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What China can learn from Japan's Quality Infrastructure Investment
Commit to global infrastructure governance on multilateral platforms
China and Japan are still committed to badly-needed “hard stuff” like infrastructure for poorer countries, while the West is mired in 'soft' development, and I’m pretty tired of headlines like Japan vows billions for Africa amid rising Chinese influence from last week. Call me naive but I do think international development is an area with big potential for cooperation and donor countries can learn from each other.
In that spirit, Pekingnology is privileged to publish Japan's ODA Investment in Infrastructure: Bilateral and Multilateral Initiatives to Promote "Quality Infrastructure Investment (QII)" by Dr. Doi Kenichi today.
Below is an English translation from Dr. Doi’s original Chinese-language post at "Guanhai Think Tank."
. Doi, the Senior Researcher and Advisor at DIINSIDER, conducted his research as PhD researcher at Peking University. Before joining academia, Dr . Doi served international development and global health at The Japan International Cooperation Agency (JICA) and Services for Health in Asian African Regions (SHARE), a Japanese NGO.
Japan is a member of the Development Assistance Committee (DAC) of the Organisation for Economic Cooperation and Development (OECD). At the beginning of its involvement in international development cooperation, Japan, as an emerging economy in Asia, provided foreign aid mainly in the form of promoting economic and trade development and supporting infrastructure development. Since then, Japan has gradually absorbed the aid approaches of developed Western countries and has been involved in shaping the international trend of development assistance. Japan has developed a unique model of international development cooperation, taking into account its own national conditions, the development needs of recipient countries and international trends. The Japanese model of international development cooperation can be valuable for China to learn.
Japan has been a so-called "traditional donor" like Western powers. However, while European and American countries have long focused their foreign aid on social sectors such as health and education, Japan has attached importance to international development cooperation in infrastructure, providing a significant amount of infrastructure Official Development Assistance (ODA) to developing countries. Japan has been actively promoting global governance in the infrastructure sector based on the long-standing track record of its aid. Japan is working on the Quality Infrastructure Investment (QII) project and effectively uses multilateral platforms to promote the QII concept as an international standard.
2. “Quality Infrastructure Investment (QII)”
To support "quality growth" in developing countries, it is essential to develop infrastructure regarding quantity to meet the demand and transparency, openness, economic efficiency regarding project life cycle costs, and debt sustainability. It is also crucial to look at infrastructure investment in the long term and to carefully consider the economic and social impacts. Japan has been leading international dialogues to promote "the Quality Infrastructure Investment (QII)" and actively disseminating this concept at international conferences and bilateral summits.
3. "QII" bilateral initiative: "Quality Infrastructure" foreign aid projects
Japan practices "QII" in its bilateral foreign aid for infrastructure in developing countries. The Japanese ODA Loan project for the Port of Mombasa is a good example of this effort to reduce the life-cycle costs of projects. The Port of Mombasa is the largest international trade port in East Africa and serves not only as a hub for Kenya but also as a transportation hub for the Northern Corridor of East Africa. However, logistics were hampered by the underdeveloped port facilities and transport infrastructure around the port.
(by Stuart Price/Kenyan Ministry of East African Affairs, Commerce and Tourism, 31 July, 2015, shows a general view of Mombasa Port on Kenya's Indian Ocean coast.)
To address these issues, the Japanese ODA supported the development of a container terminal at the port of Mombasa. A Japanese company joined its development project. Various corrosion protection and repair techniques have been employed to protect the port's steel structures from corrosion in the harsh marine environment. To enhance the corrosion durability of the steel, the project uses corrosion protection coating technology. When the piles are driven into the sea, the heavy-duty anti-corrosion coating method ensures that the part of the sea spray from the seabed to the piles exposed to the marine atmosphere is covered with polyethene resin or polyurethane elastomeric resin, making them less susceptible to corrosion.
This makes the piles more expensive on purchasing costs than traditional techniques but reduces the overall project life cycle cost in the long run due to their longer service life. In the reclamation of the Port of Mombasa, steel with a heavy-duty anti-corrosion coating was used to construct approximately 900 metres of berths. This is expected to make it more cost-effective in a whole project life cycle.
