In World Economy News 22/05/2015
Prime Minister Shinzo Abe unveiled a plan to expand Japan’s financing for infrastructure projects in Asia by 30%, suggesting Tokyo’s intent to counter China’s push to spearhead a new regional investment bank.
Mr. Abe pledged to offer roughly $110 billion over the next five years to fund “high-quality infrastructure investments” in Asia through various channels, including expanding the Asian Development Bank’s lending capacity and yen loans from the Japanese government.
In an apparent effort to differentiate its efforts from China’s aggressive fundraising through the new bank, Mr. Abe played up the quality of projects that Japan can offer, with its long expertise in energy-saving technology and reliable public transportation systems.
“We need to spread innovation to every corner of Asia. There is no room for cheap and subpar,” Mr. Abe said at a Tokyo conference hosted by Nikkei Inc. and attended by several Asian leaders. “Japan is determined to play a major role in providing funds so the preference for innovative projects takes roots in Asia.”
Mr. Abe’s new blueprint comes as China gears up to launch the Asian Infrastructure Investment Bank, to be set up with about $100 billion in capital later this year. The U.S. and Japan have so far stayed away from the bank, indicating concerns about the new bank’s governance and that it will undermine existing international lenders where they play leading roles. Japan is the largest shareholder in the Manila-based ADB, whose president has traditionally been Japanese.
For Beijing, which has criticized multilateral organizations like the World Bank and the International Monetary Fund as being too dominated by the U.S. and Europe, the bank is part of a push to raise China’s profile in world affairs.
In a sign that multilateral lenders are also pushing back against China’s financing ambitions, the World Bank on Wednesday offered Indonesia as much as $11 billion in new loans during the next three to four years for basic infrastructure.
Mr. Abe endorsed a plan recently unveiled by the ADB to expand its lending capacity by 50% by combining internal financial resources. He also supported a possible increase in the bank’s capital from the current $153 billion. Mr. Abe didn’t mention the new Beijing-led bank in his speech.
So far, 57 countries including the U.K. and Germany have expressed intentions to join the Beijing-led AIIB as founding members.
Representatives from the 57 prospective members are currently meeting in Singapore to discuss the draft articles of agreement and operational policies for the bank, according to a Singapore government statement on Tuesday. Shi Yaobin, vice minister of China’s Ministry of Finance, and Yee Ping Yi, deputy secretary of Singapore’s Ministry of Finance, are co-chairing the Singapore meeting, the statement said.
Tokyo’s new initiative emphasizes financing projects such as subway and bridge construction that may be expensive but will be durable, environmentally friendly and disaster-proof, Mr. Abe said.
Still, the amount of the funds the prime minister pledged is far from sufficient to meet the huge demand for infrastructure funding in the region, which the ADB estimates to be about $8 trillion for the coming decade.
Tokyo’s new plan also includes providing “risk money” from the government-run Japan Bank For International Cooperation, which allows nations to launch infrastructure projects without pledging government guarantee for funds.
“There is a limit to the concept of covering such huge demand with public funds alone,” Mr. Abe said. “We must come up with a system to channel larger amounts of varied private-sector funds to flow into Asia.”
