Policy Proposals Asia and Oceania Joint Report of the India-Japan Business Leaders Forum 2014
The business leaders from India and Japan greatly appreciated the Imperial visit to India in December 2013, which symbolizes the deepened bilateral relationship and strong ties between the two countries. Both sides also welcomed the expanded economic cooperation between our two countries in infrastructure development, trade, and investments that has taken place between the two countries. The India-Japan Comprehensive Economic Partnership Agreement (CEPA) has played a vital and significant role since it came into force in August 2011. The number of Certificates of Origin issued in Japan for CEPA has reached about 44,000 by November 2013, which is evidence of the progress being made.
The Japanese and Indian business leaders believe that the two countries should cooperate further to promote free trade based on CEPA and perform its critical role as the engines of growth in the world economy.
Following the last Forum meeting in May 2013 in Tokyo, 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. Recent Achievements
Both sides welcomed following achievements that have strengthened the bilateral economic relationship during recent years and show hope for further progress :
- (1) Completion of ratification process on Social Security Agreement and administrative preparation being under way
- (2) Agreement on Action Plan to expand FDI between the two governments
- (3) Expanded defense cooperation, including sale of Japanese seaplanes for rescue missions and holding of joint naval exercise for three straight years.
- (4) Permission for Japanese Mega banks to open their branch offices at city centers
- (5) Approval of FDI in multi-brand retail in India (10 states and union territories)
- (6) Launch of an India-Japan US $4.5 billion DMIC facility, equity participation and provision for inclusion of board members from the Japan Bank for international Cooperation (JBIC) to the DMICDC
2. Improving the Business Environment Through Effective Use of India-Japan CEPA
CEPA, as an important institutional infrastructure, is essential to the task of further accelerating and consolidating business activities between Japan and India. Both sides stressed again that it is still necessary to further promote understanding of the CEPA provisions amongst the custom authorities and business communities on both sides. The business leaders recognized that meeting of the Sub-Committee on Improvement of the Business Environment, set up under the CEPA framework, should be held regularly 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.
The 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. The Indian side also 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. Both sides agreed that particularly important perspectives in this context include developing Indian industries to become internationally competitive and promote 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.
The Japanese side suggested 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; relaxing restriction on foreign capital participation to Indian banks (4.99% by new banks approval guideline and 26% by revised bank law) to allow financial know-how exchanges between the two countries; relaxing restrictions on External Commercial Borrowing (ECB); extending deregulation in financial and insurance sectors; and securing international conformity of intellectual property law and its administrative applications.
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. Interest of and investment by Japanese retailers will be closely watched by the business leaders. Both sides praised the initiative of the two governments in signing Action Plan to expand FDI between the two countries through India-Japan business partnership, cooperation with central and state governments on investment promotion and facilitation, and improvement in business environment.
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 hopes that steps would be taken to bring about improved access to Japanese markets so that Indian companies can operate on equal terms with Japanese companies.
In order to expand human exchanges between the two nations, smooth procedures for acquiring visas are essential. With such personnel 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 that are occasionally delayed.
3. Importance of Infrastructure Development and India-Japan Cooperation
Business leaders of India and Japan appreciate the direction on infrastructure development set out in the Indian government's 12th Five-Year Plan, sharing the view that the development of industrial and social infrastructure throughout India, 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 appreciated the progress in taking forward the Delhi — Mumbai Industrial Corridor (DMIC) as a symbol of Japan — India economic relationship. They 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 while acting as a catalyst for manufacturing and urbanization, it should enable the flow of cutting edge next generation technology to India.
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 the Chennai-Bangalore Industrial Corridor (CBIC) , 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 related 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 board members from the Japan Bank for International Cooperation (JBIC) to the DMICDC and measures taken by the Indian government should enable the flow of innovative cutting-edge technology in a range of infrastructure sectors including smart community development.
In addition, both sides expressed again hope that work on other projects such as Mumbai-Bangalore Industrial Corridor, Delhi-Kolkata Industrial Corridor, and other development initiatives, would also be launched and provide opportunities for Japanese Companies.
The Japanese side made a suggestion for promoting an energy-conserving and environmentally sustainable 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 support in de-risking projects, and facilitating PPP participation. This will require establishment of a forum to allow regular dialogue between government and the private sector of the two countries.
Both sides agreed that for Japanese companies to help with the shortage of electricity in India, it is essential to accord smooth approval on land acquisition and environment safety, secure provision for major fuels such as natural gas and coal and transferring rise of fuel price to the buyer, ease regulation, and enable medium and long-term contracts relating to generation, transmission, distribution, and selling of electric power.
4. 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 to disseminate Japanese technology for energy sector 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.
For introduction of high-speed railways including between Mumbai and Ahmedabad, it is important that the two governments cooperate fully towards its early realization. In addition to fields such as, automobiles, machinery, material sciences and the chemical industry, emphasis also needs to be given to the introduction of cutting-edge technologies in areas such 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, India-Japan 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.
The business leaders urge the two governments for extensive and deep cooperation in science & technology, research and development and innovation as they will increasingly define the path of economic development in coming years.
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.
5. Cooperation in the Asia-Pacific region
Japanese and Indian business leaders agreed that the economic integration of ASEAN targeted for 2015, will 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.
Both sides 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.
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. The business leaders of the two countries again 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 leading 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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On behalf of :
India-Japan Business Leaders Forum
India-Japan Business Leaders Forum