Given regional and global developments arising out of globalization and nuclear weapons program of North Korea, industry leaders are asking for a more active political engagement of Japan which they say will be more active this century. In an interview to The BusinessLine, President of the Confederation of Indian Industry (CII) R. Seshasayee says that this morphing of attitude and perspective of Japan is causing Japanese politics to drive its business more than Indian politics does.
Seshasayee calls for a radical shift of “economic engagement” to start from a “political angle” as
”Japan is going to be politically more active in the Asian region” than it has “the last 20 years” when it was “passive.” He feels that Tokyo also believes that “building equations with India” is “critical” and since “Business follows politics” as “they are inter-mingled” economic engagement will accelerate. Moreover, “Japanese businesses want to see consonance in politics and business” at a country-level.
The industry sees that “Japan has taken quite some time to accept and acknowledge the Indian growth story” probably because the “businesses are more cautious” and “deliberate in their actions.” He says that Japan wants to make sure that this growth “is not fickle” and is “durable” before “getting into risks” that are “manageable.” The unfortunate side effect to this is that Japanese businesses have “grossly under-leveraged” the high “brand image” in India which is high for “its quality, its business values, and its value to customers.” However, products makde in Japan are expensive and “The only way to solve that problem is for them to get into partnership with India” for “manufacturing” using “Japanese technology.” Historical experience has been that Japanese businesses have been more successful when they partner with an Indian company than by running the show themselves. However, there are gaps in partnership dynamics as “Indian business has been more tuned towards the West in terms of partnerships.” It is only in the case of automotive industry, Indian businesses are “sufficiently tuned to partnerships with Japan.” Seshasayee says that access to Japanese technology and processes are the key investments that Indian businesses seek to gain competitiveness and market expansion based on quality and value and not just price.
However, the Japanese tend to see “technology as a relatively non-tradable” advantage because of concerns more over intellectual property rights (IPR) than commoditization of technology. Seshasayee feels that India has good IPR laws with a fast and fair law enforcement process and therefore the Japanese “have to change” in “their own enlightened self-interest” so they can “expand.” He acknowledges that that while India “has an environment” to support IPR protection “in terms of legislation,” the nation needs “to also deliver” on “speed” of “our enforcement process.”
According to him, another driver that will get Japanese investments to India is that Japanese banks “have an overweight of Chinese assets” and “traditionally” Japanese businesses “have followed” the bankers in “overseas ventures.” The only way to reduce this over-weight is for Japanese financial institutions “to build a portfolio of Indian assets.” Now that the Japanese banks are over the East Asian crisis, “they are now in a position to build their books” and “expand” instead of mere “restructuring and cleaning up the balance sheets.”
Indo-Japan relations are struggling to grow despite a strategic partnership agreement and many cosmetic measures. It is time that India and Japan develop a architecture for engagement that will then drive businesses and strengthen the collaboration.