[ Nippon Keidanren ] [ Policy ]

Joint Proposal by the Japan-India Business Leaders' Forum

Japan-India Partnership for Sustainable Growth

(22 August 2007, New Delhi, India)

1. Introduction

Japan and India have for many years shared the values of democracy and human rights and have cultivated close bilateral ties as respected members of the international community.

Despite their long record of friendly relations, their economic scale (Japan and India are ranked first and third, respectively, in Asia), and their mutually complementary ties, Japan and India continue to be characterized by a relatively small bilateral flow of goods, services, human resources, capital, and information. Clearly our two countries have not fully harnessed the potential of their bilateral relationship and have plenty of room for improvement in this area.

This year, as Japan-India Friendship Year 2007, offers opportunities to shorten the psychological distance between our two countries and improve the depth and breadth of our bilateral economic ties.

The economic relationship between Japan and India is unquestionably destined to evolve into one of the most important strategic relationships of any two countries in Asia and even worldwide. It is hoped that our two countries will strive for mutually beneficial and sustainable economic growth by cultivating stronger levels of bilateral economic exchange. The Japanese business community has displayed sharply increased interest in India in recent years. In fact, Japanese companies that had set up business in India last year remarkably increased from the previous year. Moreover, it is estimated that total direct investment amount by Japanese companies will increase greatly.

During their recent summit meeting that convened in December last year, the leaders of our two countries agreed on the creating of a "strategic and global partnership" as well as a variety of undertakings, including reciprocal state visits every year and the start of negotiations on (Comprehensive) Economic Partnership Agreement (EPA/ CEPA). These accords reflect a deeply shared interest on the part of both countries to seek an even-stronger bilateral relationship. As one outgrowth of the accords, business leaders from Japan and India have gathered here and engaged in a candid exchange of views and opinions. This in its own right heralds the beginning of a new age in Japan-India ties. The Japan-India Business Leaders' Forum submits the following joint proposal to the heads of our two governments in the interest of encouraging the continued development of forward-looking relations between Japan and India.

2. Early conclusion of (Comprehensive) Economic Partnership Agreement between Japan and India

(1) Promotion of Trade

Our two countries are currently engaged in government-level negotiations on a (Comprehensive) Economic Partnership Agreement. In the interest of cultivating mutually beneficial economic ties, it is critically important that those negotiations lead to the early conclusion of CEPA/ EPA. The Forum is strongly hopeful that the conclusion of a mutually beneficial and high-quality EPA/ CEPA will result in further cementing of our economic ties. The Forum expects that the conclusion of EPA/CEPA will effectively remove or reduce tariff as well as non-tariff barriers. The Japanese side expects the import related tax system would be simplified. In order that both countries fully enjoy the benefits of EPA/CEPA the Forum supports a mutually acceptable but easy-to-use rules of origin should be worked out.

(2) Cultivation of the investment climate

Foreign direct investment is effective means to create employment and various business opportunities, improve competitiveness of industries and promote economic growth. In this context, heightened levels of reciprocal investment by Japan and India should be encouraged, which will demand that both countries improve their investment climates. Japanese business has a strong interest in investment in India. In order to materialise this interest into reality, the Japanese side expressed that relaxation or abolition of restriction on foreign companies in India is indispensable.

Encouraging the penetration of more Indian companies into the market for business process outsourcing (BPO; the outsourcing of data entry operations and other back-office processes) of Japanese companies will demand elimination of the 10 percent tax rate on technical service fees, a matter that remains an issue for the revised Japan-India Tax Treaty.

Those achievements would bring about improvements to the business and investment climates and contribute to India's competitiveness in turn.

(3) Expanded personnel flow

Currently, movement of people between Japan and India remains undynamic (approx. 160,000 individuals per annum) even if tourists are included in the total. The low number of direct air flights so far is one major factor restricting the flow of people between Japan and India. Given these conditions, the public and private sectors in both countries should work together to foster expanded personnel exchange by further developing resources for tourism and increasing the scale of commercial air service.

In order to shorten the psychological distance between the two countries and foster the cultivation of a lasting, forward-looking bilateral relationship, it will be essential to seek greater mutual understanding through heightened contact and exchange particularly between the younger generations of both countries, for instance, by promoting exchange programs through universities and institutions for advanced research and encouraging heightened cultural exposure to such as Japanese animations and Indian films.

