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Japan's trade insurance to cover full African investment

Government pushes infrastructure exports as China races ahead

China has been aggressively investing in African infrastructure projects, including Kenya's Northern Corridor railway project.   © Reuters

TOKYO -- The Japanese government will create trade insurance that will fully cover infrastructure-related exports and loans to Africa, hoping to encourage companies here to make further inroads into a region considered the last frontier of the global economy.

Coverage will be provided through a partnership between the government-owned Nippon Export and Investment Insurance, or NEXI; the Kenya-based African Trade Insurance Agency; and the Saudi Arabia-based Islamic Development Bank. Hiroshige Seko, minister of economy, trade and industry, will make an official announcement as early as May 9.

No existing framework provides 100% coverage, making companies reluctant to make big investments in Africa, particularly in regions facing political instability. But the government does not want to see Japanese businesses miss out on opportunities, given the rapid growth expected there in the coming years, especially as Chinese corporations increase their African presence.

Say an African government imports a container crane from Japan using a loan from a Japanese bank. NEXI will insure 85% of the funding, with the other two agencies covering the rest. Policyholders currently can get only the 85% coverage from NEXI. Construction projects will be 90%-insured by NEXI and 10%-insured by the other two partners.

The three agencies are preparing to sign a memorandum of understanding on the new insurance at the Tokyo International Conference on African Development slated for August, with a goal of launching the framework by year-end.

China has been aggressively investing in Africa as part of its Belt and Road infrastructure initiative. President Xi Jinping pledged $60 billion in aid and loans to the continent last September.

To catch up, Japan will deepen cooperation with the African Trade Insurance Agency, which is funded by the African Development Bank as well as various countries on the continent. The Islamic Development Bank counts Saudi Arabia, Iran and the United Arab Emirates among its investors and is well-versed in African affairs.

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