Source: www.asiaecon.org |

India and Japan Seek to Strengthen Ties

INDIA’S PRIME Minister Manmohan Singh and his Japanese counterpart Shinzo Abe met on December 15, 2006 to discuss relations between the two nations. In the past, the relationship has been strained. India’s economic decline during the 1970s and 1980s discouraged external trade. Diplomatic ties were further damaged by India’s 1998…

INDIA’S PRIME Minister Manmohan
Singh and his Japanese counterpart
Shinzo Abe met on December 15,
2006 to discuss relations between the two
nations. In the past, the relationship has
been strained. India’s economic decline
during the 1970s and 1980s discouraged
external trade. Diplomatic ties were further
damaged by India’s 1998 nuclear tests.1
However, with levels of growth as high as
8.1 percent, India has become an increasingly
attractive partner.

PM Abe recognizes the benefits of cultivating
ties with India.2 He sees a partnership
with India as an opportunity for economic
growth as well as strategic move to
balance against an increasingly powerful
China.3 Japan should take advantage of
the economic opportunities in India but at
the same time pressure it to increase efficiency.
India, on the other hand, should
also be cautious of measures that will
harm certain vulnerable sectors.

BOTH LEADERS have agreed to
begin negotiations for economic
partnership in January 2007. Japan
wants India to reduce tariffs on imported
goods, especially automobiles and
electronics. Furthermore, the country
wants India to remove certain regulations
on foreign investment. Indian representatives,
on the other hand, are likely to demand
that Japan import more of its fruits
and textiles.4

PM Singh proposes cooperative knowledge
transfers, specifically in information
technology, nanotechnology, and biotechnology
sectors.5 He also suggests that
integrating India’s software with Japan’s
hardware capabilities would be a profitable
venture for both.6

Attracting Japanese
Investment

AFTER EXHAUSTING domestic
production capacity, Japanese
businesses are eager to expand
overseas. They are accustomed to an efficient,
organized business environment,
and doing business in India can be complex.
Some preliminary measures need to
be taken in order to attract Japanese business.
India must open its labor market and
revise labor laws. Opening the services
sector, especially retail, real estate and
banking, would further invite foreign investors.
7 Revision of its complex tax system
would also help.8

At their meeting, PMs Abe and Singh set
up a Special Economic Partnership Initiative
to encourage investment in India’s
infrastructure. Talks centered on the energy
sector with plans to set up industrial
corridors.9 Furthermore, Japan agreed to
continue providing India with Official Development
Assistance. The nations will
focus on developing the following sectors:
infrastructure, environment, social development,
and human resource.10

Cooperation & Development

NUCLEAR ENERGY security was
another concern on the agenda.11
Japan is overtly opposed to the
use of nuclear weapons. PM Abe skirted
the issue of India’s nuclear at the meeting,
and said that Japan would participate in
International Atomic Energy Agency’s discussions.
Abe supports India’s desireto develop civil nuclear
energy. He trusts that the nation will use it in a
responsible manner. Japan relies on nuclear
power for 40 percent of its electricity, and
it is considering assisting India in developing
its supply.12

DEFENSE AND national security
issues were also addressed during
the discussions. Both leaders
have decided to deploy their coast guard
forces to fight piracy within their Exclusive
Economic Zones. They also jointly condemned
terrorism.13

Conclusion

Japan’s trade with India amounted to $6.5
billion in 2005, only one percent of its
overall trade.14 The US and China have
increased trade with India, but Japan has
remained hesitant.15

INDIA MUST improve business conditions
and develop the necessary infrastructure
if it is going to compete with
neighboring nations such as China for Japan’s
trade and investment. The onus lies
solely on India. In light of India’s recent
growth, it seems likely that the two leaders
will cultivate a stronger economic partnership.
Strengthening this bilateral trade relationship
may allow the two nations to
gain an edge over Western countries in
technology and other strategic sectors.

Source: www.asiaecon.org |