The annual Indo-Japanese summit meeting could not have come at a more propitious time. Given the backdrop of recent standoff with China over its incursions across the line of control in Ladakh, Beijing’s growing stridence on its claims over the Senkaku islets in East China Sea currently under Japanese control and its unrelenting inflexibility over sovereignty of islands in the South China Sea, Prime Minister Manmohan Singh’s visit to Japan provided an appropriate setting for the two countries to chart a new course in their relationship, which appeared to have been losing steam.
Although China will remain the elephant in the room, there is a host of other issues of common interest and concern that deserve a lot more attention.
Fortunately for India, the drift that Japan has witnessed in the last few years with six prime ministers in five years appears to be over with Shinzo Abe successfully staging an unprecedented come back at the helm of affairs with a clear mandate. Unlike in his previous stint, Abe is far more resolute and confident and is willing to take bold steps on both economic and diplomatic fronts. He has unleashed his own brand of an economic revival programme, popularly called Abenomics, which may be risky but seems to be working. A reviving Japanese economy should be good news for India. There are three specific areas that have figured prominently one way or another during the prime minister’s interactions with his Japanese counterpart.
One, India has been the largest recipient of Japanese aid for the last several years but in terms of investments, though steadily growing, they have not come up to expectations. Compared to more than US$ 100 bn. that Japan has invested in China, it is hardly 14 bn. in India till 2012, which constituted less than 4 percent of Japan’s total outbound investments. In fact, Singapore has invested in India more than Japan. The fruits of the Comprehensive Economic Partnership Agreement (CEPA) between India and Japan that became operational in August 2011 are yet to be seen. The bilateral trade at $18 bn. last year was about 5 per cent of Japan’s trade with China.
To be sure, it is not that the Japanese are not interested but it is a fact that India is far more difficult place to do business besides woefully poor infrastructure and an enduring licence Raj system and other associated evils such as red tape and corruption. The much touted mega project, a brainchild of Japan, the Delhi-Mumbai Industrial Corridor, signed in 2006 is yet to take off and similarly the progress on dedicated rail freight corridors that Japan has committed to fund connecting Delhi with Mumbai and Kolkata is excruciatingly tardy. Japan is also keen on developing the Bengaluru-Chennai Industrial Corridor but it is also likely to see the same fate as DMIC. Moreover, India is still an outlier when it comes to extensive East Asian production networks where Japanese are deeply involved and hence unless it integrates with that region, India will remain unattractive to Japanese investors. Connectivity is the key but once again unlikely to take off anytime soon.
Two, a quick agreement on civilian nuclear cooperation (talks stalled consequent to the March 2011 Fukushima accident) is critical for two reasons. Firstly, Japan has the most advanced technology in this sector and secondly, except Russian, most other major global reactor building companies have close links with Japanese companies: Toshiba owns American Westinghouse, and General Electric (U.S.) and Areva (French) have close technical tie ups with Hitachi and Mitsubishi respectively. Further, Toshiba alone has more than 30 percent of global reactor building capacity. Hence, India cannot hope to forge meaningful cooperation with any other without an agreement with Japan. True, despite continued scepticism and complete closure of all nuclear reactors in Japan, Abe has been actively promoting Japanese reactors. Besides Vietnam, he recently signed agreements with United Arab Emirates and Turkey. India is a huge market Japan cannot afford to miss. Fortunately, the prime ministers have committed to an early agreement.
Three, with a common China factor in the backdrop, intensified security cooperation is another key area that has figured quite prominently in the discussions. The India-Japan ‘strategic partnership’ began to take off only in 2009, but the progress has since been stupendous. There are currently some 8 bilateral institutional mechanisms including annual prime ministerial meetings, Two-Plus-Two Talks, and military-to-military talks. The low key coast guard exercises have been upgraded to the navy-level in view of rapidly changing maritime security environment in the Indo-Pacific region where both have high stakes, which now is becoming the global centre of gravity. There are a number of opportunities for them to work together in addressing innumerable non-traditional security challenges and also in Myanmar and other countries of Southeast Asia.
What is noteworthy is that New Delhi could not have asked for a more favourable line up of top Japanese political leadership: PM Abe, Deputy PM Taro Aso, Secretary General of the ruling Liberal Democratic Party, Shigeru Ishiba, and several other known Indophile cabinet ministers. Time is most opportune to take full advantage of this.
While it is true that for more than two decades the Japanese economy has been mired in virtual stagnation buffeted by deflation and mounting debt, it would be foolhardy to undermine its innate strengths: Japan is sitting on a mountain of more than $18 trillion of private savings. It is a major supplier of capital across the world, and it continues to be a leader in several advanced technologies. Tokyo has also been loosening its self-imposed restrictions on export of arms and dual-use technologies. It means a huge opportunity for India to work with Japan in certain niche areas. The bottom line is that Japan has been instrumental in transforming East Asia with its generous investments and technology transfer and the same thing can happen with India too provided it gets its act together and plays its cards well.
(G V C Naidu teaches at Jawaharlal Nehru University, New Delhi)