Introduction

In a speech before the Indian Parliament in 2007, then Japanese Prime Minister Shinzo Abe introduced the ‘Confluence of Two Seas’, a precursor to Tokyo’s Indo-Pacific policy framework. It referred to the linking of the Pacific and Indian Oceans to make a ‘Free and Open Indo-Pacific’; Abe named India as an anchor in such a vision.[1]

To be sure, India-Japan relations date back to the decades after the Second World War. Their current partnership is increasingly featured as an important pole in Abe’s book, Utsukushii kuni e (Towards a Beautiful Country: My Vision for Japan) where he writes that it would not surprise him if “in another decade, Japan–India relations overtake Japan–US and Japan–China ties.”[2] A driver for this strategic partnership has been the series of policies that India implemented following the thawing of the Cold War. While India missed the opportunity of engaging with the East Asian miracle during its protectionism era, it has corrected its course since the liberalisation of the 1990s and has issued strategic foreign policies such as Look East Policy, Look East Policy 2.0, and the now refurbished Act East Policy.

As Asoke Kumar Mukerji once noted,[3] Abe drew from Indian philosophy to articulate the basis for Japan’s interest in and engagement with India and the Indo-Pacific. Increasingly, India is finding its space in Japan’s foreign policy frameworks such as the ‘Arc of Freedom and Prosperity’, the Quadrilateral Initiative, and Asia’s Democratic Security Diamond.[4]Indeed, New Delhi and Tokyo share fundamentally similar civilisational moorings, making them natural partners in areas of common interest. Japan’s Free and Open Indo-Pacific (FOIP) and India’s Act East Policy and Security and Growth for All in the Region (SAGAR) initiative are complementary frameworks that create scope for the two countries to deepen their collaboration in the region.

The two countries have thus begun to collaborate in third countries: for instance, in Sri Lanka,[5] Bangladesh, and Myanmar.[6] In recent years, the bilateral partnership between India and Japan has expanded[7] and they are pooling efforts in third countries in the context of their shared outlook towards the Indo-Pacific.

India and Japan’s cooperation in third countries began in 2018 with the announcement of the setting up of an LNG terminal in Sri Lanka. The two have since been involved in the funding and construction of roads, hospitals, and a range of infrastructure projects in Africa through the Asia-Africa Growth Corridor (AAGC) initiative.[a] As India and Japan are both active and vital middle powers in the Indo-Pacific, their partnership in promoting infrastructure linkages holds significance. While the partnership is not overtly a step to supplement the many potential measures to counterbalance perceived apprehensions with regard to China’s growing footprint, it offers scope for smaller nations in the region to reduce their reliance on China and look to engage with other countries. This brief explores the areas of collaboration for India and Japan in Bangladesh and Myanmar – two littoral countries where China’s involvement is significantly pronounced.[8]

Indian and Japanese Interests in Bangladesh and Myanmar

Bangladesh

The socio-economic development that Bangladesh has been able to achieve in recent years can be attributed to specific, targeted strategies including women empowerment and economic inclusion at the grassroots.  In recent years, both India and Japan, separately, have included Bangladesh in their investment radar. According to the Statistics Department of the Bangladesh Bank, net inflow of FDI to Bangladesh from India and Japan in 2019 was $115.9 million and $72.3 million, respectively. The two countries have shown interest in financing infrastructure projects in Bangladesh, such as the Chilahati-Haldibari rail link, the Dhaka-Siliguri rail link, and the Araihazar Economic Zone. The Chilahati-Haldibari rail link is the most recent trans-border link to be revived after the Maitri Express was restored in 2008 after 43 years.[9] India has extended three lines of credit to the country, while Japan has provided China Exit Subsidies.[b]

