Prime Minister Dr. Manmohan Singh paid an official visit to Japan from 21-23 October. This was the PM’s second bilateral visit to Japan where he attended the annual summit between the two countries.

Agenda

Prime Minister of Japan Taro Aso and the Prime Minister of India, Dr. Manmohan Singh held detailed talks in Tokyo as part of the Japan-India Annual Summit. Both shared the view that Japan and India share common values and interests, therefore they must advance bilateral as well as regional cooperation in multilateral areas to promote peace, stability and prosperity in Asia and the world. The two leaders reaffirmed the importance of the Strategic and Global Partnership established in 2006 for harnessing the full potential of Japan-India relations. A roadmap for strategic and global partnership was laid out during his visit on the 22nd of August 2007.

They reviewed the implementation of the Roadmap for New Dimensions to the Strategic and Global Partnership and pledged to continue their efforts to broaden and deepen the relationship on the basis of the shared congruence of interests to develop it as an essential pillar for the future architecture of the region.

The two Prime Ministers welcomed cooperation in the field of security between the two countries and issued a Joint Declaration on Security Cooperation between Japan and India. Japan has inked a maritime cooperation agreement with India similar to the one it signed with Australia.

Underscoring the importance of exchanges at the cultural, academic, youth and people-to-people levels, they expressed satisfaction at the enhanced people-to-people exchange between the two countries under the Aso Programme and Japan-East Asia Network of Exchange for Students and Youth (JENESYS) Plan.

The two Prime Ministers positively appraised the work of the Japan-India Working Group to explore collaboration in establishing a new Indian Institute of Technology (IIT) in Hyderabad, with Japanese assistance. The IIT will be a symbol of joint efforts in promoting educational excellence in India, through Japanese contributions.

The PM also called on the Emperor and Empress of Japan. Other dignitaries who visited the Indian PM included the Foreign Minister of Japan, heads of the Democratic Party of Japan, Kometo party and former Prime Minister Mori.

Business Sessions

The Indian PM addressed a business lunch by Keidanren, which is the apex chamber in Japan. The business lunch had the presence of leading CEOs from major Japanese corporations who interacted with the PM. This is the first time Keidanren is organising an event like this for a visiting Indian Prime Minister.

Prime Minister Manmohan Singh stressed that Japan needed to raise its investment profile in India. He referred to India’s rising bilateral trade with China where the annual increase itself was more than the whole of India’s total trade with Japan. The second India-Japan Business Leaders’ Forum was also held in Tokyo, in which Mukesh Ambani led the Indian side. The business leaders made concrete suggestions and proposals to the Government for enhancing economic and commercial partnership.

Japanese Investment in India

Japan’s trade with India in 2007 was about 1.21 trillion yen (US$11.8 billion), according to the Japanese finance ministry, slightly more than 4 percent of Japan’s trade with China. This year it will touch US$15 billion and India has set a target of US$20 billion dollars by 2010.

To augment trade relations, separate dialogues are going on in areas of high technology, energy, functional matters, civil air services etc. India was the single largest recipient of Japanese ODA since 2004. Last year India received about 30 percent of Japanese ODA abroad.

Delhi-Mumbai Industrial Corridor

Both countries are now working for a Comprehensive Economic Partnership Agreement. The CEPA covers dedicated freight corridors, both on the Western side and the Eastern side. The Delhi-Mumbai industrial corridor is part of the proposed freight corridor. The industrial corridor will have nine investment regions dedicated to industries like chemicals and engineering, as well as three ports and six airports. During the visit, the first phase of the project was cleared; now the total commitment from Japan is a weighty US$US4.7 billion.

This mega infrastructure project is a 1,483 km ‘dedicated freight corridor’ between Delhi and Mumbai providing high-speed connectivity for high-axle-load wagons all along the industrial corridor on either side of the freight corridor. The industrial products will typically travel on the freight corridor to the ports, satisfying Japan’s desire for better infrastructure to do business in India.

Delay in FTA

The Japan-India Free Trade Agreement is on hold for many reasons. India is reluctant to give blanket tariff concessions, ostensibly to protect the interests of its domestic manufacturers. Japan insists that India should allow Japanese inputs duty-free into the country and in turn they would allow Indian pharmaceuticals and agricultural products into Japan, which are currently barred by Japanese non-tariff barriers. Once the FTA is in place, Japanese carmakers would be able to import parts duty-free and then produce vehicles in India cheaper, to cater to overseas markets. But the auto part makers in India oppose opening the market to imported components.

Japan’s free trade agreements with ASEAN and eight other countries allow parts of a product to be made anywhere, assembled anywhere, and sold somewhere else. The Japanese are able to produce each component where it is deemed to be cheapest, and coordinate production in factories in different East Asian countries as if they were one country. India is not keen on this– understandably because unlike countries who have small domestic markets, India has a huge internal market.

Despite reservations from both sides, India and Japan may finally compromise to make the FTA possible. Once that happens, India expects Japanese investment can flow in on a massive scale.

Japan External Trade Organization’s in its annual survey of Japanese firms operating in ASEAN and South Asia has already identified India as the region’s most attractive destination in the medium term.

Nuclear Pie

Japan’s Hitachi Ltd and Westinghouse Electric, a unit of Toshiba Corp is keen to compete with global giants like General Electric Co and France’s Areva for a share in India’s nuclear energy pie. Japan’s Daiichi Sankyo Co earlier this year acquired control of Indian drugmaker Ranbaxy Laboratories Ltd. More and more Indian firms are keen on a larger share of Japan’s generic drugs market—the world’s second-largest after the United States.