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Report on the Proceedings of the Seminar on Promoting India’s exports to Japan under India-Japan CEPA

New Delhi

Thursday, 6 October 2016

The daylong seminar comprised an inaugural session and four specific sectoral sessions. The

inaugural session was also held in two parts. At the beginning, there was a brief presentation

of the RIS-AIC report on „India-Japan CEPA: An Appraisal‟ which was followed by a panel

discussion on it. It was succeeded by the ministerial level inaugural session where the

Minister of State for Commerce & Industry (Independent Charge), Smt Nirmala Sitharaman

was the guest of honour. The four sectoral sessions were focussed on promoting India‟s

exports to Japan in the areas of: (1) Textiles & Garments; (2) Marine products & Sea Food;

(3) Pharmaceuticals and (4) IT Services. This report briefly seeks to summarize the

proceedings in each of the sessions. At the end, the various suggestions/recommendations

that emerged at the seminar are also put together separately. The programme for the seminar

may be seen at Annexure 1.

PART I

THE INAUGURAL SESSION:

Professor Sachin Chaturvedi, the Director General of RIS, welcomed the participating delegates and

also all the members of the panel. Others on the panel included, Ambassador Shyam Saran, Chairman, RIS, Dr V.S. Seshadri, Vice –Chairman, RIS, Ambassador H.K Singh, Professor Abhijit

Das, Head, Centre for WTO Studies, New Delhi and Mr. Naoyoshi Noguchi, Chief Director General

of JETRO, New Delhi.

In his remarks, Professor Chaturvedi dwelt upon the work that was being done in RIS in the context of

a general domestic concern that India was not deriving comparable levels of benefit vis-a-vis its partners from the various FTAs. With reference to the report on „India-Japan CEPA-An Appraisal‟,

Prof. Chaturvedi said that the report will help in understanding the two economies and their economic

relationship under CEPA in a better way. The report carried several suggestions regarding the course

of action that was required in terms of the way forward for both the countries under India-Japan CEPA.

As the chairman for the session, Ambassador Shyam Saran, Chairman RIS, then briefly introduced Dr V.S.Seshadri and drew attention to the study project undertaken by the latter with the sponsorship of

Ministry of External Affairs. A report assessing the benefits of possible membership of APEC by

India and a report appraising the implementation of India-Korea CEPA had already been brought out. A study of the implementation of India‟s CECA with Singapore was also underway, after the

completion of the India-Japan CEPA. He then invited Ambassador Seshadri to briefly give his

presentation of the report.

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Presentation of the report by Dr. V.S.Seshadri

In his presentation Dr. V.S Seshadri recalled the complementarities between India and Japan as highlighted by the Joint Study Group in 2006 and how, over the years, these complementarities had

got further re-inforced. He then briefly mentioned some of the key findings of the report. (A copy of

the presentation is at Annexure 2.)

India‟s merchandise exports to Japan did not witness any dramatic increase after CEPA

compared to India‟s overall exports. However, if India did not have CEPA, the exports would

likely have been worse off. Exports of India particularly in sectors such as sea food

(especially shrimps & prawns), garments, Pharmaceuticals, Leather, colors and pigments and dyes however showed some momentum and the Indian exporters had also utilized the CEPA

concessions well. However, with most of the CEPA concessions already kicked in, further

increases in India‟s exports can come about only if exports became more competitive and there was also increased value addition in the aforementioned areas.

India‟s merchandise imports from Japan, taken as a whole, also grew at a rate less than

India‟s overall imports .However, imports of items like steel, copper wire and nickel rose

sharply .Surge in imports of steel also affected the domestic industry . There was also concern about a steady increase in copper wire imports. Significant increases also occurred in imports

of ships and floating structures, and plastics.

The utilization of CEPA by both India and Japan appeared good and rising .But for about

75% of India‟s exports to Japan, tariffs were zero in Japan even on MFN basis.

Japan enjoyed a trade surplus with India close to US$ 5 billion in 2014-15.Additionally, in the

coming years, tariff concessions provided by India to Japan will improve significantly under CEPA. Therefore, unless Indian companies made efforts to boost India‟s exports, the trade

deficit for India with Japan will keep on widening. This was particularly so considering also

the various JICA projects in the pipeline (like the Shikansen project) and other trade inducing Japanese FDI in India.

It was important to address some implementation issues specially in the agricultural and

marine sector where India had SPS and other related issues with Japan.

There was a good export opportunity arising from Japan‟s decision to increase its use of

generics up to 80% by 2020.Regulatory cooperation could help India in meeting the Japanese standards and documentary requirements.

Indian garment trading companies should also seek to use the opportunity arising from China

vacating the Japanese market in certain segments.

There were also certain areas where tariff concessions provided by Japan to other countries

were deeper. India should seek to improve its access through CEPA review or RCEP

negotiations.

On the Services front it was welcome that Japan‟s imports of services from India had doubled

between 2011 and 2015. India, however, still had a deficit in bilateral trade and India had less

than 1% market share of the IT and IT enabled services in the Japanese market. Better brand

promotion of Indian IT Services in Japan was important.

Dr Seshadri concluded his presentation by highlighting the importance of activating the pillar of

cooperation in CEPA, particularly with a view to improving India‟s trade competitiveness and in the

creation of new export capacities for exporting to Japan.

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Remarks of Ambassador H.K. Singh

In his remarks, Ambassador, H.K.Singh dwelt on the current global context, offered some comments on the report and also talked about Japanese approach to investment opportunities in

India. Following are certain of the viewpoints he conveyed:

Liberalization had brought significant benefits to India and India must stay the course. India

offered only partial liberalization in its FTAs, and hence our own share of trade with FTA

partners was amongst the lowest.

The report‟s finding that further gain will be possible only if India was able to improve its

competitiveness and consolidate its export capacity was a very important one. Focusing too

much on trade deficit however was not necessary at present. Rising levels of Japanese investments in India were crucial for India to utilize the CEPA in a better way. If regulatory

cooperation can be taken up more rigorously it can help reduce transaction costs.

Japan had played a stellar role is India‟s development .Around 72% of its investment were on

manufacturing , creating over 360,000 jobs. Both FDI and development cooperation assistance from Japan into India were high. Japan was also looking at RCEP negotiations

along with a‟ look west‟ approach towards exporting more to Africa using India as a

manufacturing base. India also needed to clarify its approach towards APEC membership and RCEP

Lastly Ambassador H.K.Singh referred to the synergising role of the Japanese private sector and the

government and the role played by agencies like JICA, JETRO and JBIC .He suggested that DIPP, Department of Commerce, MEA and other Indian agencies consider mounting similar efforts.

Remarks of Mr. Naoyoshi Noguchi, Chief Director General of JETRO, New Delhi

Mr. Noguchi drew attention to three important aspects in the context of India seeking to boost its exports to Japan.

Firstly, there was no trade and investment promotion agency in India like JETRO which had

an office in Japan. Such a trade promotion agency functioning in Japan will be very useful. Organizations like CII, FICCI, and FIEO could consider establishing their offices in Japan.

He also suggested that there must be an official export and business promoting Indian agency

in Japan so that individual exporters and companies did not have to exhibit their products separately.

