Home Articles New Infrastructure Remodulation with Foreign Partnership: The Japan Interest

Infrastructure Remodulation with Foreign Partnership: The Japan Interest

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The infrastructure sector is a key driver for the Indian economy. The sector is highly responsible for propelling India’s overall development and enjoys intense focus from Government for initiating policies that would ensure the time-bound creation of world-class infrastructure in the country. Infrastructure sector includes power, bridges, dams, roads and urban infrastructure development. In 2016, India jumped 19 places in World Bank’s Logistics Performance Index (LPI) 2016, to rank 35th amongst 160 countries.

 

infrastructure sector

Foreign Investments in recent times

India is witnessing significant interest from international investors in the infrastructure space. Some key investments in the sector are listed below. The infrastructure sector in India witnessed 33 deals in FY 2016-17 involving US$ 3.49 billion as against US$ 2.98 billion raised across 31 deals in FY 2015-16, with the majority of deals led by the power, roads and renewable sectors, as per investment bank Equirus Capital. Meinhardt Group, an engineering company based in Singapore, plans to establish its position in India as it targets the next wave of India’s urban development to meet the country’s development needs. UAE-based firm, DP World, having previously invested US$ 1 billion in India is planning to invest another US$ 1 billion in India’s infrastructure sector along with logistics and container terminals, stated Mr Sultan Ahmed bin Sulayem, Chief Executive Officer (CEO), DP World,I Squared Capital, a global infrastructure investment company, plans to raise up to US$ 4 billion through its second infrastructure fund, which will be invested in infrastructure assets in India and across the globe, Abertis Infrastructures SA, a Spanish infrastructure firm, has agreed to buy two toll road assets in operation in South India from Macquarie Group for Rs 1,000 crore (US$ 151 million) to scale up its presence in India, GVK Power & Infrastructure Ltd won the bid to develop Mumbai’s second airport in Navi Mumbai for Rs 16,000 crore (US$ 2.39 billion), UAE-based Gamma Group, outlined plans of investing around Rs 3,000 crore (US$ 453 million) in the infrastructure, health and education sectors of Kerala, skyTran Inc., a NASA technology partner specialising in developing pod car systems for urban transport, plans to build a one-kilometre pilot track in India at its own cost as per the requirement of the government, which has shortlisted skyTran as one of the three companies chosen to build pod cars on trial basis, Infrastructure Leasing and Financial Services Ltd (IL&FS) and global private equity (PE) firm Lone Star plan to jointly invest US$ 550 million in stressed infrastructure projects in India, to name a few.

The Japan Angle: Bullet Train and Beyond

Out of 150 countries that JICA operates in, India is its biggest donee. “India has been the largest since 2008. JICA (Japan International Cooperation Agency), is today the largest bilateral donor agency in India. It has disbursed over Rs 1.5 lakh crore of soft loans to India since 2007-08.Out of 150 countries that JICA operates in, India is its biggest donee. India has been the largest since 2008. But we have become much closer since 2015.

 

The bullet train may be the most eye-catching but JICA’s spread is deep and wide. India-Japan will cooperate to connect Africa, Southeast Asia and India’s Northeast as part of the $40 billion Asia-Africa Growth Corridor (AAGC) programme, a counter to China’s Belt and Road Initiative. Deepening security and defence ties is high on the priority list. India will invest $17bn to build its first high-speed train system, having reached a deal with Japan to help finance the project. The network, which will run 508km between Mumbai and Ahmedabad, was announced by Prime Minister Narendra Modi.”This is the new India, and the flight of its dreams is endless,” he said. “The bullet train project will bring speed and employment. It is human-friendly and eco-friendly.”

Japan will fund more than 80 percent, nearly $1.4bn, of the project’s cost, providing a 0.1 percent interest loan due to be repaid over the next 50 years. Shinzo Abe, the Japanese prime minister, said the development – a joint venture between Indian Railways and Japan’s Shinkansen Technology – will prove beneficial for both nations. “A strong India is good for Japan, and a strong Japan is good for India … We are fully committed to supporting this initiative,” he said on Thursday. Abe said the deal marks increasing levels of cooperation between the two regional powers.

