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Speech Transcripts

June 18, 2013

Speech: India-Japan Relationship in Global Trend

Jawaharlal Nehru University, New Delhi, India

Prof. Girijesh PANT, Dean of International Studies, Prof. Srikanth Kondapalli, Prof. Lalima Varma, Dr. H. S. Prabhakar,

Ladies and gentlemen,

It is my great pleasure to be back at JNU. I am especially happy to have this opportunity in my current capacity as the President of the Japan International Cooperation Agency. On this occasion, I feel that I am triply privileged to deliver a speech here at JNU.

I am privileged, firstly, because the current relationship between India and Japan is very good, perhaps the "closest" in the last six decades. Japan and India have laid solid foundation seeking mutually rewarding relations in the field of economic development, trade, investment, culture, science and technology, politics, and security. At the prime ministers' meeting in Tokyo on May 29th, Prime Minister Abe and Prime Minister Singh reaffirmed their commitment for furthering development of the "Japan-India Strategic and Global Partnership," an initiative established by themselves in 2006.

I am privileged, secondly, because JNU is an intellectual center in India fostering academic and policy-related studies on India's relations with Japan and other East Asian countries. I have been tremendously benefitted academically by my close associations with Professors Varma, Prabhakar and many others. I am looking forward to many comments and advice in today's discussion.

I am privileged, thirdly, because JICA is a public purpose organization of the Government of Japan best known in this country. Many of JICA's staff, experts and volunteers have contributed to the economic development of India. And it is a real privilege for me to speak to this great audience on behalf of JICA.

Since my contribution to JICA's substantive work has still been rather limited, let me contribute to JICA's work by PR activities.

As those familiar with history know, Japan's first ODA loan was extended to India in 1958. Since then, we have expanded operations in various fields, through variety of our assistance modalities such as technical cooperation, ODA loans and investment, and grant aid. India has been the largest partner country of the Japanese bilateral ODA since 2005. The volume of ODA has been increasing steadily and the last fiscal year recorded the largest commitment equivalent to 3.5 billion USD.

The Metro projects in India are some of the highly visible JICA assisted projects. They cover four major cities, Delhi, Kolkata, Bengaluru and Chennai. We are about to sign the loan agreement for a new ODA loan to Mumbai Metro Line 3 project.

In addition to infrastructure development, JICA has also supported human resources development, HRD. This is based on India's development dynamics and reflects changing needs of the industry sector.

One of the good examples of such HRD initiative is a very unique program called the Visionary Leaders for Manufactures Program, VLFM. The chief advisor of the program, Professor Shoji Shiba, was a professor of MIT. The Confederation of Indian Industry (CII) invited Professor Shiba to India for supporting Indian manufacturing sector. In 2007, JICA, the National Manufacturing Competitiveness Council (NMCC) and CII kick-started VLFM with close collaboration with IIM Calcutta, IIT Kanpur and IIT Madras. The program provided "breakthrough" approach created by Professor Shiba, and it intends to create an "innovation" in the manufacturing sector. This program comprises four programs for CEOs, senior managers, middle managers, and small- & medium- enterprises. More than 800 locomotive leaders, who would lead future manufacturing sector, have been trained through the program. Recognizing such contribution, the Government of India conferred the prestigious Padma Shri Award on Professor Shiba recently. Now, VLFM has renewed its name as "Champions for Societal Manufacturing" Program and upgraded the framework from March 2013 onwards.

Another vital example is a set of projects for the Indian Institute of Technology at Hyderabad. This is in order to meet with the growing demand for qualified human resources in the area of science and engineering through a holistic approach. These projects include joint research initiatives, academic exchanges and IIT-H campus development. From the Japanese side, the government, universities and private firms have formed a consortium to be engaged in the project by using their comparative advantages. We are also inviting IITH students to Japan for Master and Ph.D courses.

Lastly, I would like to introduce young individuals' effort for cooperation and friendship between the two countries. That is the Japan Overseas Cooperation Volunteers (JOCV) program. JICA resumed dispatching volunteers to India in 2006, and since then 41 young Japanese volunteers have been working in India: 31 as Japanese Language Instructors, 6 as Judo Instructors, 2 as Midwifes, and 2 as Extension Educators. There is now a language teacher, Ms. Moriyama, posted here at JNU. The needs of Japanese language learning and health sector have been arising and we are willing to expand these grass-roots activities gradually.

