Introduction
The business leaders from India and Japan welcome the expanded cooperation between our two countries in infrastructure development, trade, and investments. The Japan-India Comprehensive Economic Partnership Agreement (CEPA), which has played a vital role since it came into force in August 2011, is a symbol of the progress being made. The number of Certificates of Origin issued in Japan for CEPA has reached almost 30,000 so far. Both countries should continue to use the CEPA as a platform for enhancing free trade.
The Japanese and Indian business leaders believe that the two countries should cooperate further to contribute towards leading Asia to overcome the impact of the European financial crisis and slowdown in other developed countries, thus perform its expected role as the engines of growth in the world economy.
Japanese enterprises are showing growing interest in India. The number of Japanese firms with operations in India is increasing, and they are participating in a wide range of sectors. As of October 2012, a total of 926 Japanese firms have set-up operations in India, an increase of 114 over the same month of the previous year. Several Indian IT and pharmaceutical companies are endeavoring to gain foothold in Japanese market.
Following the last meeting in December 2011 in New Delhi, the Japanese and Indian business leaders exchanged views towards strengthening and deepening trade and investment between Japan and India, based on the universal values of democracy and free trade. The business leaders submit the following report to the Heads of the two governments.
1. Achievements since last meeting
Both sides welcomed following achievements that have strengthened the bilateral economic relationship and show hope for further progress.
- (1) Permission for Japanese Mega banks to open their branch offices at city centers
- (2) Subscription of Social Security Agreement
- (3) Approval of FDI in multi-brand retail in India (10 states and union territories)
- (4) Launch of an India-Japan US $ 4.5 billion DMIC facility, equity participation and provision for inclusion of board members from the Japanese government to the DMICDC
2. Promoting Effective Use of the Japan-India CEPA for Improving the Business Environment
CEPA, as an important institutional infrastructure, is essential to the task of further accelerating and consolidating business activities between Japan and India. Japanese side stressed that it is still necessary to further promote understanding of the CEPA provision among the Indian customs authorities. The Sub-Committee on Improvement of the Business Environment set up under the CEPA framework, of which the first meeting was held on October 16, 2012, should be held periodically to further improve the business environment.
As mandated by CEPA, business leaders urge the sectoral regulatory bodies of the two countries to initiate discussions on disciplines of domestic regulation and work towards recognition of qualifications with a view to facilitate bilateral trade in Services.
Indian side urged that there is a need to address the concerns of India regarding access for marine and agriculture products in the Japanese market and removal of non tariff barriers. Also, Indian side urged to evolve a mechanism to streamline the procedures for testing, inspection, record maintenance etc. of food exports, particularly the seafood, from India to Japan. Particularly important perspectives in this context include developing Indian industries to become internationally competitive and promoting investment by Japanese SMEs in India by creating favorable business conditions. Japanese SMEs would create more jobs for the young people in India and contribute to the development of supporting industries. Japanese side emphasized the importance of resolving outstanding business environment issues quickly including: simplification of land acquisition; early implementation of Goods and Services Tax; resolving inconsistencies in tax collection between the central and state governments; rectification of discrepancy between real profit and assumed profit as regards deemed taxation; providing one-stop service for customs and interstate trade; removing restrictions in granting permit to foreign financial institutions to operate in city centers; and relaxing restrictions on External Commercial Borrowing (ECB); extending deregulation in financial and insurance sectors.
Business leaders from both sides welcomed the Social Security Agreement between Japan and India, which was agreed upon in May 2012 and subscribed in November 2012. India has completed all procedures relating to the implementation of Social Security Agreement and also notified the same. The business leaders urged the Japanese government to complete the procedures on its part and notify them at the earliest so that it actually starts contributing towards improving the business environment and facilitating movement of natural persons across the two countries.
The business leaders also welcome the decision taken by the Indian government to allow FDI in multi-brand retail with nationwide application of the law.
The Indian Services sector has a strong interest in the Japanese market, especially in fields such as IT, IT Enabled Services (ITES), and professional services. Indian pharmaceutical companies with strong global reputations and solid records have also shown interest in accessing the Japanese market. The Indian side expressed hope for steps to bring about improved access to Japanese markets so that Indian companies can operate on equal terms with Japanese companies within Japan.
In order to expand personnel exchanges between the two nations, smooth procedures for acquiring visas are essential. With human exchanges between Japan and India expected to expand further in the near future, the business leaders called for further simplification and expediting the procedures for issuance of business and work visas.
3. Importance of Infrastructure Development in India and Promotion of Japan-India Cooperation
Business leaders of Japan and India appreciate the direction set out in the Indian government's 12th Five-Year Plan, sharing the view that the development of industrial and social infrastructure, including power supply, roads, railways and ports, along with the development of logistics and industrial parks, is an urgent requirement to promote the development of industry in India.
The Indian business leaders expressed their view that promoting DMIC-related projects within the comprehensive over-arching framework of the National Manufacturing Policy of the Government of India will bring major benefits to both sides.