Indian investments in Japan were very low. Indian business entities must have a business

base as well as a manufacturing base in Japan. From 1st October, 2015, an India Desk in the

JETRO headquarters in Japan had been set up to facilitate the flow of investment in Japan

from India by helping Indian companies to make investments in Japan.\

Indian businesses could also study the new business trend emerging such as the example of

the Japanese company, Maruti Suzuki, establishing a manufacturing base in India and

exporting a Maruti car named Baleno, manufactured in India, to Japan. Its evaluation in

Japan, including the price factor, was good. There were also a number of Japanese companies, with a manufacturing base in India, who imported their products from Japan into India but

after value addition, exported it to other nations, hence contributing towards increasing

India‟s exports.

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Remarks by Professor Abhijit Das, Head, Centre for WTO Studies, New Delhi

Professor Abhijit Das said that the RIS-AIC report was very incisive, rich in detail and was

very comprehensive in its coverage of the economic ties between the two countries.

Illustrating this, he cited an instance from the report concerning surimi exports from India to Japan, where the presence of imported preservatives was preventing from taking advantage of

the preferential tariffs because according to the Japanese government it no longer met the

rules of origin. He stated that resolving this issue with Japan was very important as Surimi is

one of India‟s major items to Japan

The report made a very important observation with respect to the need for mechanism for

invoking the bilateral Safeguard measures. The Ministry of Commerce of India should take

immediate action for putting in place such a mechanism that has also been included in India‟s

other FTAs.

India must not only look at its widening trade deficit with Japan but also look into the

composition of goods being imported by India from Japan. India mostly imported

intermediate or capital goods from Japan, which further helped in enhancing and

strengthening India‟s domestic competitiveness.

INAUGURAL SESSION: PART II (MINISTERIAL SEGMENT)

In his opening remarks, Professor Sachin Chaturvedi, Director General RIS, extended a warm

welcome to all the delegates and in particular to the Hon‟ble Minister of State for Commerce & Industry ( Independent Charge) Smt Nirmala Sitharaman. He noted that the seminar was a

continuation of the earlier two national consultations initiated by the Minister through RIS on the

FTAs entered into by India and about how India should be coping with the new mega FTAs in the making.

Welcome Remarks by Ambassador Shyam Saran, Chairman, RIS

Ambassador Shyam Saran , Chairman, RIS, extended a warm welcome to all the participants and

noted that the inspiration for the event was the suggestion by the Minister to put together such a

seminar .She had proposed holding an event focused on how the suggestions and ideas in the RIS-AIC report could be taken forward in a practical way .She was very keen that we had a platform

where the representatives of the government, think tanks and businesses from both sides including

some of the Japanese trading houses came together and discussed ways to promote trade and investment. Pointing to some of the findings of the report, Ambassador Shyam Saran also stated that it

was crucial to focus on four sectors that showed promise –Textiles and Garments, Pharmaceuticals,

Marine products and IT Services. These were the topics on which the seminar will have separate

sessions. He also acknowledged the very good cooperation received from the Ambassador of Japan and the Japanese Embassy in organizing the seminar. He further thanked MEA and Foreign Secretary

Dr. Jaishankar for extending support for the entire study project that had already resulted in the RIS-

AIC reports on India and APEC and on the CEPA with Republic of Korea. Another report on India‟s CECA with Singapore was under preparation. Ambassador Shyam Saran then invited Foreign

Secretary Dr. Jaishankar to give his remarks.

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Remarks by Dr. S. Jaishankar, Foreign Secretary

The Foreign Secretary said that the report was very useful from a practitioner‟s point of view .While

CEPA was noted as one of the most comprehensive FTA entered into by India, the last five years were probably not the best years for the world, for India and for Japan. Some of the projects like

DMIC had also progressed slowly and had yet to create the momentum. Mr. Noguchi‟s observation

that India did not have trade and investment promotion agencies in Japan was relevant and CII and

ITPO had closed their offices. Ambassador H.K.Singh‟s view that synergy within the government also needed improvement was very valid. There was also a need for improvement in quality and the

value addition aspect could be much better as pointed out by Professor Das.

The Foreign Secretary said that in recent times the big change was the boost given to the overall

energy in the bilateral relationship by the 2015 summit between Prime Ministers Abe and Modi who

have also created game changing possibilities like the high speed railway project and the civil nuclear cooperation .Even as there were some issues, the overall investment sentiment was positive. India had

also gone out of its way to make a special carve-out for Japan with a Japan plus arrangement

.Aligning ODA with investment was important .After the DMIC corridor there will be expectations

about the Chennai-Bengaluru corridor.

There were also cultural, linguistic and other factors that also needed to be taken into account as

pointed out in the report. India had perhaps not taken these challenges as seriously as some of Japan‟s other partners. Japan‟s FDI in India was 1/7

th of its FDI in China and 1/4

th vis-a-vis Thailand. The

Foreign Secretary also said that the Japanese investors could perhaps relate to the modernization

efforts of this government in the form of initiatives like Make in India, Start up India, Skill India etc and may find India an amenable place to do business.

Finally, based on his experience in dealing with Japan, Dr. Jaishankar said that Japanese expectations

should also be rooted in the Indian reality. A localized investment approach will be useful. Dr. Jaishankar also observed that Japan was one country which had also changed the India mindset. An

entire generation grew up with the Maruti experience. The Delhi Metro was another example. The

Shinkansen project also had potential to do the same.

Remarks by H.E. Mr. Kenji Hiramatsu, Ambassador of Japan

The Japanese Ambassador began his address by recalling that the India-Japan CECA was one of the most difficult bilateral negotiations in the history of Japan as it took 14 rounds of negotiations to be

concluded. He pointed out that after CEPA became effective, the number of Japanese organizations

establishing themselves in India had gone up by 51 percent between 2011-2015, which provided

employment to several people .They also provided technology and innovation .In this regard, he cited the example of Maruti Suzuki Baleno, which was the first time that Maruti Suzuki had exported its car

to Japan.

Investment flows from Japan to India in 2014-15 grew by 25 percent .He also mentioned that

according to a Japanese survey in 2015, India was the most preferred destination for investment by

Japanese companies in terms of medium as well as long term investments.

In the Services sector, Ambassador Kenji referred to the example of Tata Consultancy Services Japan,

which had established itself as a Joint Venture. He added that the number of work visas issued by the

Japanese Government to Indian nationals had increased by 70% from 2011 to 2014, which was reflective of the fact that more and more Indian nationals were getting employed in Japan.

Ambassador Kenji expected that the Japan-India Social Security Agreement, which became effective on the 1

st of October 2016, would further promote economic and people exchanges between India and

Japan.

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Talking about trade in goods between India and Japan, Ambassador Kenji admitted that progress had

been quite modest and below expectation. There was however a huge discrepancy in trade data between both the countries and the Japanese statistics showed that the Indian exports to Japan had

increased consistently from 2011 to 2014, only showing a decline in 2015 by 30 percent. According to

the Indian statistics India‟s exports to Japan had only increased for the years 2012 and 2013.Ambassador Kenji also stressed on the need for Indian companies and exporters to study the

needs and demands of the Japanese market in order to boost their exports to Japan. He further

highlighted the areas of interest for Japan namely, Mango Puree, Shrimps from Indian east coast, Organic Cotton, Generic Medicine and IOT. Ambassador Kenji also recommended that Indian

companies should set up offices in Japan as there were only few Indian companies which had done so.

Highlighting that Japan had identified 12 sites to set up industrial townships in India, he said, “Japan

is keen to see more reforms including land acquisition law, tax reforms so that investors can feel

positive change in ease of doing business in India.” He added that it may be important to invite export processing companies from Japan with incentives.

