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PM goes to Japan, it is 'thank you' time again

October 21, 2008 12:48 IST
Prime Minister Manmohan Singh will reach Japan later in the day today, accompanied by a heavyweight business delegation that includes Reliances Industries' CMD Mukesh Ambani, ICICI's K V Kamath and Infosys's Nandan Nilkeni.

Actually, this is not the best of times to visit Japan which is passing through political chaos. According to sources, Dr Singh's visit was almost got cancelled since Japanese Prime Minister Taro Aso was under pressure to hold elections on October 26. Aso's Liberal Democratic Party doesn't have a majority in the upper huse. The Democratic Party, Japan's main opposition, and the LDP's ally the New Komeito Party were applying pressure on the prime minister to go in for an early election.

A day before Dr Singh's arrival, a poll by Kyodo News claimed that the approval rating for Prime Minister Taro Aso's Cabinet has dropped to 42.5 percent, down 6.1 points from September, while disapproval is up by the same margin, to 39 percent. Aso has been in power for less than two months. Luckily for him, the economic crisis has come to his rescue, and he is trying to divert attention to the economic crisis to get rid of political pressures.

According to Japan Times, 'While Aso has been saying he wants to concentrate on economic stimulus measures to fight the global credit crisis rather than call a general election, the largest percentage of voters who disapprove of his Cabinet said they cannot hope for much from (his Cabinet's) economic policies.'

However, for Dr Singh Japan is familiar territory. In the '80s, as secretary, economic affairs, he had to visit Japan every year to plead for aid for India. After he became finance minister and introduced economic reforms, he got a rousing reception in 1992 at the Waseda University. Japan was a rare country that bailed out India from becoming a defaulter in its international commitments in 1991. After receiving huge aid from Japan during Prime Minister Chandra Shekhar's regime, as finance minister in the P V Narasimha Rao government Dr Singh had visited Japan to thank them.

According to Arjun Asrani, then ambassador to Japan, "As it happened with Nehru's visit in 1958, the entire hall was full at Waseda University. During that visit, I saw to my astonishment that the Indian finance minister could attract such a large crowd of captains of industry at the event arranged by Keidanren, the industrialists' association. He was so popular as the author of India's economic reforms."

This time also, Dr Singh will thank Japan for keeping silent and going along with the consensus at the Nuclear Suppliers Group meeting that relaxed its guidelines to allow India to enter the global nuclear energy trade.

In recent years, Japan and India's relations have been either cordial or warm except for two years, from 1998 to 2000, after India tested its nuclear weapons. In December 2006, India and Japan issued a joint statement, Towards Japan-India Strategic and Global Partnership. Both countries want to increase the political, economic, and defense cooperation between them but things are not exactly moving at the right pace. Japan is highly impressed by the Indian navy and is looking for more engagement with the Indian navy to increase security for its oil and goods supplies in the Indian Ocean and Malacca Straits. When maverick politician Junichiro Koizumi visited India in 2005, he took the relations to a new high.

Ambassador Asrani says, "After China's rise the Japanese have valued India's friendship and now, more and more Japanese have changed their views and are not considering India as a rival in Asia. Second, the American push is also there. In any strategic move of Japan you can find the American hand. American influence on Japan's diplomacy is quite strong, and it wants that India and Japan should come closer."

Asrani counts the China factor as important. He says, "China is watchful of India and Japan. It is worried about it but they can't say much because they also have good relations with our neighbours Myanmar, Sri Lanka, Nepal and Pakistan."

During Shinzo Abe's time in 2006-07, Japan-Australia-India and America thought of having a new platform dubbed as the Quadrilateral Initiative or Democracy Arc but the idea "never got going". China resented the move publicly.

Asrani, who is well aware of Asian sensitivities, says, "I am happy that the quadrilateral democracy arc is not happening because it is not a good idea to start with. I am always concerned about whatever we do or say vis-à-vis ASEAN countries. We are rubbing Malaysia, Indonesia and other countries the wrong way if Japan, Australia and India claim that only we three are having democracy in this region."

