Policy Proposals Asia and Oceania Joint Report of the India-Japan Business Leaders Forum 2017
Introduction
The Japan-India Summit Meeting, held between H.E. Mr. Shinzo Abe, Prime Minister of Japan and H.E. Mr. Narendra Modi, Prime Minister of India, in Gandhinagar in the Indian state of Gujarat, resulted in the further deepening of the Special Strategic and Global Partnership, and a major leap forward in the "new era in Japan-India relations." Business leaders from India and Japan welcome these outcomes and salute the resolve of the heads of the two governments to further promote coordination of Japan's "Free and Open India and Pacific Strategy" and India's "Act East" policy and to lead the stability and prosperity of the Indo-Pacific region and the world. At the same time, business leaders welcome the further enhancement of economic and industrial cooperative relationships between the two countries, including the expansion of investment in India, under bilateral initiatives such as the India-Japan Investment Promotion Partnership, and the further development of a close, mutually-beneficial economic relationship between the two nations.
Business leaders from India and Japan hold strong hopes that the two nations, which share universal values such as democracy and the rule of law, will become driving forces in the global economy through the strengthening of their collaborative and cooperative relationship and the realization of inclusive and sustainable economic growth under a free and open international economic order.
Since the establishment of the India-Japan Business Leaders Forum (IJBLF) in 2007, business leaders representing both countries have gathered in one place, timed to coincide with India-Japan Summit Meetings, to hold serious discussions aimed at expanding economic exchange between India and Japan. A Joint Report containing a summary of the outcomes of the Forum is submitted to the heads of government of the two nations, and members from both sides work to bring those outcomes to fruition. In this way, the Forum has contributed to the resolution of many bilateral issues and the strengthening of their collaborative and cooperative relations, including the realization of the India-Japan Comprehensive Economic Partnership Agreement (IJCEPA).
This year marked the 10th time that this Forum has been held. Amidst the various changes in the environment facing the economies of India and Japan, business leaders of the two nations discussed promotion of economic partnerships, improvement of the business environment, and cooperation in strategic areas such as infrastructure development, so that the economies of both countries can continue to prosper together and play a role as growth engines in the global economy. A summary of those discussions has been compiled in this report. The business leaders urge the leaders of India and Japan to realize the recommendations contained in this report, and they express their resolve to cooperate with the two governments from a business standpoint as they lead the peace and prosperity of the Indo-Pacific region and the world.
1. Maintenance and Strengthening of a Free and Open International Economic Order, and Promotion of Economic Partnerships
In the belief that the various reforms being pursued under H.E. Mr. Shinzo Abe, Prime Minister of Japan, including the "Future Investment Strategy 2017 — Reforms for the Realization of Society 5.0," and economic reform initiatives under H.E. Mr. Narendra Modi, Prime Minister of India, such as "Make in India," "Digital India," and "Skill India," will drive steady growth in both countries' economies as well as bring new opportunities to both markets, and thereby accelerate trade, investment, technology and people-to-people exchanges between the two countries, business leaders from India and Japan expressed their hopes for the continued strong advancement of those reforms.
At the same time, the establishment of an environment in which goods, services, funds, people, technology, data, and all other resources can move freely across national borders is essential to the realization of the two countries' growth strategies. For this reason, the business leaders expressed strong concerns about the rise in anti-globalization and protectionism around the world in recent years, and reached a consensus that their two countries should cooperate with each other in the maintenance and strengthening of a free and open international economic order.
From these perspectives, business leaders from India and Japan recognized that, together, their two countries should raise the banner of free trade by communicating its significance and their strong commitment towards it to the world. They recognize that the Regional Comprehensive Economic Partnership (RCEP), which is currently being negotiated, should be concluded swiftly, in a comprehensive manner covering all three pillars - goods, services & investment with setting high standards. This should include liberalization of goods and services, trade and investment, as well as the integration of rules of origin, the introduction of regional cumulative rules, and the establishment of other various rules. The business leaders agreed that they would continue to work together to play a leading role in achieving these goals.
2. Improving the Business Environment for the Expansion of Trade, Investment, etc.
For the acceleration of trade, investment, technology, and people-to-people exchanges between India and Japan, along with the maintenance and strengthening of a free and open international economic order, solving the various issues in the business environment through regulatory and institutional reforms in both countries is of extreme importance.
