Dialogue  January-March, 2007, Volume 8  No. 3

Changing Perceptions on Indo-Japanese Relations                       

K.V. Kesavan

The year 2007 marks the fifty fifth year of Indo-Japanese diplomatic relations and it has also been designated as the year of Indo-Japanese friendship. During these years, though bilateral relations have passed through several ups and downs, one can notice strong currents of friendship and mutual goodwill bonding them together. Indo-Japanese relations have entered a new period of warmth and understanding especially since 2000. New convergences and commonalities have occurred in their interactions. Mutual perceptions of each other’s national and diplomatic interests have witnessed a remarkable change owing mainly to the rapidly shifting geo-strategic situation of Asia. Both countries now look at each other in terms of fashioning a comprehensive, long term security and economic partnership. Until very recently, Indo-Japanese relations remained almost wholly economic in nature, but today they encompass a wider range of interests like security, energy cooperation, joint efforts in the restructuring of the UN, cooperation in safeguarding sea-lanes and so on. This change has been made possible because of the patient and persevering efforts undertaken by both countries particularly since 2000. Today there is hardly any serious discussion in Japan on the future economic and security architecture of Asia that does not include India. This was not so about fifteen years ago when India did not figure at all in such discussions. There is a fundamental change in Japan’s assessment of India and its unfolding role in Asia. In some of the public opinion surveys conducted in Japan in recent months, India has figured prominently as a country that will emerge as a major economic power by the middle of this century. The present prime minister of Japan, Shinzo Abe, has consistently expressed strong support for Indo-Japanese partnership based on a wide range of security economic and cultural commonalities. In his book titled “ Towards Building a Beautiful Country”, he has even stated that Indo-Japanese relations will become the most important bilateral relations for Japan in the future.

One can cite three reasons for this dramatic transformation in Japan’s attitude. First, India’s firm adherence to its economic liberalization programme despite several changes in the government, and the impressive growth of the economy have convinced Japanese politicians and economic leaders that their earlier scepticism about India’s ability to accomplish an economic take-off was badly misplaced. They now believe that there is a national consensus in India on the need for implementing the economic reforms. During the pre-1991 years, Japan had serious reservations on the inward looking, state controlled economic strategies pursued by the Indian government. But the whole Indian economic scenario has changed since 1991 when the economy has consistently recorded a 6%annual rate of growth and in the last couple of years the growth rate has been around 8%. Most of the restrictive measures such as licences, quotas, etc, have been removed and the Indian economy has become far more free and transparent. Today the manufacturing and service sectors account for about 80% of India’s national income. The new economic liberalization policy has recognized the role of foreign direct investment (FDI ) as a major vehicle of development and opened up unprecedented opportunities for foreign investors. Many Japanese political and business leaders strongly believe that if the Indian economy continues to maintain the current rate of growth, India will emerge as one of the economic giants of the world. Second, India’s pursuit of a multidimensional diplomacy since 1992 has also considerably reduced the psychological gap that used to impede the bilateral relations during the cold war years. Many Japanese leaders considered non-alignment as another name for maintaining close relations with the Soviet bloc. However, since the end of the cold war, India has skillfully crafted its diplomacy to build a new strategic and economic partnership with the US. The fact that the US has emerged as India’s biggest trade partner as well as investor with a wide range of scientific and technological collaborations has created a favourable impact on the policy-makers of Japan. In addition, they are also pleased to see the progress of Indo-US cooperation in the security field. Both countries carry on an in-depth strategic dialogue where they address issues of common interest such as maritime security, energy cooperation, counter-terrorism, etc. They attached utmost significance to the successful visits to India of President Bill Clinton in March 2000 and President George Bush in February 2006. Many in Japan also welcome the current Indo-US civilian nuclear agreement as it would bring India “into at least the international non-proliferation regime” and “make the Indian civilian nuclear regime more transparent and accountable”. Third, following the adoption of a new ‘Look East policy’ in 1992, India has been steadily expanding its political and economic relations with Japan, ASEAN, South Korea and China.