Both sides agreed that swift and steady progress should be encouraged to complete the construction of the Dedicated Freight Corridor (DFC) between Delhi and Mumbai. In order to promote steady progress of the Delhi-Mumbai Industrial Corridor (DMIC) and projects proposed under the concept of the South India core nodal development, the business leaders of both sides agreed to continue to urge both governments to use forums such as ministerial-level Public-Private Policy Dialogue, the DMIC taskforce at the vice-ministerial level, and sector-specific discussions for problem solving in order to push ahead quickly with projects by Japanese companies and harness Japanese technology, expertise, and long-term funds in all aspects of infrastructure development. Both sides welcomed the launch of an India-Japan US $ 4.5 billion DMIC facility, equity participation by the JBIC and provision of inclusion of board members from the Japanese government to the DMICDC and measures taken by the Indian government to build a positive business environment. These measures would enable the flow of innovative cutting-edge technology in a range of infrastructure sectors including smart community development.
The two sides need to take measures for pushing forward the Chennai Bengaluru Industrial Corridor. In addition, both sides expressed hope that work on other projects such as Mumbai-Bengaluru Industrial Corridor would also start at the earliest.
The Japanese side made a suggestion for promoting an energy-conserving and environmentally conscious society in India. This includes improving the effectiveness of legal systems, and regulations related to each project and fiscal incentives to achieve pollution free development.
The business leaders agreed to continue to request the governments of Japan and India to relax legal restrictions relating to infrastructure development, provide financial support, and facilitate PPP participation. This will require establishment of a forum to allow regular dialogue between government and the private sector.
For Japanese companies to help with the shortage of electricity in India, it is essential to accord smooth approval, secure enough amount of major fuel such as natural gas and coal and conclude medium and long-term contracts relating to generation, transmission, distribution, and selling of electric power to the consumers.
4. Strengthening Cooperation in Strategic Areas
The two sides recognized the need to expand bilateral energy cooperation on a commercial basis and called for further exploring the ways forward to showcase Japanese technology in energy sector for wider dissemination in India. Indian side requested that the decision to organize exhibitions of Japanese environmental technologies in India should be implemented to enhance cooperation in energy sector. The Japanese and Indian business leaders also hope for steady progress in the India-Japan Energy Dialogue.
In addition to fields such as, automobiles, machinery, and the chemical industry, emphasis also needs to be given to the introduction of cutting-edge technologies in such areas as electronic hardware, telecommunication equipment, heavy industries, rail transport management systems, as well as technological exchanges in agriculture and environmental management.
As part of improvements to infrastructure in the power sector in India, Japan-India cooperation in constructing nuclear power plants is strategically important. To facilitate this process, the business leaders urge the two governments to work towards greater cooperation in this regard, including signing a nuclear power agreement, while continuing to secure the maximum levels of nuclear power plant safety.
Given the global competition for scarce resources, the business leaders hope for new joint India-Japan initiatives to develop strategically important resources in India, including rare earths.
Development of high-caliber human resources as a form of "soft infrastructure" will be essential for promoting joint projects in strategic fields. The business leaders recognize the importance of enhancing cooperation to promote skills enhancement through initiatives like training and certification, bilateral student exchanges, and corporate internships. These efforts will be built on the basis of Japan-India human resources cooperation, which is already achieving impressive results.
The Indian side emphasized the need for Japanese investments in setting up skill development centers in India, as was discussed during the recent government level talks in Tokyo.
5. Japan-India Cooperation in the Asia-Pacific Region
Japanese and Indian business leaders agreed that the economic integration of ASEAN targeted for 2015, and the ongoing process of democratization in Myanmar and that country's return to the international fold, offer considerable opportunities for cooperation in trade and investment between the two nations to expand in the region. The business leaders are confident that the India-Japan Strategic and Global Partnership will have a positive effect on the economic development of the Asia Pacific region.
Japanese and Indian business leaders agreed to continue joint initiatives towards making the ongoing Regional Comprehensive Economic Partnership (RCEP) negotiations most beneficial in comprehensive terms. This partnership will contribute towards the expansion of production networks and strengthen supply chains in the region through liberalization of trade in goods and services and investment and standardization of Rules of Origin.
Conclusion
Japan and India have historically shared strong bilateral relations based on abiding sense of mutual respect and cooperation. Both countries have great potential to develop strategic economic partnerships into an alliance based on mutual complementarities and geopolitical significance. Partnership between Japan and India can also be effective for addressing the problem of piracy in the Indian Ocean, which is important for securing sea routes. In this regard, the business leaders welcomed the first joint exercises between the Maritime Self-Defense Forces of Japan and the Indian Navy, carried out in June 2012. The business leaders of the two countries also called for greater cooperation in fields of cyber security and countering terrorism.
The governments and private enterprises in Japan and India should make concerted efforts to use CEPA as the foundation framework to build a robust economic alliance that will benefit businesses in both countries.
Business leaders from Japan and India firmly believe that joint efforts by the two major democracies in Asia can contribute to the stability and prosperity of the Asia-Pacific region.
Finally, members of this Forum wish to express their appreciation for the trust placed in them by His Excellency Dr. Manmohan Singh, Prime Minister of India, and His Excellency Mr. Shinzo Abe, Prime Minister of Japan.
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Baba Kalyani Indian Co-Chair Japan-India Business Leaders Forum |
Hiromasa Yonekura Japanese Co-Chair Japan-India Business Leaders Forum |