KUALA LUMPUR – Prime Minister Shinzo Abe announced Saturday that Japan will relax the conditions for its yen loan scheme for emerging countries in Asia as it tries to boost its economy through infrastructure exports to the fast-growing region.
Abe also pledged ¥1.2 trillion ($10 billion) in loans for public infrastructure projects in other Asian countries over the next five years, as part of Japan’s ¥13-trillion initiative to support high-quality infrastructure development.
The loans will be jointly provided by the Japan International Cooperation Agency and the Asian Development Bank.
During a speech in Kuala Lumpur, Abe also said that JICA, through the ADB, will pump up to ¥180 billion into private-sector projects.
“The pace of growth in Asia is gaining steam with each passing year. (The implementation of) yen loans should not be left behind by this speed,” Abe said at a business and investment summit for the Association of Southeast Asian Nations, as ASEAN leaders and their dialogue partners gathered in Kuala Lumpur for a series of summits.
Tokyo’s move to review its yen loan scheme to make it more acceptable to potential partner countries is seen as a countermeasure to Beijing, which is tapping the huge demand for infrastructure development in Asia. Japan is still smarting from the loss of an Indonesian high-speed railway contract to China earlier this year.
The Chinese-led Asian Infrastructure Investment Bank — which Japan has not joined — is being perceived as a rival to other global financial institutions, notably the ADB, which is traditionally headed by a Japanese.
Abe said in the speech that it will not be necessary to ensure state guarantees from partner countries if yen loans are granted to public organizations, with sufficient involvement of the governments of these countries.
The lending process will also be shortened by as much as a year and a half, he said.
To make it easier to provide development funds to emerging countries, the Japanese government will compress the period for processing the implementation of yen loans, which usually takes about three years, one of the Japanese officials said.
Indonesia initially dropped the rail proposals of both Japan and China due to the high costs, but later picked China after Beijing made a new proposal to build the high-speed rail link between Jakarta and Bandung in West Java without Indonesian fiscal spending or debt guarantees.
“Let us together expand high-quality infrastructure in Asia,” said Abe, who also repeated the investment initiative he announced in May to provide $110 billion to promote quality infrastructure in Asia over the next five years.
The Japanese government also said Saturday it will extend up to ¥17.3 billion in loans for road development in Cambodia.
Abe conveyed his assistance to Cambodian Prime Minister Hun Sen during their talks on the sidelines of the ASEAN meetings. Abe was quoted by the Foreign Ministry as saying he understands that the Cambodian government attaches importance to boosting connectivity with its neighbors, and that the latest yen loan serves this purpose.
The new aid will help repair a road connecting the Cambodian capital Phnom Penh and neighboring Thailand.
Abe also announced Japan’s plan to assist in training as many as 40,000 people in Asia, including ASEAN countries and India, over the next three years, as well as set up a fund known as the Japan ASEAN Women Empowerment Fund to encourage female entrepreneurship in Asia.
After deliberations, the 10 leaders in the Association of Southeast Asian Nations will sign a declaration Sunday establishing the ASEAN Economic Community, originally envisioned in 2002.
Although ASEAN has helped to greatly increase the region’s economic and political integration, there is a long way to go before the AEC is fully functional after it becomes a legal entity on Dec. 31.
ASEAN countries have torn down tariff barriers and removed some visa restrictions, allowing people to work in other countries provided the jobs are in eight sectors, including medicine, engineering and tourism.
But they still fall short in more politically sensitive areas such as opening up agriculture, steel, auto production and other protected sectors. Intraregional trade has remained at around 24 percent of ASEAN’s total global trade for the past decade, far lower than 60 percent in the European Union.
There are also other hurdles, such as corruption, uneven infrastructure and unequal costs in transportation and shipping. A wide economic gulf divides Southeast Asia’s rich and middle income economies — Malaysia, Indonesia, Singapore, Brunei, Thailand and the Philippines — and its four less developed members, communist Vietnam and Laos, Myanmar and Cambodia.
“The coming into being of the ASEAN community marks a new beginning for more than 630 million people, the birth of an integrated region — an entity that is a global economic force,” Malaysian Prime Minister Najib Razak said. However, much work remains. Mohamad Munir Abdul Majid, chairman of a council that advises ASEAN on business matters, said there is a disparity between what is officially recorded as having been achieved and what the private sector reports as its experience.
For instance, if you were to transit from one country to another, there are no tariffs at the borders. “But once you enter … you may have to grease the palms of some people in certain ASEAN countries to proceed. These ‘behind the border’ barriers … are a key impediment slowing down the process of integration,” said Tan See Seng, a professor of international relations at the S. Rajaratnam School of International Studies in Singapore.
Malaysian Trade Minister Mustapa Mohamad agreed that nontariff barriers remain. “There is a need for courage and political will. Sometimes we chickened out for whatever reason. It’s important for us to push forward, to run faster,” Mustapa told a regional business conference.
The AEC was envisaged in 2002 — and a blueprint created in 2007 — to face competition from China and India for market share and investments. While China’s economic growth is expected to slow to an average of 6 percent annually over the next five years, India’s expansion is likely to pick up to 7.3 percent in the same period, according to the Organization of Economic Cooperation and Development.
A declaration that China signed with ASEAN in 2002 to resolve disputes peacefully has become essentially worthless, prompting ASEAN Secretary-General Le Luong Minh to say, “That’s why we need a new agreement which would be legally binding.”
No resolution is in sight for the moment as ASEAN remains divided on how to deal with China, a major trading partner.
According to a draft of the Chairman’s Statement dated Oct. 26, and seen by Kyodo News, the leaders of Japan and ASEAN member states may not directly mention the ongoing South China Sea dispute at their Saturday meeting, but will voice concern over the decline of Japanese investment in the region.
China has been at odds with many of the ASEAN countries after it staked claims to most of the South China Sea, where the Philippines, Malaysia, Vietnam, Indonesia and Brunei have competing claims. Diplomatic squabbles have frequently erupted over oil and gas exploration and fishing rights in the area. China has also irked ASEAN countries by creating artificial islands from reefs to bolster its claim.
Abe will meet his counterparts from the 10-member grouping and a statement about the summit will be issued by Malaysian Prime Minister Najib Razak in his role as ASEAN chairman.
The draft chairman’s statement of the ASEAN-Japan Summit only mentions in a general way the importance of maritime security and freedom of navigation, but does not directly mention the “South China Sea.”
“We reaffirmed our support for the maintenance of peace, stability and prosperity, and underscored the importance of maritime security, freedom of navigation, unimpeded commerce, and to ensure the resolution of disputes by peaceful means in accordance with universally recognized principles of international law,” it read.
The statement has been crafted in such a way that this paragraph appeared after another noting Japan’s new law entitled “Legislation for Peace and Security of Japan and the International Community,” adopted in September 2015.
A statement issued after the ASEAN-Japan Summit last year had mentioned “that the South China Sea dispute has to be addressed peacefully without use of force, by exercising self-restraint and avoiding actions that would complicate the situation including unilateral actions.”
ASEAN and its partners are also expected to affirm their commitment to cooperate in the war against terrorism following last Friday’s attacks in Paris, which killed at least 129 people and wounded hundreds.
The ASEAN summit will also include separate meetings with China, South Korea, India, Japan and the United States. On Sunday, those five countries, along with the 10 ASEAN countries and Australia, New Zealand and Russia, are to meet in the so-called East Asia Summit to discuss regional and global issues such as terrorism, the migrant crisis and cybersecurity.