Dhaka and New Delhi finalised seven agreements in 2020, in areas including agriculture, hydrocarbons, and textiles; they agreed to expedite the India-Bangladesh Friendship Pipeline and the Maitree Super Thermal Power Project, and inked a Framework of Understanding on Cooperation in the Hydrocarbon Sector.[10] Talks are underway between the two countries to explore fresh areas of cooperation such as artificial intelligence (AI), disaster management, and environmental conservation. To be sure, however, differences between India and Bangladesh remain on issues like the Teesta Agreement.[c]

Meanwhile, Dhaka’s ties with Tokyo have also expanded in recent years. In 2016 Bangladesh supported Japan’s bid for a permanent seat in the UN Security Council, and in the years after, Bangladesh facilitated the entry of Japanese firms into the country by improving the investment environment and enhancing its Special Economic Zones.[11] Japan is investing US$20 billion in the Araihazar industrial park, which is planned to start operating by 2022.[12] During the initial year of the Covid-19 pandemic, Japan began giving incentives to its firms to relocate their manufacturing bases from China; Bangladesh is one of the alternative locations.[13] In 2022, Japan and Bangladesh will mark 50 years of diplomatic ties—that year the Matarbari port will begin operating, and the coal-fired power project will also be finished.

Table 1. Indian and Japanese Investments in Bangladesh

Japan’s Marubeni Corp. and India’s Larsen & Toubro collaborated in building the 400-MW Bibiyana-III Gas Based Combined Cycle Power Plant in Bangladesh in 2016. In 2018 they engaged in their first joint venture to build a rail system in a third country, and won the contract for constructing Bangladesh’s first mass rapid transit system.[14]

Myanmar

Myanmar has had a tumultuous history with a long-standing military rule. Following the 2010 general elections, the political transition encouraged other countries to begin looking to the country for investment opportunities. The diplomatic climate for Myanmar changed dramatically as sanctions were eased, and it was also during this time that the new Foreign Investment Law was implemented.[15]

China was one of the first countries to push its investments into Myanmar. China is Myanmar’s second-largest source of foreign investment and its top trade partner. From 1988 to June 2019, approved Chinese investment amounted to more than $25 billion. It accounts for nearly 26 percent of total FDI in the country.[16]China pushed heavily for infrastructure projects under the Belt and Road Initiative (BRI), to form a China-Myanmar Economic Corridor. Projects such as the Leptadaung Copper mine project, the railway linking Kunming to Kyaukphyu, the New Yangon City project, as well as other economic zones are examples of how China has found avenues for expanding its economic footprint in Myanmar.

Both India and Japan have shown interest in following in China’s steps. For India, 80 percent of its investments in Myanmar are in the oil and gas sector.[17] India has multiple connectivity projects in the country such as the India-Myanmar-Thailand Trilateral Highway, the Kaladan Multi-Modal Transit Transport Project (KMMTTP), an industrial corridor linking India’s northeast regions to Myanmar, the Mandalay bus service, and the Mekong-India Economic Corridor. Japan’s investments in the country, meanwhile, were estimated to exceed $ 1.7 billion dollars from 2011 to 2020, with four loan agreements amounting to $ 1 billion.  It has 39 corporations working in the Thilawa Special Economic Zone in industries such as transport, real estate, hotels and tourism. 

Table 2. Indian and Japanese Investments in Myanmar

Myanmar has long relied on Japan as an important source of foreign aid. During the period of military junta rule from 1988 to 2010, Tokyo exercised restraint in giving aid due to pressure from its major ally, the United States. Japan resumed its aid during the post-junta regime.

