The Japanese and Indian policy approaches on industrialisation have always been and continues to be distinctly different. Even in formulating the legislation for patents and patenting practices! (As explained in the first part of the article published in eFE, May 17, 2004)

What are these fundamental differences?

In implementing its Industrial Policy, Japan’s MITI adopted the following steps:

* Catching up with the latest technologies in various industries, protection against foreign and political domination, adjustment to changing comparative advantage and provision for social overhead investments which could be made possible through an inventory of policy instruments such as tax incentives, subsidies for industrial R&D including commitment of government funds for basic and ’non-commercial’ R&D, restrictions on foreign imports and so on. Handling market failures through the visible hands of the government in conjunction with the invisible hand of the market.

* Treating anti-trust laws not as an end in itself, but as a means of guarding against abuses that might damage Japan’s collective well-being, e.g. the FTC’s approval of the merger of the Yawata and Fuji steel companies into Nippon Steel.

* Never encouraged a litigious society and courts never became the main mechanism for conflict resolution.

To quote Prof Okimoto again, “Areas in which MITI has actively intervened include (1) consensus building and the articulation of a long term ’vision’ for those industries under its jurisdiction, (2) the setting of sectoral priorities, (3) the allocation of subsidies and facilitation of financial flows to priority sectors, (4) adjustments of industrial structure, (5) infant industry protection, (6) investment guidance in certain industries and under certain conditions, (7) regulation of excessive competition, (8) down side risk reduction and cost diffusion, and (9) export promotion and mediation of trade conflicts.”

MITI has extensively used the typically Japanese ’extra-market’ institutions — the keiretsu structures — as its multiple points of entry for government interventions for the above purpose, something which none in the West is even aware of!

In essence, the post-war industrial policies of Japan (1955-1973) for industrial catch-up were oriented towards the over-all directions and goals for (a) long term vision for Japan’s industrial economy (b) special development laws for priority industries and (c) annual dilineation of goals for each industry, based on consensus between MITI and industry. Crucial elements of the above policies were the following:

* Industry promotion measures through tax incentives for R&D, accelerated depreciation allowances and non-taxable reserve funds for retirement compensation and special contingencies,

* Special financing measures such as development loans, long-term credits, etc,

* Technological development through identification of national priorities for technological development, encouragement and assistance in advancing manufacturing and process technology, control over licensing technology, R&D subsidies, government-sponsored research projects, basic research support from government laboratories, flexibility for ad hoc responses to developing situations, etc

* Anti-trust measures fine-tuned to selective exceptions and flexible enforcements,

* Close working between MITI-industry-associations,

* International interface protection through tariffs and quotas, non-tariff barriers and control over FDI, special tax deductions for exports, overseas market co-ordination, export-import financing and trade-friction mediation, and so on.

Thanks to such policies, the Japanese companies were able to efficiently assimilate the imported process technologies and by virtue of her matching patent law provisions they could also upgrade the technologies through adaptation and incremental improvements. If this was true of basic sectors such as steel, similar developments took place in the pioneering semiconductor field as well.

To quote again Prof Okimoto, “Bell Labs (the original inventor and patent assignee of the transistor) had to make its patents freely available at reasonable fees as part of the 1956 antitrust consent decree. The effect of this transfusion of technology on the growth of the US telecommunications, semiconductor and computer industries can scarcely be overstated. But Bell Labs’ compulsory licensing not only invigorated the US information industries but also facilitated the growth of Japan’s fledgling information industry, because Bell’s patents were also available for international transfer, and Japan took full advantage of the available know-how.”

For further details, the original reference may be consulted.

In India, on the other hand, industrial policies have never been formulated for the public or private sectors on a ’total mission mode’, with technology import as an end in itself at every stage. A Technology Policy itself had to wait till mid-eighties, with much of it still standing aloof from what the official industrial policy planners do through their ministries! No wonder that even after five decades of development, India Inc. can hardly boast of any meaningful ’core competence’ in any field , be it in steel, petrochemicals, electronics, biotechnology or special materials and products. No surprise that in the midst of her massive ’patent illiteracy’, the Indian industries do not seem to experience much trauma and pain in quietly going in for also the TRIPS dictated New IPR Regime.