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Japanese Prime Minister Shinzo Abe

Japanese PM Shinzo Abe hopes US$110 billion for regional infrastructure curbs Chinese influence

Japanese prime minister emphasises regional cooperation by committing US$110 billion to serve Asia's 'voracious infrastructure demand'

AP

Vying to keep pace with China's rising influence and economic clout, Japan plans to provide US$110 billion to help develop roads, ports and other infrastructure in Asia in the next five years, Prime Minister Shinzo Abe said yesterday.

Abe announced the commitment, which exceeds the US$100 billion China has set aside for its newly created Asian Infrastructure Investment Bank (AIIB), at a conference in Tokyo. It represents about a 30 per cent increase over current funding levels.

"Asia has a voracious infrastructure demand, reaching as much as 100 trillion yen [HK$6.4 trillion] annually," Abe said.

"We should seek 'quality as well as quantity'. Pursuing both is perfectly suited to Asia."

"By attracting diverse funds, we hope to bring changes to Asia," Abe said. "In the long run, we'd like to spread quality infrastructure and innovative infrastructure in Asia."

In addition to the US$110 billion in financing in collaboration with the Asian Development Bank (ADB), Japan will provide 4 trillion yen (HK$256 billion) in support for public-private lending over the next five years.

Japan sided with the US in not joining the 57 countries that have signed on to the Beijing-initiated AIIB. It says it wants to see if the new institution will meet the rigorous standards for operation and disclosure required of other lenders, such as the Asian Development Bank and World Bank.

Officials earlier announced plans to step up support for regional infrastructure investment, but had not specified how much Japan would spend.

Japan is eager to counter rising Chinese influence in the region. Analysts say their rival efforts will likely complement rather than compete with each other given the region's huge need for vital infrastructure.

About half of the funds to be spent will be channelled through Japan's aid agencies and the remainder will be extended in collaboration with the ADB.

Despite friction between the two countries over various issues, Abe has said he sees eye-to-eye with China on the need for infrastructure funding.

Both Japan and China are rapidly expanding manufacturing capacity and trade in the region, especially in Southeast Asia, and can benefit themselves from improved ports, railways, roads, energy systems and other key facilities.

The scale of financing is still nowhere close to the US$8 trillion the ADB says is needed by 2020 to help build up the essential infrastructure.

"This is good news but it's a drop in the bucket," said Alison Evans, a senior analyst with IHS Economics & Country Risk in London.

The greatest benefit, she said, would go to smaller countries with the biggest needs, such as Myanmar and Laos.

"Definitely, as far as the recipient countries are concerned, the more funding the better," she said. "There's more than enough opportunities to go around."

Although China and Japan are rivals as the world's second- and third-biggest economies, they also have different advantages that can meet varied needs. With Chinese lenders, project planners need to "jump through fewer hoops," Evans said.

Abe did stress Japan's focus on quality, mentioning plans to provide advanced technologies, such as coal power plant knowhow, high-speed rail systems and electric vehicles.

"We will help Asian countries to realise their energy strategies and contribute to technological development around Asia. We will spare no effort in our cooperation," he said.

But Abe said Japan recognises that at times in the past risk-averse lenders have set requirements for risk guarantees too high.

In a shift, he said the policy-lending Japan Bank for International Cooperation will launch a new mechanism to fund higher-risk projects.

This article appeared in the South China Morning Post print edition as: Abe hopes investment keeps China contained
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