“Anything you can do, I can do better.”
The famous line from the Broadway musical, Annie Get Your Gun, might also describe Japan’s response to the Asian Infrastructure Investment Bank (AIIB), after announcing plans to up the ante on the China-led bank’s planned capital of $100 billion.
On Thursday, Japanese Prime Minister Shinzo Abe told an international conference that his government and the Asian Development Bank (ADB) would jointly provide $110 billion for the financing of “innovative” infrastructure in Asia over the next five years, a 30 percent increase on previous funding and exceeding the AIIB’s $100 billion.
“In order to make innovations extend to every corner of Asia, we no longer want a ‘cheap, but shoddy’ approach,” Abe was quoted as saying by the Nikkei, describing plans for investments in high-speed rail, advanced water treatment, and energy-saving technology to address such issues as Asia’s greying demographics and increasing energy demand.
According to the Japanese government, the “Partnership for Quality Infrastructure” plan will pursue “quality as well as quantity,” based on four key pillars. The first pillar comprises a 25 percent increase in Japanese official development assistance (ODA) loans, including the promotion of public-private partnerships (PPPs), with the second pillar entailing greater support for ADB initiatives, such as a 50 percent expansion in its lending capacity, as well as increased cooperation through the Japan International Cooperation Agency (JICA).
Currently, Asia-focused yen loans provided by JICA total 600 billion Japanese yen ($5 billion) a year, with around 70 percent related to infrastructure.
The third pillar calls for enabling the Japan Bank of International Cooperation (JBIC) to “actively provide funding for PPP infrastructure projects “with relatively high risk profiles,” as well as utilizing the newly established Japan Overseas Infrastructure Investment Corporation for Transport & Urban Development (JOIN). Finally, the fourth pillar aims to promote quality investments, through site visits, seminars, and international forums.
The policy statement gave examples of “quality infrastructure investment” such as India’s Delhi Metro, Mongolia’s Ulan Bator Railway Fly-over, and Vietnam’s Nhat Tan bridge.
“From South East and South West Asia to Central Asia, the Asian region needs an immense amount of infrastructure development and financial resources for it to unleash its potential and to continue to be a growth center that leads the world economy of the 21st century,” the policy said.
“In meeting this challenge, it is important to ensure the quality of infrastructure in order for a government to achieve sustainable development and to bring well-being and benefits to its people.”
In announcing the new plan, Abe made a subtle swipe at the AIIB, which has faced criticism over its governance standards and transparency.
“Excessive economic activity by the government sector must not elbow its way past the diverse ideas of the private sector. We must not create a ‘bad money drives out good money’ type of market where counterfeit and pirated products displace advanced technologies,” he said.
“Creating quality. That is the Japanese way of operating.”
Japan ‘Asia’s Standout’
Tokyo’s plan to ramp up Asian infrastructure lending follows the AIIB’s success in wooing a number of U.S. allies to join its official list of 57 founding members, including Australia, Britain and South Korea, despite reported opposition from Washington.
As noted by The Diplomat’s Shannon Tiezzi, the AIIB includes 16 of the world’s largest economies, excluding only the United States, Japan, Mexico and Canada, with Japan Asia’s only major economy not to seek membership (even Taiwan and North Korea applied, but both were rejected for different reasons). Following negotiations over its charter, the official signing is scheduled for the end of June.
According to India’s Economic Times, China will be the largest shareholder of the AIIB with a 30.85 percent stake, followed by India and Russia, “based on the AIIB members’ GDP weight in the world economy.” China will hold the post of president, although according to a German official quoted, the AIIB is expected to operate “in accordance with international procedures.”
“For us, it is important that the standards do not differ too much from those adopted by the IMF [International Monetary Fund], World Bank and the Asian Development Bank. Our feeling is that Beijing does respect that it has to adhere to international standards and procedures,” German Ambassador to China, Michael Clauss said.
Founding members of the AIIB are expected to initially pay up to a fifth of its $50 billion of authorized capital, “which will be raised to $100 billion.”
According to Reuters, Japan’s Asian investment plan “had long been in the works” as part of a Group of 20 measure, but it was now deemed worthy of greater promotion.
“We had thought it was better not to speak up much, but that doesn’t get through,” Koichi Hagiuda, a special aide to Abe’s Liberal Democratic Party (LDP), told the newswire.
“So some demonstration seems to be needed.”
While Japanese and Chinese officials are planning to meet in Beijing on June 6, “Tokyo looks unlikely to make a decision on joining any time soon,” Reuters said.
Should Japan join the AIIB, it could become the second-largest donor based on its economic size, with LDP lawmakers expected to issue recommendations on the issue soon.
“If it [AIIB] becomes a proper financial institution for the sake of Asia, there is no reason to be embarrassed about joining later,” Hagiuda said.
Amid speculation that the AIIB may struggle to commence lending by its target date of early 2016, Japan’s move has given it some valuable breathing space in the region’s propaganda battle over economic supremacy.