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With a view to focus on CII’s policy advocacy work in the International context, CII has started a new publication called as “ Global Watch”. The CII “Global Watch” focusses on global economic issues and highlights India’s linkages with other countries.
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  • 1. FOCUS: JAPAN INAUGURAL ISSUE: OCTOBER 2015 I age-old friends and close partners and share a warm relationship based on common values. Japan has greatly assisted India in its development mission, partnering on key infrastructure projects including the Delhi Metro, Delhi-Mumbai Industrial Corridor and Dedicated Railway Freight Corridor. The state visit of Prime Minister Narendra Modi to Japan in September 2014 marked a new milestone in bilateral relationship as the two countries elevated their ties further to a ‘Special Strategic and Global Partnership’. Economic engagement, particularly investment, has been accorded high priority in the bilateral relationship. Building on the landmark ndia and Japan, two of Asia’s three largest economies, have been 01 Indian members of the India Japan Business Leaders forum interacting with Japanese Prime Minister Shinzo Abe in Tokyo. Director General’s MessageINSIDE STORIES Message from Indian Ambassador03 Message from Japanese Ambassador04 Viewpoint: Naushad Forbes05 CEO Speak: Baba Kalyani06 Policy Barometer10 Industry Voices12
  • 2. Comprehensive Economic Partnership Agreement A key recommendation of the Report was faster (CEPA) implemented between the two countries in 2011, progress on infrastructure development, including the Prime Minister of Japan, Mr. Shinzo Abe pledged $35 power, water supply, roads, railways, etc. Expanded billion in investment in India’s public and private sectors cooperation in strategic areas including energy, over the next five years. The two countries also set a environment, technology and advanced manufacturing target of doubling Japanese FDI and the number of was also suggested. Joint Working Groups are being Japanese firms in India by 2019. formed to identify opportunities and delineate specific issues in infrastructure, energy, skill development and innovation.Bilateral trade engagement more than doubled between 2006-07 and 2012-13. However, aggregate trade has come down to $15.52 billion in 2014-15 from a peak of Both Indian industry and government agencies must $18.5 billion in 2012-13. This is a matter of concern for strive to promote export of value-added goods to Japan. us. Japan ranked fifteenth among India’s trade partners Japanese policies and recent reform measures have in 2014-15. There is high potential for faster progress spurred interest among Indian entrepreneurs in sectors on goods and services trade. such as food products, garments, pharmaceuticals, IT and ITeS. CII suggests that market access issues and facilitation of trade in services should be taken up withRegarding investments, India has been ranked as the the Japanese side. Non-tariff barriers must be lowered,most attractive investment destination in the latest testing and certification procedures and costssurvey of Japanese manufacturing companies as rationalized.conducted by the Japan Bank for International Cooperation. Interestingly, $1.1 billion worth of Japanese FDI came into India during the second half of 2014 alone, CII has had a long and valued partnership with Japanese compared to about $17 billion between April 2000 and business and institutions which has greatly benefited June 2014 in all. Indian industry. We have recently signed an MoU with Hitachi India to implement pilot projects in the Smart Cities mission. We also work closely with JapaneseThe unique Japan Plus team, as constituted by professors on programs such as Visionary Leaders forGovernment of India in October 2014 to assist Japanese Manufacturing (VLFM) and Visionary SMEs which haveinvestments into India, has guided over 120 Japanese helped improve the competitiveness of Indian industry.companies on various business verticals. The India- Japan Public-Private Investment and Trade Promotion Policy Dialogue held in April this year was another The India-Japan economic engagement today is welcome step which outlined a road map for Japanese multifaceted, vibrant, and dynamic. CII believes that industrial townships in India. given the strong interest of our leaders, the India-Japan economic relationship will have transformational impact onIndia’sdevelopment.WelookforwardtointensifyingourThe India-Japan Business Leaders’ Forum (IBJLF), led engagementwithourJapanesefriendsinyearstocome.by CII and Keidanren, held its last meeting concurrently with the Annual Summit of the two Prime Ministers in Tokyo in September 2014. In its Joint Report submitted to the two leaders, the Forum members expressed concern about declining bilateral trade and recommended effective use of CEPA to improve the business environment Director General and resolve barriers. A broader dissemination of the CEPA Confederation of Indian Industry mandate amongst the authorities and businessmen of both countries is required. Chandrajit Banerjee FOCUS: JAPAN 02 DIRECTOR GENERAL'S MESSAGE
