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K. Venugopal

Tokyo , Dec. 15

The Prime Minister, Dr Manmohan Singh, offered to simplify the tax regime, reduce import tariffs, improve the infrastructure and eliminate bureaucratic delays as he wooed Japanese businessmen to come and invest in India.

"I am aware of the concerns Japanese investors have about doing business in India," he said. "We have made substantial progress in each of these areas, but I am aware that there is more to be done. We will do our best."

Speaking at a luncheon jointly hosted by the five chambers of commerce and industry in Japan, Dr Singh said he was personally monitoring all infrastructure projects each quarter.

India needs an investment of at least $320 billion in infrastructure in the next five years.

The total investment need would be closer to $500 billion.

This required public, private, domestic and foreign participation, and the Government would like to promote public-private partnerships by offering "viability gap funding", and access to long-term funds through the Infrastructure Development Finance Company.

Slow pace

Even as he promised to make it easier for Japanese investors, Dr Singh could not hold himself back from taking a dig at the slow pace of involvement in India. "I have been surprised to see Japan lose ground in India during the 1990s to other East Asian and South-East Asian economies, both in terms of foreign investment flows and trade," he said.

He reiterated an example he provided to members of the Diet, Japan's Parliament, of how India's trade with both China and South Korea was booming and grew last year at around 40 per cent with both. India's trade with China was nearly three times that with Japan; South Korea's was almost equal to Japan's trade with India.

"It is a fact that South Korean consumer brands have moved aggressively into India and their brands have very high recognition value among our consumers." He said. "The challenge is before you. I invite you to take it."

Survey findings

Earlier, welcoming him, the Chairman of the Japan Chamber of Commerce and Industry, Mr Nobuo Yamaguchi, said he was pleased about the launch of negotiations toward a Comprehensive Economic Partnership Agreement, and asked Dr Singh to demonstrate "his characteristic strong leadership" for an early agreement.

The Japanese business community had high hopes for and great interest in India. "But to increase investment by Japanese corporations, however, your nation still needs to make its business environment more attractive by, for example, implementing infrastructure development."

Dr Singh later provided a part of the answer. "I urge you to weigh the initial problems of entry against the long-term profitability and stability of doing business in India." He pointed to the results of a Japan External Trade Organisation 2005 survey, which found that the profit prospects of Japanese manufacturing companies were the best in India compared to ASEAN countries.

How an EPA is different from an FTA

When two countries sign a free trade agreement, they commit themselves to reducing duties that make it costly to import goods. For decades, countries have sought to make imported goods costlier than similar goods produced locally in order to protect domestic manufacturers.

Several rounds of negotiations under the World Trade Organisation have resulted in all countries gradually reducing these import taxes. Yet some countries that were unhappy with the pace and scale of reduction of these taxes have gone ahead with bilateral free trade agreements aiming to quicken the elimination of tariffs. Scores of bilateral free trade agreements have been put in place in recent years.

The Economic Partnership Agreement that Japan is pursuing with India is of a piece with what it has initiated with many countries in East Asia. The CEPA concerns not just freeing trade but also facilitating the exchange of services such as software and banking, promotion of investment in either country by removing discriminations against foreign investors, the protection of their intellectual property rights, the improvement in the business environment and cooperation in a host of fields such as science and technology, agriculture, tourism and the environment.

Japan has so far signed EPAs with five countries (Singapore, Malaysia, Mexico, the Philippines and Thailand) and is in negotiations with another five.

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