He concluded by thanking Ambassador V.S.Seshadri for his tireless research on India-Japan CEPA

and encouraged RIS to carry on further research on India-Japan relations. He also proposed the

establishment of a Japan desk in RIS.

Release of the Report on ‘India-Japan CEPA: An Appraisal’:

Smt. Nirmala Sitharaman, Hon‟ble Minister of State for Commerce and Industry (Independent Charge), Govt. of India (seventh) released the Report on „India-Japan CEPA: An Appraisal’

authored by Ambassador Dr V.S.Seshadri, Vice-Chairman, RIS.

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Keynote Address by Mrs Nirmala Sitharaman, Minister of State (Independent Charge)

for Commerce and Industry

The Commerce Minister commended the report and noted that it will be very useful in pushing ahead

and in fortifying the India-Japan trade and economic ties. She highlighted, in particular, on how the report had gone into detail in drawing out the exact issues in the implementation and usage of India-

Japan CEPA.

India-Japan CEPA stood out amongst the various far reaching FTAs concluded by India, and covered

trade in goods, services, investment, rules of origin, movement of natural persons, telecommunication,

financial services, intellectual Property Rights, government procurement, SPS Measures, Customs

Procedures and Cooperation. The Minister noted that there had been an expansion in bilateral trade amongst India and Japan post CEPA from US$ 10.4 billion, in 2010-11 to US$ 14.5 billion in 2015-

16.

She further stated that even though the bilateral trade between India and Japan had increased, the

trade deficit that India had with Japan had also widened from US$ 3.1billion before CEPA was inked

in 2011 to US$ 5.2 billion in 2015-16, which was a matter of concern. The rising bilateral trade between India and Japan coupled with the widening trade deficit of India with Japan suggested that

the Indian companies were not able to get greater market access in Japan. The minister urged Indian

firms and exporters to utilize the India-Japan CEPA in a more effective way as it will help India to

bridge the widening trade deficit that India had with Japan.

Seeking greater market access for the Indian pharmaceuticals sector in the Japanese market, the

minister said the share of India in the Japanese drug market continued to be below par and was limited mostly to active pharmaceutical ingredients (or APIs - raw materials for drugs). Japan was also

looking to cut down on its increasing health care costs on account of its aging population. She further

said that the demand for generic medicines in Japan was increasing and India being the world champion in pharmaceuticals had the capability to meet this demand and can prove a win-win for both

countries.

By recognizing Japan as India‟s closest and most reliable trade partner, the Minister said that various measures needed to be taken to sort out the implementation issues related to CEPA and hoped that

Japan will play an important role in India‟s economic transformation and development.

On the IT and IT-enabled services, the Commerce and Industry Minister said that despite the fact that

India had a great deal to offer, India's export of IT items to Japan remained low at US$ 1 billion. She

urged the Japanese side to give recommendations that will enable Indian IT and IT-enabled firms to enter the Japanese market better.

The Minister also drew attention to the implementation issues in the marine products sector, she

referred to the preferential tariff accorded to surimi fish meat from India, one of the most sought after items in the Japanese market. A negligible amount of an imported cryo-protectant, TSPP, was applied

for preservation. Though the value of the TSPP was less than 0.5 per cent of the overall product cost,

it was precluded from CEPA benefits as the „product is not of Indian origin‟. These issues needed to be looked into so that the product which was otherwise entirely an Indian one could also get CEPA

concession.

Vote Of Thanks by Professor Prabir De

Dr. Prabir De, Professor at RIS, gave the vote of thanks and anticipated an enriching and productive

session that would enable a high- yielding collaboration among the two countries. Envisioning a

constructive and worthwhile discussion among the erudite panel members, effective policies and long

term commitment were pronounced as defining characteristic.

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SESSION 1:

BRINGING VALUE AND VOLUME TO INDIAN TEXTILE AND APPAREL

EXPORTS TO JAPAN

The first sectoral session was chaired by Dr. Jayant Dasgupta, former Ambassador of India to the

WTO. It sought to focus on ways that would enable India to take a share in the space being vacated by

China in certain segments of the Japanese market for textile and garments. It also took up the issue of business opportunities, tie ups and investment pertaining to bilateral cooperation under CEPA.

Presentation by Mr. Seiji Hamanishi CEO, Ryohin-Keikaku Reliance India PVT. LTD. (MUJI)

The session began with a power point presentation by Mr. Seiji Hamanishi on the activities of his

company MUJI stores, which had opened an outlet in Mumbai earlier this year and had also opened another outlet in Bangalore in September. His PowerPoint presentation may be seen at Annexure 3.

The merchandise sold by MUJI comprised of all kinds of products ranging from children wear,

apparels, decoration items, footwear, electronics, stationery, stackable storage, blanket, bath salt, file box, kitchen products, maternity travels, Indian Organic Cotton (OC) products etc. Founded in 1989,

it had about 758 stores out of which 414 were in Japan and 344 stores overseas. It was a reasonably

priced brand pertaining to the material selected; minimized packaging and a streamlined

manufacturing process, Muji‟s transit from phase 1 to phase 2 would result in expansion of its scope wherein it will finalize merchandise in India. Apart from this, policies to reject usage of chemicals

and genetically modified seeds had been implemented. It aimed to inspect the farmland, procure

safety requirement of labour conditions, child labour and workers rights according to international standards.

As for MUJI‟s organic cotton procurement, Mr. Hamanishi‟s presentation defined the product as not contaminated with any chemicals, or genetically modified, farmland inspected and certified by

international attesting institution, its traceability from raw cotton to merchandising. The Indian OC

was characterized as soft, silky, with natural colour, had natural taste in merchandise etc. His

company‟s collaboration with local partners was a win win solution for both parties since it would save farmers from genetically modified seeds issue, the price range of merchandise was ordinary and

in the long term it would help in securing farmer‟s income and cow dung and herbs would be used for

pest control etc. Mr. Hamanishi noted that even though the share of organic cotton was less than 1% of the entire cotton market, 88% of the cotton items in Muji were made of organic cotton and the goal

was to attain 100% .Moreover Indian organic cotton contributed the majority among Muji Organic

Cotton merchandise.

Presentation by Mr. J.D. Giri, Vice-President, Shahi Exports

Mr. J.D. Giri, spoke about the performance of his company “Shahi Export Private Limited” and the scope of collaboration between India and Japan. His presentation may be seen at Annexure 4.

Shahi Exports was the largest Indian exporting company in readymade garments. It was functioning in

9 states and had 52 manufacturing units. Being a labour intensive company it held a lot of potential and importance in relation to CEPA and exports to Japan.

The company exporting about 36 to 37 billion of textile and garments had contributed to the GDP, generated employment with over 49 million people employed out of which 70 % comprise of women

in the garment industry. The role of government had been intense in terms of providing funding.

The present session addressing the dynamics of trade between the countries was envisioned to help and increase exports to Japan. Japan embodied a potential opportunity for India since it had a stable

economy and India had strong relations with Japan. The population of Japan was well educated and

quality consciousness among the people was high. However the business culture of Japan made it

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difficult for companies to penetrate. Mr. Giri stressed on the need for long term goals to have a win

win situation for both the countries.

