New Delhi: Prime Minister Narendra Modi is to visit Japan on 11-12 November. Ahead of his third meeting with Prime Minister Shinzo Abe, Japan’s ambassador to India Kenji Hiramatsu says Abe is likely to seek more stability and clarity in taxation issues as well as better incentives from the government to encourage Japanese investments. Edited excerpts from an interview:
PM Modi’s visit to Japan has been announced. Can we expect the signing of the civil nuclear deal during the visit?
During the last meeting between the two prime ministers (in New Delhi in December), it was announced that they have agreed in principle about the civil nuclear agreement. And it was agreed that it will be signed after technical details are finalized. We are now working on the technical details. We are speeding up the process. We hope that all the technical details will be finalized before the prime minister’s visit to Japan.
What are these technical details holding up the agreement?
I can’t tell you at the moment because there are several issues we have to finalize.
The World Bank last month ranked India 130 in its ease of doing business rankings. What is the experience of Japanese investors when it comes to the ease of doing business in India?
We appreciate the reform efforts made by the government including GST (goods and services tax) and the bankruptcy code. I hear a lot from my business colleagues and they really appreciate GST. We hope for an early implementation of GST. India is very attractive for Japanese investment because of the high growth of the economy, the size of the market and the fact that it is very young. From our side, India is the most favoured destination for Japanese business people. Not only in the short term, but also in the long term. But occasionally, they (investors) face some problems like tax measures or some financial regulations, slow development of infrastructure—factories or plants need stable provision of water and electricity. There are still some concerns, some problems... I hope India’s reform efforts will keep pace with the international situation. Many other countries are making a lot of efforts to attract investments. But India is a big market and it is a country of the future. So, they are looking to this market. But India also needs to exert more efforts with regard to tax and regulation, and infrastructure.
What are the issues that you would like to see sorted?
Sometimes, it takes a lot of effort to understand the tax system in this country. So, we need simplification. Sometimes, the tax systems are changed and some companies find it difficult to keep pace with the change, so some stability and some transparency in the system is desirable. As I said, they want to invest, but they want clarity about the future environment and investment.
What is the perception among Japanese firms about doing business with Indian companies? My question is in the context of Daiichi’s experience vis-a-vis its deal with Ranbaxy and now DoCoMo with Tata. What is the reputational impact these have had in terms of perception?
Japanese companies want to do business in India and they hope that the business environment is good enough to do this. For that, any kind of controversy, any sort of litigation should be sorted in an acceptable manner. And a rules-based approach, a rules-based solution is always desirable.
In the case of Tata-DoCoMo, there is international arbitration. We hope that a solution will be found in line with the ruling. Tata is a very big company and a very respected company here. DoCoMo is a giant in the telecommunication field and a very respected company. So, it is very unfortunate that two big giants are in this kind of a problem. I hope this will not have a negative impact on Japanese investor sentiment. There are always problems occurring in business deals. But India is a big emerging market. There are new players coming into this country and they are looking carefully... that is why I hope this sort of a controversy will not send a negative message to Japanese investors.
Will the recent changes at the top in Tata Sons speed up resolution of the dispute?
I would not like to comment on that.
Will these disputes be discussed at the meetings between the two prime ministers?
We have always talked about the importance of the business environment. So, we hope that the business environment as a whole will improve in India, which includes more stability in the system, and clarity in tax issues. So, in general terms, that will be discussed. But more specifically, we are hoping for better incentives coming from the central government or state governments to encourage investment. So, this sort of a message Prime Minister Abe will send to Prime Minister Modi in general terms.