The February 2021 coup throws a cloud of uncertainty over ongoing and prospective projects in Myanmar that are receiving foreign funding. The United States has imposed—sanctions on the country, as has the United Kingdom—this could keep projects on hold.[18]The US has asked Japan and India to follow suit. Both nations, however, are being cautious.[19]Japan’s Deputy Defence Minister Yasuhide Nakayama urged cautious action and warned that Myanmar may fall back into China’s clutches.[20] India, too, is reacting to the coup with similar care; as are the country’s business community in Myanmar.[21]

Japanese companies operating in Myanmar appear to have moved faster, though. The automaker, Suzuki for instance, has halted production work due to uncertainty of the present situation.[22] Japan’s Kirin Holdings, soon after the coup, announced that it will terminate its two major joint ventures with Myanmar Economic Holdings Limited (MEHL) and Myanmar Economic Corp. (MEC), thus becoming the first Japanese company to publicly denounce the military coup.[23]

Observers note that China could use the uncertainty to increase its influence in Myanmar. China and Russia on 12 February did not sign a UN Human Rights Council (UNHRC) resolution on the situation in Myanmar shortly following the military coup. Officially, China has made non-interference in the domestic affairs of other countries a core principle of its foreign policy; there is no reason to expect China to make an exception now.  

Rationale and Prospects for India-Japan Collaboration

Japan’s policy of Free Indo-Pacific Trade is in synergy with India’s Act East Policy, thereby forming a perfect ground for collaboration. Japan’s approach towards infrastructure financing in the Indo-Pacific region is influenced by its own economic interests. According to the first Revitalisation Strategy that was introduced in 2013, Japan is looking to obtain overseas markets through higher infrastructure investments and using their Official Development Assistance to provide loans and investments for economic infrastructure. For example, Japan has extended ODA loan agreements with Bangladesh and Myanmar for key infrastructure projects such as the Matarbari Port and Yangon Urban Development, as well as private investments through FDI promotion projects.

India and Japan are collaborating on two projects in Bangladesh: the Ramgarh–Baraiyarhat Highway and the Jamuna Railway Bridge. The former is being funded through an Indian Line of Credit, a grant from the World Bank, and loans provided by Japan. The latter will utilise soft loans from Japan, and will be constructed by an Indian infrastructure company.

BBIN Motor Vehicles Agreement

Tokyo and New Delhi could work together to facilitate the BBIN Motor Vehicles Agreement, which aims to ease the cross-border movement of goods and people between Bangladesh, India, Bhutan[d] and Nepal. The agreement, since being inked in June 2015, has faced difficulties with respect to operational modalities. It is set to be revived after discussions in 2020 regarding the signing of an enabling MoU designed for “ease of running business” instead of merely “trading across border.”[24] As the objective of the MVA is to pave the way for transport corridors transforming into economic corridors, Japan has the scope to work with India in the sub-region, and especially in Bangladesh, strengthening value chains and even creating new ones. This becomes even more important amidst the Covid-19 pandemic which has highlighted the need for diversifying supply chain networks.

Education and ICT

India and Japan have entered into a trilateral agreement with Myanmar to pursue infrastructure projects in 15 schools in the Rakhine state.[25] Myanmar is keen on improving ICT, telecommunications and e-governance, and has proposed to budget $100 million for its e-Governance Master Plan.[26] Japanese companies such as the KDDI and Sumitomo Corp have already entered the market and invested $2 billion in the telecommunications industry. India, for its part, has completed its 2015 Agreement with Myanmar to set up the Centre of Excellence in Software Development and Training through the ASEAN-India Cooperation Fund. [27]

In Bangladesh, the ICT sector is poised for expansion: according to the Bangladesh Association of Software and Information Services (BASIS), over 1,500 software and IT-related companies have registered in the country. Government initiatives to develop the ICT service sector, such as creating a high-tech park in every district, coupled with cheap labour, have made Bangladesh a key player in the global outsourcing market. Further, under its Vision 2021, it launched the ‘Digital Bangladesh’ initiative which seeks the country’s transformation to a digital economy by focusing on expanding internet penetration, upgrading existing services, and promoting e-commerce and e-banking.

Tourism

The Buddhist tourism circuit[e] is another area where India and Japan can collaborate. The value of developing the Buddhist Circuit is not only in the boost it gives to local MSMEs and the broader tourism industry, but also in the revival of 2,000 years of international interaction and confluence of ideas between India, Japan and Myanmar. The Circuit can act as an important channel for people-to-people connectivity. Research centres may also be set up to enhance scholarly work on Buddhism.

