Policy Proposals Asia and Oceania Joint Report of the India-Japan Business Leaders Forum 2016
Introduction
As the beginning of a new era in relations between the two countries, the Prime Ministers of India and Japan have resolved to cooperate to transform the Special Strategic and Global Partnership into a deep, broad-based and action-oriented partnership, for the prosperity and peace of the Indo-Pacific region and the world. Business leaders from India and Japan welcome this resolution and have high expectations that the two countries will drive the global economy forward by strengthening their economic relationship under a regime of free and open trade and investment.
The Japan Revitalization Strategy, including the 4th Industrial Revolution (Society 5.0), being advanced under Prime Minister Abe's Abenomics policy, will lead to the expansion of business opportunities through the creation of new growth markets and accelerate trade and investment by both Japanese and Indian companies. The two nations' business leaders expressed their hopes for the continued strong advancement of this strategy.
The business leaders from India and Japan applaud Prime Minister Modi's initiatives, such as "Make in India" and "Digital India," and welcome his resolve to make India the investment destination with the most business-friendly environment, as well as his strong commitment to the various reforms devised to achieve that goal. In particular, the business leaders applaud the passing of the constitutional amendment bill for the introduction of a goods and services tax (GST), the implementation of the Agreement between Japan and the Republic of India on Social Security, the development of a Company Act and the relaxation of restrictions on foreign investment, and the development of various infrastructure. They hold strong hopes that the Prime Minister will display powerful leadership for the resolution of further issues.
The two nations' business leaders welcome the extension of the validity period for multiple-entry business visas by the governments of both nations. They also commend the fact that the Sub-Committee on Improvement of the Business Environment set up under the framework of the India-Japan Comprehensive Economic Partnership Agreement (IJCEPA) met for the first time in four years this July, attended by business community representatives from both nations. They have high expectations that regular meetings of this Sub-Committee will further improve the business environment in both countries and lead to a broader, deeper economic relationship between India and Japan.
Since the establishment of the India-Japan Business Leaders Forum (IJBLF) in 2007, cooperation by members from both sides has contributed to the resolution of many bilateral issues, including the realization of the IJCEPA. The business communities of India and Japan will continue to cooperate in strategic areas such as the promotion of economic partnerships, improvement of the business environment, and infrastructure development, and on issues of a global scale. In so doing, they will cooperate with the governments of both nations from a business standpoint to ensure that the Indian and Japanese economies will grow together and continue to act as growth engines in the global economy.
The business leaders submit the following report to the heads of the two governments.
1. Promotion of Economic Partnerships and Improvements to the Business Environment
To strengthen economic partnerships and cooperative relationships through trade and investment between India and Japan, the two countries' business leaders continue to call for the resolution of various issues relating to the business environment.
In India, free and smooth corporate business activity, including by Japanese companies, requires the development of systems for the prompt and smooth introduction of a GST and the steady implementation of the Agreement between Japan and the Republic of India on Social Security. In addition, the following are also essential: the early passage of a bill for amendment of land acquisition laws; the organization, streamlining and international conformity of permanent establishment (PE) taxation, transfer pricing taxation, standards and certification systems, and intellectual property systems; further relaxation of restrictions on foreign investment and financing in the distribution sector and other sectors; and appropriate levels of service taxes in industrial complexes, etc. The business leaders of the two countries strongly urge the Indian government to step up its approaches on these issues and the Japanese government to cooperate in their improvement.
To ensure fairness, transparency, and predictability in administrative procedures in India, they also call for the establishment of an Administrative Procedure Act and the simplification and expedition of the various procedures. The act would provide for common rules concerning procedures for penalties, etc. by administrative bodies and the procedure for establishing Administrative Orders. Regarding national taxes, an Act on General Rules for National Taxes should be established, and similar state legislation should be enacted in each state for regional taxation.
Business leaders from India and Japan applaud the establishment of the Japan Plus team, and of the Core Group chaired by the Cabinet Secretary on India-Japan Investment Promotion Partnership, and its consultations with the Japan Chamber of Commerce in India and Industry and the Indian government (Ministry of Commerce and Industry). They recognize the importance of periodical meetings of the Sub-Committee on Improvement of the Business Environment and of improving the business environment through coordination between the public and private sectors, and hold high expectations for the further strengthening of their functions.
In addition to the Sub-Committee on Improvement of the Business Environment, Business leaders from India also called for the regular convening of other institutional mechanisms under the India — Japan CEPA. These include the Sub-committee on the Rules of Origin, the Sub-Committee on Technical Regulations, Standards and Conformity Assessment Procedures and SPS Measures, Sub-Committee on Trade in Services, Sub-Committee on Cooperation and Sub-Committee on Movement of Natural Persons. It was hoped that as these Sub-committees are re-activated, several pending issues between the two countries would find resolution.
It was also suggested that the Withholding Tax of 10% on dividend, royalty and technical service fees be eliminated as per the provisions of Japanese domestic laws or the alter the India — Japan Double Taxation Avoidance Agreement to reflect the same.