Presentation by Mr. Vijay Mathur, Additional Director General, Apparel Export

Promotion Council (AEPC) Mr. Vijay Mathur, Additional Director General, Apparel Export Promotion Council (AEPC), New

Delhi gave a comprehensive presentation titled, “On Bringing Value and Volume to Indian textile and apparel Exports to Japan” and a copy of the same may be seen at Annexure 5.It. provided statistical

data on the top ten garment items imported by Japan, in which China‟s share had declined in recent

years. Since, India‟s presence was only 0.5% in Japan‟s import of these items, the scope for a higher

share in all of them was high.

The presentation also gave a case study of M/s Neetee Clothing Pvt. Ltd., Gurgaon which was

exporting to MUJI, Japan and had to adapt certain measures like – attitudinal changes, from aggressive to collaborative. It shortlisted Indian fabrics like khadi and hired a rented design studio in

Japan and displayed garments made with Indian fabrics and Japanese designs on Japanese

mannequins .It also initiated changes in factory premises and committed itself to “zero defect garment”. By adopting simple and sustainable steps it was able to establish a strong hold in the

market.

Mr Mathur then dwelt on the new opportunities for investment and reforms in the garment sector

following the new garment package announced by the Government of India on 22 June 2016..

According to the announcement, there would be additional incentives under ATUFS, enhanced duty

drawback coverage, new scheme refund, employee provident fund scheme reforms, introduction of fixed term employment, increasing overtime caps and enhancing scope of Section 80 JJAA of Income

Tax Act.

The presentation also focused on the ways in which Japanese firms can take benefit from the garment

package. Japanese sewing machine manufacturers now had the opportunity to supply sewing machine

and equipments in large number. They can also supply/develop fabrics for the Japanese market worth around US$ 15 bn; and AEPC can connect fabric developer/manufacturer with garment exporters.

AEPC can also facilitate visit of Japanese technicians and experts for „process set up‟ and assist in

visits of Japanese buyers for fixing meetings for match making. He also proposed that the Embassy of

Japan in India & AEPC can collaborate in this regard. He also dwelt on the strategy that will be followed by AEPC in the next three years that will seek to derive full benefits from this textile

package announced by the government. It provided a roadmap of AEPC 2016-2017 TO 2018-19 and

listed strategies like awareness and information sharing of the special package, engagement with machine manufacturers, engagement with fabric and accessory suppliers, engagement with state

governments, hosting Mega Apparel Shows etc,.

Presentation by Shri D.L. Sharma, Director, Vardhaman Mills:

Shri D.L. Sharma, Director, Vardhman Mills gave a presentation titled “Japan Market Development” and a copy of the same may be seen at Annexure 6. Mr Sharma said that the factors that drove textile

and apparel exports to Japan included - China‟s proximity to Japan, cultural understanding,

availability of product specifications & designs and the fact that Japanese companies set up their manufacturing units in China or they transferred technical know-how to China.

Mr Sharma then elaborated on the essential factors for promoting business in Japan. The included:: understanding the importance of customer, involvement of Japanese Companies in manufacturing &

distribution, understanding of the market and customer requirements, market visitation and interaction

with potential customers and channel partners.

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The presentation gave an overview of Vardhaman Textiles Ltd which was a large integrated textile

manufacturing company in the country. It traced the journey of Vardhman in the Japanese markets and its collaboration with the Japanese trading company Marubeni. Vardhman‟s business partners

included: Marubeni Corporation, Nisshinbo, Shinko Sangyo (Toyobo), Almundo Associates and Imai

Trading. Additionally, the presentation focused on Vardhman‟s business development with Yoshii

Towel. It listed the special products that were sold to Japan. These included: Cashmere/ Cotton Blended yarns, Silk/ Cellulosic regenerated fibre Blended yarns, Cellulosic regenerated fibre,

Functional fibre/ cotton blended yarns etc. The presentation elaborated on the Fabric Business and

traced its evolution in the Japanese market. Details regarding business penetration into Bangladesh markets were put across and Vardhman‟s flourishing trade with Uniqlo (a Japanese Garment

company) in Bangladesh was highlighted. Further, Vardhaman‟s engagement with Takisada – one of

the largest whole sellers of fabrics in Japan was also referred to. The main products that Vardhman dealt with comprised of women‟s wear, stretch trousers, tops, trench coats etc.

In order to build long term business relationship with Japanese customers, Mr. Sharma proposed that

mutual understanding and trust should be built, world Class Production/Manufacturing facilities should be provided and there should be scale and flexibility of operations,. Senior management

should necessarily be involved and long term commitments and continuous product development

should be aimed for.

The Question-Answer Session

1. A question was posed to Mr. Hamanishi about MUJI sourcing of organic cotton and

whether the testing and certification was done by MUJI itself or by any other agency.

Mr. Hamanishi answered that MUJI had two sourcing agencies for organic cotton:

one was Marubeni and the other was MGS (MUJI Global Sourcing). He further added

that they also used a most well established agency that certified organic cotton named

GOTS (Global Organic Textile Standards).

2. Another question was posed to the Indian delegates, regarding India‟s New Textile

Policy and how could it positively impact on India‟s textile exports to Japan. In

response, Mr. Vijay Mathur replied that the success of new textile package vis-à-vis

Japan was dependent on three very important factors. Firstly, it depended on the

additional investment of US$ 11 billion in the next three years, out of which around

US$ 1bilion worth of JUCI machines will be coming to India Already there were

around 183 companies which had informed AEPC in writing that they were going to

expand their business by the use of more machines. The second important factor was

establishing deeper collaboration between fabric suppliers of Japan with companies

like Vardhaman etc. And the final one was that at the council level both the countries

can help in meeting the expectations of the buyers and sellers. He urged the Japanese

Embassy in India, JETRO and AEPC to work together to help suppliers like Shahi

exports and the like to optimize benefits out of the new garments package. He also

remarked that India‟s textile and garment exports were expected to increase by around

US$30 billion in the next few years, out of which a good share could go to Japan.

3. Another delegate, speaking on the same issue, commented that any company which

was venturing into the Japanese market, can progress only after building a sufficient

level of Japanese confidence in it. Hence whether the new textile policy will be able

to reap any benefits in Japan or not, was also a matter of time.

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4. Another delegate raised two questions for Mr. Haminishi. The first question was

regarding the share of apparel in the Japanese merchandise sale of textiles, for which

Mr. Hamanishi replied that the share of apparel was 72 percent of the total sales. The

second was regarding the MUJI‟s sourcing policy for garments in India. Mr.

Hamanishi responded by commenting that MUJI had a long checklist and different

criteria for sourcing different categories of garments. For instance, he said that for

spinning organic cotton, the company must have a certificate of manufacturing and

must meet the set number of yarns produced per week. He further added that MUJI

had a joint venture with Reliance, which had a very strong garments sourcing team.

SESSION 2:

PROMOTION OF INDIAN SEA FOOD EXPORTS

The session was chaired by Shri Hari Krishna, Director in the Ministry of Commerce & Industry in

the marine products exports sector. The session focused on the business opportunities in Japan and the

possible scope for bilateral cooperation under CEPA.

A Presentation by Dr. Ram Mohan, Joint Director (Marketing), Marine Products Export

Development Authority (MPEDA):

Dr. Ram Mohan, Joint Director (Marketing), Marine Products Export Development Authority

(MPEDA) gave a comprehensive presentation titled “Indian seafood exports to Japan – Market

prospects” and a copy of the same may be seen at Annexure 7. Dr Ram Mohan was also earlier the

Resident Director of MPEDA in Tokyo.