Since 1994, India has been a dialogue partner of ASEAN, and more recently, it has participated in the ASEAN+l annual post-ministerial meetings. As a member of the ASEAN Regional Forum ( ARF ) since 1996, India has been playing a useful role in all its activities. In December 2005, owing to the initiative taken by Japan, India was invited to participate in the first summit meeting of the East Asian Community held in Kuala Lumpur. The growing economic and political strength of India , many felt at that time , would add a great deal of clout to the new forum. But Japan also believed that the inclusion of India , Australia and New Zealand could offset the influence of China in the deliberations of the summit. In this context, it is relevant to note that Prime Minister Shinso Abe has been advocating a quadrangular understanding between Japan, the US, Australia and India for contributing to the security and stability of Asia. On 13 March 2007, Australian Prime Minister John Howard and Abe signed an unprecedented defence agreement which would see both countries cooperating in such areas as maritime security, energy , peace-keeping operations, counter terrorism, etc. Both countries have agreed to hold regular talks at the level of defence and foreign ministers of the two countries similar to the two plus two talks held regularly between Japan and the US. There are expectations both in Japan and Australia that India should be brought within the purview of these dialogues in view of the many common values that exist among them. But at the same time it is also imperative to see that such quadrangular understanding does not create any uneasiness in China that the whole exercise is directed against Beijing.

Prime Minister Mori’s initiative: The beginning of the present buoyancy in the bilateral relations should be traced to the visit made by the then Japanese Prime Minister Yoshiro Mori to India in August 2000. After India’s nuclear tests conducted in May 1998, both countries passed through a period of stress and uncertainty. Japan’s decision to suspend its official development assistance (ODA ) and the accompanying hesitation of the business people to invest in India had led to a state of near stagnation in bilateral interactions which lasted for nearly three years. It was under these conditions that Mori took the historic decision to visit India essentially to reinvigorate bilateral ties by giving a broader orientation. He called upon both countries to look beyond their immediate bilateral problems and work towards a new global partnership that would address a wide spectrum of issues such as nuclear disarmament, structural reform of the U.N. maritime security, etc He believed that under the rubric of global partnership, both countries could effectively address several world issues instead of getting bogged down only in their bilateral affairs. Mori’s vision of a global partnership was the result of a strong realization in both countries that bilateral relations were badly immobilized because of the undue importance placed on one single issue. Virtually, Indo-Japanese relations were held hostage to the nuclear issue for three years. Simultaneously, many people in both countries worried that too much reliance on ODA was also fraught with risks. While one cannot ignore the benefits that the Indian economy received in a variety of sectors, one should also admit that when ODA was suspended during 1998-2001, it virtually affected the whole gamut of bilateral relations. In order to come out of this predicament, Mori wanted to redefine the bilateral ties in the light of the rapidly changing geo-political landscape of the world as well as Asia.

 Broadening of the partnership: The idea of global partnership was carried a step further by the two countries when the then Indian Prime Minister Atal Behari Vajpayee visited Japan in December 2001. Both he and his Japanese counterpart Junichiro Koizumi agreed to intensify bilateral cooperation in several areas like counter terrorism, safety of the sea-lanes, energy and environmental security, etc. In April 2005, the then Japanese prime minister Koizumi visited India and issued an Eight Point Initiative along with Indian Prime Minister Manmohan Singh and it laid stress on expanded and comprehensive dialogue mechanisms at different levels; extensive economic engagement through expansion of trade and private investment; enlarged security dialogue and cooperation; cooperation in the fields of science and technology ; cooperation in the restructuring of the U.N; and cooperation in responding to global challenges and opportunities.

Prime Minister Manmohan Singh’s visit to Japan: The buoyant mood in the bilateral ties was further consolidated in December 2006 when Manmohan Singh visited Japan. One of his objectives was to meet and establish a close rapport with his new Japanese counterpart Shinzo Abe who has been showing his extraordinary enthusiasm for closer relations with India. Their joint statement titled, ‘Towards India-Japan Strategic and Global Partnership’ constitutes a long and detailed roadmap for building a multi-layered network of bilateral relations. Broadly it emphasizes the following points: a) holding annual summit meetings between the top most leaders; b) institutionalization of strategic dialogue at the level of foreign ministers; c) pursuing negotiations for the conclusion of bilateral economic partnership agreement/comprehensive economic cooperation agreement ( EPA/CEPA ); d) establishment of business leaders forum; e) cooperation in the field of science and technology; f) encouragement of exchanges at the level of the two peoples; g) cooperation in multilateral fora like the UN, SAARC, EAS, etc. and h) cooperation in areas like energy, environment, global trade, etc.

As a result of all these efforts, the parameters of the bilateral ties have expanded considerably. For instance, the defence dialogue initiated in 2000 has now become firmly institutionalized. Defence ministers and service chiefs of both countries have regularly exchanged visits to keep the dialogue going. In May 2006, the Indian defence minister Pranab Mukherji visited Japan and with his Japanese counterpart issued a joint statement clearly specifying the areas of bilateral defence cooperation such as maritime security along the Indian Ocean and the Strait of Malacca , annual exercises between the two navies, regular port calls, etc. Mukherji clarified that India’s new defence cooperation with Japan was independent of its good relations with the US since he believed that as two major Asian countries, they shared many common interests and concerns. He also explained how despite its close relations with the US and Japan, India could not participate in the Washington inspired Proliferation Security Initiative ( PSI ) because of the differences in their approaches.

