Its geostrategic location and Japan’s need for new investment avenues have combined to help infrastructure development in India’s long neglected North Eastern states.
On January 28, India and Japan held the fifth joint meeting of the Act East Forum to review the progress of various projects in the North Eastern region of India. It was co-chaired by India’s foreign secretary Harsh Vardhan Shringla and Ambassador of Japan to India Suzuki Satoshi.
Established in 2017 when former Japan prime minister Shinzo Abe was on a state visit to India, the Forum is a platform for collaboration between the two countries under the rubric of India’s “Act East Policy” and Japan’s “Free and Open Indo-Pacific Strategy”. At that time, a memorandum of understanding was signed by the two countries where Japan extended a Rs 2,239 crore ($344mn) loan for the North East Road Network Connectivity Improvement Project to improve the National Highway (NH) 40 and construct a bypass on NH54 in the region.
The forum was created to identify specific projects for economic modernization of India’s North-East region including those pertaining to connectivity, developmental infrastructure, industrial linkages as well as people-to-people contacts through tourism, culture and sports-related activities.
So far, Japan has committed to invest Rs 13,000 crore in various infrastructure projects in the region. These include Guwahati Water Supply Project and Guwahati Sewage Project in Assam, Northeast Road Network Connectivity Improvement Project spread over Assam and Meghalaya, Northeast Network Connectivity Improvement Project in Meghalaya, Bio-diversity Conservation and Forest Management Project in Sikkim, Sustainable Forest Management Project in Tripura, Technical Cooperation Project for Sustainable Agriculture & Irrigation in Mizoram and Forest Management Project in Nagaland.
The forum is a result of the growing intimacy between the two countries and the strategic importance of the North Eastern states of India. The region shares borders with Nepal, Bhutan and China to the north, Myanmar to the East and Bangladesh to the south and west, which makes it important for Japan’s Free and open Indo-Pacific vision. It aligns brilliantly with Japan’s already strong ties with countries in the neighbourhood like Myanmar and Thailand, and its need for new investment destinations. The threat of Chinese expansionism is an added incentive.
The Japanese government and private sector has anyway been a big investor in India. Companies like Suzuki, Honda, Yamaha, Toyota, Sony and Panasonic are household names in the country and were among the first to enter after India began opening its economy in the 1980s and 90s. At the same time India has been one of the biggest beneficiaries of Japanese development aid for several decades and billions of yen have translated into projects of critical importance including the Delhi Metro and the upcoming $ 90 billion New Delhi Mumbai Industrial Corridor. Japan is also one of the largest FDI investors in India accounting for over Rs 193,000 crore or 7.2 percent of overall FDI inflows into India.
What has also helped is the camaraderie between the top leaders of both countries. Under Abe’s stewardship, which ended in September last year when he quit on health grounds, bilateral trade between the two countries increased from 740 billion yen ($7.023 billion) in 2005 to 1,821 billion yen ($172.8 billion) in 2018 – a rise of 146 percent. From bullet trains to civil nuclear programme, funding for critical infrastructure to setting up industrial corridors, Japan has been a big investor in India’s growth story. In the Abe era, Japanese investment in India increased a whopping 1165 percent from 29.8 billion yen ($2.8 billion) in 2005 to 377 billion yen ($35.8 billion) during the same period.
At a micro level, investment from Japan is likely to transform the region in a big way.
The North-eastern states account for nearly 8 per cent of India’s land mass and a little less than 4 per cent of the country’s population but contribute just 2.5 per cent of the nation’s GDP. This imbalance has resulted in the region not getting the benefit of being part of the world’s fastest-growing economy and has remained in the fringes.
Foreign investment has also been negligible. Between January 2000 and September 2019, India attracted cumulative FDI equity inflow of $ 446,917 million but investments in the entire Northeast was only $ 122.28 million, — less than 0.03 per cent of the total tally.
The potential for investment in the region is manifold. Endowed with rich mineral resources, it has hydropower potential estimated at nearly 50,000 MegaWatt, natural gas reserves of 190 billion cubic metres, coal reserves of over 900 million tonnes and oil reserves of over 500 million tonnes. Further it also has huge reserves of limestone, a key raw material in the production of cement, of around 5000 million tonnes.
Already, Japan is by far the biggest foreign investor in the region but this is just a start.