Chair:                P R Chari, Research Professor, IPCS

Delegation:        Dr Terence Roehrig, Associate Professor, National Security Decision Making Department
                          Dr David T Burbach, Assistant Professor, National Security Affairs

India, China and Japan

India has been walking a fine line between improving relations with Japan and the US and not appearing to threaten China in the process. It is important to realize that, despite tensions between China and Japan and between China and India, Japanese expertise on China is far greater than Indian expertise on China. Despite the warming ties between India and Japan, there is really no "software" connecting the two countries. The Japanese comfort level with China therefore is substantially higher than with India. There are students, travelers and businessmen going from Japan in China in their thousands despite their mutual tensions which is more than can be said for the India-Japan relationship.

Indo-Japan Relations

The political decision has been reached in Japan to improve ties with India but the decision makers have a hard time convincing Japanese businessmen to buy into this relationship. They would much rather that the Japanese government did not complicate relations with China which is where most Japanese investments have been heading in recent years.

The two major Japanese complaints to explain the low level economic relationship with India are the attitudes of the Indian bureaucracy and the lack of infrastructure. These have been long-standing complaints and progress on these fronts has been slow. However, there are Indian complaints too on this issue. For one, it does not speak highly of Japanese attitudes if they have to be "inspired" to invest in a market that is growing at about 9 per cent a year when money in their own markets gives close to no returns hence they obviously need to diversify into other markets besides China and Southeast Asia. The longer the Japanese take to come into the Indian markets, the more they are likely to lose. There are other problems too, as Indian businessmen are becoming increasingly reluctant to deal with Japanese and Korean businessmen owing to their tendency to indulge in sharp practices. Enterprises from the two countries are also making a big mistake in the way they deal with their employees by discouraging their formation of unions. India has labour laws different from both countries, and these need to be respected, else the firms would be playing into the hands of political parties ready to exploit the situation. Japanese and Korean firms should allow the formation of workers unions that they might then be able to control rather than let matters reach a head as in the case, last year, of labour revolt at the Honda factory outside Delhi.

Indo-Japan ties are likely to receive a boost if Japan would get over its self-imposed restrictions on exporting defence technology. While Japanese ODA to India will continue, its sum is too small to be of any real significance to the relationship. What India requires is massive investments in infrastructure where the Japanese could play an important and substantial role. Specifically, investments are required in the Indian power sector, increasing port capacity and for building roads. In this regard, plans for developing the Delhi-Mumbai industrial corridor as outlined in the Indo-Japan Joint Statement are significant.

Indo-Japan Strategic Ties

While the business and financial community in India have accepted globalization and its consequences, the strategic community in India is still 10-15 years behind in reaching a similar conclusion. The Indian Army does not seem to acknowledge that the Chinese army has been downsizing as part of its modernization and refuses to consider a similar downsizing. There are signs of change however - the Indian Navy that received the smallest proportion of the defence budget all these years has begun to see an increase in its allocations. The Indian naval buildup had always been stymied by extraneous considerations but is presently one of the biggest in the world.

Any strategic relationship between India and Japan will have to be sea-based but the two countries are simply unable to connect at the strategic level. The Japanese side is hamstrung by a bureaucratic approach to defence and strategic matters. It is often even difficult to identify with whom such matters could be discussed.

It seems that, apart from the Malacca Straits, there are very few areas of India-Japan strategic cooperation. But, from the Indian point of view, there really is no need for a Japanese role in the Indian Ocean. The best thing would be for Japan to work towards becoming stronger in Northeast Asia while India does likewise in the Indian Ocean region. If the Chinese decide they want to become an Indian Ocean power, they would need to take a revisionist position. They would also need bases in the region, including in Southeast Asia, and their strategic roads, rail and pipelines would be directed southwards. Japan's rising strength, however, would place constraints on such Chinese activity.

The Indian Economy, Globalization and Defence Production

There are inefficiencies in the Indian economy but this has not prevented some sectors from reaching world-class standards. The challenge, however, is to pull the Indian average up to the world average in respect of the other sectors of the economy. With respect to defence production there are certainly several problems, and this is an area where global standards have yet to be reached. Two problems with Indian defence research and production have to do with the practice of tenured appointments that robs their personnel of incentives to continue research and influences the work culture itself. Defence production units in India are state-owned, and synergies with the private sector are yet to be developed; moreover, Indian defence production is lagging behind countries like China in the time required between conceptualization and manufacturing of fourth and fifth generation weaponry.

The current state of the production of the Light Combat Aircraft (LCA), Main Battle Tank (MBT) and the nuclear submarine signifies three big strategic failures for India, and the Defence Research and Development Organization (DRDO) has been responsible for each of these. As long as the work culture remains what it is, no amount of restructuring will help. There is no doubt that keeping the production of defence items confined to the public sector is to court disaster.

On technology issues, India is unhappy with the regimes that are in place in the US that govern the transfer of technology, believing them to be unfair and unequal. American legislation has made it so difficult for US companies to engage in technology transfer; hence high-tech companies simply give up avoiding dealing with American red-tape in this regard. This is despite the fact that the US has probably less concerns with India on technology issues than it has with China. There is an acknowledgement in the US too that its commitment to non-proliferation and the Bush administration's preference to identifying "good guys" and "bad guys" instead of basing this on any firm principles has meant that India has suffered on occasions.