4. QII multilateral initiative: International mainstreaming of "Quality Infrastructure Investment"
4.1. Mainstreaming through multilateral platforms
In addition to its own practice of Quality Infrastructure Investment (QII), Japan has also promoted the international mainstreaming of the QII concept, which was proposed by former Japanese Prime Minister, Abe Shinzo in 2015. Since then, Japan has used multilateral diplomatic platforms to promote the QII concept as an international standard.
Firstly, at the Group of Seven (G7) Iseshima Summit hosted by Japan in 2016, an agreement was reached on the "G7 Iseshima Principles for the Promotion of QII". At the G20 Osaka Summit, hosted by Japan in 2019, the member countries agreed to the Principles for Quality Infrastructure Investment, making QII an internationally recognized principle for a wide range of countries, including China and other emerging countries. The QII promotes not only the physical quality of facilities but also the social aspects.
4.2. "QII multilateral initiative: investing through MDBs
Japan is also working with Multilateral Development Banks (MDBs) for "QII". The most prominent case is the collaboration with the Asian Development Bank (ADB).
On 21 May 2015, then Prime Minister Abe Shinzo announced the Partnership for Quality Infrastructure at the 21st International Exchange Conference "The Future of Asia" in Tokyo. Since then, the Japanese government has indicated that through the Partnership for Quality Infrastructure, it will promote "QII" in cooperation with other countries and international organisations. The Japanese government stated that it would cooperate with ADB to provide "QII" for the Asian region totalling approximately US$110 billion over the next five years.
Subsequently, on 17 December 2015, Japan's aid implementing agency, the Japan International Cooperation Agency (JICA) and ADB signed a Memorandum of Understanding (MoU) on a strategic partnership for sustainable and inclusive development through the promotion of "QII" in the Asia-Pacific region. In addition, ADB and JICA have partnered to establish Leading Asia's Private Sector Infrastructure Partnership Trust Fund (LEAP) with an investment agreement of US$1.5 billion from JICA. This has resulted in more active support for high-quality infrastructure projects in the private sector, including through Public-Private Partnerships (PPP), which is expected to attract US$6 billion in additional private sector investment funding for infrastructure. In addition, to promote high-quality public infrastructure development in the Asia-Pacific region, ADB and JICA provide US$10 billion in co-financing. ADB and JICA announced they would jointly support the long-term investment plans of the target countries while leveraging their respective strengths to furnish the necessary technical cooperation for project preparation and implementation.
5. A period of international competition in overseas infrastructure investment?
G7 Summit in 2022 officially launched the Partnership for Global Infrastructure and Investment (PGII) initiative, which plans to raise US$600 billion over the next five years to invest in infrastructure around the world. The G7 outcome document also mentions "QII". This is the culmination of western developed countries' emphasis on infrastructure aid that has been observed in recent years. Infrastructure investment has been the focus of overseas cooperation between China and Japan. The increased investment in global infrastructure development finance by Western countries can lead to fierce international competition in the sector.
Japan's "QII" initiatives in the recent decade could be valuable for China to learn. As a leader in infrastructure aid among the "traditional donors" formed by developed countries, Japan has pursued the "quality" route and has also effectively utilised "Gn" diplomatic platforms, such as G7 and G20, to promote the international mainstreaming of QII, and has worked with MDBs to strengthen the impact of its advocacy of "QII".
There have been wide-range voices of "quantity-driven" Chinese overseas infrastructure investment, particularly in developed countries. Currently, China is also promoting the concept of "high-quality development". As a member of the G20, China has committed itself to "QII". China should use this international momentum as an opportunity for further enhancement of its overseas investment quality.
At the same time, China can learn Japan's initiative to commit to global 'infrastructure' governance on multilateral platforms. China has initiated several multilateral international development platforms such as the BRICS, G20, Belt and Road (BRI) and Global Development Initiative (GDI).
As a significant global infrastructure investor, China may consider using these global development platforms to enhance its engagement in the design of international rules for better quality global infrastructure. Regarding multilateral institutions as its collaborators, China has already been a major member of established MDBs such as the WB and ADB as well as an architect of emerging international financial institutions such as the Asian Infrastructure Investment Bank (AIIB) and the New Development Bank (NDB). China can also look to Japan's experience in designing global governance and bilateral and multilateral investment practices to pursue and practice "QII". (End)
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