In India's 12th Five Year Plan, 8.2 percent growth and significant improvements in social indicators are aspired. In order to achieve these targets, the Plan mentions 1 trillion-USD investment in five years for infrastructure development. It will definitely contribute to better investment climate in India.

At the Prime Ministers' meeting in Tokyo last month, they shared the view that improvement of business environment is significant to enhance bilateral investment and trade. The two prime ministers expressed their expectation of more predictable and transparent business environment including tax administration. Relaxation of financial regulations in India was also welcomed for increasing investment volume.

JICA, in its role, would like to cooperate with the Government of India in achieving this policy. I would like to share some of the on-going JICA- assisted projects as good examples for infrastructure development and investment climate improvement.

The current flagship projects of two governments are the Delhi Mumbai Industrial Corridor (DMIC) and the Chennai Bengaluru Industrial Corridor (CBIC). As for DMIC, the two governments launched a 9 billion USD financial facility and listed candidate projects for financing. JICA has dispatched an expert to DMIC Development Corporation to work closely with the related ministries. Construction work of Western Dedicated Freight Corridor, the largest JICA-assisted project in India, will start soon, showing visible progress this year. These inter-state development initiatives will bring much more favorable investment climate in the region.

We will start preparing a master plan for CBIC in September this year.

The master plan will draw a long term pragmatic ideas and will contribute to formulating strategic industrial policies for the target states. We intend to reflect real voices of foreign investors as much as possible.

Further, a new policy-based lending, Tamil Nadu Investment Promotion Program, TNIPP, was formally announced in the prime ministers' meeting in Tokyo last month.

The objective of TNIPP is to further improve the investment climate in Tamil Nadu by strengthening concrete policy actions and enhancing quality of urban infrastructure in the state. Tamil Nadu is now the largest investment destination in India for Japanese companies. Though the government of Tamil Nadu has taken actions to improve investment climate, the Japanese investors have been raising their concerns such as delay of infrastructure projects, slow processing of investment applications, and land acquisition issues. TNIPP is a new type of cooperation to support improving policies as well as physical infrastructure, thus reflecting the needs of investors.

So, I think I have established the case that JICA has been working positively for the betterment of Indian society and economy. In fact, there are many more projects JICA is working in India. For further information, please refer to our pamphlet entitled, "Operations and Activities in India."

But, JICA's activities are only part of Japan's engagement in India. The private sector of Japan is also playing a very important and constructive role.

The trade volume of the two countries has been increasing steadily. The import from Japan to India has expanded to 12.5 billion USD in the fiscal year 2012, 1.6 times bigger than that of 5 years ago. The export from India to Japan was 6.1 billion USD, which has expanded by two times during the same period.

Some people may argue that in comparison with China's trade with India, Japan's trade volume is still small. India's exports to Japan are less than half its exports to China, and its imports from Japan are only 27 % of its imports from China.

However, exclusive attention to trade statistics can be misleading to understand the on-going international economic relations.

Probably, more significant than trade is foreign direct investment, as it connects economies in a much deeper sense.

In fact, the net flow of FDI from Japan to India was 2.8 billion USD in 2012, more than ten times increase from 2005. That is the third largest FDI inflow into India after Mauritius and Singapore. The share of Japan in the total cumulative FDI to India ranks the 4th place after Mauritius, Singapore and U.K. Recently, the presence of Japanese companies in India has increased two fold from 2008; as of November 2012, there are 926 companies operating in India. In comparison, China's FDI into India 2011 was 180 million USD, only 8 percent of Japan's FDI in the same year.

Starting with Maruti Suzuki, the auto industry has been one of the main- stream of the Japanese investment to India. In 2012, the total production share of the Japanese auto companies like Maruti Suzuki, Toyota, Nissan and Honda was about 38%. Major companies are installing their R&D facilities in India and considering India as a strategic location for establishing production centers. Some auto companies regard India as an "export hub" and they have started exporting from India to Europe, Middle-east and Africa.