The Singh-Abe joint statement has also institutionalized a new strategic dialogue between the two countries at the level of foreign ministers. India’s foreign minister Pranab Mukherji is scheduled to visit Japan by the end of March 2007 to meet his counterpart Taro Aso. Similarly, institutionalized dialogues at different ministerial levels that are under way will contribute to diversify bilateral ties.

Asymmetry in bilateral relations: In an interview to the Yomiuri Shimbun on 5 December 2006, Prime Minister Singh referred to the need for expanding the range of bilateral economic relations by adding more substance to the partnership. During his visit to Japan, he stressed this point with his Japanese hosts and strongly advocated the need for signing an EPA between the two countries that would not only give a boost to bilateral economic ties, but also promote broader economic integration of Asia. As of 2005, bilateral trade amounted to only about $ 6.5 billion and this figure pales into insignificance when compared to Indo-US or Indo-China trade. India occupies 26th position among importers of goods from Japan and 28th position among exporters of goods to that country. Singh referred to the “disproportionately small size” of Indo- Japanese trade and urged Japan to increase its import of India’s knowledge based products in the IT and pharmaceutical sectors. Even though IT offers tremendous potential, it has not been effectively tapped until now. Japan accounts only for about 6% of India’s total IT exports and this is too small considering the huge size of Japanese IT sector. The time has come now for India to seriously explore new areas of exports to Japan where consumer choices keep changing fast.

Similarly, India offers unlimited opportunities to Japanese investors in a wide range of fields and Japanese investment in India has increased markedly since 1991. But given the enormous size of Japanese global investment, what India has received so far is miniscule. India accounts for only 0.25 % of Japanese total global investment. Even though Japan occupies the third position in terms of FDI in India during August 1991-June 2006, it only accounts for about 6% with a total investment of $ 2.1 billion. Japanese investment has flowed into sectors like transport ( 58% ), electronic equipment and computer software ( 6.8 % ), telecommunication ( 4.08 %) earth-moving machinery (3..4 % ) and services ( 3.3 % ). The Indian government has been urging Japan to increase its presence in the infrastructure sector which offers Japan endless prospects. India has also planned to develop more than a hundred special economic zones (SEZs ) that would provide a business friendly environment with modern infrastructure, fiscal incentives, full foreign ownership, easy repatriation of profits, and so on. Despite the liberal polices of the Indian government, Japanese investment has yet to record a dramatic surge. Many official and private surveys conducted recently in Japan have indicated that the Japanese investors are not fully satisfied with the pace of economic liberalization programme in India and they refer to many obstacles such as lack of adequate infrastructure facilities, labour laws, bureaucratic red tapism, etc. It is therefore essential for the Indian government to address these problems and make appropriate measures to assure Japanese investors that India will provide a win-win situation.

Official Development Assistance ( ODA ): ODA has long been the core element of Indo-Japanese relations and India was the earliest country to receive Japanese aid even as early as in 1958. Though India and Japan have considerably diversified their relations since then, ODA still continues to loom prominently in the bilateral ties, and India has been the top recipient of Japanese aid since 2002 replacing China. While there is great appreciation in India about Japan’s contribution to Indian economy in a large range of fields like transport, communication, power generation, environment, etc, many feel that the time has come for India to shift its interest from ODA to economic partnership based on Japanese private investment. For one thing, ODA in recent years has been very much embroiled in political controversies within Japan. Further, the Japanese taxpayers are very critical of the way ODA is disbursed by the government. They contend that when their own economy has been bogged down in serious difficulties for more than fifteen years, there is little sense in extending aid to countries which are far away from their shores. It is significant to note that the overall quantum of Japanese ODA has been steadily decreasing in recent years and Japan is no longer the biggest donor country of the world which it used to be before. It is also necessary to bear in mind that in recent years the Japanese government has tended to link ODA to the fulfillment of certain political objectives. India cannot easily forget its unpleasant experiences during 1998-2001 when ODA was suspended following its nuclear tests. Japan’s position that it would resume ODA only if India signed the Comprehensive Test Ban Treaty ( CTBT ) virtually brought the bilateral relations to a standstill. Luckily the 9/11 terrorist attacks on the US brought about a change in Japan’s policy and as noted earlier, Prime Minister Mori launched a new diplomatic initiative for building a global partnership between the two countries.



Dialogue A quarterly journal of Astha Bharati

Astha Bharati