India’s Got Talent…for Japan

There is a popular saying among Indians that ‘Dubai is the best-run Indian city’. Hundreds of thousands of Indians, as well as others from the Indian subcontinent and Southeast Asia, have been making a living in the Gulf region through temporary contract labour.

They are mostly unskilled or semi-skilled workers engaged in the provisioning of a variety of services such as construction, retail, building maintenance and security, teaching, healthcare and domestic help.

There is a popular saying among Indians that ‘Dubai is the best-run Indian city’. Hundreds of thousands of Indians, as well as others from the Indian subcontinent and Southeast Asia, have been making a living in the Gulf region through temporary contract labour.

They are mostly unskilled or semi-skilled workers engaged in the provisioning of a variety of services such as construction, retail, building maintenance and security, teaching, healthcare and domestic help.

The international movement of workers to the Gulf represents a new phase of capital accumulation in which unskilled and semi-skilled labour moves to where capital is generated by, and invested through, extractive industries.  This in itself is not a novel development since, historically, labour has been mobilised to serve the interests of capital.

What’s different today is the scale of movement of such workers across international borders and the growing international mobility of technical and high-skilled professionals. Unlike previous flows of people, those of today are highly regulated by governments through immigration policies and visa regimes.

In this context, Japan provides an interesting case. So how has Japan adjusted to these flows of people, and especially to the global mobility of technical professionals?

The information technology (IT) industry is one of the most globalised high-value services sectors. Most modern economic activities use IT and Japan is no exception. Japan’s reputation for its manufacturing has been resurrected by the intensive use of high technology powered by IT and software.

India has been a major supplier of IT talent and software services to the world economy, mainly to the United States, United Kingdom, Western Europe and Singapore.

Japan had not been a receiving country for Indian IT services until recently. This is largely because Japan has been closed to immigration, its business practices favoured local long-term suppliers and for a long time it did not follow international technological standards. Such regimes and institutional arrangements have served Japan very well for nearly four decades since the end of World War II, but have now become hefty barriers to becoming globally flexible.

Japan now needs to make adjustments, such as securing high-skilled technical professionals, while it continues to farm out its manufacturing industries to lower wage economies in Asia. Otherwise, its current economic malaise, including the dramatic shifts in labour markets, is likely to remain.

The demand for technical professionals in Japan has arisen because of the structural shift away from manufacturing to services. Demographic shifts accompanying industrialisation and social modernity have also resulted in declining fertility rates in advanced capitalist countries, creating imbalances in labour markets for both unskilled and skilled labour.

With the wide variety of services now internationally traded rather than consumed at the point of production, the demand for technical professionals globally has increased. This means that the physical movement of software professionals to the United States, backed by offshore development sites such as those in India, arguably improves firms’ competitive advantage.

Japan exhibits one of the worst cases of a demographic crisis, with population growth below the replacement rate. In this scenario, ensuring the availability of workers, service providers for the elderly and recruiting and retaining foreign technical and non-technical professionals to sustain Japan’s high technology sector has become paramount.

The good news is that there are signs of gradual improvements. Japan has overhauled its immigration policy following labour shortages among small- and medium-sized enterprises in 1990. Since then it has introduced further reforms to attract high-skilled labour through a points based system similar to Australia’s program for recruiting foreign skilled professionals.

As recent research shows, the United States is more open to foreigners than Japan. While India is an important contributor of technical talent to the world economy, the position of Indian professionals in Japan is only a small fraction of that in the United States.

However, the share of highly skilled Indians relative to the total number of Indians was the highest in Japan, indicating that Indian professionals see Japan as an important place to work.

There are now identifiable residential clusters in the Greater Tokyo and Yokohama areas where Indians live, Indian international schools have been established and Indians living in Japan are able to bring in their elderly parents. This suggests there is a growing, albeit small, Indian professional diaspora in Japan. We know from other experiences that technical diasporas are globally networked, facilitate flows of knowledge and skills, and contribute to local innovation dynamics.

It is evident that Japan has been responding to the competitive pressures emanating from the world economy by gradually taking in foreign professionals. Bilateral interactions between India and Japan are increasing. With the rise of China, the economic partnership between Japan and India will likely grow stronger.

The presence of Indian technical professionals in Japan will help Japan adjust to the imperatives of the world economy and secure the vital talent that is so critical to both Japan’s competitiveness and the diversification of India’s IT export markets.

Why Japan needs India’s talents is republished with permission from East Asia Forum