Article 108

Nippon Calling

By M.L. Sondhi
Observer, New Delhi, December 14, 1991

There is more to cooperation than sushi, golf and nightclubs

The intelligentsia in Japan seems to be unable to understand the ‘liberalisation’ taking place in the Indian economy.  Confronted with the Marxist rhetoric in Indian academic and media circles, the Japanese perceive the social and political realm in India as a stronghold of socialism and unproductive economic policies.

Although prime minister Narasimha Rao and finance minister Manmohan Singh have pronounced on the obsolescence of centralized planning, yet our officialdom has not been able to frame a credible case of India’s economic logic.  The climate of opinion at the highest level in New Delhi may have changed, but in Tokyo, India is still perceived as a country where people believed in the idolatry of socialist, if not communist redemption.

An important Japanese economist remarked “Narasimha Rao and Manmohan Singh’s economic goals are laudable, but their methods are unsound.”  Indian officials still nurse nostalgia for left-wing ideas.  Their defence of India’s economic distortions appears to the Japanese mind as both frivolous and silly.  It would be wiser for India to emphasise the bold reversal of her ideological direction in favour of the private sector.

Indian economic diplomacy needs a more realistic approach.  We must tell the Japanese at all levels that we wish to emerge as an important actor in the world market and that we wholeheartedly endorse the spread of liberal economic ideas in the developing world.

We must realize that the Japanese are not going to be fooled by the manipulated meanings we love to give to socialism in our political discourse.  If we continue to use the idiom of Leftist-state economics, we are likely to lose the support of those in Japan who are in favour of recycling surplus money to India.

A new conceptual framework for bilateral trade and economic relations between India and Japan cannot be realized by the outmoded liturgy of the cult of central planning, state ownership and collectivism.  If we do not grab this opportunity to break away from the old ethos in our economic dialogue, there may not be another chance.  We must project Indian investment policy as a logical scheme which entails a qualitative transformation of Indian economic life.  A broader and qualitative improvement to the Indo-Japanese relationship cannot result from mere government-level exchanges.  It requires a new relation between politics and economics, going beyond the recalcitrant Indian bureaucracy, to deal specifically with social pathologies through higher-levels of policy unification.

In his book, The Business of the Japanese State, Richard J Samuels forcefully points out that the transactional nature of Japanese government-business relations is enduring because the political stability of Japan’s national institutions is an undisputed reality.   He also explains that Japanese firms have full control over the markets which is respected by the state and they, in turn, accept the jurisdiction of the state over the markets.  The Japanese economic miracle has been helped by this “reciprocal consent” between the state and private business.

Normative guideposts must be developed for issues like foreign aid, market access, and capital and technology transfer.  For this, Indians do not need to attempt philosophical forays.

A great deal will depend upon the ability of the Indian think-tanks to establish dialogue with advisory and research groups in Japan who have a crucial role in creating homogeneous economic and political values.

Indian economists, political scientists and business management specialists will have to give up rigid paradigms of thought.  India simply does not have, at present, anything resembling the intellectual enterprise which has sustained the Japanese economic miracle.  Indians must pay attention to the way in which Japan has created a particular kind of political and economic culture which sustains its market economy.  

There are quite a few areas, both in private and public life, where action is necessary for optimizing Japan’s involvement in the Indian economy.  First, India should take advantage of the ‘Asia first’ approach of the Ministry of International Trade and Industry, which is animated by an overwhelming concern for an Asia-wide economic resurgence.

India has failed to “look East” and has not shown any comprehension of the geo-political and economic dynamics of the Asia-Pacific region.  A case in point is the flawed Indian policy towards APEC which is emerging as a full-fledged economic community.

Second, India should give up its ostrich-like attitude on the question of fund-raising efforts in Japan’s securities market.  If we are serious about using private enterprise as an engine of Indian prosperity, there is no point in maintaining a low economic profile on the Japanese economic scene.

A good way to re-condition ourselves psychologically and economically in Japan would be to enter the banking and capital market with Samurai Bonds – yen terms bonds to be issued by India.

There is reason to believe that the Export-Import Bank of Japan would be sympathetic to a much bigger role for individual private loan extensions for helping Indian firms.

A revitalized Indian economic system in which the relationship between capital and labour is not perceived in terms of antagonism would help to create a social and intellectual climate for both direct investment and financing of private industrial enterprises in India and for Indian investment in the Japanese securities market.

Third, the fervour in Japanese governmental and business circles for protection of environment in the developing world has to be given due regard.  India should ask experts to review Indian projects from the point of view of protection of environment and make proposals to Japan as part of a broad environment-friendly strategy.  This will not only help return India to the call of conscience, in Gandhian terms, but will also help move economic levers in Japan.

Moreover, India must understand Japan’s concern about the division of the world into economic blocs.  At a time when Japan’s Official Development Assistance (ODA) payments total more than $8,900 million, and when it has become the main source of world’s purchasing power, Japan is greatly agitated by the trends which contradict the universalist framework of a free and open global system.

India’s socialist sentiments do not usually translate into global visions, and Indian bureaucrats and administrators have an inbuilt tendency to support artificial divisions.

It is, therefore, imperative to study the broader implications of supporting Japan in the struggle for an open global system.  India should build a network of trust with Japan and other countries wishing to remove the deadening hand of bureaucracy on international economic life.

It is time New Delhi started serious negotiations with Japan, not only in the economic sphere.  Both countries should be natural partners in the peace process in Asia and the world.  Step-by-step political negotiations will help reinforce the economic dialogue.

The democratic partnership between the two countries should be emphasized as also the international dialogues which go back to Subhas Chandra Bose and Radha Binode Pal.

The two countries have also to make a realistic assessment of their future roles in the UN system, possibly as permanent members of the Security Council.  They can make joint proposals to strengthen Prince Norodom Sihanouk’s position in Cambodia and to counter Kim Il Sung’s efforts to unleash nuclear terror in north-east Asia.  India must support the return of Kurile Islands to Japan and use its influence with Moscow.

The India-Japan relationship is full of potential, both in the economic and political aspects and, above all, in its humanitarian aspect.