1. Japan has acknowledged that it cannot prevent China from using its economic might to help the region’s middle-income countries meet their infrastructure needs. Yet by articulating new principles for investment, enlisting new partners, and bolstering its financial commitments, Japan has developed an alternative to the Belt and Road Initiative that could limit developing countries’ dependence on Chinese lending.
2. These efforts could even influence China’s own practices, as Japan has made its quality infrastructure program the basis for bilateral development cooperation with China.
3. Abe’s approach to meeting Asia’s “infrastructure gap” looks increasingly like the gold standard, making Japan an essential player in financing and building the infrastructure Asia needs to grow. Japan’s methods should serve as a model for U.S. policymakers for more constructive economic engagement in the region, which will be necessary if the United States is going to have staying power in the competition for influence with China.
PIONEERS IN FOREIGN INVESTMENT AND DEVELOPMENT ASSISTANCE
1. Decades before the recent vogue for economic statecraft, Japan pioneered the use of foreign investment and development assistance to advance its national interests.
2. Tokyo recognized that promoting industrialization in Asia’s less-developed countries — particularly by building energy and connectivity infrastructure — could create market opportunities for Japanese firms, strengthen political influence in strategically valuable countries, and facilitate resource-poor Japan’s access to energy and other natural resources needed to fuel high-speed growth.
3. At the end of 2016, Japan’s stock of foreign direct investment in major Asian economies (excluding China and Hong Kong) was nearly $260 billion, exceeding China’s $58.3 billion.
PURSUING 'QUALITY INFRASTRUCTURE' INVESTMENT
1. Japan’s financial position in Asia provided a solid foundation for an upgraded approach to infrastructure investment.
2. In March 2013, the Abe administration established an advisory council to develop a strategy for infrastructure exports and create new tools for supporting Japanese exporters.
3. “Quality” investment means considering a wide range of factors when making investment decisions, including environmental and social impact, debt sustainability, the safety and reliability of the construction, and the impact on local employment and technical expertise.
4. In 2015 and 2016, the Abe government issued a series of policy statements that amounted to a comprehensive new approach to Japan’s infrastructure investment and development across Asia.
5. First, in the February 2015 revision of Japan’s Development Cooperation charter, the administration called for “quality growth,” meaning growth that is inclusive, sustainable, and resilient.
6. Japan would focus on “physical and non-physical infrastructure including that which is needed for strengthening connectivity and the reduction of disparities both within the region and within individual countries” and help Southeast Asian countries escape the “middle-income trap,” something China is struggling to do itself.
7. Three months later, the government announced the Partnership for Quality Infrastructure, by which Japan would increase its investment in Asian infrastructure to ¥13.2 trillion (roughly $116 billion in current U.S. dollars) between 2016 and 2020, a 30 percent increase over the previous five-year period.
8. The partnership included reforms to streamline the process of making loans and provide additional guarantees against losses to encourage private companies to participate in infrastructure projects.
9. The Abe administration would further refine this program in 2016, when, as the chair of the G7, it unveiled the “High-Quality Infrastructure Export Expansion Initiative.” From 2017 onward, Tokyo would nearly double its annual support for infrastructure exports from ¥110 billion to ¥200 billion (roughly $1.8 billion in U.S. dollars), make it easier to secure loans denominated in yen and possibly also in euros, and increase Nippon Export and Investment Insurance’s coverage for overseas projects to 100 percent
JAPAN SETS NEW INFRASTRUCTURE INVESTMENT RULES
1. In addition to the rules for ensuring transparency and responsible financing, Japan hopes to adopt the principle of ensuring “openness” of facilities without imposing restrictions on usage and “economic efficiency” by making infrastructure durable enough for long-term use.
2. Prime Minister Shinzo Abe is shifting toward conditional cooperation with Chinese President Xi Jingping’s “Belt and Road” infrastructure initiative under which Beijing wants to expand infrastructure networks in Asia, the Middle East, Europe and Africa to achieve its goal of connecting nations along the ancient Silk Road trade routes.
3. China has been bolstering its economic clout with foreign investments, signing a memorandum of understanding with Italy to jointly advance the “Belt and Road” projects, the first time Beijing has struck a deal under the cross-border initiative with a Group of Seven industrial power.
(Source: https://warontherocks.com/2019/04/quality-infrastructure-japans-robust-challenge-to-chinas-belt-and-road/)