Business leaders from India and Japan applaud the heads of the two governments for their strong commitment to and leadership in the improvement of the business environment. In particular, they highly commend the historic introduction of a Goods and Services Tax (GST) in India in July this year, and hold high expectations for the two Prime Ministers' strong leadership in the further improvement of the business environment, including the early realization of the business proposals highlighted by both India and Japan listed in the annexure, to ensure free and smooth business development by companies in both countries.
As an effort to resolve these issues, the business leaders commend the discussions being pursued by the Embassies of both countries as well as industry bodies like the Confederation of Indian Industry (CII) and the Japanese Chamber of Commerce and Industry in India with relevant authorities in both India and Japan. The Business Leaders also noted that the Sub-committee on Improvement of the Business Environment, established under IJCEPA, met again in July this year, attended by members of the business communities of both countries.
Business leaders from India and Japan hold high expectations that, through regular meetings of the Sub-committee on Improvement of the Business Environment and other sub-committees under the IJCEPA and other various measures, the business environments of both countries will be further improved, and that economic exchanges between India and Japan, such as trade and investment, will expand and deepen further.
Indian Business Leaders noted that a review of the India- Japan Comprehensive Economic Partnership Agreement (IJCEPA) had been initiated and the exercise will help identify measures to provide a boost to bilateral trade and investment.
Indian business leaders highlighted issues related to the need for improved air connectivity between Indian and Japanese cities, simplification of Rules of Origin, conclusion of mutual recognition agreement for services professionals such as lawyers, accountants and nurses, and conclusion of a Mutual Recognition Agreement (MRA) for testing facilities in the pharmaceutical sector among others.
The Indian business leaders also re-emphasized the need for the Withholding Tax of 10% on dividend, royalty and technical service fees to be eliminated as per the provisions of Japanese domestic laws or to alter the India — Japan Double Taxation Avoidance Agreement to reflect the same. The details of these issues are in the Annexure to this Statement.
3. Expansion of Cooperation in Strategic Areas such as Infrastructure and Energy
Business leaders from India and Japan shared their recognition of the importance of partnerships and cooperation in strategic areas such as infrastructure, clean energy and other energy sectors, science and technology innovation, information and communications, smart cities, biotechnology, and pharmaceuticals, for the further strengthening of the two nations' Special Strategic and Global Partnership.
The business leaders also 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 heads of the two governments to further advance strong infrastructure development in India and elsewhere, while seeking synergies between Japan's "Partnership for Quality Infrastructure" and India's "Act East" policy.
In particular, the business leaders welcomed concrete outcomes such as the news that the groundbreaking ceremony of the Mumbai-Ahmedabad High-Speed Railway (MAHSR) project, which is a symbol of the "new era in India-Japan relations," took place. They called for the continued development of infrastructure, such as roads, railways, ports, airports, power generation and smart grids, water processing, and industrial complexes, including corridor projects such as the Dedicated Freight Corridor (DFC) construction project, the Delhi Mumbai Industrial Corridor Project (DMIC) and related projects, to strengthen India's industrial competitiveness and connectedness, enhance sustained, inclusive growth, and improve the lives of the Indian people. Indian Business leaders would look forward to Japanese industry investments into DMIC regions which are in advanced stages of construction.
From the standpoint of promotion of high quality infrastructure development through the partnerships between the public and private sectors, business leaders from India and Japan strongly urge the Government of India to enhance the understanding of its importance, as well as to, among other measures, introduce and expand the use of a comprehensive evaluation system for Indian infrastructure project tendering processes, for the proper evaluation of life-cycle cost reductions and technologies, and to rationalize and optimize the sharing of risks and roles between the public and private sectors in public-private partnerships (PPP), including the provision of government guarantees.
Cooperation between India and Japan in the area of nuclear power generation is a strategically important factor in achieving a fine 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 commend the conclusion and coming into force of 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 welcome the concrete moves being made in the area of cooperation in nuclear power generation. From the same perspective, they hold high expectations for strengthening the cooperation in promotion of high-efficiency and environmentally-friendly coal- and gas-fired power generation, prevention of electric power system destabilization that could occur by the introduction and expansion of renewable energies, and enhancement of energy-saving measures. They also call for stronger engagement between Japan and India in high-technology areas in the defense and security sectors, based on an agreement between the heads of the two governments.
