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India’s Prime Minister in South East Asia Tour

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Indian Prime Minister Dr. Manmohan Singh is touring Southeast Asian countries. He reached Tokyo on the first leg of his tour. His tour is aimed at increasing bilateral trade with Japan, improving relations with China and maybe garnering support for permanent seat in UNSC.

Singh, PM

As Japanese firms focus on business with China and Southeast Asia, trade and investment flows between India and Japan are not well developed. Recently a rift developed between China and Japan over the arrest of a Chinese trawler’s captain at disputed islands allowed India to occupy some space in the East Asia region. Tokyo is also struggling to limit the risk of doing business with China as it is becoming more assertive in the South and East China Sea regions. Japan’s military dependence on the US, increased dynamism of China in the region and the politics surrounding North Korea’s nuclear policy pushed the relations between two countries into jeopardy.

Fishing in Troubled Waters

India found a chance there to increase its trade with Japan amid increasing tensions between Japan and China. The bilateral trade between India and Japan in 2009 totaled just $11.55 billion, about 4 percent of Japan’s trade with China. Japan exports mainly machinery, electronics, iron and steel products to India while India exports mainly oil, iron ore and chemical products to Japan. Japan is India’s 14th biggest trade partner, while India is Japan’s 27th biggest trade partner. About 630 Japanese companies are operating in India and Japan’s direct investments in 2009 in India totaled just about ¥344 billion ($4.23 billion).

As emerging economies, India and China are considered rivals in the region, although China is much ahead of India. Japan is concerned that china is holding back shipment of rare earth minerals, vital for electronic goods and auto parts, following the trawler dispute. Analysts are estimating that Japan wants to make India as a strategic partner to offset problems in relations with China.

Economic Partnership Agreement (EPA)

The two countries reached an accord in September on an economic partnership deal with a view to step up two-way trade and investment. The deliberations for the deal took three years due to hurdles of tariffs on trade. Indian tariffs on Japanese car parts and Japanese checks on Indian pharmaceutical goods have been the hurdles to clinch a deal. Now, after the deal, tariffs will be reduced on 94% of bilateral trade flows in 10 years that would increase bilateral trade by tenfold.

Under the deal, Japan will treat Indian generic drugs in the same way as Japanese products and approval access will become smooth. The Indian PM hopes that this will create more business opportunities for Indian firms. The agreement aimed for cooperation in environment, investment, IT and energy fields. The two countries had previously agreed on closer security cooperation in December 2009.

India PM in Tokyo

India’s Prime Minister Manmohan Singh is in Tokyo on two-day tour of East Asia. India and Japan.  He started talks in June 2010 on a civil nuclear energy deal that benefits Japan in a big way, as $150 billion worth nuclear energy market is waiting to be tapped in India. But, Japan wanted to make sure that India would not conduct another nuclear test in the future, to clinch the deal, which was rejected by India.

The Indian Prime Minister reminded the world, in interview with the Japanese media, that India has declared a unilateral moratorium on explosive testing. He said India would stick to that decision. The Indian PM is expected to garner support for India’s ambition for become permanent member of United Nations Security Council during his tour to South East Asia.

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