Japan yesterday unveiled a plan to provide US$110 billion in aid for Asian infrastructure projects, as China prepares to launch a new institutional lender that is seen as encroaching on the regional financial clout of Tokyo and its ally Washington.
The amount of Japanese funds, to be invested over five years, tops the expected US$100 billion capitalization of the Asian Infrastructure Investment Bank (AIIB), the Beijing-sponsored lender scheduled to begin operations next year.
Japanese officials said the plan, announced by Japanese Prime Minister Shinzo Abe at a symposium of Asian officials and experts, represents a 30 percent increase over Tokyo’s past infrastructure funding.
Japan said it wants to focus on “high quality” aid, for example, by helping recipients tap its expertise in reducing pollution while building roads and railways.
That is an implicit contrast with the AIIB, whose projects Washington has said might not adequately safeguard the environment.
“We intend to actively make use of such funds in order to spread high-quality and innovative infrastructure throughout Asia, taking a long-term view,” Abe said in a speech announcing the plan.
About half the funds are to be extended by state-affiliated agencies in charge of aid and loans and the rest in collaboration with the Asian Development Bank.
Japan hopes the aid will help draw private funds to help meet the vast demand for infrastructure in Asia.
Finance officials said Japan’s aid plan had long been in the works as part of a G20 pledge to meet global needs.
However, worried that Japan might look less proactive than Beijing, Tokyo also wants to showcase its support for the region.
“We had thought it was better not to speak up much, but that doesn’t get through,” said Koichi Hagiuda, a special aide to Abe in his Liberal Democratic Party (LDP). “So some demonstration seems to be needed.”
Japanese and Chinese finance officials are to meet in Beijing on June 6 and might discuss the AIIB, but Tokyo looks unlikely to make a decision on joining any time soon.
LDP lawmakers looking into the matter will put together a report later this month or next month, but will only state the pros and cons of joining or staying out, said Masahiko Shimayama, a member of the party panel.
“I think it’s unlikely that the [Japanese] government would make a decision on when to join based on our report,” he said.
Tokyo, which given the size of its economy could become the No. 2 donor if it decides to join the AIIB, might well keep its powder dry for some time to come.
“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.
The AIIB is holding a meeting of founder members in Singapore this week to decide on the articles of association and operational details.
A delegate to the conference, speaking on condition of anonymity, said it was unlikely the new bank could start lending at the start of next year as predicted, given the need for member countries to get approvals from their legislatures.
“China hopes that members get such approvals by year-end and the operations start from the next year, but I wonder if it is possible, given domestic political situations in each country,” the delegate said.
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