Dr. Ram Mohan began by speaking about MPEDA office in Tokyo and its role.. Established in 1978,

it aimed to develop close interaction with the importers and authorities concerned to seafood import and regulations. It helped to facilitate business interactions between seafood exporters of India and

importers in Japan and provided updates and relevant information on production, exporters and

infrastructure facilities to importers. Indian was world‟s No. 1 supplier of shrimp. It was amongst the top suppliers of frozen shrimp to Europe and was also the largest supplier of Asian Surimi to the

Japanese market.

The presentation further provided details on Japanese sea food imports. Japan was globally the second largest importer of seafood, with a per capita consumption of 27 kg /annum. Major seafood items

imported were salmon, trout, shrimps, surimi, cephalopods, fish fillets etc. In context of India, Japan

was a major and traditional market for Indian seafood with 9% share of India‟s total exports. India stood at 11

th position overall in seafood imports by Japan in value. India‟s seafood exports to Japan

included items like shrimps, surimi & surimi based products, squid, cuttlefish, octopus, clams, baigai,

fish / fish fillets, chilled tuna and fish meal. In recent times, sushi shrimp, marinated shrimp and

nobashi shrimps were also imported from India into Japan.

The situation of India was pronounced as unique, since it had a vast coastline of over 8000 km laced

with bays, lakes and backwaters and its export oriented aquaculture. Apart from the black tiger shrimps, the presentation also talked about high potential for Vannamei aquaculture in India that had

consistent production throughout the year with uniform sizes.

Dr Ram Mohan also pointed out that there were some points of concern in the Japanese market which

included falling per capita consumption of fish products, changing food preferences for younger

generation, higher tariff rates for value added product, better tariff benefits to competitors under their FTAs with Japan or under TPP and demand for precision processing techniques and automation.

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Against this background Dr. Ram Mohan, felt it was important to strengthen India‟s export promotion

efforts in this sector with the following measures:

Tackle Rules of Origin and tariff issues under CEPA.

Equip labor with processing skills and assist processor in establishing required infrastructure

for value addition.

Assist processors in market promotion of MPEDA quality logo products

Encourage investments including through joint ventures with Japanese companies particularly

for value added products

Promote tie-ups between Indian shrimp farmers and Japanese importers, supermarkets and

retail chains.

The target products for value addition could be- nobashi, sushi, tempura items, breaded and

battered items, marinated shrimp, freeze dried shrimp and fish fillets

Presentation made by Mr. Kazuhisa Tateno, Vice President, Toyota Tsusho India Pvt. Ltd:

A representative of Toyota Tsusho India Pvt. Ltd (Mr. Kazuhisa Tateno, Vice President) made a presentation on the topic titled „Enhance export of marine products to Japan.‟ A copy of the

presentation is at Annexure 8.

The Toyota Tsusho Corporation was a member of the Toyota group. The presentation highlighted the

dynamics of shrimp and prawn import into Japan and assessed its demand in India, domestic

consumption in Asia, higher demand in EU and USA and the problems of epidemic shrimp disease.

He suggested the there was an opportunity for India to attract Japanese marine product companies to

come into India and establish themselves here. These marine food companies will further assist in

boosting India‟s marine exports worldwide and to Japan.

Talking about imports of prawns into Japan, Mr. Tateno asserted that in Japan the imports of prawns

were decreasing because of a number of factors like increase in the demand of prawns in the western countries as well as in Japan, which in turn had increased the price of prawns. He commended that

despite the fact that the imports of prawns had been decreasing, India‟s exports of prawns to Japan

had been quite steady. He also commended the Indian marine exporters for making changes and always trying to adjust in order to cater to the Japanese market.

Shedding light on the import of surimi into Japan, which was also one of the major exporting items of

India, Mr. Tateno said that United States was the top exporter of surimi to Japan. However India was the biggest exporter to Japan in Asia.

He went on the make some recommendations for Indian Marine food exporting companies to boost their exports to Japan. He urged them to use imported and well made machines which will ensure

higher quality and standards. In this regard he cited the example of the first surimi manufacturers in

India, who used imported Japanese machines and technology. He pointed out that in order to avail the preferential tariffs under India-Japan CEPA all materials used by the Indian exporters must be made

in India (whereas imports like „phosphates‟ for preservatives or crab sticks as flavour ingredients were

imported). While talking about the skills for processing, attention to hygiene was also mentioned as a

key aspect.

With the notion of „seeing is believing‟, the presentation proposed that a first class factory should be

a model factory and exporters should not be discouraged as it did take long time to catch up with global standards. New methods had also been developed for improvement of quality.

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The Question-Answer Session

After the presentation by the panel, the session was open to queries and comments.

1. Dr Seshadri posed two questions. His first question was, how can India use the pillar of

Cooperation for improving India‟s exports in the marine products sector, not only in terms of increasing the volume, but also in terms of improving the quality of exports, standards, etc.

Additionally he made a suggestion that the Indian Ministry of Finance can put forward to the

Japanese cooperation agencies seeking assistance for improving India‟s competitiveness in

this important sector. One possibility could be to work for a recognition granted by the concerned Japanese agencies and regulatory authorities to the MPEDA logo so that Indian

products can enter in Japan with the assurance that the products have met Japanese standards.

Citing the example of Thailand and Vietnam, which had benefitted in the area of Japanese technical assistance, Mr. Seshadri made a query regarding the possibility of having similar

technical cooperation between India and Japan. In response to this question, Dr. Ram Mohan

said he was happy to report that MPEDA was trying its best to meet the Japanese standards in the marine exports... He further assured that he will certainly put forward these suggestions to

the Indian Ministry of Finance so that they can discuss it with the Japanese authorities.

2. Another query raised by Dr. Seshadri sought to know if some of the the value adding items

like preservatives or bread crumbs for making breaded shrimps or the bamboos for making shredded shrimps can be domestically produced in India. A panelist remarked that they were

making good progress towards improving their standards to meet Japanese requirements. He

suggested various factors that will help India to achieve higher standards including the use of better technology and good post harvest infrastructure along with Japanese cooperation.

3. A participant from the audience enquired about the share of value added products in the total

exports, to which one of the panelists responded by quoting the figure that India had 15% of

the value added products out of the total exports. .The participant further commented that large amounts of frozen raw materials were exported to Thailand from India, where they got

further processed and then exported to Japan. He questioned as to why India cannot force the

Japanese companies to set up factories in India, process the products and then export them to Japan from India , which will generate a lot of employment and revenue for India. The

panelist repeated that India or Indian companies cannot „force‟ the Japanese companies to do

anything in this regard. The panelist further stated that it was up to the Indian companies to try and meet the Japanese requirements for processed products

SESSION 3:

THE BUSINESS OPPORTUNITY ARISING FROM JAPAN’S DECISION TO MOVE

TOWARDS GREATER USE OF GENERICS BY 2020 – HOW CAN INDIAN

COMPANIES RESPOND?

The session was chaired by Professor Abhijit Das, Head, Centre for WTO Studies, New Delhi. The focus of the session was on the size and nature of business opportunity in the Pharma sector, the

specificities of Japan‟s approval processes for drugs and their manufacturing units and the possible

scope for bilateral cooperation and promoting India‟s exports to Japan. Professor Das welcomed the

panelists and said that the opportunities and challenges provided good grounds for a rich discussion.

Presentation by Dr Abhay Sinha, Regional Director, Pharmexcil:

Dr Abhay Sinha Regional Director Pharmexcil gave a comprehensive presentation on „India –Japan

opportunities for collaboration‟ and a copy of his PowerPoint presentation may be seen at Annexure9.