Obviously, the Comprehensive Economic Partnership Agreement, CEPA, effectuated in August 2011, is expected to boost the trade volume, too. The tariffs have been scheduled for elimination by 90 % on Indian and 97 % on Japanese goods over the next ten years.

But I would like to emphasize the impact of economic integration that is taking place on a much larger scale involving both India and Japan. Prime Minister Abe mentioned the "confluence of the two seas" in his speech in the Indian parliament in 2007. Now, we are in fact observing increasing integration connecting the two oceans, the Pacific and the Indian Ocean. As Prime Minister Singh said in his speech to Japan-India Association last May, "The Indo-Pacific region is witnessing profound social and economic changes on a scale and at a speed rarely seen in human history." In the last quarter of the 20th century, we saw a dramatic rise of the Pacific economies. In the first quarter of the 21st century, we are witnessing the rise of the Indian Ocean countries.

First, South Asia and Southeast Asia is being more and more connected. Exports from ASEAN to India tripled from 2005 to 2011. India-ASEAN summit in December 2012, stressed the political, economic and security cooperation and the importance of ASEAN-India connectivity. As highlighted in the Vision Statement of ASEAN-India Commemorative Summit, the commitment of India-Myanmar-Thailand Trilateral Highway project is a good example "to add greater momentum to the growing trade and investment linkages between ASEAN and India."

Here, I would like to point out the involvement of Japanese business behind this growing connectivity between Southeast Asia and India. As many of you know, many ASEAN countries are production centers of many Japanese companies. 91 percent of automobile production in Thailand are made by six Japanese auto-makers. Though I do not have exact statistics, trade between Southeast Asia and India contains many products and components made in Japanese plants in Southeast Asia. Furthermore, components made in Indian plants of Japanese companies like Toyota are now exported to Southeast Asia.

Second, South Asia and Africa is being connected, too. Trade between India and Sub-Saharan Africa increased nearly six times from 2005 to 2011, from 8.6 billion USD in 2005 to 51.3billion USD in 2011.

This increasing connection between India and Africa reflected the remarkable opportunities in Africa. Africa is now one of the growth centers of the world with more than 5% annual growth over the past decade and is expected to grow in the coming years.

Japan's engagement in Africa is increasing.

  • FDI Stock from Japan in Africa grew six times from 2005 to 2011, from 1.3 billion USD to 8.1 billion USD.

And as I mentioned earlier, some of the major Japanese companies regard India as an export hub to other countries and regions including Africa. Toyota, Honda, and Suzuki are all exporting automobiles made in India to Africa.

Two weeks ago, Japan held the 5th Tokyo International Conference on African Development (TICAD) in Yokohama, Japan. Under the adopted "Yokohama Declaration 2013" and "Yokohama Action Plan 2013-2017", Japan committed to the expansion of investment and trade relationship with Africa through private sector development, infrastructure development and sustainable economic growth. Our cooperation with Africa will lead to creating better economic environment not only in Africa but also in the Indian Ocean.

The Indian Ocean, together with the Pacific Ocean, connects the thriving economies of North America, Northeast Asia, Southeast Asia, South Asia, the Middle East and Africa.

In his speech at The Japan-India Association last May in Tokyo, Prime Minister Singh pointed out that "maritime security across the linked regions of the Indian and Pacific Oceans is essential for regional and global prosperity." As a maritime nation, Japan also commits to the maritime security in the Indian Ocean.

The India-Japan relationship is often called "strategic," as PMs Singh and Abe's "Strategic Global Partnership" indicates. It may be strategic in geopolitical sense. In this age of "power shifts" with many economies emerging and re-emerging, cooperation between India and Japan is a stabilizing factor. But it is not to counter anybody. The media sometimes depicts Japan's approach to India as an attempt to encircle China. It seems absurd to encircle one of the most important economic partners for both India and Japan. China is also a very important partner of growing connectivity of the two oceans.

Indeed, the Indo-Japanese relationship is a strategic partnership. But I would like to emphasize the strategic importance of creating mega region of economic prosperity connecting the Indian Ocean and the Pacific Ocean for both countries.

JICA is proud of joining this endeavor in Southeast Asia, Africa, and South Asia, especially India.

Thank you very much.

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