Business / Economy | TICAD 7 Special

JAPAN'S INITIATIVES

Businesses encouraged to invest in key future market

Staff Report

The Japan Times recently interviewed Shigeru Ushio, who heads the African Affairs Department of Japan’s Foreign Ministry and is a key senior bureaucrat managing The Seventh Tokyo International Conference on African Development (TICAD 7) to be held in Yokohama from Aug. 28 through 30.

During the interview, Ushio attached great importance to the growing African population, saying it will likely become a huge market for Japanese firms. At the same time, he pointed out poor productivity regarding agriculture in Africa could be a “bottleneck” in the future. He also admitted Japan lags behind other nations in doing business on the African continent, and Tokyo is now focusing on the quality of its economic assistance and infrastructure projects.

The following are edited excerpts of the interview.

What’s your general view of Africa and the current situation surrounding TICAD right now?

Simply put, we pay particular attention to two factors. One is the growing population of Africa, to which we attach great importance. Another is the formation of the African Continental Free Trade Area (AfCFTA).

The population of Africa is now about 1.3 billion, accounting for 17 percent of the world’s population. This is now predicted to surge to 2.5 billion in 2050. At the end of the 21st century, one in every four people in the world will be African.

This population will form a large market of great importance; because of this, Africa is described as “the largest frontier of the 21st century.”

As for AfCFTA, this is so big that we need to see how it will work and how each country will behave. It’s a huge market with a population of 1.3 billion and gross domestic product of $3.4 trillion, which makes it appropriate to call it “the largest frontier of the 21st century.”

One critical issue pertains to agriculture. Productivity is low, meaning that the food self-sufficiency rate is low, which forces Africa to rely heavily on imports. This also leads to higher labor costs than those of Asia and it can create a bottleneck. We need to reconfirm the importance of agriculture.

Many countries, China in particular, have expanded economic assistance and Russia is going to organize a summit meeting with African leaders. What’s the strategy for Japan? Isn’t Japan lagging behind other countries?

It’s true that Japan is lagging behind other countries, many of which, including emerging economies like Indonesia, are trying to advance into Africa.

The Asian market will eventually become saturated. Given that fact, competition in ASEAN (Association of Southeast Asian Nations) and Asia will intensify and businesses will have no choice but to expand beyond their region.

The private sector of Japan is finally becoming serious (about business in Africa). That’s what I have felt in organizing TICAD this time. Still, Japanese firms are lagging behind. So, a key purpose of TICAD is to back them up and give them a boost.

Other than the automobile industry, Japanese firms are slow in going to Africa compared with those of other countries. Why?

For one thing, you can say they haven’t fully become global companies yet. What is needed most is to find a good partner in foreign companies and thereby advance into Africa.

I used to work in Indonesia and I don’t think Japanese firms have an advantage over foreign competitors in Southeast Asia, either.

What’s the main significance of TICAD this time?

If some firms advance into Africa, the government should familiarize itself with what is going on in Africa and improve the investment environment. That’s a role the government should play. We still are exploring ways to reduce risks and make the business environment better, but we’d like to gain a springboard opportunity through TICAD 7.

I hear TICAD has become more business-oriented since the 2008 event, which was a turning point. Is it true?

That’s not only relevant to Africa as it can be said about Asia as well. The significance of official development assistance has been considerably decreased as far as effects on development are concerned. The role of ODA has been refined and it is now believed that ODA should play a role of catalyst that introduces private sector funds.

Do you plan to set up a new specific goal at TICAD 7, like the previous target, to provide aid worth $30 billion?

An agenda critically important for both Africa and Japan is how we can make Japanese private sector corporations ready for business in Africa. Support for such efforts will be a central focus.

Quality of assistance is more important than quantity. We don’t attach much importance to quantity.

But Japan’s “quality” projects usually cost more.

From the beginning, we haven’t tried to achieve any quantitative target. Once again, we don’t attach much importance to quantity. We need to pay attention to some factors like the fiscal soundness of a recipient government.

If you build a road and it becomes bumpy only one year later, who would shoulder the cost of maintenance? It’s the local government. If Japan builds a road and you don’t need to repair it for five or 10 years, you won’t say it’s really expensive. If you think about the total cost, it’s not expensive.

Situations surrounding TICAD have changed a lot. What’s your view of the history of TICAD?

When TICAD was launched in 1993, Western countries were financially exhausted and not able to keep providing assistance to Africa. Africa saw more and more conflicts and the situation was very tough.

For a long time, central topics were those about government assistance. But Africa started seeing fewer conflicts and people began to think growth should be promoted, and it was private sector investments that came to be considered most important.

Could you explain some examples of successful Japanese businesses in Africa?

Ajinomoto Co., whose performance has been always good, and Yamaha Motor Co., which has been selling motorcycles and outboard engines. I think everything Yamaha is dealing with in Africa has been quite successful.

Do you think forming an alliance with a third party company is a key for success in general?

Yes, I think so. TICAD 7 can help achieve that key, which is a characteristic of this event. This time, we have greatly increased the number of official side events during the duration of TICAD 7.

From a business perspective, we’d like to make networking opportunities to find business partners.


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