Japan's spent nearly $50 billion in Africa to little acclaim.

Photographer: Mohamed Dahir/AFP/Getty Images

Japan's Aid Needs More Imagination

Mihir Sharma is a Bloomberg View columnist. He was a columnist for the Indian Express and the Business Standard, and he is the author of “Restart: The Last Chance for the Indian Economy.”
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Shinzo Abe’s recent promise of $30 billion in financing to African countries over the next three years shouldn’t have come as a great surprise. Quietly, over decades, Japan has become the leading financier of growth-supporting infrastructure across large swathes of the developing world. Perhaps too quietly.

In fact, few people outside the country appreciate the scope of Japan’s overseas development assistance (ODA). In several South and Southeast Asian countries, the country is the largest provider of foreign assistance and low-cost loans, larger than the U.S. or the World Bank. Japanese development aid to India, for example, totaled $1.4 billion in 2013 -- almost double Germany’s effort. (American aid to India that year was only $100 million.) Japan occupies a similarly dominant position in concessional lending to Indonesia, Vietnam and Myanmar

QuickTake China's World Bank

It's now begun to expand its footprint in Central Asia, particularly in Kazakhstan, as well as Africa. The strategic motivation is obvious. Rival China has invested billions in both regions in recent years, with Chinese President Xi Jinping recently promising another $60 billion to Africa alone. The difference is that China's aid money has captured imaginations there and elsewhere in a way that Japan's generosity -- it's spent nearly $50 billion in Africa in recent decades -- simply hasn't.

I’m frequently puzzled about the wild excitement wherever I go about China’s "One Belt, One Road" plan to lay roads, ports, pipelines and other infrastructure between China and Europe. The optimism seems excessive compared to the amount of money that’s actually been disbursed so far, not to mention the scheme's lack of detail and the very real doubts about its sustainability. There's no guarantee it'll even survive past Xi Jinping’s tenure in office, given that it's so very much his baby.

Better known as the New Silk Road, the scheme has reinforced the idea that China will be central to the development of countries far from its shores -- indeed, that the Middle Kingdom will one day be the anchor of economic relations from the North Sea to the South China Sea. Xi has thus created a brand that's taken on a life of its own -- one that promises to deliver concrete strategic and commercial benefits to China.

By contrast, many people in countries in which Japan is already funding OBOR-scale projects are blissfully unaware of its contribution. India’s a case in point. In Tokyo recently, more than one person gloomily remarked to me on the contrast between visits to India by Xi Jinping and by the Emperor of Japan. The Chinese president was rarely off the front pages. But the Japanese emperor’s trip -- a relatively rare event -- created barely a ripple. (Granted, Japanese Prime Minister Shinzo Abe did win a few headlines during his own trip to India last year.)

Partly this represents a failure of imagination on Japan's part. Its bureaucrats are comfortable with the idea of supporting Southeast Asian integration or development along the Mekong River. But the idea that the Japanese are already helping create the arteries of the global economy -- since ports that they are financing in, say, Bangladesh and Indonesia will be trading with each other and putting goods on rail lines that Japan might also finance -- has been harder for them to promote. By contrast, the name "Silk Road" virtually sells itself.

There's no reason Japan can't compete better for mind share in Asia and beyond. After all, it’s easy to differentiate Japanese investment from China’s. In Africa, for example, the Japanese have admitted that they can’t win by competing with China on the amount of assistance alone. That's why they've emphasized “quality” and the lower life-cycle costs of the infrastructure they help create.

Unlike China, too, Japan isn't trying to put itself at the center of the developing world's economy, with everyone else on the periphery. While Japan's ODA programs prioritize Japanese companies, they're far more focused on the needs of recipient countries than China's are -- and are driven by the choices made by those nations’ voters and politicians.

Most importantly, Abe’s more muscular foreign policy opens up opportunities for rebranding Japan overseas that would be positive both for its companies and for large parts of the developing world. As a democracy, Japan naturally prefers to deal with other democracies. Its engagement with Myanmar has stepped up dramatically now that generals have begun to give way to civilians in Naypyidaw, for example.

Democracies have to work harder to build consensus behind big infrastructure projects. But projects with popular buy-in are, in the long run, far more sustainable. Large democracies like India or Indonesia are natural targets for Japanese assistance and investment; if Japan manages to get its narrative right, then the arteries of world trade will flow through democracies. That would be a far more ambitious -- and laudable -- aim than anything China has in mind at the moment. 

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

To contact the author of this story:
Mihir Sharma at m.s.sharma@gmail.com

To contact the editor responsible for this story:
Nisid Hajari at nhajari@bloomberg.net