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Dr. Sinha began his presentation by dwelling on the nature and size of the global generic market and

flagged that six Indian companies were amongst the top twenty international generic companies.

Generic drugs had 70 percent market of the Indian pharmaceutical sector. India also supplied 20 per

cent of global generic medicines market exports in terms of volume, making the country a large provider of generic medicines globally which was expected to expand even further in the coming

years. Over the Counter (OTC) medicines and patented drugs constituted 21 per cent and 9 per cent,

respectively, of total market revenues. Since India‟s cost of production was significantly lower than

that of other major players, it gave a competitive edge to India. FDI inflows into the pharmaceutical sector in India from 2020 onwards totalled US $ 13.86 billion. By 2020, India was likely to be among

the top three pharmaceutical markets by incremental growth and the sixth largest market globally in

absolute size.

India‟s Pharma exports globally were US$ 16.89 billion and 55 percent of all exports went to highly

regulated markets like US, EU etc, .In all, 615 manufacturing facilities in India had US FDA approval.

Seen against this backdrop, India‟s exports to Japan of pharmaceutical products accounted for a very

small share. While bulk drugs exports were increasing, growth in the export of formulations was not as desired. Many Indian companies that had received approvals for their manufacturing units and

products from other developed country regulators had still not received approval from the Japanese

PMDA. Only about 27 Indian companies or so had PMDA approvals.

The opportunity was vast with Japan being the third largest global market (after US and China) and

it‟s ageing population (by 2035, one third of the population will be over 65 years) meant that expenditure on health will continue to rise. The target fixed by the Japan government to reach 80

percent usage of generics by 2020 can only be met by Japan by getting cooperation of other countries

and India could play an important role.

Mr Sinha pointed out that Japan was a very quality conscious market and it required a long term

approach to be successful. He also outlined the various efforts being mounted by the Department of

Commerce of India, Pharmexcil and Indian Pharma companies to promote brand India in Japan that included the launch of the Rx India logo.

Mr Sinha also mentioned the different ways in which collaboration between India and Japan was taking place in the Pharma sector.

a) A Japanese company acquiring one Indian company-Meiji Seika acquiring Medreich Ltd. Bangalore in 2015.

b) An Indian company acquiring a Japanese company ( Lupin acquired 100 % of Kyowa

Yakuhin in November 2008.) ; and

c) A Japanese company establishes a branch office with plant and laboratory for manufacture of APIs and products for Japan. (Eisai set up a unit in Vizhag in 2007)

Mr Sinha felt that contract manufacturing could be a steady way to meet the Japanese requirements since approval of PMDA could be quickened.

Finally, Mr. Sinha also referred to the MOU signed between PMDA and its Indian counterpart FDA on 11

th December 2015.As a follow up to this a joint symposium was also held in Delhi in May 2016

when the PMDA also agreed , in principle, to open an office in India. Mr. Sinha felt that due to efforts

in the last four years there was certainly better awareness and contact between the two sides.

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Presentation by Mt. Makoto Shigemitsu, Executive Board of Director and Deputy Managing

Director, Medreich Limited, Bangalore:

Mr. Makoto Shigemitsu, Member of Executive Board of Directors and Deputy Managing Director,

Medreich Limited, Bangalore, gave a presentation on the topic titled, “Activities of Meiji/Medreich

Group and expectation on India/Japan Bilateral Cooperation in Pharmaceutical Field” and a copy of the same may be seen at Annexure 10.

Mr. Shigemitsu introduced the activities of the Medreich Group as well as of the parent Meiji group

that had bought over Medreich in 2015. Medreich itself dealt with manufacturing and sale of branded generics of pharmaceutical formulations. It did both contract manufacturing (CMO) and also contract

development and manufacturing (CDMO). It had 8 manufacturing sites in India, with 7 of them in

Bangalore and 1 in Hyderabad. While presently it had the capacity to manufacture 18 billion units, it was expanding its capacity by 3 billion units especially for Japan market.

The parent Meiji was a very well known group in Japan and sold both new drugs and generics. It had sought to expand overseas through acquisition of Medreich Group. Its objective will be to make

formulations in Medreich for Japan market and to introduce Meiji‟s products in India through

Medreich. There will also be cooperation in R&D.

As for the Japanese market, Mr Shigemitsu stressed that to succeed, partnership and mutual

understanding were essential. Also, when reference was made to Japan quality, the quality was not

just in terms of the product meeting the required specifications but it also meant quality of design, quality of management system, quality of product control, quality of documentation etc,.

There were three aspects that differentiated Japan. Since medicines were ingested into the body the Japanese mindset was to be very careful irrespective of origin of the pharmaceuticals. Secondly, in

some countries (including in US for example) cosmetic quality, like appearance or packaging was not

given too much importance. This was not the case in Japan. Thirdly, hygienic control was very important and assimilation of process hygiene across the production cycle was to be strictly observed

Mr Shigemitsu said that Japan‟s regulatory regime may be difficult to understand .But with effort and

cooperation, there could be an enhancement in the future contribution to drug supply and India-Japan trade.

Presentation by Mr. Krunal Parekh, a representative of Lupin Pharmaceuticals:

Mr. Krunal Parekh, General Manager-Operations of Lupin Pharmaceuticals, who was

connected through Skype, gave a presentation on his company‟s experience in the Japan

market. Introducing his company he said Lupin had performed well over the past ten years to

make its business a successful one. The total market of the company was around US$ 10

billion and its revenues had grown from Rs. 1600 Crores to Rs. 14,000 Crores. The net profit

of the company had increased more than tenfold. Lupin was the seventh largest generic

medicine company globally and ninth largest generic company in Japan. He further spoke

about the various manufacturing facilities of Lupin worldwide, including its manufacturing at

Sanda in Japan. A Japan dedicated manufacturing unit had also come up in Goa and Kyowa

pharmaceuticals also acquired another Japanese injectible company I‟rom Pharmaceuticals in

2011.

Mr. Parekh considered that with government support generic medicines can become one of

the major medicinal segments in the years to come. Since Japan was expected to expand its

generic medicine manufacturing base to 80% by 2020, it called for Indian generic medicine

manufacturing companies to establish themselves in Japan. He observed that the selling price

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of generic medicines in Japan was expected to undergo a price cut. Talking about stable

supply and high quality requirements in Japan, he emphasised that the high quality of drugs

was at times regarded as a deterrent for Indian companies. Currently, the Japanese

government was offering incentives to Pharma industry in the form of cash incentives which

it intended to discontinue post 2020. Mr. Parekh felt that some cash incentives to Indian

entrants by the Japanese government can persuade more Indian companies to enter the

Japanese Market and contributed to the future enhanced requirements of generic medicines.

The Question-Answer Session

Summing up the discussion, Professor Abhijit Das said that quality appeared a key message coming

across all the presentations. He then opened the floor for Q&A when a query was posed regarding the

exact scope of the MOU signed between PMDA of Japan and FDA of India and whether it would in any way help Indian companies in sailing through the Japanese regulatory framework more easily. Dr.

Sinha replied that would be the long term objective. But the object of the MOU was limited to

promoting information exchange and giving better insight and awareness about regulatory process on

each side to the other. This will help companies to be better aware of the process involved when they undertook capacity building of manufacturing units.

