Looking East optimally

Japanese private investors shy away from India because of our poor infrastructure and opaque legal and taxation systems.

The victory of Shinzo Abe’s Liberal Democratic Party (LDP) in the Japanese parliamentary election and the forthcoming India-Asean summit in New Delhi appear to work to India’s advantage at the present transformative period in the regional and international system. If Abe’s return to office as prime minister raises hopes and expectations – like they did once before in the 2006-2007 period – it is the Asean discourse that promises to bring tangible results. Abe’s victory is long on rhetoric while the low-key Asean offers much in substance.

For a start, it is important to understand the significance of Abe’s victory. The Indian commentators have been quick to conclude that Abe acquired a massive and historic verdict in last weekend’s election. Whereas, the truth is that he has for a second time walked through the revolving door for prime ministers in Japan. (Japan has had seven prime ministers in as many years.) Can he shut that door tight and complete a full term in office?

It involves weaning Japanese politics away from the “vicious cycle of backroom politicking, excessive dependence on public spending and social conservatism,” as a Japanese observer noted. But Abe is neither a political heavyweight nor a seasoned pro, and his main asset is his blue-blooded political pedigree, which may not be enough at a time when the political waters are so deeply troubled. His biggest challenge will be the economy that has been in the rut for the past two decades.
The LDP’s recipe was to increase public spending and ease monetary policy to boost consumption but Abe offers no new thinking on much-needed structural reforms. Also, China’s growth is integral to Japan’s economic revival and Abe’s campaign rhetoric of strong leadership in foreign affairs and his nationalist rallying cry for Japan to defy China and South Korea over the disputed islets in the East China Sea are plainly unrealistic. Again, the North Korea problem compels Japan to work with China and South Korea.

Suffice to say, Abe’s hands are full and he is in no position to create ‘broader Asia’ or a ‘confluence of the two seas’ (Indian Ocean and the Pacific), or the ‘arc of freedom and prosperity’ along the outer rim of Eurasia, as our pundits fancy. India is entitled, though, to its lingering hopes that this time around, Abe will redeem the pledge for an interest-based bilateral relationship. Clearly, the locus is on economic and business interests and the two governments are indeed seriously committed, but then, Japanese private investors and businessmen shy away from India, disheartened by our poor infrastructure, non-transparent legal and taxation systems, harsh living conditions, etc. and won’t stick it out like their South Korean or Chinese counterparts.

Public concern

The LDP’s electoral platform pushed for a resumption of Japan’s dependence on nuclear power, but deep-seated public concern continues in Japan and Abe will be skating on thin ice if he makes hasty moves to reopen the 48 nuclear reactors which got shut down in the aftermath of the Fukushima disaster. In sum, Abe’s mandate shouldn’t be interpreted as a ‘game changer’ auguring the acceleration of nuclear and defence cooperation with India.

In comparison, the India-Asean summit in New Delhi on Thursday holds out the high probability that the ties between and India and the regional grouping is all set for a big surge. India is already involved in a variety of interlocking Asean-initiated dialogue and cooperation frameworks, which straddle the political-security, economic and socio-cultural areas. Meanwhile, the conclusion of the India-Asean Free Trade Agreement in the services and investment sectors, which is on the cards, offers tangible benefits to our economy.

The FTA with Asean in goods signed in 2009 boosted the trade to $79 billon as against $32 billion previously, and the trade target of $100 billion by 2015 seems achievable. Besides, the door opens to a magnificent vista – the Regional Comprehensive Economic Partnership covering 16 countries (the ten Asean countries plus India, China, Japan, South Korea, Australia and New Zealand), which promises to be one of the largest free trade areas in the world.

An unspoken running theme in India’s relations with both Japan and the Asean is China’s rise, and woven into the tapestry is the thread of the United States’ ‘rebalancing’ in Asia, which threatens to dominate. Three things must be noted. One, Washington’s campaign to rally Asian region as a platform to ‘contain’ China has not met with enthusiasm among the countries of the region. Second, Asean comprehends that a collaborative relationship between India and China benefits Southeast Asia and is willing to offer itself as a prime location and to act as a bridge between North East Asia and South Asia.

The third aspect concerns the interplay of competition and cooperation between India and China. Ensuring inclusive and sustainable growth is going to be the preoccupation of the two countries for the foreseeable future and both are acutely conscious of the weight of their problems. Thus, the fashionable determinism that the two countries are bound to be strategic adversaries is rather misplaced.
Competition between India and China may be unavoidable, but conflict is not. Neither side would cede any strategic advantage to the other, but conflict is not inevitable. Both have shown the resilience to co-exist peacefully and to discuss issues in a candid and constructive manner and even recognise the need to partner each other to shape an international system that can accommodate their common interests.  

(The writer is a former ambassador)