With greater India-Japan partnership post-COVID, can a powerful Asia-Africa Corridor emerge?
For a while engagement across borders appeared to come to a grinding halt when India began with suspending visas to nationals of Italy, Iran, South Korea and Japan to check the spread of coronavirus in the country. As the virus spread triggered a broader ban by most countries on all international travel, it seemed as though cross border businesses and foreign offices would remain on pause mode and collaboration would have to wait for less straining, virus-free times. After all, traditional norms suggest that it is essential for counterparts to be in the same room in order to achieve substantive results.
Instead, we find countries are trying actively to find ways to work around this adversity. The crisis has brought with it several constraints that are unlikely to abate in the coming months or possibly years, and has brought into focus the converging interests of democracies across the globe. With the specter of looming global recession, social distancing compulsions, and a growing public perception that over-reliance on China makes for poor protection of national interests, more than a few governments find themselves in a position where they confront issues which so far had been noted but not actively addressed in favor of geopolitical or market compulsions. In the current scenario where negotiations between officials sitting across the table is still some way off, virtual meetings and more strongly defined statements from individuals and governments are slowly taking the place of traditional forms and structures of business and diplomacy. This is a reflection of the need of the hour, as democracies seek to forge plurilateral partnerships to emerge from this crisis with new paradigms in the post-Covid world.
Once the outbreak spread the Indian government was quick to arrive at a decision to ban travel and announce a lockdown. For a nation of India’s size and population density, a less aggressive approach could well have spelt disaster. As the country approaches 40 days of continuous lockdown, the government has gradually begun to consider measures to encourage manufacturing-led investment in India, both for the domestic Indian market and for leveraging India’s location as a production hub for Africa and beyond. The government is reportedly developing a land pool nearly double the size of Luxembourg to lure businesses moving out of China. Approximately 115,131 hectares of existing industrial land has reportedly been identified in investor-friendly states of Gujarat, Maharashtra, Tamil Nadu, and Andhra Pradesh.
For India, land acquisition has been one of the biggest impediments for companies looking to invest. Stories of past good intentions have been littered with tales of thwarted ambitions of global giants such as Saudi Aramco to Posco, both of whom have found themselves frustrated by delays in land acquisition. Prime Minister Narendra Modi’s administration is working with state governments to change that as investors seek to reduce reliance on China as a manufacturing base in the aftermath of the coronavirus outbreak and the resultant supply disruptions. Providing land with power, water and road access is expected to attract new investments to an economy that was slowing even before the virus hit, and is now staring at a rare contraction as a nationwide lockdown continues to impact consumption.
According to a recent Bloomberg report, Japan plans to allocate an economic stimulus package of $2.2 billion to help firms shift production out of China, where supply chains have been disrupted as a result of the coronavirus outbreak. Of the $2.2 billion package, the government reportedly proposes to allot 220 billion yen ($2 billion) to firms for shifting production back to Japan, and the remaining 23.5 billion yen to companies seeking to move manufacturing functions to other countries.
In addition, official sources suggest that Japan is considering an investment of close to $200 billion in the proposed ‘Asia Africa Growth Corridor’ (AAGC). Japan has already invested around $32 billion in infrastructure projects in Africa. The concept of the AAGC emerged in November 2016 in the joint declaration issued by Indian Prime Minister Narendra Modi and Japanese Prime Minister Shinzo Abe. Japan has also been pushing for a larger presence in the African markets, demonstrated by the Tokyo International Conference on Africa Development (TICAD 7) held in 2019 in Yokohama, with the aim of improving trade relationship with African countries. The TICAD conferences seek to connect African and Japanese investors, rather than relying on Japanese aid as the principal approach to African nations.
There are other developments that also suggest a growing potential for partnership between India and Japan in Africa. At the India-Africa Forum Summit in 2015 Prime Minister Modi announced a $10 billion line of credit to mark a new milestone in the Indian government’s approach to engagement with the African continent. This line of credit was marked especially for financing key infrastructure projects in African countries and have since then contributed to capacity-building and education. India is the fifth-biggest investor in Africa, with investments over the past 20 years amounting to $54 billion, creating jobs and opportunities for communities and professionals across Africa. At the 2017 inaugural address of the annual meeting of African Development Bank (AfDB) at Gandhinagar, Prime Minister Modi stated that India is working with the US and Japan to support development in Africa. Talking about the vision document, the Prime Minister said that ‘the idea is that India and Japan, with other willing partners, would explore joint initiatives in skills, health, infrastructure, manufacturing and connectivity.’ Sources say the Modi government has made Africa a key priority for foreign and economic policy.
Keeping such common interests in mind, it is natural that Japan and India find means to leverage their ties as natural allies in this shift away from a dependency on China. Although the immediate winner in Asia in the battle to control appears to be Vietnam, a nation with a 9.5 crore population and a direct border with China which has managed to go 19 days without new coronavirus cases (and only 39 active cases out of the original 271), a shift to a new manufacturing base is a decision that is often take with a strategic computation of both business interests and policy-led incentives.
In such a scenario, “India and Japan for Africa” could well be a theme that is obvious and of mutual interest. India’s domestic consumption story as well as its strategic location as a gateway to the African market makes for a compelling case for a shift of manufacturing facilities. Some Japanese companies that created a manufacturing footprint in India in the recent past are already seeing an upswing in momentum. Daikin India, the domestic arm of the giant in the Japanese air conditioner market, expects to touch an annual sales turnover of 100 billion yen (approx. Rs 6,400 crore) over the next two years from growth in the domestic market and exports to eastern Africa and the Middle East. The company, which has two functional units in Neemrana, Rajasthan, is in the final stages to select for its third manufacturing facility, which would be in the southern India and cater solely to the exports market.
Stories such as Maruti Suzuki and Daikin are evidence of synergy between India’s manufacturing capabilities and Japanese commercial attitudes. In Africa, Indian private sector companies such as Reliance, Varun Beverages, Bharti Airtel, Essar Group, and the TATA Group have also made substantial investments and significant strides. Airtel Africa recently posted its eighth consecutive quarter of double-digit revenue growth and EBITDA margin expansion in 3Q20. The telecom giant now serves about 107.1 million customers across Africa. A partnership of Japanese technology and Indian management capability could well usher in an era of better products and services to assist Africa in achieving its true potential.
(Richa Jayal is a senior researcher on India-Japan affairs, and an entrepreneur in linguistics. She is a graduate of the Jawaharlal Nehru University and Osaka University).