Cybersecurity

India and Japan in October 2020 finalised a cyber-security agreement that focuses on 5G technology, AI, and critical information infrastructure in pursuit of the Free and Open Indo-Pacific.[28] The agreement could be used as a starting point for digital cooperation in both Bangladesh and Myanmar, considering the growing necessity of digitalisation in the two countries. Chinese companies like ZTE[29] and Huawei[30] are already launching 5G services in Myanmar and Bangladesh, respectively. If India does not want to fall behind on its Act East strategy, and if Japan aims to maintain its footprint in the region, they would need to cooperate further in this domain.

Way Forward

The presence of Japan in South Asia, and especially in India’s northeast through its Overseas Development Assistance, is not a recent development. In 2017, the India-Japan Act East Forum was established to serve as the platform for bilateral cooperation drawing from India’s Act East Policy and Japan’s Free and Open Indo-Pacific Policy. The aim of the Forum is to identify infrastructure and cultural connectivity projects in India’s Northeastern Region (NER).[31] Businesses in Japan are particularly keen on aiding and supplementing India’s efforts towards playing a more pivotal role in global supply chains, especially in the aftermath of the economic re-adjustments prompted by the Covid-19 pandemic.[32] However, bilateral cooperation between India and Japan has a broader objective – that of promoting their shared interests and pooling individual strengths towards the development of a more prosperous, stable and secure Indo-Pacific region. This goal is not distinct from approaches that are geared towards evolving tools to respond to and as required, counter China’s growing footprint across the region.

With China not only emerging as a competitor in establishing regional hegemony, but also posing a challenge to the rules-based global order, the India-Japan partnership has gained increased salience in the region. Expanding Chinese footprint across South Asia and Southeast Asia has provoked concern especially in the past decade. Sino-Bangladeshi ties have also improved over the years. Chinese FDI to Bangladesh outstrips that by Japan and India combined. Further, China has been investing in infrastructure projects in Bangladesh such as the Padma Bridge and the Sylhet Airport and has extended funds for other ongoing infrastructure projects.

Both Bangladesh and Myanmar have sought to balance China’s involvement in their respective countries by inviting and giving space to other countries such as India and Japan to participate in their development strategies. For instance, China has been involved in projects like the Kyaukpyu port and oil pipelines in Myanmar but the latter has sought an increased role for India in the country as well, especially in pharmaceuticals and manufactured items. China is keen on constructing a port at Sonadia in Bangladesh, but the project has been shelved and instead another port at Matarbari is under construction with Japanese collaboration.

While Japan has shown commitment to its engagements through timely completion of projects, India needs to improve its own capacities. Notwithstanding the advances, there is a deep-rooted sense of caution with respect to India’s bilateral collaborations, especially those concerning infrastructure development as for decades many such proposed projects have remained confined to paper or have witnessed sluggish progress at best. For instance, India and Myanmar agreed to components of the Kaladan Multimodal Project (KMTTP) over two decades ago, yet little progress has been made since. Additionally, the visibility of India in the collective psyche of citizens in neighbouring countries has also remained limited. In Bangladesh, for example, popular opinion regarding India is often divided. The shared history between the two countries also at times contributes to creating difficulties in bilateral cooperation.

Often, too, the nature and extent of cooperation is determined by political regimes in power. Perceptions regarding India’s long delays and issues with New Delhi’s engagement with its neighbourhood, for instance, appear to be evolving under the current administration that is largely regarded as more focused and intent on delivering. A simultaneous development has been a stark divergence in political and popular perception – those contributing to the fostering of ties as opposed to those contravening the same. How these factors play out will determine multilateral cooperation. Aside from the logistical problems—such as difficult terrains, monsoons, and constant disputes with ethnic armed forces—remain a big hindrance to the Kaladan as well as Trilateral Highway.

