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Policy Proposals  Asia and Oceania Joint Report of the India-Japan Business Leaders Forum 2015

New Delhi, December 11, 2015

Introduction

India and Japan share universal values including democracy and the rule of law, and business leaders from both countries have high expectations that their political leaders will empower these two nations to drive the global economy forward by further strengthening the Japan-India Special Strategic and Global Partnership. Business leaders from Japan and India also hope that both countries' governments will support improvements to the business environment with a view to achieving the target of doubling Japan's foreign direct investment in India within five years, which was set out in the Japan-India Investment Promotion Partnership jointly announced in September last year.

Policies based on the "three arrows" of Abenomics, together with the "three new arrows" recently announced by Prime Minister Abe, are effectively leading to growth in the Japanese economy, creating new opportunities in the Japanese market and accelerating trade and investment by both Japanese and Indian companies. Business leaders from Japan and India expressed hopes for continued commitment to such policies.

In addition, the reforms undertaken by the Government of India over the past 18 months has reinvigorated Japanese investor interest in India and has generated a positive sentiment about the Indian economy. The two countries' business leaders also expressed strong hopes that Prime Minister Modi will speed up various reforms that are currently pending. Both sides welcome the Japan Plus team announced by Prime Minister Modi in September last year and established by the Indian government the following month, and request that this team be used effectively to facilitate business in India. In addition, they consider that the target announced by Prime Minister Modi of improving India's business environment to lift the country from its current position of 130th in the World Bank's "Doing Business" rankings to the top 50 within three years will lead to India becoming a driving force in the global economy. The business communities of both countries wholeheartedly support such initiatives by Prime Minister Modi, which will contribute to building a strong India.

Looking ahead to the launch of the ASEAN Economic Community in December 2015, business leaders from Japan and India have a shared recognition of the need for their two countries to play major roles in further strengthening economic partnerships throughout Asia.

Since the establishment of this Forum in 2007, Indian and Japanese members have cooperated in resolving many bilateral issues, including those related to the implementation of the India-Japan Comprehensive Economic Partnership Agreement (IJCEPA). The business communities of Japan and India will collaborate with their governments from a business perspective to enable both countries to play their roles as growth engines for the global economy.

The business leaders submit the following report to the heads of the two governments.

1. Improving the Business Environment Through Effective Use of IJCEPA

To expand bilateral trade and investment, Indian and Japanese business leaders continue to call for the resolution of various issues relating to the business environment in both countries.

The first crucial point is prompt implementation of the Agreement between Japan and the Republic of India on Social Security, which was signed by both parties more than three years ago. This will resolve concerns over the future held by businesspeople from both countries and ease the burden on companies.

The Indian side stressed upon the need to eliminate the Withholding Tax of 10% on dividend royalty and technical service fees applicable in Japan, to provide a boost to services trade between the two countries. This matter should be taken up by the Sub-Committee on Improvement of Business Environment within the IJCEPA framework.

To expand trade and investment by Japanese companies in India, there is also a need to simplify land acquisition, promptly implement a goods and services tax, and ensure international conformity with intellectual property rights systems. At the same time, it is also important to swiftly resolve the many issues previously raised by the business communities of Japan and India, which are listed in the attachment — some of which have already been addressed.

With reference to transfer pricing litigation, the Indian side stressed on the need to encourage the adoption of Mutual Agreement Procedures (MAP) between competent authorities of both countries to minimize tax litigation and crystalize tax liability.

Both sides sincerely hope that more extensive utilization of IJCEPA, as well as economic improvement around the globe should bring about increase in bilateral trade and investment in years to come. It is essential that all provisions of IJCEPA should be further highlighted and implemented. Both sides expressed their concern that the Sub-Committee on Improvement of the Business Environment set up under the IJCEPA framework has met only once since IJCEPA came into effect in 2011. It is important that this Sub-Committee should be convened regularly each year with participation by public- and private-sector representatives from both countries, and that the outcomes of its meetings should be swiftly reflected in the policies of both governments.

2. Importance of Infrastructure Development and Japan-India Cooperation

Japanese and Indian business leaders expressed their high regard for the role played by official development assistance provided by the Government of Japan in reducing poverty and improving social infrastructure in India.

