Japan can be Catalyst to include China in the discussion

As Industrialised Countries ramp up support for infrastructure development in emerging economies amid China’s growing influence, the time has come for them to reconsider how best to use their own resources in this field.

The U.S. International Development Finance Corp. went fully operational early this year with the dual mission of promoting strategic investments and furthering Washington’s diplomatic and national security interests.

The reorganisation consolidated American development finance agencies into a single body with an investment cap of $60 billion double that of its main predecessor and access to more flexible financing options, including equity investment.

Australia rolled out the Australian Infrastructure Financing Facility for the Pacific last year to expand support for infrastructure in Pacific island nations.

Meanwhile, the U.S., Australia and Japan have established a framework for regular working-level talks on closer cooperation among their respective development finance institutions, including the Japan Bank for International Cooperation.

The partnership part of the vision for a “free and open Indo-Pacific” promoted by Tokyo and Washington works to identify opportunities for joint projects.

All such moves have come in response to China’s Belt & Road infrastructure initiative

China has come under fire over infrastructure investments for leaving emerging economies mired in “debt traps” and taking control of strategically significant facilities such as ports and propping up autocratic governments.

It is important for other countries to unite to counter actions by Beijing that destabilise the region’s geopolitical order.

But the role China plays in furnishing emerging countries with necessary infrastructure cannot be overlooked. Other nations should approach the issue by not merely countering China but also prompting Beijing to focus on infrastructure projects that would promote regional stability.

Japan could serve as a catalyst for such a perspective shift

Tokyo has agreed to partner with Beijing on projects in third countries that are open, transparent, financially sustainable and make economic sense. Given China’s interest in such cooperation, Japan should leverage its strict standards to push Beijing toward higher-quality investment.

Leaders from the Group of 20 major economies endorsed principles for quality infrastructure investment last year, which has spurred discussion of an international certification system, called the Blue Dot Network. Japan should actively contribute to this effort and encourage China to participate as well.

One of the keys to sustainable infrastructure support is ensuring that neither the financing country nor the beneficiary ends up being burdened excessively. Given that public finances are tight, countries should make good use of private-sector capital and expertise.

It is also important for both sides to be able to benefit from projects not only in the short term but over the long term as well. A temporary boost in exports of equipment and materials from the supporting country will no longer cut it.

Countries instead should emphasise a development model that will continuously benefit and provide the know-how to society for example through the better operation of transportation and other public utilities or even management of cities themselves while also turning a profit.

Reining in greenhouse gas emissions is an important challenge as well. While the needs and economic circumstances of individual countries need to be kept in mind, the shift to projects with a lower environmental burden must not be neglected.