India-Japan collaboration can also be viewed through the prism of the Quadrilateral initiative. At a time when all four Quad members – Japan, India, Australia and the US – are displaying greater resolve in strengthening and operationalising the grouping within the Indo-Pacific framework.[33] Nonetheless, the goal of bilateral cooperation in third countries is not entirely limited to or shaped by China. While Beijing is in many ways acting as a catalyst for the expansion of not just Indo-Japanese partnership but also a greater degree of convergence among other Indo-Pacific nations, it is important to consider that these partnerships also have broader aims of building a more prosperous and cohesive region. Therefore, collaborations such as the Japan-US-India (JAI), India-Australia-Japan, and Japan-US-Australia-India Consultations (Quad), do co-exist with the India-China-Russia framework, Shanghai Cooperation Organisation, China-Japan-South Korea, and BRICS frameworks.

Conclusion

The nature and extent of India-Japan relations has undergone a phenomenal change in the recent years. The current relationship is based on timely and considerate associations based on convergence in their geo-strategic and security deliberations. In this regard, their involvement in both Bangladesh and Myanmar will play a crucial role in not only enhancing their footprints within the region but also to counteract China’s bid at establishing hegemony.

Both India and Japan share good relations and are aware of the internal issues in Bangladesh and Myanmar. They have maintained cordial relations with Dhaka as well as democratic and the still powerful Myanmar army. While the return of military rule in Myanmar does create ramifications in the collaborative efforts, the prospects for opportunities cannot be ignored. As India and Japan join the Biden administration and Australia[34] in their calls for democracy to prevail in Myanmar in the recent Quad meeting, hopes for future collaborations remain.


About the Authors

Sreeparna Banerjee is Junior Fellow at ORF, Kolkata.

Pratnashree Basu is Associate Fellow at ORF, Kolkata. 

Additional research by Swapneel Thakur, Masters Student in Diplomacy, Law and Business from OP Jindal University.


Endnotes

[a]The Asia Africa Growth Corridor (AAGC) is an agreement between the governments of India, Japan, and African countries to improve sea connectivity between and within Asia and Africa. Initially, $ 40 million was said to have been provided by Japan and India together; however, no concrete implementation plans were drawn up.

[b] This subsidy (approx. $221 million) is being offered by Japan since 2020 for Japanese companies to shift their base away from China and find alternatives such as India. The move was prompted after the need to diversify manufacturing and supply chains was highlighted during the pandemic.

[c] The Teesta water sharing agreement is one of the most contentious and deeply political bilateral issues between India and Bangladesh. The river flows through both countries and the debate is surrounding the use of the water from the river. Barring a deal in 1983, no conclusive agreement has yet been reached on water sharing.

[d] Bhutan has for the time being opted out of the MVA.

[e] India has been working to attract Buddhist countries, including Japan and Myanmar, in order to boost foreign tourist arrivals. Apart from organising International Buddhist conclave, India is also looking to develop a so-called Buddhist circuit that would connect important Buddhist sites in the country.

[1]Gurpreet S. Khuranna, “What is the Indo-Pacific? The New Geopolitics of the Asia-Centred Rim Land,” in Geopolitics by other means: The Indo-Pacific reality, ed Axel Berkofsky and Sergio Miracola (ISPI, 2019) 13-2

[2] Shinzo Abe, “Utsukushii Kuni E (Toward a Beautiful Country)”, Bunshun Shinso, Bungei Shunju, 2006

[3]Asoke Kumar Mukerji, “India-Japan Collaboration in the Indo-Pacific”.

[4]Titli Basu, “India-Japan and ‘Confluence of the Two Seas’: Ten years on,Manohar Parrikar Institute for Defence Studies and Analyses, September 13, 2017.

[5]India, Japan looking at working in third countries: Jaishankar,Mint, September 18,  2020.

