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POLITICS

Japan distance from AIIB for uncertainty

  • 2015-06-30 15:00:00
  • , Sankei
  • Translation

(Sankei: June 30, 2015 – p.11)

 

 The convention for the establishment of the China-led Asian Infrastructure Investment Bank (AIIB) was concluded on June 29. But the government maintains the stance of keeping its distance from AIIB for the time being as Tokyo views the AIIB “as riddled with uncertainties,” in the words of a government official. The government will draw on Japan’s technological capabilities to contribute through “high quality infrastructure investment” to building and expanding infrastructure in Asia. As China lowered interest rates four times since last November, which clouds prospects for Chinese economy’s future, some in the Japanese government believe China is confronted with problems.

 

 “I expect that AIIB will fulfill its role by meeting the standards appropriate to an international financial institution,” said Chief Cabinet Secretary Yoshihide Suga in a press conference held on June 29, emphasizing his view to carefully watch the AIIB until its role and function as “an international financial institution” become clear.

 

 The reason the government decided to put off participation in the AIIB is based on the view (of Prime Minister Shinzo Abe) that “providing a borrowing country with more funds than it can repay must be avoided.”

 

 Although the government has requested of China that the AIIB should have1) fair governance, 2) transparent standards for financing, and 3) consideration to environment and human right in infrastructure investment, Beijing has not given clear answers. A source connected to international finance says: “What are required (during an inspection by existing financial institutions) are an environmental assessment and investigation of the impact on residents. If the AIIB overlooks these, banks in the world will be unable to work together.”

 

 While China as the largest financing country has a de facto “veto,” the percentage of financing by the United Kingdom and France are restricted to lower levels, which was expected to happen. “If Japan had participated in AIIB, it would not have been allowed to have any influence,” said a member of the Liberal Democratic Party and former minister, supporting the government’s judgment.

 

 Realizing that the government needs to meet the enormous demand for infrastructure in Asia, the administration aims to invest $110 billion (13.3 trillion yen) in infrastructure over the next five years. By expanding Official Development Assistance (ODA) and actively financing the risk funds through the Japan Bank for International Cooperation (JBIC), the government “will expand high-quality infrastructure in Asia,” according to Prime Minister Abe.

 

 There is a concern that China will increase its influence on developing countries by taking advantage of infrastructure investment by the AIIB. Through joint financing by the Japan-led Asian Development Bank (ADB) and the U.S.-led World Bank, the government is planning to pursue cooperative relations with the AIIB.

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