The line, which will use Japanese bullet trains and technology, is expected to be complete by 2023 and will cut travel time between the two cities from eight hours currently to around three. The new train will carry 750 passengers at an average speed of 250 kilometres per hour and a top speed of about 320 km/h, double the top speed of the fastest train in India. Modi has promised to invest billions of dollars to modernise India’s railway system, which carries more than 22 million passengers daily. The two sides also signed agreements covering science and technology, investment promotion, disaster management and civil aviation cooperation after the discussions.

Japanese trains and technology are now expected to open a new chapter in Indian railways, laying emphasis on safety, speed and service. As part of the deal, India is receiving cutting-edge Shinkansen locomotive technology, which is fabled for its reliability. A powerful symbol of Japanese industrial prowess and engineering might, the Shinkansen is renowned for its excellent performance. The train has so far not had a single accident or fatality since its launch and its average delay is less than a minute. Indians hope this record will be replicated in their country as well. The technology transfer and local manufacturing that Japan has agreed to is also expected to boost India’s domestic industry as part of Modi’s “Make in India” campaign to transform the nation into a manufacturing hub and generate millions of jobs for its youth.

India is reportedly considering another six potential high-speed rail corridors, including one connecting Mumbai and Delhi. But the former chairman of India’s railway board Vivek Sahai said that the financial investment required to build such fast rail meant it was unlikely to phase out traditional trains any time soon.

 

North East Investment:

Japan also pledged support for infrastructure projects in the Northeast. The two countries signed 15 agreements in a range of areas, including infrastructure, skill development, security and disaster management. A project to build a convention centre in Varanasi has been cleared.

Japan has a historic connection to the Northeast and is among the few countries that India has allowed a presence in the eight landlocked states which are the country’s gateway to the Association of Southeast Asian Nations members. India and Japan has also signed a document on Japanese loan and aid for highway development in the Northeast that can complement India’s connectivity initiatives in Bangladesh, Myanmar and beyond, besides BBIN (Bangladesh, Bhutan, India, Nepal) and BIMSTEC (Bay of Bengal Initiative for Multisectoral Technical and Economic Cooperation) Motor Vehicle Agreements.

 

Japan will extend a loan of Rs 2,239 crore to India for ‘North East Road Network Connectivity Improvement Project’ to improve the National Highway 40 (NH-40) and construct a bypass on NH-54 in the Northeast. The project is expected to contribute to the improvement of the intra-regional and international connectivity through regional economic development.

Japan is keen to expand infrastructure projects in Southeast Asia amid China’s OBOR initiative and, along with India, it is exploring opportunities to develop projects in ASEAN. This is part of Indo-Japan corridor conceived last year for the Indo-Pacific region that also extends to Eastern Africa under Asia Africa Growth Corridor, an initiative that would provide an alternative to OBOR, which is being implemented in a non-transparent fashion dictated by China’s interests.

Japan has cooperated with a variety of development projects in the Northeast, ranging from connectivity infrastructure such as roads and electricity, water supply and sewage, to forest resource management and biodiversity. Further, there is a great potential for people-to-people and cultural exchanges between Japan and the Northeast, given Japan’s historical connection with the region. Against this background, Japan and India last month launched the Coordination Forum in order to explore and expand cooperation in the north-eastern region.

 

Conclusion:

While the deal on US-2 amphibious aircraft has not yet stitched, discussions around unmanned ground vehicles, robotics, developing smart islands (think Andaman & Nicobar), among others, made headlines.

Away from the media glare, on the ground there was some serious business afoot, with both JICA and Jetro (Japan External Trade Organisation) playing a critical role. Some 450 Japanese honchos congregated at the Gandhinagar summit earlier this week, 250 of whom had flown down from Japan.

Beyond infrastructure development, Japan is looking to build a cultural link with the region which physically connects India to Southeast Asia. The Japanese Ambassador to India, Kenji Hiramatsu, took a delegation of 38 Japanese companies based in Delhi to Imphal, Manipur on May 20-21 to encourage investments in the region. The visit was organised particularly to mark the commemoration of the 73rd Anniversary of the Battle of Imphal, fought between Japanese Army and the Allied Forces in 1944. The Ambassador in his speech on the occasion pledged to invest and develop the region to help it overcome the devastating effects of the war.

Image and References

www.ibef.org
www.japantimes.co
www.aljazeera.com
www.dw.com
www.mytimesnow.com
www.thebetterindia.com
Indiatoday
Economic Times
Times of India

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