Developing and securing high-caliber human resources to support such cooperation will be essential to drive it forward. Recognizing this, Indian business leaders stressed the importance of enhancing human resource development initiatives, including technical training, university undergraduate and post-graduate student exchange programs, corporate internships, and language programs.
In the defence sector, the recent discussions between two countries under the aegis of the Memorandum on Defence Cooperation and Exchanges was welcomed and the decision to include the private sectors of both countries in the discussions of the Joint Working Group on Defence Equipment and Technology Cooperation was appreciated by the Indian business leaders.
As there is a greater need for new and innovative products and solutions, the Indian side felt that both the countries need to focus on better mechanisms of collaboration between science and industrial research. There is a need for better managed and structured grants to support joint collaborations between India and Japan. The number of eligible areas for the grants needs to be wider and needs to facilitate Indian companies collaborating with Japanese academic institutes and industry. The levels of grants need to be increased significantly to enable breakthrough innovations resulting in commercial applications. It was also suggested to launch an India -Japan Industrial R&D Fund for supporting collaborative industrial projects under sectors of interest.
Indian Business Leaders suggested that an India Japan Start-up Hub could be set up which would launch a joint start-up fund where Governments of both countries would invest 25% each, and the rest 50% will be invested jointly by Indian and Japanese Angels/VCs/PEs. This fund will bring the best of brains from both the nations for various joint projects in the start-up space. The Hub would also play host to an India-Japan start-up facilitation cell which will monitor and hand-hold start-ups from both nations to collaborate and explore each other's market and knowledge base. It would also create a joint India-Japan start-up platform where entrepreneurs, VCs and other stakeholders from both the nations can meet regularly and leverage new opportunities as well as an India Japan Incubation Forum to discuss and facilitate various aspects of the business incubation process, and doing research on new incubation models.
The business leaders noted the contribution made by Japanese companies to the various initiatives of the Government of India such as Make in India, Skill India and Start-Up India for building a strong and vibrant Indian manufacturing sector. In that context, the CII, with JICA support, is working towards aligning the Champions for Societal Manufacturing (CSM) Project with schemes of DIPP (Make in India, Skill India and Start-Up India) for building a strong and vibrant Indian manufacturing sector in the Indian Way (using Indian faculty).
The business leaders also noted that the Technical Intern Training Program is being expanded to train around 500 interns during 2017-18 and subsequently to train 1000 interns in 2018-19. The program was envisaged to accelerate the "Make in India" revolution during H.E. Prime Minister Abe's visit to India in December 2015. CII has been appointed as a Sending Organization by the Ministry of Skill Development & Entrepreneurship, Government of India, to support implementation of the Technical Intern Training Program. The first batch of 15 interns has already undergone an extensive 4-month training by expert Trainers from Japan.
Members welcomed the setting up of the India-Japan Study Centre at the Indian Institute of Management (IIM), Bangalore, to facilitate collaborative initiatives among academia, industry and government agencies of both the countries to work on domains such as business environment, government policies, innovation, project management, sourcing, technology transfer, development and management, sustainability, intellectual property rights, and understanding of local culture and business practices. The sectoral focus would be on infrastructure including energy and transportation, and Micro, Small and Medium Enterprises.
It was also highlighted that the Japan India Institute of Manufacturing (JIM) would be expanded and the number of such programs in India increased. JIM was established from a Memorandum of Cooperation (MoC) signed in Tokyo on November 11th, 2016 between Ministry of Economy, Trade and Industry, Government of Japan (METI) and Ministry of Skill Development and Entrepreneurship, Government of India (MSDE), for a "Manufacturing Skill Transfer Promotion Program." The Program imparts practical skills in Japanese-style of manufacturing to the participants of the program. Four such Institutes are already operational and two more shall be opened in 2017-18.
Conclusion
Business leaders from India and Japan firmly believe that joint engagement by both countries, which share common fundamental values such as democracy and the rule of law, will contribute to the stability and prosperity not only of their own two countries, but to the entire Indo-Pacific region and the world at large.
Finally, members of this Forum wish to express their deep 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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Baba Kalyani Indian Co-Chair India-Japan Business Leaders Forum |
Sadayuki Sakakibara Japanese Co-Chair India-Japan Business Leaders Forum |
ANNEXURE