Japan’s BRI Nod to Boost Asia’s Infrastructure Buildup
Photo Credit: Thailand Business News
By Amrita Jash

Japan’s BRI Nod to Boost Asia’s Infrastructure Buildup

Jul. 31, 2017  |     |  0 comments

After longstanding reservations, Japanese Prime Minister Shinzo Abe finally gave his nod to China’s grand Belt and Road Initiative (BRI) which aims at connecting Asia, Europe, and Africa via the Silk Road Economic Belt and the 21st Century Maritime Silk Road. On June 5, 2017, in his speech at the 23rd International Conference on The Future of Asia, Abe declared that the BRI holds “the potential to connect East and West as well as the diverse regions found in between.”

However, Abe’s declaration that “Japan is ready to extend cooperation” came with a three-stringed precursor, which stressed: “harmony with a free and fair trans-Pacific economic zone,” that the infrastructure built will “be open to use by all” and “developed through procurement that is transparent and fair,” and that the projects will “be economically viable and financed by debt that can be repaid, and not harm the soundness of the debtor nations’ finances.” Despite these attached clauses, Japan’s forward bend towards China’s BRI has given a new thrust to China and Japan’s frosty relationship. And most importantly, it will provide an impetus to Asia’s much needed infrastructure build-up given the two strong actors at play.

Though tentative, what makes Japan’s cooperation with China’s BRI crucial is the fact that Asia has a large infrastructure need which is essential for the economic growth of Asian countries and which is significant for their global competitiveness. As the 2017 Asian Development Bank (ADB) report calculates, infrastructure needs in developing Asia and the Pacific will exceed USD 22.6 trillion through 2030, or USD 1.5 trillion per year, if the region is to maintain growth momentum. In view of this, the challenges facing Asia are: the new global and regional economic environment in the backdrop of global financial crisis; the growing concern over climate change, and the need for infrastructure to be “climate-proofed” and to be shifted towards “green” sources; and most importantly, the rise of new initiatives and actors in Asia’s infrastructure development landscape. Under these systemic dynamics, a collaboration between China and Japan will be a boon in bridging Asia’s expanding infrastructure gap.

Since the pronouncement of Xi Jinping’s BRI policy in 2013 fit with the establishment of the Asian Infrastructure and Investment Bank (AIIB) for the purpose of responding to development needs in Asia, Japan too has become proactive in refurbishing its role in infrastructure build-up and investments. As a result, both China and Japan became engulfed in a new kind of rivalry over infrastructure.

The BRI can serve as a testing field for China and Japan to achieve their mutual interests via cooperation and common development.

To counter the BRI, Abe in 2015 launched the Partnership for Quality Infrastructure (PQI) initiative, with the aim of spreading “high-quality and innovative infrastructure throughout Asia, taking a long term view.” Abe further upped the ante against the China-led AIIB by increasing Japan’s pledged investment in global infrastructure from USD 110 billion in 2015 to that of USD 200 billion in 2016 — higher than the founding capital of AIIB. In addition, marking an all-time high, in 2016 the Japan-led Asian Development Bank increased its lending by 17 percent — an increase from USD 26.9 billion to that USD 31.5 billion.

Given their competitive edge, significant parallels can be drawn between China’s BRI and Japan’s PQI. This can be understood in terms of the projects undertaken which may seem to compete with each other. First, in upgrading sub-regional cooperation in the Greater Mekong Sub-region (GMS), China under the BRI launched the Lancang-Mekong Cooperation (LMC) Framework, while Japan, on the other hand has launched the New Tokyo Strategy 2015 for Mekong-Japan Cooperation (MJC2015). Second, both China and Japan are battling for rail projects in Asia. After fierce bidding against Japan, China secured the deal build to build Indonesia’s first high-speed train: the Jakarta-Bandung high-speed rail line. For its part, Japan signed a memorandum with Thailand on joint investment in a 635 km high-speed rail link between Bangkok and the northern Thai city of Chiang Mai, and a 574 km railway from Ban Phu nam Ron at the border in Kanchanaburi to Chachoengsao and Aranyaprathet district of Sa Kaeo.

Another important high-speed railway bid that brought China and Japan face-to-face was the Mumbai-Ahmedabad high-speed rail link in India, wherein Japan clinched a USD 15 billion deal against China. For its part, China Railway Group Limited signed a USD 3.14 billion agreement with Bangladesh Railway for the Padma Bridge rail link project. The most noted upcoming competition will be witnessed in the high-speed railway project between Singapore and Kuala Lumpur where China and Japan are seen as among the leading contenders for the railway contract. Another upcoming battle between China and Japan will be for the contract to construct the 1,500 km high-speed rail line between Thailand and Malaysia.

Competition between China and Japan can also be felt in other areas. For example, in Bangladesh, Japan has proposed to finance and build a deep sea port on Matarbari island, in response to the Chinese plan to build another on nearby Sonadia island. Similarly, in Sri Lanka, Japan is pursuing a plan to build a port and industrial zone at Trincomalee, in response to China’s USD 1.4 billion project in Hambantota.

In the backdrop of this competition over infrastructure in Asia, Japan’s nod to the BRI acts as a game changer. The BRI can serve as a testing field for China and Japan to achieve their mutual interests via cooperation and common development. What can be expected with a China-Japan nexus is that the infrastructure build-up in Asia will get a significant boost. With the growing infrastructure needs and expanding investment gaps, collaboration between the China-led BRI and Japan is the need of the hour.

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