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Japan homes in on South Asia’s competitive markets

Japan has to make up for its relatively late entry and the opportunities it lost in the past. Despite Maruti-Suzuki, the symbol of Japanese innovative people-oriented venture, the Japanese really could not capitalise on its goodwill in such a diverse society and market as in India

analysis Updated: Jul 04, 2016 02:29 IST
Japan,India,Narendra Modi
Prime Minister Narendra Modi (right) with Japan's Prime Minister Shinzo Abe ahead of a meeting at a business forum in New Delhi in 2015(AFP)

Japan increasingly figures in three contexts in South Asia today. First, its role in fostering regional cooperation, where it has the potential of emerging as a critical player in regional groupings like SAARC and the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), and sub-regional groupings like Bhutan-Bangladesh-India-Nepal (BBIN). Second, its massive support across South Asian countries on a bilateral basis has been avidly watched and recorded. And third, its conspicuous increase in investment in non-traditional ventures like energy could lead to politico-strategic alignments in the near future. In all, these regional partners are the single-most beneficiaries as they gain without being dragged into global security alliances and, more critically, from an effectively quiet yet non-controversial Japanese economic intervention.

In the regional context, Japan, besides being given observer status in SAARC, has been the only nation that has floated a substantive SAARC-Japan fund. Though the SAARC process has not been able to utilise this fund effectively, there is a huge potential for this fund to inspire and work on people-centric projects of “non-official SAARC”. In the emerging sub-regional blocs like the BBIN, the Japanese imprint is clearly seen both in terms of potential cross-border ventures and initiatives like that of the multilateral development agency Asian Development Bank and United Nations Economic and Social Commission for Asia-Pacific (UNESCAP), where the Japanese have a deeper influence. The question is how rapidly Japan and India, after the Modi-Abe commitment of 2014, implement the connectivity projects in the North-East region of India, and how robustly reconfigures Japan’s pivotal role in India’s Act East policy to connect with and make ASEAN, East Asia Summit and Regional Comprehensive Economic Partnership more diverse, inclusive and a win-win game. Eyes are on the steady relocation of Japanese investment from China to South-East Asia, topped by the expectation that soon South Asia will be another hotbed of Japanese investment. Unlike India and China, the Japanese are never taken in a competitive strategic framework in the South Asian region. Japan has this unique and powerfully evolved core status.

Read: India, Japan say no prosperity possible in South China Sea amid tensions

Bilaterally, during 2010-14 alone, of the Japanese loan disbursements of 7.66 trillion yen in the six countries of South Asia, India constituted the highest share of almost 60%. In the total grant of 1.27 trillion yen Bangladesh took 37%, followed by Pakistan — 20.42%. And in the technical assistance of 3.55 trillion yen, Bangladesh, Pakistan and Nepal had almost 22% each. Afghanistan alone since 2001 received a support of $5.79 billion in areas varying from security to health, education to agriculture and energy to infrastructure. The likelihood of realising 3.5 trillion yen public-private investment from Japan in giant Indian next-generation infrastructure like freight and industrial corridors, clean energy, Japan industrial townships and Shinkansens is making South Asia another theatre of action. This, along with Prime Minister Shinzo Abe’s “Proactive Contribution to Peace” and Japan’s commitment to make India a full member in the four international export control regimes including Nuclear Suppliers Group, could make Japan an actor to reckon with in this geography of shallow regionalism.

Read: Japan willing to fund two more road projects in northeast India

These transforming Japanese bilateral projects in South Asia have attracted others to renegotiate their national strategy both in the direction and content of their development assistance and commercial investments. Many believe that the far-reaching $46 billion China-Pakistan Economic Corridor, launched in 2015, is a sequel to Japan’s highly successful 1,885-metre Pakistan-Japan Friendship Tunnel, completed in 2003. Besides the soft official development assistance, Japan is everywhere with all the people-centric “human security” projects. Tsunami reconstruction in Sri Lanka and the Maldives and earthquake rehabilitation in Nepal provided another humanitarian groundswell for Japanese participation. This uninhibited attraction towards Japanese disaster relief and reconstruction will be more conspicuous because this region is witnessing changing characters of disasters and cross-border environmental injuries like the Kosi floods of 2008 in Bihar and the Indus floods in Pakistan in 2010.

Japan has to make up for its relatively late entry and the opportunities it lost in the past. Despite Maruti-Suzuki, the symbol of Japanese innovative people-oriented venture, the Japanese really could not capitalise on its goodwill in such a diverse society and market as in India. Even for India relatively an insignificant venture like sending trained nurses from the North-East region to ever-aging society of Japan could never happen. These nurses could give a tough competition to the Filipinos. This is one way where Prime Minister Narendra Modi’s idea to bring the North-East region centre stage of the Act East policy could be realised.

Read: Japanese art makes its way to Delhi’s culture gully

While in Japan the communities affected by the earthquake-Tsunami-nuclear plant melts — in Fukushima and around — debate on the choice of their sustenance between “technological heart” or a “natural soul”, Japanese investors and institutions such as JICA are busy constructing state-of-the-art energy projects in South Asia. In Bangladesh, the 1,200 MW Matarbari Ultra Super Critical Coal-Fired Power in the Chittagong division is a path-breaking energy security project. Japan is versatile with its energy security projects, varying from the Greater Colombo Transmission Distribution Loss Reduction Project, Clean Energy by Solar Electricity in Pakistan and Afghanistan, Rural Electrification Project in Bhutan, Umiam Hydropower Station in India, Tanahu Hydropower Project in Nepal, and even Baluchaung Hydropower Plant in Myanmar. No country has this privilege and reach to undertake these projects without an iota of controversy. These changing directions and contents of the grant-loan-investment composition are packed with both soft and commercial orientations. These are inclusively targeted at big and small countries and have inbuilt transparency and accountability and timely delivery. All these take Japan towards being a successful model.

Mahendra P Lama is professor at the School of International Studies, JNU

The views expressed are personal

First Published: Jul 04, 2016 02:29 IST