Round The World

New Delhi, 5 September 2009 

Hatoyama Victory

TIME TO PUSH INDO-JAPAN TIES

By Parama Sinhapalit

School of International Studies, JNU

The 21st century seems to be ushering in many new international developments. First, it was the global financial crisis of 2008 that rocked the economy of the most powerful nation---the US, then the surprise win of the Congress party in India early 2009 and now the change of guard in Japan. All indicating the pace at which the world is transforming. The landslide victory of the Democratic Party of Japan (DPJ) on August 30, 2009 was a result of a massive protest vote against a worn-out, clique-ridden Liberal Democratic Party (LDP) that ruled Japan for over 50 years except for 11 months in 1997, when a non-LDP coalition ruled the country. 

Yukio Hatoyama, the President and one of the founders of the DPJ in 1996, has taken over as the new Prime Minister of Japan. At 62, the new leader faces many challenges including deflation, an increasing public debt and unemployment which has touched a record high. While revival of the Japanese economy might be the focus of the new Government in power, Hatomaya and his team also realize the need for transforming Japan from within. He has promised to reverse the process of over-centralisation of the Japanese government by transferring more power and funds to local authorities, breaking the nexus between the bureaucracy and the political rulers and pay direct greater attention to the problems of rural Japan.

While planning to strengthen the country internally, the Prime Minister also has plans for Japan internationally. Wanting Japan to be closer to Asia, Hatoyama has in an op-ed piece in the New York Times entitled “A New Path for Asia” revealed his vision of Asia's future. He visualizes Japan’s close partnership with China as the American economic and military influence wanes. While believing that the power of the US is on the decline, he still attaches considerable importance to the US-Japan alliance that will “continue to be the cornerstone of Japanese diplomatic policy”.

While articulating Tokyo’s penchant to move closer to Asia, one point Hatoyama however, seems to have missed out is the need for Japan to continue its growing partnership with India. Surprisingly, the election manifesto for the election was almost quiet on the issue despite the relationship going strong during the past few years.

While India-Japan ties have relatively a young history, the two countries have moved close to one another in the last couple of years. Japan has been one of India’s major trade partners as well as a key source of development assistance. During the past few decades, India-Japan relations have undergone both quantitative and qualitative changes. Economics has been the main driver of bilateral ties with cross-border trade and investment increasing sharply. The partnership is no more lop-sided and has both New Delhi and Tokyo looking for opportunities in each other’s country.

One of the recent initiative to strengthen the India-Japan partnership has been provided by Daiichi Sankyo’s acquisition of Ranbaxy, one of India’s leading pharmaceutical companies. The acquisition, while obtaining greater access in India’s huge pharmaceutical market, also marks the beginning of a deeper qualitative involvement of Japanese firms in scientific capacity-building.  It paves the way for utilization of India’s scientific talent in advanced pharmaceutical research under Japanese supervision. More investments of similar nature will expand economic space for both countries by creating opportunities for utilizing their demographic and skill complementarities.

The India-Japan collaboration is seen in many other areas as well. Japan is playing a key role in establishing a new Indian Institute of Technology (IIT) and is also actively collaborating in developing an Indian Institute of Information Technology, Design and Manufacturing at Jabalpur in Madhya Pradesh, one of India’s largest and relatively economically backward States. The upcoming institute can make a significant difference to development of the State’s human resources and prospects for future growth.

Japan’s penetration into India is indeed note-worthy. Another leading Japanese firm DoCoMo, has acquired 26 per cent equity in Tata Telecom, a major Indian telecommunication service provider. This provides DoCoMo a foothold in the world’s second largest mobile phone market after China with an estimated customer base of 100-110 million. Establishment of India’s first exclusive Industrial Park for Japanese firms in Rajasthan is another example of both countries attempting to harness India’s advantages as an investment location for mutual benefits. Japan’s Daikin Industries Ltd, along with five other companies, is involved. The project underscores New Delhi’s faith and confidence in Japanese enterprise and capabilities and the virtuous role that the latter can play in India’s industrial growth.

Likewise, Indian companies too have begun investing in Japan. This is part of a larger trend reflecting sharp acceleration in outward FDI from India. Outward FDI from India has increased from US$1.5 million in 2003-04 to US$17.4 million in 2007-08. Indian FDI inflows into Japan are mostly in IT and software.

While economics has been going strong between the two countries, India and Japan also appreciate each other’s geo-political significance in the Asian region while sharing common concerns. All these imperatives have been instrumental in elevating India-Japan relations to a new level of partnership based on shared interests and challenges. Both New Delhi and Tokyo are collaborating within the East Asia Summit (EAS), an effective forum for articulating Asia’s views and projecting its strategic interests. Due to its inclusivity and the potential to provide global risk diversification to members, there is a strong case for EAS continuing to function as a key forum for articulating Asia’s views to the rest of the world.

Japan has been actively supporting greater Asian economic integration as is evident from its proposing the ‘Comprehensive Economic Partnership in East Asia’ at the 13th Consultations between ASEAN Economic Ministers and the Minister of Economy, Trade and Industry of Japan (AEM-METI). This initiative, under the aegis of EAS, covers several key issues such as trade in goods and services, cross-border investment and intellectual property and aims to strengthen regional competitiveness by promoting growth of efficient production networks. India is also committed to this initiative launched by Japan.

The Joint Declaration for Security Cooperation entered into by the two countries in October 2008 marks a milestone in bilateral ties. Japan has similar security cooperation arrangements only with the US and Australia. India’s entry in Japan’s core group of allies underlines the critical significance it has acquired in Tokyo’s strategic perception of the Asia-Pacific. The declaration focuses on a variety of areas for cooperation which include joint military exercises, disaster management and counter-terrorism. In order to deepen security cooperation, New Delhi and Tokyo have also agreed on expanded collaboration between the Indian Space Research Organization (ISRO) and the Japan Aerospace Exploration Agency (JAXA) in disaster management.

The list of cooperation between the two countries is thus endless. The ties have been strengthening. With new dynamics at play in the 21st century, it is quite possible that the relations between the two Asian players will continue to improve. However, till now there has been no signal from the new Hatoyama Government that moving closer to India is amongst its top priorities. ---INFA

(Copyright, India News and Feature Alliance)