Other issues which the Indian Business Leaders highlighted included the need to introduce mutual recognition agreement for services professionals, enabling market access in fields such as IT, IT Enabled Services, and professional services as well as introduction of a Mutual Recognition Agreement (MRA) in pharmaceutical sector to enable both the countries to identify the testing procedures and standards used in the other country for their goods.
2. Importance of Infrastructure Development and Reform of Tender Systems
Business leaders from India and Japan highly commend the role that official development assistance (ODA) extended by the Japanese government has played in the alleviation of poverty and social infrastructure development in India. They also welcome the agreement reached between the two heads of government to seek synergy between India's "Act East" policy and Japan's "Partnership for Quality Infrastructure" and to further advance strong infrastructure development in India and elsewhere.
In particular, corridor projects such as the Delhi-Mumbai Industrial Corridor (DMIC), the Chennai-Bengaluru Industrial Corridor (CBIC), and other related projects are symbols of the cooperation between India and Japan. Both sides call for the continued advancement of infrastructure development, including roads, railways, ports, airports, electric power and smart grids, water treatment, and industrial complexes.
Business leaders of Japan and India, from the stand point of promotion of development of high quality infrastructure through public private partnership, asks Indian government to implement the following: Introduction and expanded use of a comprehensive evaluation system in tendering process to reduce life cycle cost and to correctly evaluate technological value; rationalization and optimization of risk and role sharing between public and private sectors in public private partnership (PPPs) projects including provision of government guarantees; allowing of one company bids when deemed necessary; and implementation of tenders in a whole and thorough way per each project.
3. Cooperation in Strategic Areas and Global Issues
Business leaders from India and Japan welcome the fact that the two heads of government agreed to raise bilateral collaboration to a new level in the areas of infrastructure, manufacturing and high technology, including advanced transportation systems, civil nuclear energy, solar power generation, space, biotechnology, rare earth minerals, and advanced materials. They hold a shared recognition of the importance of introducing advanced technologies and exchanging technology between the two countries in these strategic areas. Both sides also welcome the adoption of Japan's High Speed Railways (HSR) technologies (the Shinkansen system) in the Mumbai-Ahmedabad high-speed rail corridor project—for which a joint Japan-India feasibility study was successfully concluded in July this year—and the ongoing research in this area.
Along with high-efficiency and environmentally-friendly coal- and gas-fired power generation and the introduction and expansion of renewable energies, cooperation between India and Japan in the area of nuclear power generation is a strategically important factor in terms of securing a balance between the stable supply of electricity, which underpins industrial activity and people's lives, and protection of the environment. From this perspective, business leaders from India and Japan welcome the Agreement between the Government of Japan and the Government of the Republic of India for Cooperation in the Peaceful Uses of Nuclear Energy, and hope for its early conclusion. Stronger engagement is needed between Japan and India in high-technology areas, based on an agreement between the two countries in the area of defense and security.
Developing and securing high-caliber human resources to support such cooperation will be essential to drive it forward. Recognizing this, the business leaders stress anew the importance of enhancing human resource development initiatives, including technical training, university undergraduate and post-graduate student exchange programs, corporate internships, and language programs.
Strengthening of India-Japan economic cooperation through Japan-India Special Strategic and Global Partnership must be implemented based on free and open trade and investment framework. The result would enhance the economy of Asia and Pacific region, which would in turn contribute toward sustainable growth of the world economy. Business leaders of India and Japan recognizes that the Regional Comprehensive Economic Partnership (RCEP) would contribute toward expansion of regional production network and strengthen supply chains through not only liberalization of trade and investment but also through integration of rules of origin and introduction of regional cumulative rules. These measures would contribute toward fulfillment of H. E. Prime Minister Modi's "Make in India" policy. For this purpose, RCEP should be concluded swiftly, in a comprehensive manner with setting high standards. Business leaders of the two countries agreed to continue in taking joint initiatives toward this end.
Looking Ahead
The Confederation of Indian Industry (CII) and Keidanren, as the serving Secretariat organizations for the India Japan Business Leaders Forum (IJBLF) from India and Japan respectively, set up a Joint Working Group to implement the contents of the IJBLF Joint Report, and convened its first working-level meeting in July this year. Going forward, the Working Group will follow up on the various actions being taken for the speedy implementation of the recommendations put forth in this Joint Report.
Conclusion
Japan and India have historically shared strong bilateral relations based on an 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.
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 not only India and Japan, but of the Asia-Pacific region, and of the entire world.
Finally, members of this Forum wish to express their appreciation for the trust placed in them by H.E. Mr. Shinzo Abe, Prime Minister of Japan, and H.E. Mr. Narendra Modi, Prime Minister of India.
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Sadayuki Sakakibara Japanese Co-Chair India-Japan Business Leaders Forum |
Baba Kalyani Indian Co-Chair India-Japan Business Leaders Forum |