Japan is carefully considering how to cooperate with China’s massive international infrastructure plan for the benefit of Asian and global trade
China’s Belt and Road Initiative (BRI) may be the most ambitious foreign development plan in history. The project, estimated to contain anywhere between $1 trillion and $8 trillion in investment, according to the Center for Strategic and International Studies, aims to build infrastructure throughout Asia, Africa and Europe to recreate historical trading routes to and from China.
Japan, Asia’s democratic powerhouse, has its concerns about China’s initiative, but it is also seeing new opportunities for finding synergies with the BRI. In May of last year, Japanese Prime Minister Shinzo Abe voiced support for the Chinese project for the first time, and has said that it “holds the potential to connect East and West as well as the diverse regions found in between.”
Seeing opportunities for Japanese companies to work in these overseas infrastructure development projects, as well as the potential to boost regional connectivity and integration, Japan has agreed to participate. But the cooperation comes with some caveats, namely, that the infrastructure should be open for all, that procurement be fair, that the projects be economically viable and that they contribute to peace and prosperity, according to a speech given by Prime Minister Abe at the 2017 Future of Asia conference.
Much of the criticism surrounding China’s BRI is the fact that large loans are granted to countries which may not be able to pay them back, creating what some would call a debt trap. For example, despite feasibility studies suggesting that an ambitious port project in Sri Lanka wouldn’t be sustainable, Chinese institutions and businesses helped the country carry out the plans. But the debt ballooned and the Sri Lankan government, under new leadership, was unable to make payments and ultimately gave China control of the port on a 99-year lease.
“The One Belt One Road concept is not very clear, so it is important to pay attention to each individual project and neither overestimate nor underestimate the global approach,” said Shinichi Kitaoka, president of the Japan International Cooperation Agency (JICA). “Projects have to be economically, environmentally and socially sound. If they are, we can cooperate, but if not then we will work separately.”
Separately, Japan is forging ahead with its own plans to develop high-quality infrastructure around the world and has named boosting infrastructure exports as a top priority. In June, the Japanese government announced plans to establish a $50 billion fund to boost infrastructure investment in the Indo-Pacific region. This capital, said PM Abe, will be available over the next 3 years and serve to build “high-quality infrastructure,” which he defined as investments that increase employment, expand educational opportunities and facilitate FDI.
In 2015, Japan also announced its “Partnership for Quality Infrastructure” plan, which was later expanded, and makes the provision for the financing of approximately $200 billion for infrastructure projects around the world. Already known for its high quality infrastructure, Japan is currently involved in the creation of India’s first high-speed rail corridor, expanding a port in Mombasa, Kenya and working to bring environmentally-friendly electricity to rural areas of Tanzania.
“The initial costs of projects led by countries such as China or Korea are lower than Japanese projects, but sometimes project maintenance costs can even exceed the initial investment, giving Japan the advantage in terms of total life-cycle costs,” said Takuma Hatano, President and CEO of the Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN), an organization that promotes overseas infrastructure investment. “At the same time, we should focus on markets where our advantages will be appreciated so we aren’t always competing with China.”
So, while Japan is going ahead with its own overseas infrastructure projects that have the mutual benefit of improving connectivity in the host nation and forging new markets for Japanese expertise in infrastructure, it is also complementing and offering alternatives to China’s Belt and Road projects.
“Japanese companies and institutions are looking at individual projects of the One Belt, One Road Initiative to consider possible participation and cooperation opportunities,”explained Hiroyuki Ishige, the chairman and CEO of the Japan External Trade Organization (JETRO). “In this light, regarding business cooperation between China and Japan in third countries, it is also important to bolster free and open, win-win relationships based on rules.”