The Hindu Business Line : Private sector should complement government initiatives

Though a lot is being done to strengthen the Indo-Japanese relation and ensure strong economic ties in the future, little has been done to get the private sectors in both the countries together.

The Japanese private sector is yet to accept the ‘new-age’ India that other countries, mainly from the West and from East Asia, have already taken note of.

Global approach

For the first time, a Japanese think-tank, the Japan Forum on International Relations (JFIR), has advised that the Japanese should change their mindset and adapt a truly global approach, keeping in mind the ground realities in India. It also felt the need for the Japanese corporations to apply the assembly/export business model in India, which they did in South-East Asian countries.

Some of the JFIR’s key pieces of advice: The Japanese should involve more local employees in the decision-making process and place them in responsible positions, and adapt top-down approach and manufacture products that suit the local market.

The Japanese think-tank also cautioned the Japanese corporations for being unaware of India’s growth potential, calling for a diversification in trade and investment for the enhancement of economic relations between the two countries.

Trade and investment

Over the decades, there were marginal changes in the trade and investment patterns between the two countries.

More than 52 per cent of Japanese investment flowed into the automobile sector and there has been no change in the basket of exports and imports between the two countries over the decades. No matter how strong the proclamation for “strategic and global partnership” is, if there is no agreement to accelerate the trade and investment between the two countries, such partnership lacks effectiveness, JFIR has observed.

There have been a flurry of Japanese missions to India over the past few years, most of them mere fact-finding missions.

The repeated complaints of infrastructure barriers and asking for improvement of investment, in contrary to the deluge of FII funds and investment from East Asian and Western countries, created counterproductive impressions among the Indian officials that the Japanese came here only to complain.

Changing scenario

However, things are changing now! A chunk of investment — about 64 per cent since 1991 — came into the country between 2000 and 2006. From 1991 to December 2006, Japanese investment amounted to $2.2 billion. Of this, $1.4 billion flowed in during 2000-2006. But this is not enough. Another $5.5 billion, comprising 27 projects, is expected to flow over the next five years, or until 2010, according to some Japanese media reports.

A strong pillar of India-Japan relations is the official assistance by Japan. India is not only the first recipient of Japanese ODA, but also the biggest. From energy to transport infrastructure development, Japanese ODA has made a big contribution. As much as 42 per cent was committed for development of energy, which has been a huge area of concern for the growth of the economy.

Residents of Delhi can never forget how the Delhi Metro brought a big relief to the transport woes of the city. But it has now become more difficult for the Japanese corporations to obtain orders for projects in India financed through Japanese ODA.

Logistics support

India reels under an acute regional imbalance for growth and investment. The lack of logistics services not only hinders the trade and investment opportunities of the States that are located far away from ports and metros, but also affects the linkages across the developed States.

It is imperative that better logistics services should be provided to these States. Hence, the need for a dedicated Delhi-Mumbai Industrial Corridor (DMIC) and Multi-Model High Axle Load Freight Corridors between Delhi and Mumbai, and Delhi and Howrah. Japan has rightly moved forward to support this project. DMIC will cover six States, which will automatically increase the potential of investment and, hence, employment in these States.

A new dimension

Japan’s relentless effort to revive the East Asian community and India’s ‘Look-East’ policy complement each other’s goals. Japan’s support to include India in the Asean+6 grouping, and India being the frontrunner to endorse Japan’s call for CEPEA (Comprehensive Economic Partnership for East Asia) mark a new dimension in the Japan-India role in the Asian economy.

Current India-Japan ties call for strengthening by overall active participation, both by the government and private sectors.

As the JFIR rightly observes, a strategic partnership will work only when the private sectors of both countries have a forward-looking approach, coinciding with Government initiatives.

(The author is Adviser, Japan External Trade Organisation ( JETRO), New Delhi. His views are personal.)

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