Even Foreign Secretary Shiv Shankar Menon, while briefing the media on the eve of Dr Singh's Japan's visit, said, "I haven't heard recently about it." As if almost rejecting the idea, he added, "We will be very careful in talking about such grouping" and went on to say that India prefers an "open architecture."

This time, too, Dr Singh will be speaking at the invitation of the Keidanren and other trade chambers. He will be holding bilateral talks with Aso and meet opposition leaders, too. Dr Singh and Aso will put their brains into some real issues between the two countries. According to Hideaki Domichi, ambassador of Japan in New Delhi, "As this is a time of international crisis, it is expected that both leaders would exchange views on how to tackle the problem as countries that have considerable weight in world economy."

Dr Singh has an important issue on hand: unimpressive trade relations.

According to FICCI, Indian exports are not getting adequate market access in Japan due to its high tariffs as a result of which India's share in Japan's imports has stagnated at around 0.6 per cent for the last five years.

FICCI wants Japan to abolish tariff on leather, footwear, textiles, marine, chemicals and animal products. Both countries have formed task forces and study groups. The issues have been discussed enough but still, both sides are unable to agree on the long-pending Comprehensive Economic Partnership Agreement. It is quite unlikely that the CEPA will be signed during this visit. If it happens it will be a pleasant surprise for India. Right now, there are issues of tariff and also Japan's belief that their service sector like medical, engineering and other professions, if not superior they are "different". CEPA is a wider agreement than a Free Trade Agreement.

"The immediate duty elimination by Japan on these products under the CEPA will give an edge to Indian exporters in the Japanese market and could double its share in the next five years," said Dr Amit Mitra, secretary general, FICCI.

FICCI states, "India's exports to Japan are way behind China's exports that has a share of 20.6 per cent in Japan's imports. Chinese imports into Japan have more than doubled since 2002 and have shown a remarkable increase from $ 61.8 billion in 2002 to $ 128 billion in 2007."

Most of the other Asian countries have a higher share in the Japanese market. Korea (4.4 pc), Indonesia (4.3 pc), Thailand (3 pc) and Malaysia (2.8 pc) are the main importing countries for Japan apart from USA (11.6 pc), Germany (3.1 pc) etc. India's share in Japan's imports has been hovering around a meager 0.6 pc from 2002 to 2007, although in value terms Japanese imports from India have doubled from $ 2.1 billion in 2002 to $ 4.2 billion in 2007, according to a FICCI analysis.

Asrani, says, "You have to understand where Japan stands today in terms of its economy. It is no longer the manufacturing hub of the world. Japanese companies have shifted their units to China and South-East Asia. Car manufacturing has been shifted to the West. Our trade will be limited. The Japanese have invested in Thailand, Indonesia, Malaysia and China."

Asrani says, "The goods that is exported from China to Japan are produced in China by Japanese companies. It is produced for the Japanese market. India has not been a traditional export base for Japanese companies. The Japanese tell us that because of poor infrastructure and strict labour laws they haven't been investing in the manufacturing sector. India-based MNCs are producing in India for the domestic market."

The PM's visit will also take up the important issue of dedicated freight corridor project and the Delhi-Mumbai industrial corridor project. Japan is expected to give huge official loans for these ambitious ventures.

Asrani says, "The Japanese are good people but they think they are unique, they are different and they don't open up quickly due to their 300 years history of isolation."

On October 23, Dr Singh will leave for China where he will attend the Asia Europe Meeting which will have, according to Chinese Foreign Minister Yang Jiechi, 45 top leaders of the globe representing 60 percent of the world's population, over 50 percent of the global GDP, and about 60 percent of its trade.

It will be a good change for Dr Singh from watching dear ally Amar Singh and his own minister Shivraj Patil bickering over the Batla House shoot-out.

Sheela Bhatt in New Delhi