiwanese investments in Asia foster regional mobility of Chinese skilled and semi-skilled workers.
6. Depopulation in rural Japan is common, produced by lower fertility rates and outmigration of young people to urban areas.
7. Hence, the intuitive (often Japanese) argument that higher youth unemployment negates labour shortages is not valid.
8. Freeters (unemployed, part-time freelance workers) have been adapted from arbeiter in German or arubaito, which is part-time job in Japanese. The new social group NEET is a new development in the wider economic and social structure in Japan.
9. Keidanren, the most powerful Japanese business association, expressed such a view as well (Author’s Interview, Tokyo March 2006, December 2011).
10. An exchange rate of US$ 1 = ¥ 120 has been used for all conversions in this paper because of historical values. These numbers will be higher with today’s exchange rates, generally considered an anomaly in a deflationary economy.
11. In 2003, embedded systems (the units that contained embedded software) had a turnover of ¥51 trillion ($425 billion) (Kojima, Citation2006, p. 5). This figure is consistent with 10% of Japan’s GDP of $4.3 trillion mentioned above.
12. Thus far, investment by both government and private business has been quite aggressive. For example, between 1996 and 2001, the ratio of IT-related annual expenditures to revenues increased consistently, from 0.99 to 1.2% (JEITA, Citation2002, p. 58). The average IT-related expenditure per enterprise in 2001 was ¥ 9.4 billion ($78 million).
13. The estimated shares are 2.8% for India, 19.3% for China, 3.9% for Japan and 41.5% for the United States. The corresponding shares for 2001 were less than 1% for India, less than 1% for China, 11.7% for Japan and 50.5% for the United States (Ogawa, Citation2007, p. 5). Japan’s share of employees in the information services industry was 570,000 in 2005 compared to India’s 130,000 and China’s 90,000 (Ogawa, Citation2007, p. 6).
14. This perception was captured through numerous interviews by the author in Japan in 2005, 2006 and 2011.
15. The data are collected by a number of Japanese government ministries. Hence, the data are not always consistent. Moreover, there are a variety of definitions under which the entry of foreigners is recorded.
16. There are of course other categories, which fall under the definition of ‘professionals’ such as journalists, investors, lawyers, medical professionals and humanities and international business personnel (Japan Immigration Association, various years). These professionals largely fall under the OECD definition of human resources in science and technology but with our focus on the software and IT industry, we omit these categories.
17. Information based on interviews conducted with Indian professionals working for multinationals in Tokyo.
18. It is also noteworthy that India sends more professionals to Japan (5%) than it exports software (2–3% of total exports). This may be due to greater ‘face-to-face’ interactions demanded by Japanese clients.
19. Currently, more high-skilled Japanese citizens go abroad than foreigners come to Japan. Intra-company transferees, assumed to be highly skilled professionals, ranged from 5,000 to 6,500 foreigners in the 1990s and between 10,000 and 11,000 in 2001 and 2004 (Japan Immigration Association, various years). In contrast, nearly 53,000 Japanese nationals went abroad to take up various posts (Kobayashi, Citation2001, pp. 121–122). Similarly, nearly 200,000 Japanese citizens went abroad for studies and technical training and over 100,000 for research in the late 1990s. Anecdotal evidence suggests the emigration of young Japanese women due to professional and lifestyle reasons and marriage.
20. The total number of foreign engineering students in Japan has increased, with nearly 18,000 foreign students in 2006. This may be due to declining enrolment by Japanese students. Science and engineering departments in the United States are also known to have become dependent on foreign students.
21. Although the absolute numbers are quite small, Malaysia is noteworthy for its high share of engineering enrolment. Japan is known for its engineering industries and the outward reach of Japanese multinationals in South East Asia, including Malaysia, may be a factor in this development. Likewise, Malaysia has an official policy of ‘looking east’.
22. http://www.uni.international.mext.go.jp/about/, Accessed 2013, January 17.
23. A survey of the Japanese Language Proficiency Test in 2004 showed that there were 90,356 Chinese applicants compared to India’s 3,869 (JISA, Citation2006, p. 39). Similarly, China had more than 111 times the teachers for Japanese language than India. Few Indians, compared to the Chinese, study Japanese language or business culture. For these reasons alone, Japanese clients have not been very enthusiastic about offshoring work to India (JISA, Citation2006, pp. 38–39).