[6]“LIVE MINT, September 18, 2020

[7]“LIVE MINT, September 18, 2020

[8]Titli Basu, “India-Japan Vision 2025: Deciphering the Indo-Pacific Strategy”, Indian Foreign Affairs Journal, Vol. 13, No. 3, July–September 2018, 242-255.

[9]Sudha Ramachandran, “India-Bangladesh Relations: Time to Move Beyond Connectivity”, The Diplomat, January 4, 2021.

[10] Huma Siddiqui, “India, Bangladesh ink 7 agreements; Connectivity and energy cooperation top agenda”, Financial Express, December 17, 2020.

[11]Bangladesh firms to see Investment boost as Japanese Firms leave China”, The Japan Times, February 16, 2021.

[12] THE JAPAN TIMES, FEBRUARY 16, 2021

[13]Bangladesh withdraws to back Japan’s bid for nonpermanent U.N. Security Council seat”, The Japan Times, September 7, 2014.

[14] Ramananda Sengupta, “India, Japan collaborate to counter China’s sway, The New Indian Express, November 4, 2018.

[15] David Allen and Rainer Eizenberger, “Myanmar’s Natural Resources: Blessing or Curse?”, Heinrich-Böll-Stiftung,  December 11, 2013.

[16]Santosh Choubey, “Exim Bank of India Must Take Note of Chinese Designs in Myanmar as Another Hostile Front May Open in Coup Shadow”, News 18 world, February 12, 2021.

[17] Exim Bank of India on India-Myanmar trade and investment: Prospects and Way Forward.

[18]Tim Mac Donald, “Myanmar coup: Could sanctions on the military ever work?”, BBC, April 9, 2021.

[19] Brahma Chellany, “Don’t isolate Myanmar”, The Japan Times, February 10, 2021.

[20]Japan defence official warns Myanmar coup could increase China’s influence in region”, The Economic Times, February 2, 2021.

[21] Elizabeth Roche, “India’s tricky options in the Myanmar muddle”, Live Mint, February 25, 2021.

[22]URGENT: Suzuki halts production at 2 plants in Myanmar after coup”, Nippon, February 2, 2021.

[23]Francesca Regalado, “Japan’s Kirin to end joint beer ventures in Myanmar after coup”, Nikkei Asia, February 5, 2021.

[24] Bipul Chatterjee and Arnab Ganguly, “Time to Implement the BBIN Motor Vehicles Agreement”, Economic Times, February 12, 2020.

[25]India & Myanmar discuss projects in strife-torn Rakhine”, Times of India, October 2, 2020.

[26]Myanmar’s new digital strategy improves ICT development and network readiness, Oxford Business Group, 2020.

[27]Signing of Agreement between India and Myanmar for setting up of a Centre of Excellence in Software Development and Training (CESDT) on 6 August, 2015”, Press Release, Ministry of External Affairs, , Government of India, August 6, 2015.

[28]India, Japan Finalise Pact For Cooperation In 5G Tech, AI, Critical Infrastructure”, NDTV, October 8, 2020.

[29] Yuichi Nitta, “ZTE signs deal to help launch 5G in Myanmar,Nikkei Asia, May 17, 2019.

[30]Wang Yamei, “Huawei all set for 5G technical support in Bangladesh,Xinhua, November 9, 2019.

[31]Launch of India-Japan Act East Forum”, Ministry of External Affairs, Government of India, December 5, 2017.

[32]India, Japan looking at working together in Bangladesh and Myanmar: Jaishankar”, Hindustan Times,  September 18, 2020.

[33] Nayanima Basu, “India, Japan cooperating in Bangladesh, Sri Lanka to strengthen Quad — envoy Suzuki”, The Print, February 9, 2021.

[34]India, US, Japan, Australia Call For “Urgent” Return Of Democracy In Myanmar”, NDTV, February 19, 2021.



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