Japan takes notice of India, finally
By Suvendrini Kakuchi

TOKYO - After years of pushing India to the sidelines, Japan is changing its tune and actively courting the world's largest democracy, lured by its growing international economic and political prowess.

"The old image of India as a poverty-stricken country is no more. Japan has begun to view India as a place with huge investment and manufacturing potential," said Satoshi Matsuki, a specialist on India at Japan's Foreign Ministry.

Indeed, the Foreign Ministry announced last month a new research program called "India, a Strategic Global Partner", under which improvements will be also be made in Japanese development assistance to India. Japanese aid to India in 2002 reached US$112 million, making the country the next-highest recipient after China.

Measures toward deregulation in the Indian economy and its rapid ascent into a global information technology (IT) leader has helped elevate the appeal of its economy of a billion people and vast natural resources, according to analysts interviewed here.

On the political front too, Professor Perma Galpo, an expert on South Asia at Gifu University, sees India-Japan diplomacy taking on greater importance as the two countries work in coordination to gain permanent seats in the United Nations Security Council.

"Upcoming revisions to expand the Security Council has attracted both countries and now encourages them see them working together for a common aim," Galpo said in an interview. "They need each other."

Galpo points out that bilateral ties face a smoother future in comparison to Tokyo's usual problematic relations with East Asia. While Japan has closer economic and commercial links with East Asia and countries such as China and South Korea, relations are often bogged down by the legacy of Japan's pre-World War II colonization period of Asian nations.

Japan's latest approach to India has so far also been reciprocated well by Indian businesses that have traditionally been looking West - 70 percent of India's exports are aimed at the United States market.

"More smaller Indian companies are seriously developing strategies toward Japan. Japan is becoming an important market as a way of balancing their trading partners," said Yoshie Shimane of the Institute of Developing Economies in Japan.

For instance, Japan is the world's second-largest software market after the United States. Already, Japanese companies have begun to accept Indian engineers. Projects to supply software in India and to provide it to Japan via communication networks have been set up between Indian and Japanese companies.

Two-way trade figures, while still way below that of Japan's trade with Southeast Asian countries and China, are already reflecting this increased economic interest. Japan's trade with India in 2003 stood at US$3.94 billion. While exports to India stood at $1.86 billion, imports stood at $2.08 billion, leaving a deficit trade balance of $ 219.96 million with India. According to a provisional estimate of the Indian federal Commerce Ministry, the Indo-Japanese bilateral trade in fiscal 2002-03 stood at $3.70 billion, signifying 1.19 percent growth over the previous fiscal's $3.65 billion and $3.63 billion in 2000-01. The trade balance in fiscal 2002-03 tilts in favor of India with a surplus of $27.70 million.

But signs of change are apparent. In October Fujitsu Ltd, a Japanese IT giant, launched a joint-venture project with two Indian firms to develop software in Bangalore, India's Silicon Valley. The joint venture that employs 100 staff produces software in India's offshore production facilities, where Indian engineers exchange data with their Japanese customers through communication networks.

"Partnering with Indian firms is key for Fujitsu to grow in the global market," an official at Fujitsu pointed out.

In the area of automobiles, too, India is an attractive destination for Japanese investors. India's motorcycle market now eats up more than 5 million units a year, second only to China, and is expected to double by the end of 2010.

Honda Motor Co reports that its local joint venture - Hero Honda - produced 1.68 million motorcycles in 2003, making it the world's largest single producer of two-wheeled vehicles.

"India has far more potential than China," Akio Kazusa, joint managing director at Hero Honda, commented in December. He said Honda is planning to expand its production aggressively and has already established a new research section aimed at developing models catering to Indian consumers.

Said a spokesman for Isuzu Motors, Tad Ioka: "Right now our focus is on Thailand and China. But in two years' time, it's going to shift to India. We see India as an important production base."

Indeed, economists see India's electronic market as being almost equal to Japan's. The sale of television sets for 2002 reached some 8 million units, close to Japan, which was at 8.6 million, only slightly higher.

Experts say the IT industry has also seen the rapid growth of households that can afford to buy expensive cars and personal computers - from 3 million in 1999 to 6 million by 2005.

The trends are promising to many but some, like Shimane, advise cautious optimism in sizing up the potential of the Indian market for Japan. Economic relations between Japan and India are likely to be slower to take off than Japan's ties with Southeast Asia, which have been there for decades.

"India symbolizes a different market from Southeast Asia, where Japanese companies were embraced wholly in the '80s and even now. With India, where local companies have a stronghold, the steps will be slower. But the future is bright," she explained.

(Inter Press Service)