SESSION 4:

PROMOTING GREATER TRADE AND COOPERATION IN IT AND IT-ENABLED

SERVICES IN AN INCREASINGLY DIGITAL ERA

The session was chaired by Mr. Masayoshi Tamura, General Manager of Hitachi Private Ltd and Co-

Chair of NASSCOM-Japan Council. The session focused on Services trade facilitation measures that

can further promote trade in this sector and the issue of cooperation between the IT and manufacturing companies in India and Japan for promoting more creative business activities and

innovation. Mr. Tamura recalled his own efforts at promoting cooperation between the two differently

placed countries with different capacities and strategies and invited Mr .T.V Kamalakkannan to make the presentation.

Presentation by Mr. T V Kamalakkannan, Director and Chief Delivery Officer, TCS, Japan:

Mr. T V Kamalakkannan, Director and Chief Delivery Officer, TCS, Japan spoke on the opportunities

and vision in promoting strong relations between India and Japan in IT and IT enabled services. His presentation may be seen at Annexure 11. Mr Kamalakkannan began by emphasising the need for

strong relations between the two countries and welcomed the chemistry and energy shown by the two

leaders. With reference to IT and IT enabled services, he said that while Japan was a large market of around US $ 120 billion for these services India had a less than 1% share of the market. The

headroom for growth was therefore high .The RIS-AIC report was an excellent one that captured

many details of trade in this sector and also incorporated many of the suggestions made during earlier discussions.

Mr. T V Kamalakkannan then dwelt on the approach needed to enter the Japanese market. Firstly, he

said, it will be wrong to presume that anything that worked globally will also work in Japan. It would be important to develop mutual symbiotic relationships in which trust and transparency will be

absolutely important.

Referring to the experience of his own company, Mr. T V Kamalakkannan said that TCS had been in

Japan for 28 years and grew incrementally to generate annual revenues to the tune of US$ 50 million.

But in 2014 and Mitsubishi formed a joint venture Nippon TCS Solution Centre Limited with a 51%, 49 % ratio resulting in a strong collaborative venture. The customer base was predominantly

manufacturing, quality management system, engineering services, IT infrastructure services,

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application development and support services. Business process outsourcing did not happen much

since work was mostly outsourced to China, owing to cultural and other factors. TCS had also recently opened a dedicated IT centre for Japan in Pune which also had several Japanese working.

There were basically two types of companies in Japan- the locally focussed companies and global Japanese companies with international operations. Another category was Japanese headquartered

companies wanting to go global in a technology digital and automotive era. For companies like TCS it

was important to figure out how to use this third option as a door opener to acquire a foothold

Mr. T V Kamalakkannan said that Japanese customers were now focussed on increasing

competitiveness, working towards standardisation and participation, moving for global governance

and compliance including risk management and aiming for global expansion. If Indian companies needed to gain momentum in the Japanese market they needed to align global solutions and strategies

with Japanese mindset. Bridging cultural and linguistic barriers was necessary as was also noted in the

report. The culture of India and Japan, had many similarities and this could be usefully leveraged .It was very welcome to hear from the Japanese Ambassador that the Totalization Agreement was now in

force from October 1, 2016 and that should simplify matters. The idea of setting up an IT University

in Japan as proposed in the report was very good one and this could be funded by the two

governments and the industry from both the sides. While the top companies in the IT sector in Japan had a very strong presence in the Japanese market, the digital era was a very good opportunity for

Indian companies to enter the market or expand. This was particularly so for innovative companies.

One way of achieving this could be in the form of building IOT platforms.

Mr. Tamura thanked Mr. T V Kamalakkannan and said that he himself was there at the inauguration

of the TCS Japan Centre in Pune and that it was a very worthwhile centre for everyone to visit.

Remarks of Mr. Yasujiro Miyake, Counsellor, Embassy of Japan:

Mr. Yasujiro Miyake said that at the Embassy of Japan he was assisting companies in the promotion

of trade and investment and that he would offer remarks on three specific aspects : offshoring from

Japan to India, movement of professionals from India to Japan, and cooperation between Indian IT companies and Japanese manufacturing companies(„ match making‟)

Offshoring, he said, was already happening and there was not much for governments to do. He gave the example of TCS-Mitsubishi itself and added that another example was of Sony of Japan that

created a Software Centre in Bangalore as early as in 1997. The company had been developing

embedded software for long in its electronic appliances and many of such software were developed

and exported to Japan and elsewhere from Sony Bangalore centre.

In respect of movement of professionals, Mr Miyake pointed out that an MOU had been signed in

April 2015 during the visit of Japanese Minister for Economy, trade and industry Mr. Yoichi Miyazawa and the Indian Minister for Information and Communications Technology Shri Ravi

Shankar Prasad in which the former agreed for more and more Indian IT professionals to come and

work in Japan.

On matchmaking, Mr. Miyake said that this was happening all the time .He pointed out that on the

very day of the seminar an exhibition of combined digitalisation of advanced technologies was taking place in Japan to which ten Indian IT companies had been invited for business discussion. From 1

st

October of the current year an Indian desk had been also set up in JETRO in Japan for the IT sector.

Companies like Fourth Valley Concierge Corporation were also active in collaboration with other Japanese companies in the campuses of IIT Delhi, IIT Mumbai and IIT Hyderabad. Another Japanese

company had set up cafes, with free coffee, drinks and WIFI and provided information to students

regarding opportunities in Japan. Further steps had also been taken to relax visa policies including grant of visas for up to five years. Over the last five years several Japanese companies had also been

recruiting engineers from India and they had numbered around 5 or 6 per year.

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Remarks by Prof. Arpita Mukherjee, ICRIER:

Prof. Arpita Mukherjee offered many suggestions for enhancing Indian exports of IT services to Japan

as given below.

Indian IT companies needed to diversify and go beyond english speaking markets if strong

growth of IT services had to be sustained

The Japan market was an important one here. But it was also somewhat different with

software development taking place mainly on the main frame that was also product oriented

and geared to manufacturing and not so much towards consumers.

Japan focusing mainly on IITs for recruitment may not be enough. They should also tap other

engineering colleges in other locations. Customized courses catering to needs of Japanese

companies could also be considered for introduction in some engineering colleges.

Suitable areas in DMIC or Chennai-Bangalore corridors could also be considered for locating

software development units and parks. Incentives including in respect of transportation and other needs could be considered.

It was also important for efficient issue of visas and work permits so that the element of

uncertainty on this score can be done away with.

Japanese language should be offered as an option at A-level and O-level.

There was a lack of clarity and understanding about the bilateral Double Taxation Avoidance

Agreement and this needed to be addressed

The e-commerce regime in India needed to be looked into with a view to bringing greater

clarity and simplification

Japanese‟s commitments to India in the services trade in CEPA were much lower than what

Japan had offered to other countries. It would be important to upgrade the commitments of

both partners to make them the best offered by each of them to the other.

The Question-Answer Session

After the panel discussion, the floor was open for questions, comments and suggestions.

1. One participant wanted to know about Japan‟s view point towards the review of CEPA that was currently underway. Mr. Miyake replied that there was no substantial commitment in

trade in services under CEPA in addition to existing level of liberalization. Any new

commitment would require change of law of investment policy. Since liberalization cannot go back there was some limitation in an FTA. Real liberalization can happen at multilateral

level. He also pointed out that the proposed new services agreement under negotiations

(Trade in Services Agreement) with other nations was a plurilateral agreement and can bring about certain changes.

