Japan Pledge Ups China Ante

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Japan Pledge Ups China Ante

Japan has pledged billions in assistance to five Southeast Asian nations. How will China respond?

In a move likely to raise eyebrows in Beijing, Japan has pledged billions of dollars in foreign aid to five Southeast Asian countries where it is increasingly vying against China for influence among governments hoping to secure long term funding.

Under the deal, announced by Japanese Prime Minister Yoshihiko Noda at the Japan-Mekong Summit over the weekend, Cambodia, Laos, Burma, Thailand and Vietnam will receive $7.4 billion over three years from April 2013.

Noda justified the package saying stability in East Asia couldn’t be attained unless there is stability in the Mekong region, adding: “Japan will continue to vigorously promote cooperation with the Mekong region as a key area for assistance,” he said.

He outlined 57 flagship projects ranging from ports to power plants and highways to high-speed rail worth a total of $28 billion that would benefit from the package, along with offering Japanese expertise.

A further $3.7 billion worth of debt, or 60 percent of total loans and charges, owed to Japan by Burma will be written-off, taking the total value of the weekend package to more than $11 billion.

“In order to support Myanmar’s (Burma’s) efforts for reforms in various areas towards its democratization, national reconciliation and sustainable development, Japan will extend economic cooperation – while continuously observing the progress of these efforts,” Noda said.

Japan is widely regarded as a bellwether for Burma, which has undertaken extraordinary political and economic reforms in a bid to normalize the country after decades of brutal military rule.

The deal was announced as Thein Sein became the first Burmese leader to visit Japan in 28 years.

Japanese companies are also figuring prominently in places like Dawei, in Burma’s south, where a massive $8.6 billion port and industrial complex is being built. There are plans to have the country’s first stock exchange up and running by 2015.

But arguably more important are Japan’s relations with China.

Tensions between China and Japan, both regional powers, have fed a climate of mutual suspicion and animosity of each other since World War II, and Tokyo’s generous financial packages come amid a race between the pair for regional influence.

China’s reach is ever growing and complicated by intensifying disputes with its other neighbors, in particular over control of the resource rich Spratly islands, which are also being contested by Brunei, Malaysia, Cambodia, the Philippines and Taiwan.

Beijing is currently embroiled in a three week stand-off with the Philippines on Scarborough Shoal and has tried to thwart an attempt by the Association of South East Asian Nations (ASEAN) to forge a united front when dealing with China over territorial issues like the Spratlys.

China has delivered its own financial packages to select countries, including Cambodia, leading to accusations that Beijing has been attempting to buy regional influence and split the 10 members of ASEAN over issues it holds dear.

It’s a charge that China for its part vehemently denies.

But given the size of Tokyo’s latest offering and their tit-for-tat game playing, Beijing will likely again feel compelled to reach deep into its pockets to produce a response that should please countries located in and around the strategically important Mekong River even more.