Abe focuses on 'quality' investment for Asia
TOKYO -- Japan believes Asia should have quality infrastructure without sacrificing quantity, Prime Minister Shinzo Abe said Thursday, seeming to present an alternative to a Chinese-led infrastructure bank his country has not committed to join.
The Japanese government and the Asian Development Bank will jointly provide $110 billion to finance infrastructure in the region over the next five years, Abe told this year's International Conference on the Future of Asia, organized by Nikkei Inc. and the Japan Center for Economic Research. That would mark a 30% increase over the past five years.
Range of lenders
More than $50 billion of this lending and investment would come from the Manila-based ADB, which counts Japan as a top shareholder. The Japan International Cooperation Agency would provide over $30 billion, including grants and low-interest loans. The Japan Bank for International Cooperation and the Japan Overseas Infrastructure Investment Corp. for Transport & Urban Development would put up about $20 billion.
This does not include private-sector investment. Public funding alone cannot satisfy Asia's "voracious" demand for infrastructure, Abe stressed. To attract private money, JBIC will be allowed to finance infrastructure without repayment guarantees, usually from governments in recipient countries. JBIC funding helps lower the risk for private investors. But the inability to secure such guarantees has been the downfall of many potential projects.
JICA, another official lender, is to increase lending and investment by one-fourth over the next five years. Together with the ADB, it will back public-private partnerships, a way to channel private-sector money and know-how into infrastructure.
Japanese official development assistance and other outlays of public money to emerging economies totaled $16 billion in 2012. Private-sector flows were double that. With central banks in rich nations and emerging economies alike throwing open the credit spigots, plenty of money is sloshing around in search of destinations.
The 'other' lender
The Asian Infrastructure Investment Bank, a Chinese proposal for funding the region's building blocks for modern economies, was clearly in the back of Abe's mind as he touted Japan's ADB-centered aid initiative. His emphasis on the "quality" of Japan's investments made an implicit comparison with China's approach, criticized by some as heavy-handed.
Even the scale of the funding he announced, at $110 billion, seemed meant to rival the AIIB, which has a proposed capital base of $100 billion.
The Asian Development Bank has raised its loan capacity by half, is weighing a capital increase and aims to lend more to the private sector, the prime minister said. Abe clearly wants the ADB, where Japan and the U.S. call the shots, to remain the region's leader in infrastructure financing.
Abe used the word "quality" seven times in his half-hour speech, emphasizing that Japanese infrastructure is built to last. He described how Japanese engineers built a hydropower plant in the Myanmar jungle 60 years ago. Today, it supplies nearly one-fifth of the nation's electricity.
And "rather than simply bringing Japan's technologies into a country, we foster the people there and make the technologies well-established," Abe said. "This is how Japan operates."
Cheap often means shoddy -- a lesson handed down through the ages as a Japanese proverb, Abe said. He used even blunter terms when asked about the AIIB in a television appearance last month, warning of the perils of borrowing from "loan sharks."
But some say Abe's intent in seeking a stronger ADB now is to promote good governance at the AIIB, not to bash it.