What is in effect Japan’s version of the Belt and Road Initiative is being rolled out at an accelerating pace. But unlike China’s global infrastructure initiative, which mainly takes the form of highways, railways and sea lanes, Japan’s project is all about energy networks and supply chains.
It poses a further challenge to America’s waning economic and strategic influence in Asia, the world’s most populous, resource-rich and potentially powerful region. What is more, it is a cooperative venture with the World Bank, which lends multilateral credibility.
Japan’s project does not have a snappy title. Instead, its twin initiatives labour under the ponderous names of the Resilient and Inclusive Supply-chain Enhancement Plus (Rise+) and the Dynamic Response for Invigorating Value Chains and Energy Security (Drive).
Still, the Japan-World Bank cooperation is significant, as evidenced by the fact that World Bank president Ajay Banga travelled from Washington to Tokyo to sign an agreement with Japan’s finance minister, Satsuki Katayama, on June 1 on the latest phase of the scheme.
A statement issued by the World Bank after the signing announced that Japan would launch Rise+, a new US$20 million facility under Japan’s single-donor trust funds that will complement the original Rise partnership launched under Japan’s G7 presidency in 2023.
“Rise+ will help developing nations translate growing demand for key infrastructure development and private capital mobilisation for supply chains of critical minerals, including rare earths, into concrete public and private investment, leading to industrial development and quality jobs,” the statement said. “By coordinating public and private sector action, the initiative aims to help countries turn their natural resource wealth into lasting economic opportunity.”
This is an ambitious and timely agenda, especially when supply chains of critical minerals, including rare earths, are perceived to be of critical importance to both advanced and emerging economies in an age of almost obsessional technological development.
The emphasis of the Rise+ initiative on “coordinating public and private sector action” is also commendable, given the vulnerability of poorer and less-developed economies to the pressure to exploit their rare earths and other minerals at minimum cost and maximum financial and technological benefit to advanced nations.
Meanwhile, the Drive initiative is meant to complement Japan’s recently announced US$10 billion framework – called the Partnership on Wide Energy and Resources Resilience Asia, or Powerr Asia – to address fuel supply shortages and supply chain disruptions in Asia stemming from the Middle East conflict.
The World Bank Group, by collaborating with Japanese agencies including the Japan Bank for International Cooperation and the Japan International Cooperation Agency under Drive, “will help the most affected countries stabilise their economies and build more resilient energy systems for the future through sovereign lending and private sector solutions”, it said.
But how does all this dovetail with – or compete against – the Belt and Road Initiative and other similar projects involving the US, India, Australia and others that followed the launch of the Chinese initiative in 2013?
True, infrastructure development, which is a key element of the belt and road, also figures large in Japan’s cooperation with the World Bank. But the unfortunate fact from a regional perspective is that the element of competition is clear and there is little evidence of dovetailing. And that in turn reflects the increasing regional fragmentation and polarisation, as distinct from regional cooperation and integration.
For at least a decade, the battle for regional economic influence involving China, Japan, the US, India and others has been gathering pace, involving infrastructure and other public goods. The latest addition of Japan’s Drive and Rise+ plan adds a new dimension through the emphasis on energy security and supply chains.
At first sight, the sums being pledged in the Japan-World Bank collaboration seem puny alongside the sums committed to the belt and road. But the latest involvement by the World Bank, with its huge multilateral resources and global reach, provides a new financial dimension.
When the launch of the belt and road was followed by that of the China-led Asian Infrastructure Investment Bank, it was widely supposed that the AIIB would serve largely as a financing vehicle for the former. But under its founding head, Jin Liqun, the bank was steered away from this purpose as it sought to establish credibility as a bona fide multilateral institution.
By stepping up its cooperation with Japan in key geoeconomic areas like infrastructure provision, energy security and supply chain strengthening (though the financial sums likely to be involved have yet to be disclosed), the World Bank could be seen as showing favouritism to one powerful member.
China has long complained that it is unable to exert as much influence as it would like within the World Bank Group. But it could be countered that in launching the AIIB and the New Development Bank with Brics states, Beijing went into competition with Washington on regional economic development.
All this does not augur well for the future of multilateral cooperation, at least for Asia. This is unfortunate, given the huge demand for capital in the region to finance public projects and the fact the Trump administration is withdrawing economic aid to Asia and other regions. Bilateralism is again trumping multilateralism, it seems.