3. Japan-India Cooperation in Hard and Soft Infrastructure Development

(1) The Delhi-Mumbai Industrial Corridor Plan

Efforts are now afoot to bring about implementation of the Delhi-Mumbai Industrial Corridor Plan and the Multi-Modal Dedicated Freight Corridor Plan. If implemented, these plans will deliver infrastructure essential to further development of India's economy and industrial base. Development of financing mechanisms such as Japanese Depositary Receipt (JDR) could promote implementation of such projects. Assistance of this kind by Japan's private and public sectors in the development of Indian infrastructure can also be expected to contribute to the expansion of opportunities for the business communities of both countries.

(2) Nurturing a climate for public-private partnerships (PPP)

Promoting substantive undertakings of the type just mentioned will demand that Japanese ODA be harnessed more than ever before for strategic purposes and that infrastructure development be actively pursued through public-private partnerships. To this end, it will be essential to create an environment more conducive to ready participation by the private sector, including setting fair and appropriate utility fees.

(3) Soft infrastructure

In addition to hard infrastructure, the development of soft infrastructure, including the acquisition of needed human resources, is another urgent challenge. In the soft infrastructure arena also, and from a strategic and comprehensive perspective, the Japanese government should effectively harness ODA resources and cooperate with the development of human resources in India by developing training facilities and improving the curriculum of vocational schools.

4. Cooperation in the Environmental and Energy Conservation Fields

(1) Continuing bilateral dialogue at the government level

Climatic change is a global problem that concerns both Japan and India and should be addressed together through cooperation. Japanese Prime Minister Shinzo Abe has advocated his "Cool Earth 50" strategy to address the issue of global warming. It is important that all the countries of the world protect the climate system for the benefit of present and future generations of humankind on the basis of equity and in accordance with their common but differentiated responsibilities and capabilities. All countries should pursue and show steady effectiveness with flexible and multiple countermeasures suited to their own respective circumstances while taking action to balance the goals of economic development with the needs of environmental conservation.

Although it is predicted that emerging countries will experience a huge surge in demand for energy in the years ahead, it is essential that every country pursues an integrated set of energy and environmental measures for its own sustainable development.

Prompted into action by the oil shocks of earlier decades, Japan has achieved one of the highest levels of energy efficiency of any country in the world. As such, there is certain potential for Japan to extend cooperation in the energy and environmental fields. It is desired that public-private cooperation in these areas be encouraged through corporate participation in the working groups for the cabinet-level Japan-India Energy Dialogue now under way.

(2) The promotion of private sector-based technical cooperation and technology transfers

The Forum recognised the recent initiatives taken by the Government of India to encourage investment in the power generation and distribution sectors, including the development of ultra mega projects using super critical technology, and welcomed participation of Japanese and Indian companies in such projects including through joint collaboration. Recognising that energy efficiency and conservation is an important aspect to addressing energy security and climate change issues, and noting Japan's high levels of energy efficiency, the Forum considers it desirable for companies from both countries to collaborate in this area. The Forum also welcomed the potential for business cooperation in clean coal technologies. We hope that public-private cooperation can be encouraged through the Japan-India Energy Dialogue at Governmental level and multilateral cooperation such as the Asia-Pacific Partnership on Clean Development and Climate.

5. High Technology Trade

The Forum endorsed the importance and potential benefits of fostering cooperation between the corporate sectors in both countries on trade in high technology equipment and materials. Recognising the respective strengths of Japan and India in high technology and the knowledge economy as well as the new business opportunities available to Japanese companies in India in this area as a result of rapid economic development, the Forum would urge Indian and Japanese companies to explore the possibilities.

6. Concluding Remarks

Japan and India have a very important strategic partnership. We are strongly hopeful that both countries will take steps to improve the breadth and depth of their own bilateral relationship. At the same time, the two countries should also contribute to the sustainable economic development of East Asia and the world at large by together taking the initiative to promote free trade and investment. Such initiatives include efforts towards establishment of the East Asia EPA (ASEAN+6) and a successful conclusion of the WTO Doha Round negotiations for a balanced and comprehensive agreement by the end of this year.

Fujio Mitarai
Chairman, Nippon Keidanren
Chairman & CEO, Canon Inc.
Co-Chair Japan-India Business Leaders' Forum
Mukesh D. Ambani
Chairman & Managing Director
Reliance Industries Limited
Co-Chair India-Japan Business Leaders' Forum
New Delhi, August 22, 2007

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