Both sides share the view that progress on the Delhi-Mumbai Industrial Corridor (DMIC), the Chennai-Bengaluru Industrial Corridor (CBIC), and related projects accords with Indian policy goals including the "Make in India" and "Clean India" initiatives. To further develop manufacturing in India, continued efforts should be made to improve infrastructure including power supply, smart grids, water treatment, roads, railways, ports, airports, and industrial parks.

From the perspective of encouraging Japanese companies to participate in infrastructure development, the business leaders agreed to continue calling for the removal or relaxation of regulations in India, clarification of Central and State Government approval and authorization rights, simplification and acceleration of government procedures including introducing electronic application, and appropriate division of tasks between the private and public sectors, including the provision of government guarantees to facilitate public-private partnerships.

3. Cooperation in Strategic Areas

Japanese and Indian business leaders shared recognition on the importance of introducing advanced technologies and engaging in bilateral technology exchange in fields such as agriculture, water treatment, sanitation, and recycling.

Both sides also welcomed the successful conclusion in July this year of the joint Japan-India feasibility study on the high-speed rail connection between Mumbai and Ahmedabad, together with the Indian government's decision to develop infrastructure for the Diamond Quadrilateral project for bullet trains to connect the four major cities of Mumbai, Delhi, Kolkata, and Chennai.

Japan-India cooperation in constructing nuclear power plants is a strategically important aspect of improving electricity sector infrastructure in India. Business leaders urged their governments to boost cooperation in this field on the assumption that a nuclear power agreement will be signed, while continuing to assure the maximum levels of nuclear power plant safety.

With an overarching agreement between Japan and India to cooperate in the defence and security sector, there is a need to promote engagement between Japanese and Indian private sector companies in the area of high-technology items.

Development and recruitment of high-caliber human resources as a form of intangible infrastructure will be essential to implementing joint projects in such strategic fields. The business leaders reaffirmed the importance of enhancing human resource development initiatives including technical training, corporate / university internships and language programmes.

4. Global Cooperation

Enhanced global cooperation based on the Japan-India Special Strategic and Global Partnership will boost economic development in the Asia-Pacific region. Japanese and Indian business leaders agree that the launch of the ASEAN Economic Community at the end of this year will help to forge broader and deeper economic partnerships throughout Asia. In particular, stronger connectivity throughout the entire ASEAN region will contribute to greater trade and investment by Japanese companies in Indian states on the Bay of Bengal. In this context, the business leaders welcome the collaboration of the Government of Japan with Indian Central and State Governments aimed at establishing industrial parks for Japanese companies.

Both sides agreed to continue joint initiatives aimed at facilitating the swift conclusion of the Regional Comprehensive Economic Partnership (RCEP) negotiations currently under way, to ensure that RCEP brings benefits as a comprehensive, high-quality legal framework. Specifically, they recognized that as well as liberalizing investment and trade in goods and services, this partnership will help to expand production networks and strengthen supply chains in the region by standardizing rules of origin and introducing cumulative rules, as well as contributing to the fulfillment of Prime Minister Modi's "Make in India" policy.

Looking Ahead

CII and Keidanren are the serving Secretariat organizations for India Japan Business Leaders Forum (IJBLF) from India and Japan respectively. To take forward the various recommendations that are put forth in the IJBLF Joint Report, CII and Keidanren have agreed to institutionalize the IJBLF follow-up mechanism including establishment of a Joint Working Group on Infrastructure to begin with.

CII and Keidanren agreed to do regular follow up with the government agencies by utilizing IJCEPA Sub-Committee on Improvement of the Business Environment between the two countries on specific actions taken by the government towards speedy implementation of recommendations put forth in the IJBLF 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 the Asia-Pacific region.

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.

Baba Kalyani
Indian Co-Chair
India-Japan Business Leaders Forum
Sadayuki Sakakibara
Japanese Co-Chair
India-Japan Business Leaders Forum

ANNEXURE
Status update on Industry Issues highlighted at the
Forum meeting held on 1st September 2014 at Tokyo

Regional Affairs