  • 3. FOCUS: JAPAN 03 MESSAGE FROM AMBASSADOR My best wishes to the Confederation of Indian Industry (CII) on the launch of the new newsletter Global Watch, the inaugural issue of whichisfocusingonIndia-Japantradeandinvestmentlinks. India is now the most preferred destination for Japanese manufacturing companies, according to the Japan Bank for International Cooperation (JBIC) Survey of November, 2014 in the medium and long term, overtaking both China and Indonesia, which led the listing in the past. India is preferred due to its market size, which is at an inflection point in terms of growth appetite for consumer goods andits ideal geographical location, both as part of the pan-Asian supply chain, as well as a manufacturing base for markets in Africa and theMiddleEast.Bilateraltradefigures,however,beliepotentialandthisis clearlyanareawherebothcountriesneedtoworkon. The good news is that the number of Japanese companies in India is on a path of growth with around 10-15 new companies opening offices in India every month. The cumulative figure now stands at over 1300 (with more than 2500 bases) in sectors such as infrastructure development,manufacturing(ledbytheautomobilesector),insurance and retail. The Tokyo Declaration of September2014, signed during Hon’ble Prime Minister Shri Narendra Modi’s visit to Japan, has the joint objective of realising investments of ¥3.5 trillion and doubling the number of Japanese companies in India, over the next five years. The challenge is for the two governments and other stakeholders to work in tandem to achieve that goal. However, I am confident that the India-Japan economic engagement will deepen at a rapid pace. The two flagship projects of Japanese investment in India, the Delhi-Mumbai Industrial Corridor (DMIC) and the Chenna i- Bengaluru Industrial Corridor (CBIC), together cover almost 30% of our population and hold the promise of world-class infrastructure along with manufacturing hubs. Besides this, 12Japanese industrial parks have been identified across the country which will act as nodes for Japanese companies seeking to invest in India. Several Indian state governments have also taken the initiative to develop special ties with Japan. Just in the last six months, the Chief Ministers of Rajasthan, Andhra Pradesh, Maharashtra and Madhya Pradesh have led business delegations to Japan and promised to ease the path of Japanese companies entering their States. These high profile visits and measures have elicited a positive response among Japanese companies and I, therefore, believe that the mutual targets set by the leaders of India and Japan can easily be met, setting thestageforanexponentialgrowthinoureconomicties. H.E. Deepa Gopalan Wadhwa Ambassador of India to Japan
  • 4. FOCUS: JAPAN 04 MESSAGE FROM AMBASSADOR I congratulate the Confederation of Indian Industry on this Inaugural Issue of “Global Watch”, which focusses on India – Japan relationship. The decades-old friendly relationship between the two countries has witnessed marked progress and expansion in recent years. We share fundamental values such as democracy, rule of law and respect for human rights. We are located in crucial positions in the Indo-Pacific region, which is of growing strategic importance. Last September, Prime Minister Abe expressed his intention to realize 3.5 trillion yen of public and private investment and financing from Japan. In turn, Prime Minister Modi underlined his determination to further improve the business environment in India, in order to boost investment. The Delhi-Mumbai Industrial Corridor (DMIC) is a symbolic project of cooperation between the two countries. Chennai Bengaluru Industrial Corridor (CBIC) is another major project and the Comprehensive Integrated Master Plan has recently been completed. Japan Industrial Townships (JITs) are already developing andcandidate sites have been identified for special investment incentives. Figures also show robust Japanese investment. When we aggregate announcements made by Japanese companies in the past year on large investments in India, it is already close to 11 billion USD. Our relationship has been elevated to the Special Strategic and Global Partnership. As Prime Minister Abe called it, our relationship is “blessed with the largest potential” for further development. Our robust and deepening economic ties are the key driver of this special relationship. Let us take these economic ties forward together. H.E. Takeshi Yagi Ambassador of Japan to India