2. Another questioned related to the status of RCEP negotiations in which India was keen on clubbing of goods and services .The panel responded by stating that RCEP included both

goods and services and there was no need to split it and both the processes were happening

simultaneously.

3. Dr. V.S. Seshadri, Vice-Chairman, RIS raised a query regarding the need for brand

promotion of India in Japan. There was inadequate awareness in Japan about the capabilities of Indian IT companies. This was particularly so among the Japanese SME companies He

called for a focused effort to bridge the gap. In this regard he wanted to know if award of

some government procurement contracts to Indian companies could generally give a signal to

Japanese companies about capability of Indian companies. Also Dr. Seshadri queried if inclusion of some commitments on government procurement in CEPA could work to enhance

India‟s share in the IT services of Japan. Another way could be to set up a IT University in

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Japan that is funded by both the governments and the industry from both the sides. Students

from such a university can become a work pool for both the countries. .They could also better understand the language and other cultural factors.

Responding to the queries Mr Masayoshi Tamura agreed on the need for brand promotion. Acknowledging the fact that Japanese are detached from Indian companies and culture, he

added that there was insufficient understanding between the two sides. At his level,

Mr.Masayoshi said, he had introduced Japanese leaders and people to India to make them

familiar with things happening here- like the start ups, engineering services, BPOs etc, . He called for India to take initiative in educating Japanese leaders since they could see potential

in India‟s research and development capabilities. He anticipated dynamic ideas emerging

from India.

4. Mr. Kamalakkannan expressed support for the idea of bringing Japanese students to India. He

added that his company had offered job to 120 Japanese students in India and most of them spoke only Japanese. The initial learning programme would be provided to them, further they

would be deputed here for six months to one year. Additionally he talked about the Shubh

Economic Federation that would be inviting 50 people. Referring to the proposal of setting up an IT University in Japan Mr. Kamalakkannan envisioned it as a long term and benefitting

project. Mr. Masayoshi Tamura stated that everyone needed to work together and collaborate

in order to achieve our visions.

5. Dr. Pralok Gupta, Assistant Professor, Center for WTO studies, raised questions regarding

the barriers pertaining to Mode 1 and Mode 2. Further he referred to the hurdles related to

cross border trade, customized contract, investment in the mode 3, issues of security and the nature of the barriers that Indian companies faced in Japan market. Mr. TV Kamalakkannan

replied that a situation had not yet reached wherein questions of security and privacy were

major concerns. Further it was added that Japan had been very particular about the security issues.

CONCLUDING REMARKS AND VOTE OF THANKS

Dr. V.S.Seshadri, Vice Chairman, RIS gave the concluding remarks and thanked all the various speakers and chairmen of different sessions for having accepted the invitation. Their contributions and

the ensuing discussion had further amplified on many of the aspects in the report. He also thanked the

Embassy of Japan, in particular Ms. Oshima Noriko, First Secretary, for all the assistance extended by her to make the seminar a success. Dr. Seshadri also thanked all members of RIS faculty and staff for

their support and assistance.

SUGGESTIONS ON WAY FORWARD

The seminar provided a number of suggestions on the way forward. They are briefly summarized below:

1. The Japanese market needs to be approached with a long term perspective. As buyers, Japanese customers go for stable and trust worthy partners. Location of offices of Indian trade promotion

agencies and industry associations in Japan could significantly assist in this exercise. (Barring

Marine Products Export Development Authority no other Indian trade promotion agency or

industry association currently has an office in Japan. Offices of CII and ITPO which were there earlier have been closed.). Getting Japanese trading houses and retail outlets to source more from

India has to be part of the effort.

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2. Cultural and language factors are important and these need bridging and require creative solutions

and adaptations. Global practices do not necessarily succeed in Japan. For example, not only intrinsic quality of the product but elements that may be regarded as constituting cosmetic quality

such as appearance, packaging, documentation etc., are critical to succeed.

3. Promoting regulatory cooperation between concerned agencies on the two sides would be essential particularly in heavily regulated sectors for better awareness of standards and practices.

4. Within Government of India too a coordinated approach between all the concerned agencies towards Japan is essential. The cooperation pillar of CEPA, for example, requires activation and

the role of Ministry of Finance will be important to ensure that timely assistance can be sought , as

part of bilateral development cooperation, for projects aimed at improving trade competitiveness, strengthening quality conformance and standards and building capacities for value added exports.

5. Participants from the Japanese side at the seminar spoke about the need for greater investments

from India in Japan. An India desk to promote such investments had been set up in the JETRO office in Japan.

6. India had only a 0.5 per cent share of Japan‟s garment imports in ten of the leading apparel items in which China‟s share was declining. There is a good opportunity for India to acquire a share of

this space being vacated particularly if the new textile package of the government of India can be

used to advantage. The package also involved importing advanced machines including from Japan. AEPC, JETRO and some of the leading Japanese trading houses could cooperate to devise

a way forward. Sourcing of organic cotton items from India, as currently undertaken by Muji

stores of Japan, could also be further strengthened.

7. India‟s exports of shrimps, surimi and other marine products continue to have good potential in

Japan notwithstanding that seafood consumption in Japan was declining. A relaxation in the rules

of origin of CEPA that can allow preservatives or other foreign items accounting for an insignificant share in the value of the product will be necessary. Additionally there are certain

seafood items on which Japan‟s other FTA partners were getting deeper tariff concessions. India

should try and get similar concessions during the CEPA review process or in the ongoing RCEP

negotiations. India should also popularize the MPEDA quality logo and work to get recognition for it from the Japanese authorities. Finally, Indian marine export companies and Japanese trading

houses should forge more collaborative ventures for value added products that can significantly

improve revenues.

8. Japan‟s decision to move towards 80 per cent usage of generic medicines by 2020 is a huge

opportunity for Indian generic manufacturing companies. Since companies in Japan by themselves will not be able to meet this target getting cooperation from India will also be of benefit to Japan.

Many options were possible like increased investments by Japanese pharma companies in India,

more Indian pharma companies investing in Japan and contract manufacturing in pharma

manufacturing units located in India for Japanese pharma companies. The last option could in particular fast track the approval process by the Japanese regulator. Greater cooperation between

the Indian FDA and PMRDA of Japan in furtherance of their MOU signed last year along with the

possible opening of a PMRDA office in India could yield better results.

9. India‟s IT and IT enabled services had less than 1 percent share of the US$125 billion market in

Japan for these services. The coming into force of the Totalisation agreement from 1st October 2016 was a very welcome development. The Japanese Embassy representatives also conveyed

improvements undertaken to facilitate visa issuance for easing movement of professionals from

India to Japan. Indian panelists stressed on the need to have greater predictability and flexibility in

the visas for professionals to enable companies to have greater freedom of action. Clarity of provisions in the Double Taxation Agreement, an issue flagged in the report, will also be useful.

There was also inadequate awareness among Japanese companies including SMEs about India‟s

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strengths in this sector and some brand promotion was essential. One way was for Indian

companies to tie up with a strong local Japanese company as was done by TCS with a Mitsubishi arm. India and Japan could also consider establishing an IT university in Japan with the help of

Indian and Japan industry players. Getting Japan to award some government contracts to Indian

companies on competitive basis could be another way to send a signal and make known to the

Japanese private sector about India‟s strengths in this area. The onset of a new digital and technology area marked by Internet of Things (IOT) could be a good opportunity for Indian

innovative companies to enhance their presence in Japan.

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