African nations and Japan will be seeking a new type of win-win partnership at the sixth Tokyo International Conference on African Development (TICAD VI) that will be held for the first time in Africa when it kicks off in Nairobi on Aug. 27 amid uncertain situations in Japan and the region.
The African participants are hoping for a new framework that would create a sustainable business and investment environment that can withstand sharp drops in commodity prices and fight escalating threats such as terrorism, which hampers growth.
On the other hand, Prime Minister Shinzo Abe, who will be attending the conference, wants to promote Japanese businesses and push for a bigger share in the last frontier as global players such as China are competing aggressively to gain access to the market.
Their wish lists are expected to be highlighted in the Nairobi Declaration, which is expected to be adopted on Aug. 28, the last day of the two-day conference. The document would include pandemic prevention measures and call for high-quality infrastructure, a necessary engine for African development, to differentiate its commitment from China.
But at the same time, the declaration is expected to emphasize the industrialization of the African economies and counterterrorism measures, a major shift from the framework focused on official development assistance (ODA).
For decades, Japan has been a major benefactor to the African continent. In 1993, when Western powers scaled down their assistance after the end the Cold War and shifted their focus more on Eastern Europe, Japan launched TICAD to re-engage the global community with Africa.
The conference has been held in Japan every five years, during which time African states, Japan and their partners tackled the goals set at previous meetings.
However, at the last TICAD meeting in 2013 in Yokohama, it was decided that the conference should be held triennially and alternate between Japan and Africa to better address the rapid growth of the African economies.
The decision serves the African region especially well now that their economies are decelerating mainly due to the sharp decline in commodity prices since mid-2014.
According to International Monetary Fund (IMF), the region’s growth dropped to 3.5 percent in 2015, which is the lowest level in almost 15 years. It is projected to further decelerate to 3 percent this year, compared to 5 to 7 percent growth over the past decade. Especially hard hit are oil exporters such as Angola and Nigeria, which the IMF expects to further slow down to 2.25 percent growth this year from 6 percent in 2014.
That is why the African nations, which have been receiving funding for big-ticket ODA projects, now require private-sector investment that can withstand drops in commodity prices to spur growth.
“We really want the money to flow into Africa. I want entrepreneurs to come and take advantage of the opportunity,” said Francois Oubida, Burkina Faso ambassador to Japan and chair of the African Development Corporation TICAD Core Committee, at a TICAD seminar in Yokohama last month.
A big change at this year’s conference is an increase in private sector participants. There will be more than 100 companies coming to Kenya, offering representatives from the African nations more opportunities to speak directly to Japanese companies.
For Japan, it provides a rare chance for Japanese CEOs to gain a first-hand assessment of the business opportunities there, especially when the African region is becoming an extremely attractive market with its population projected to double to 2 billion by 2050.
In fact, more and more Japanese companies are eyeing the African continent.
According to the Japan External Trade Organization (JETRO), the number of the Japanese companies in sub-Saharan Africa increased by almost 30 percent to 269 in 2015 from 2012. Additionally, a 2015 JETRO study found that some 56 percent of the Japanese companies that are already in Africa said that they would expand their business in a year or two.
According to JETRO, one of the countries that Japanese businesses are paying close attention to is Kenya, the host of TICAD VI. According to the IMF, Kenya is expected to see 6 percent growth in 2016, as even though it is a non-oil exporter, it enjoys low oil prices and strong domestic investment.
“TICAD will offer a great opportunity to consider how they can industrialize their economies,” said Junzo Fujita, Japan’s ambassador to TICAD in an interview with The Japan Times. “At the same time, the countries that are not dependent on resources should also focus more on bigger manufacturing projects.”
The region has the perfect population model for a sustainable manufacturing industry. The median age in the region was 19.8 in 2011, according to the 2015 Revision of World Population Prospects by the U.N. Procurement Division. When the population reaches 2 billion, the median age is expected to be 26.4, creating an abundant labor force in the market.
However, Fujita said that fighting terrorism is necessary for sustainable growth and industrialization of the region when disparity and poverty plagues the young, who could be recruited by extremist groups such as Boko Haram, the regional affiliate of the Islamic State group, and al-Qaeda ally Al-shabaab. Those groups have recently been accelerating their attacks.
“The young are frustrated and the Islamic State group brainwashes them, creating homegrown terrorists,” said Fujita, who previously served as ambassador to Uganda. “To fight that, we need more than mere employment.”
To that end, the Nairobi declaration is expected to call for developing quality infrastructure that could do more than job creation; transferring technology and promoting educational training for youth and women.
Still, Japanese companies face challenges from global powers such as China, the EU, and the U.S., as they have started economic forums and initiatives similar to TICAD and have been aggressively expanding their market share in Africa.
Especially formidable is China. Beijing launched the triennial Forum on China-Africa Cooperation (FOCAC) in 2000 that not only focuses on development projects, but also pandemic prevention and student exchange. Xi Jinping last year offered $60 billion in assistance for the continent, more than twice as much as Japan did in the 2013 TICAD.
The number of Chinese companies in Kenya, for example, far exceeds the number of companies from Japan. Around 300 to 400 Chinese businesses, both large enterprises and small companies, are operating in the country, while Japan has only 43 companies.
Tokyo emphasizes quality infrastructure as something that sets Japan apart from China, which is often criticized for low-quality public works projects and killing local businesses with cheap goods.
But Junko Ishii, director-general of industry and business development support at JETRO, argues that Japan should tap the market more aggressively. Japanese businesses in Africa focus on natural resources and automobiles, but the scale of Japanese enterprises is still small given the capacity of Japanese corporates.
Ishii also said that they have to create a business foundation that can weather bad economic conditions, citing companies such as Toyota and Ajinomoto that tapped into the African market even during a recession.
“In order for Japanese companies to be truly global, they have to survive in Africa and beat other competitors. It’s a global stage for Japanese companies to become stronger,” Ishii said at the TICAD seminar in Yokohama.
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