TOKYO -- With the growth of economies across the developing world, the demand for infrastructure development is set to increase. Japan and China have found themselves increasingly being pitted against each other in their attempts to win orders for such projects, including loan extension. With the China-led Asian Infrastructure Investment Bank entering the stage on Jan. 16, the battle is likely to get even fiercer.
"I like Japan but I could treat them badly in business because I know they wouldn't bite," said an official from Japan's ruling Liberal Democratic Party, mimicking a local met on a visit to Myanmar last fall. "But I'm afraid of China because they would do all kinds of mean things if I reject them," added the official with more than a hint of self-mockery.
After relaxing controls on arms exports in the spring of 2014, the government of Prime Minister Shinzo Abe is stepping up efforts to boost infrastructure exports. Japan has many small and midsized companies with highly sophisticated technologies that can be applied to aerospace and cutting-edge medical sciences.
One such firm, Tamagawa Seiki, founded in 1938 and based in Nagano Prefecture, mainly produces measuring instruments and angular position sensors. Its products are used in a variety of things from airplanes to trains and low-emission vehicles. The company, however, had been cautious in its export strategy for products that could be converted to weapons, partly due to the arms export controls.
"Unfortunately, only a handful of areas remain in which Japan still has an overwhelming technological lead," Tamagawa Seiki President Shigeo Seki said. "As a manufacturer, the government's support for exports is welcome," he added.
The prime minister is well aware of the growing number of infrastructure development opportunities. Global demand for infrastructure projects is estimated to be around $71 trillion between 2000 and 2030. In Asia, demand is likely to be $8 trillion between 2010 and 2020.
Tokyo is keen to export high-speed railways, power stations, urban transport systems, ports, space technology, and broadcasting and communications technology. In addition, social infrastructure such as medical, postal and financial settlement services are also likely to be high on the government's list of priorities, according to a source close to the prime minister's office.
In some cases, Abe has gone as far as to talk directly to government officials to court their support, and Hiroto Izumi, one of his special advisers, is tasked with travelling the globe in support of the Japan International Cooperation Agency and the Japan Bank for International Cooperation.
Last year, however, Japan lost out to China in the bidding for a large-scale high-speed railway project in Indonesia. "The prime minister was furious," one official said, especially given that Japan had been preparing its bid since around 2008, whereas China jumped in at the last minute to win the deal after only six months.
It is believed Japan lost out because its proposal did not meet President Joko Widodo's aims of incurring as little government debt as possible, according to a financial official well-versed in Indonesian affairs. "China, on the other hand, went to great lengths to win the deal and is even rumored to have obtained Japan's research data for routes and stations," the official commented.
Tokyo did, however, manage to secure a deal to export its Shinkansen bullet train technology to India. Abe contacted Indian Prime Minister Narendra Modi directly and approved exceptionally lucrative loan terms. In December, the two leaders also agreed on a bilateral accord that will allow Japan to export nuclear power stations and arms equipment to India.
Exporting infrastructure and arms equipment is not a mere business deal but entails vast responsibility. For Japan, it is now essential to take advantage of overseas demand in order to accelerate economic growth at home. Government intervention aimed at raising wages and talking companies into spending more may be unpopular in Japan, but infrastructure exports is one area where it would be more than welcome.