  • 5. FOCUS: JAPAN 05 VIEWPOINT ENHANCING INDIAN INDUSTRY’S ENGAGEMENT WITH JAPAN Development stands at the heart of the India-Japan relationship and India has benefited greatly from Japan’s engagement with its development aspirations.The state visit of Prime Minister Narendra Modi to Japan was his first bilateral destination outside the Indian subcontinent and marked Japan’s continuing central position in India’s Look East policy. CII believes that the Tokyo Declaration for India-Japan Special Strategic and Global Partnership signifies an important landmark in the economic partnership of the two sides. For the business community, it was of special interest to note the emphasis on Partnership for Prosperity, which was further detailed with specific projects in a separate Fact sheet. The Fact sheet appreciated the report submitted by the India-JapanBusiness Leaders’ Forum in which CII represented Indian industry. The participation of Japan as partner country in CII’s International Engineering and Technology Fair (IETF) was noted as well. Almost 50 Japanese companies showcased their technological prowess and offered joint opportunities with Indian companies at the IETF held in February 2015. The India-Japan Investment Promotion Partnership was announced by the two Prime Ministers to double Japan’s foreign direct investment and the number of Japanese companies in India. Japan pledged 3.5 trillion yen through public and private investments as well as financing and overseas development assistance over a period of five years. Projects are planned in the areas of next generation infrastructure, connectivity, transport systems, Smart Cities, rejuvenation of Ganga and other rivers, manufacturing, clean energy, skill development, water security, food processing and agro industry, agricultural cold chain, and rural development, among others. The wide range of proposed cooperation areas is impressiveandcanredefinetheIndianindustriallandscape. Electronics Industrial Parks were agreed upon to help build up electronic manufacturing capacity in India and promote India’s participation in global supply chains. Special Japan Industrial Townships are proposed as well. Officials of the two countries are now working on financing mechanisms which would include the private sector as well. Infrastructure remains central to bilateral economic cooperation. Japan has pledged approximately $500 million for Public-Private Partnership Infrastructure Financing Project to the India Infrastructure Finance Company Limited and about $156 million for the Guwahati Sewerage Project. New generation Smart Community projects are planned alongside the Delhi-Mumbai Industrial Corridor including the Logistics Data Bank Project, a Mega Solar Power project at Neemrana and a Seawater Desalination project at Dahej. The two sides also decided to fast-track the Chennai-Bengaluru Industrial Corridor. Energy efficiency, renewable energy and coal-fired generation technology were stressed along with specific projects such as the Barauni super critical thermal power plant and energy management system in telecommunication towers. In the railway sector, a feasibility study on the Mumbai-Ahmedabad High Speed Railway has already been submitted in July 2015. There is also strong emphasis on joint research and innovation which would help bring Japan’s high technology to India. The CII project ‘Champions of Societal Manufacturing’, undertaken with the assistance of Japan to strengthen manufacturing in India, is delivering notable results for the Indian SME sector. In addition, CII’s Village Buddha project was mentioned in the Factsheet as a program for leadership development for self-help groups in rural areas, particularly women. This strong direction from the leadership of both nations is bound to result in positive outcomes for India’s development aspirations and Indian industry would continue to enhance its engagement with Japanese governmentandbusinesstomeetourcommonobjectives. President Designate, CII and Chairman, CII International Council Naushad Forbes
  • 6. FOCUS: JAPAN 06 CEO SPEAK Industry can play a major role in strengthening India – Japan Relations The launch of the India-Japan Business Leaders’ Forum led by CII and Keidanren during Prime Minister Abe’s visit to India in 2007 was a crucial step in taking trade ties to a higher growth trajectory and its deliberations have led to several key issues beingaddressedbybothsides. Q. India and Japan have evolved a Special Strategic and Global Partnership in 2014. What role does economic cooperation play in the overall relationship? ion in India and the participation of Japanese companies in important projects such as the Delhi Metro. These have set the stage for development across multiple sectors. For example, the Delhi Metro has emerged as a paradigm for mass transit systems across urban India. In addition, India is privileged to be the largest recipient of Japanese Overseas Development Assistance since 2003-04. This has contributed to various sectors including power, tourism, agriculture and so on. The elevation of relationship between the two countries to‘Special Strategic and Global Partnership’ and Japan’s commitment to invest FDI to the tune of 3.5 trillion yen further strengthens the economic cooperation and bilateral trade. Q. Industry plays a critical role in developing economic relations between global trade partners. What has been Indian industry’s contribution to economic ties with Japan? A. Industry has a pivotal role in