Japan writes to India on problems faced by its companies here

Japan is putting pressure on India to sort out taxation, labour and other problems being faced by its companies such as Toyota, Mitsubishi and Honda.

Japanese Ambassador to India Takeshi Yagi has sent a letter to the Prime Minister’s Office urging early solutions to issues affecting its companies and fast-tracking proposed investments, especially in the ambitious industrial corridor projects, a Government official said.

Earlier, notes were also sent to the Finance and Commerce Ministries by the Japanese Embassy stressing on the need for a predictable and transparent business environment.

“We are aware of the problems related to various Japanese companies that have been raised by the Japanese Ambassador. We have asked different Ministries and Departments that are involved to act on them,” a Department of Industrial Policy & Promotion (DIPP) official told Business Line .

Labour issues Labour unrest has emerged as a big problem affecting Japanese investments in India. Toyota Motor’s Indian arm temporarily shut down two of its plants near Bangalore following strikes by some employees who were protesting delay in salary hikes. Suzuki Motors, too, faced violent labour protests in 2012 that led to one death and several arrests.

Retrospective taxation is another issue bothering the Japanese. The Finance Ministry has placed tax demands on certain Japanese companies, which includes a bill of $2 billion on Mitsubishi and about $600 million on Honda.

“Japan has renewed its attempts to sort out the tax related issues with the BJP Government, especially since the new regime has been saying that retrospective taxation is not a good idea,” the official said.

Early clearance Japan is also seeking early clearance for its proposed investments in the ambitious industrial corridor projects. Last month, the Japanese Ambassador had led a group of senior officials from investment and project funding agencies of the Japanese Government for a meeting with Industry Secretary Amitabh Kant to discuss investment and funding plans in the industrial corridors.

Japan has committed $4.5 billion for the Delhi Mumbai Industrial Corridor project and is also considering giving financial and technological support to a similar industrial corridor between Chennai and Bangalore.

The projects have, however, suffered a set back following tough requirements under the new Land Acquisition Act. The DIPP has asked the Rural Development Ministry to make exceptions for Government-led infrastructure projects.

India is the biggest receiver of Official Development Assistance from Japan and Indian companies are also the second biggest receiver of assistance from Japan Bank for International Cooperation, after the Chinese.

Japan wants to intensify its ties with India also to counter Chinese influence in the region. Japan’s Chief Cabinet Secretary Yoshihide Suga told a press conference in Tokyo recently that Modi was very friendly toward Japan. “We expect to further deepen our political and economic relation with India,” Suga said.

In his telephonic conversation with Modi after his election victory, Japanese Prime Minister Shinzo Abe said that he would like to work closely with Modi towards further development of the Japan-India Strategic and Global Partnership.

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