‘Ease Of Doing Business For Japanese Firms In India Has Improved’

India and Japan are set to herald a new era of cooperation in defence and security with ground-breaking initiatives like the Quadrilateral Security Dialogue (QUAD) and Asia Africa Growth Corridor (AAGC). BW Businessworld’s Manish Kumar Jha caught up with Kenji Hiramatsu, Japan’s ambassador to India to discuss the contours of cooperation.

Exerpts: 

The Japan-backed Mumbai-Ahmedabad bullet train project has a completion deadline of August 2022. What’s the progress so far? Apparently, the biggest challenge for the project is land acquisition. Do you see it as a major obstacle?
The Mumbai-Ahmedabad High-Speed Rail (MAHSR) project is a symbol of Japan-India friendship and will transform the transportation system in India. As such, we are closely monitoring its progress. On 17 September, we held the 8th joint committee meeting in Delhi. On 28 September, the Japan International Cooperation Agency (JICA) signed an agreement with the Indian government to provide an ODA loan of 89,547 million yen (about Rs 5,500 crore) as the first tranche for the MAHSR project.

The Government of India is responsible for acquiring land for this project, and I understand that it is following all the necessary procedures required by JICA. I also believe the National High Speed Rail Corporation (NHSRCL) would continue to make efforts to address the interests of affected farmers and residents.

How easy is it now for Japanese companies to do business in India? What have been the positive changes so far in this regard and what more needs to done?
Japanese FDI to India in 2018 Q1 stood at $874 million; we are the third largest investor in India. The number of Japanese companies operating in India has grown steadily to 1,369 as of October 2017.

As reflected in the World Bank’s Ease of Doing Business Rankings 2017 in which India jumped 30 places to the 100th spot, I would say the ease of doing business for Japanese companies in India has improved, thanks to several initiatives of the Indian government. Among them is the introduction of GST in July 2017, a historic achievement that Japanese companies had longed for. However, many Japanese companies find infrastructure to be a major challenge, I hope the Indian government continues to positively respond to requests and suggestions from Japanese companies. Japan will continue to help improve infrastructure in India by providing Japanese ODA loans and private investment.

Despite the strong FDI inflows and the India-Japan Comprehensive Economic Partnership Agreement (CEPA), bilateral trade has dipped in recent years. It fell from $14.5 billion in 2015-16 to $13.6 billion in 2016–17. What is causing the slippage?
India-Japan trade is actually in an uptrend, if you take a longer-term perspective. It stood at $15.7 billion in FY2017, which is 1.5 times that in FY2007. I hope that more traders will take advantage of the potential that CEPA has unlocked — trade volumes jumped 25.1 per cent in the year after CEPA kicked in. At the same time, I would like to point out that bilateral trade figures do not capture the whole web of our economic relations, as supply chains are getting more complex and Japanese corporate operations are becoming increasingly globalised.

Besides, many Japanese manufacturers have relocated production here in support of Make in India and are exporting finished products not only to Japan but to other markets as well. For example, Maruti Suzuki exports 120,000 vehicles to more than 100 countries annually, accounting for 28.4 per cent of India’s automobile exports.

In 2014, India and Japan decided to expand the bilateral relationship into a ‘special strategic and global partnership’. Defence cooperation is a major agenda. How is it unfolding?
We have regular and institutionalised engagements including the annual Defence Ministerial Dialogue, National Security Advisors dialogue, vice minister/secretary level 2+2 dialogue, defence policy dialogue, and staff talks. Besides, our navies conducted seven joint exercises in the past year alone. Then, there is the strategic Japan-India-US trilateral Malabar Exercise, of which the most recent edition was carried out off Guam in June. More recently, the Japan Maritime Self-Defence Force (JMSDF) and the Indian Navy held the Japan India Maritime Exercise (JIMEX) in October. Besides developing tactical skills, this exercise also seeks to enhance the cooperation for maintaining the rule of law in maritime domain under the Free and Open Indo-Pacific strategy.

Furthermore, the first ever bilateral exercise in the domain of counter-terrorism between the Japan Ground Self-Defence Force and the Indian Army is to be held in the coming months. Also, the Japan Air Self-Defence Force’s participation in the next round of ‘Cope India’ with the Indian Air Force and the US Air Force will add further momentum to air-to-air exchanges.

The Japan External Trade Organisation forecast a shortage of 800,000 IT workers in Japan by 2030. India is well placed to plug this gap. How does Japan plan to embrace an Indian workforce, with language as a major barrier?
There is a huge potential for synergising India’s excellence in software and Japan’s advantage in hardware. In order to build a link between Japanese and Indian (primarily IT) companies, the Japanese embassy has organised startup-pitching events twice in Delhi, while the Japanese government has established the Japan-India Startup Hub in Bengaluru. We have also invited Indian startups to an international exhibition, CEATEC, in Tokyo. In addition, the Japan External Trade Organisation hosted a Japan Career Fair this February in Pune, and will host another in November in Hyderabad.

To support highly-skilled professionals, including those from India, who seek permanent residency in Japan, we introduced a new immigration policy in 2017 which has shortened the requisite period of residency before application from five years to three or one year.

Besides, Japan and India signed an MoC to introduce 100 Japanese language courses at higher educational institutions during PM Abe’s visit to India in 2017. In July 2017, the two governments opened the Japanese Language Teachers’ Training Centre in Delhi with the aim to train 1,000 language teachers in the next five years. We welcome the growing interest in the Japanese language in India.