taking trade ties to a higher growth trajectory. The launch of the India-Japan Bilateral economic engagement has been a cornerstone of India-Japan relations. We recall with pride how Maruti Suzuki led the automotive revolut Business Leaders’ Forum led by CII and Keidanren during Prime Minister Abe’s visit to India in 2007 was a crucial step in that direction and its deliberations have led to several key issues being addressed by both sides. The business communities of both countries have through the years worked to resolve a number of challenges, including those related to the implementation of the India-Japan Comprehensive Economic Partnership Agreement (CEPA). We have consistently engaged with each other through diverse platforms including overseas business missions, participation in trade fairs in each other’s countries, and specific sectoral cooperation. Japan participated as partner country for the International Engineering and Technology Fair (IETF) 2015 for the fourth time. Q. How has CEPA contributed to the business engagement between India and Japan? A. Bilateral ties have deepened even more since CEPA was signed in 2011. It has given a fillip to trade in both goods and services. More and more Japanese enterprises recognize and are willing to tap the market potential in India. Here let me mention the latest JBIC (Japan Bank for International Cooperation) survey, which found that India was the most preferred overseas destination among Japanese manufacturing companies. Japan now accounts for more than 7.5 per cent of total FDI flows into India, and is the fourth largest investor in our country. The statistics speak for themselves. Between June and September last year, FDI flows from Japan climbed to $618 million from $273 million during the same period of 2013. In October 2014 alone, Japanese companies pumped in $103.14 million investments. Japan’s industry reportedly plans to pour some $12 billion into India over the next two or three years. An Interview with Mr Baba Kalyani, Co-Chair, India Japan Business Leaders Forum and Chairman and Managing Director, Bharat Forge Ltd.
  • 7. FOCUS: JAPAN 07 CEO SPEAK Q. What has been the action on the ground following Prime Minister Modi’s visit to Japan in August-September 2014? A. Prime Minister Modi’s visit set a new benchmark for the bilateral friendship and in particular accorded high importance to facilitating investments from Japan. One significant outcome of the visit has been Japan Plus, set up by the Department of Industrial Policy and Promotion (DIPP) to facilitate and fast-track investment proposals from that country. Both governments are represented on the team, which will handhold Japanese investments across sectors. Its mandate covers the full spectrum of investment promotion–research and outreach, promotion, facilitation and aftercare. In addition, the action agenda for India-Japan investment and trade promotion signed in April 2015 by the two Commerce Ministers was an outcome of the last summit, and in sync with Prime Minister Modi’s ‘Make in India’ vision. Importantly, the agenda contained specific points such as development of select Indian locations as Japanese industrial townships, and increased cooperation in IT and strategic sectors. In the last few months, we have seen some leading Japanese companies commit significant investments in Automotive, Renewable Energy, Infrastructure sectors and assistance in a few development projects. At a government to government level, efforts to increase cooperation in Defence sector with special emphasis on Technology have also commenced. Q. Isn’t it paradoxical that bilateral trade is shrinking while the number of Japanese companies present in India is growing? A. India offers Japanese industry vast investment opportunities. In infrastructure, the Japanese assistance in the Delhi-Mumbai Industrial Corridor (DMIC) would lead the development of roads, industrial parks, and urban facilities along side. Japanese enclaves can come up with clusters of Japanese manufacturers in cities in parallel with the DMIC. Sadayuki Sakakibara, Japanese Co-Chair of the India Japan Business Leaders Forum and Baba Kalyani, Indian Co- Chair of the Forum presenting the Joint Report of the Forum to Indian Prime Minister Narendra Modi and the Japanese Prime Minister Shinzo Abe in Tokyo on 1 Sept. 2014
  • 8. FOCUS: JAPAN 08 CEO SPEAK Japan is also assisting India in railway development where we can benefit from its expertise in high- speedrail and station development. Under the Smart Cities mission, Japanese companies can invest in water and sanitation management, mass urban transit systems, and IT-enabled infrastructure management. Yes, we have observed that the bilateral trade between the two countries has declined over the last two years which can be partly attributed to the slowdown in global economic activity. However, this also highlights the need for us to enhance the bilateral trade between Japan and India to a level which is commensurate with the size of
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