The Hindu Business Line : `India has to get stronger with Japan at the political level'

"The new Japan is going to be politically more active in the Asian region as opposed to the last 20 years when it played a passive role... Japanese politics drives Japanese business even more than for example Indian politics driving Indian business." — MR R. SESHASAYEE, PRESIDENT, CII

Mr R. Seshasayee, President, Confederation of Indian Industry, believes that there is tremendous scope for partnerships between Japanese and Indian companies, especially as Japan's interest in India has increased. He also feels that Japanese banks, having successfully weathered the East Asian crisis, are now keen on balancing and building their books, over-weighed with Chinese assets. The time for greater cooperation between Japan and India is now, says Mr Seshasayee, who was part of the delegation that accompanied the Prime Minister, Dr Manmohan Singh, on his recent trip to Japan. In this interview to Business Line, Mr Seshasayee, who is also Managing Director of Ashok Leyland Ltd, talks about the prospects of Indo-Japan engagement.

Excerpts from the interview:

On India engaging with Japan.

We have to address Japanese economic engagement from the political angle. It is critical that India gets stronger with Japan at the political level, because it is not merely a strong power in Asia, but the new Japan is going to be politically more active in the Asian region as opposed to the last 20 years when it played a passive role. An active Japan in the Asian theatre needs to be close to India. Reciprocally, Japan also thinks that building equations with India is going to be critical. Business follows politics all over. I think they are inter-mingled.

On whether Japan has taken the view that it is time to move and what Indian businesses should expect.

Japan has taken the view at a political level. Japanese politics drives Japanese business even more than for example Indian politics driving Indian business. Japanese businesses want to see consonance in politics and business when they deal with country level. To some extent, therefore, India is going to gain at some loss to China.

On why Japan Inc has held back investments.

Business with India had been held back primarily because Japan has taken quite some time to accept and acknowledge the India growth story. It is probably because Japanese businesses are more cautious. They are very deliberate in their actions. They take time to decide and when they decide they move fast. They do all their analysis, they do all their forecasting and get things right. They know the precise answers for the future and they move. I think that is the kind of approach that has been manifest in their approach to India. Make sure that this is not fickle, that this is durable and we are getting into risks which are manageable and then we move.

The Japanese brand image is extremely high in India. It is respected for its quality, its business values, its value to customers. That brand value is grossly under-leveraged in India. Japanese businesses have not shown an inclination to leverage that brand and come in. But when they do, it will be a far more rapid entry than other competitive countries and products.

On the implications for Indian business.

Products made in Japan are expensive. The only way to solve that problem is for them to get into partnership in India and manufacture in India. This has two components. Manufacturing in India with Japanese technology to bring down cost is one. Doing that in partnership with India is the other. (In the past) some large Japanese companies have come into India on their own and some through partnerships. The sum total of the Japanese experience so far, plus the fact that Japanese companies still want to understand India better, would mean scope for partnerships for Indian companies.

Indian business has been more tuned towards the West in terms of partnerships. Other than the automotive industry, we have not been sufficiently tuned to partnerships with Japan. When there is a larger Japanese presence here and success stories of (companies) being on their own, you will begin to see a lot more coming on their own.

For some years to come, Indian business can and should look for partnerships. Ultimately partnerships will come about on the basis of each partner bringing to the table something that is unique and complementary to what the other partner is bringing. If you say, I have got a partner who has got the capital, the management and the technology and I bring in no more than low level environment management skills, partnerships will be unequal. You can't get a partnership that is equal unless the Indian company can say that it brings globally benchmarked management skills. If you take the Hero Honda example, the Indian partner has demonstrated the ability to bring to the table something which is valuable.

On what it means for Indian business, in terms of increased competition.

For 10 years Indian businessmen are going in droves all over the world and saying come and compete. Come and invest in India. Increase trade. Now why would we be saying this? Indian business at a sublime level understands that only with higher level of external trade engagement can you hope to get the market growing and create space for everybody.

At a sectoral level you are looking for Japanese investments to come in because people are looking for an opportunity to partner and get into business space, which is available to them only with the technology from Japan.

Indian Inc is asking for trade engagement because there is an eagerness to improve the competitiveness. You are looking for partnerships and therefore you are going and knocking at doors. That is going to be unavoidable for a long time. At the base of that is the fundamental issue that a large part of Indian industry still cannot stand on its own to fight contemporary technology. And therefore our hunger for technology. This is no different to another developing country such as China or Thailand.

But as the Asian markets mature, we get a larger market footprint here, and we start maturing in our development efforts, in the next two decades, you will begin to see that you don't need to look for technology because you have the technology competitiveness. Today you have a conversion competitiveness.

On the Japanese's reluctance to transfer technology.

Even today the Japanese are looking at technology as a relatively non-tradable kind of strength. I think in their own enlightened self-interest they have to change. It is legitimate to look for protection of intellectual property and so long they are convinced that there is a legislation to protect intellectual property and a reasonably fast and fair law enforcement process, they must recognise that unless they transfer technology they cannot expand. It is for us to convince them that such an environment exists in India. Such an environment does exist in terms of legislation on book, but we need to also deliver little more speed in our enforcement process.

There is another angle to the whole thing that is coming not from business but from the banks' side. Japanese banks have traditionally supported Japanese businesses and have followed them in their overseas ventures. I suspect that the Japanese banks' books have an overweight of Chinese assets. If they need to counterbalance that, then I think Japanese financial institutions need to build a portfolio of Indian assets so that their books are more balanced.

This is also coming at a time when Japanese banks have come out of the East Asian aftermath and are now in a position to build their books. They are looking to expand as against the last decade where they were restructuring and cleaning up the balance sheets.

That convergence — the time convergence where they are looking at expansion on the one hand and India emerging as a likely option for them to build a balanced book — is a happy one. There is first class convergence at the political level, at the business level and at the banking level.

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