JAPAN COMMITS TO 

‘A CENTURY OF AFRICAN GROWTH’ 

UNITED NATIONS - / MaximsNews Network / 7 June 2008 -- Africa is making steady growth, and the efforts of African Governments should be commended and supported by the international community. This message will be championed by the Japanese Government at the Summit of the G-8 industrialized countries, which Japan will host at Hokkaido Toyako on 7-9 July 2008.

“In the future, Africa will become a powerful engine driving the growth of the world,” said Mr. Yasuo Fukuda, Prime Minister of Japan. “Now together with the countries of Africa, Japan is determined to make the 21st century the ‘century of African growth’."

The Japanese leader was joined by 40 African Heads of State in announcing a blueprint for a ‘century of African growth’ at the Fourth Tokyo International Conference on African Development (TICAD IV) held in Yokohama, Japan from 28 to 30 May, 2008.

Mr. Fukuda pledged to double Japan's aid to Africa to $1.9 billion by 2012. Japan plans to offer $4 billion in concessional loans to assist Africa in developing infrastructure and agriculture, and to double grants and technical cooperation. He also announced $2.5 billion of financial support to Japanese companies to encourage them to invest in Africa.

These pledges are not new. Japan committed to doubling aid to Africa at the G-8 summit in 2005. The pledges are similar to those of China and India which also aim to be big players in Africa.

At the 2006 Sino-Africa summit for 50 African leaders, China proposed a doubling of trade between China and Africa to $100 billion by 2010, and pledged to double aid by 2009.

In April 2008 India hosted its Summit for 14 African leaders and offered $5 billion in financial credit and $500 million in development grants to Africa and preferential market access for all exports from least developed countries.

Although Japan’s TICAD cooperation framework dates back 15 years, China and India have been more successful in promoting their trade and investment. Japanese companies have been shy of Africa, unlike Chinese and Indian companies.

African leaders also called for the Japanese private sector to do more. "What remains to be seen is increased trade and investment between Africa and Japan," said President Jakaya Kikwete of Tanzania and Chairman of the African Union.

“Essentially, we believe that Africa's future growth lies in trade and not aid,” said President Thabo Mbeki of South Africa.

“At present Africa's relationship with Japanese companies is at best tenuous, as many perceive Africa as far removed from Japan,” said Vice President Mompati S. Merafhe of Botswana.

To remedy the situation, Japan has established a Facility for African Investment in the Japan Bank for International Cooperation (JBIC), and JBIC and other agencies have been mandated to take proactive measures to double Japanese foreign direct investment in Africa.

The JBIC facility worth $2.5 billion is twice as large as the existing stock of Japanese investment in Africa. At the current pace, much of the facility will go unused. It’s easy to offer generous credit lines when these are not taken up.

In an effort to promote Japanese investment, JBIC has worked with African Governments and the Investment Division of the United Nations Conference on Trade and Development (UNCTAD) in preparing investment blue books of measures to improve the investment environment. The measures were identified by private investors and endorsed at the highest level of Government; and the mechanism was awarded the Best Smart Regulation by Africa Investor Magazine. African Governments have largely implemented the measures. But few Japanese companies have invested, even though other Asian firms have.

“In Zambia last year, Tata's CMC set up a $500,000 information technology project for e-governance,” says UNCTAD investment expert Ian Richards. “I've also heard that a Malaysian investor has established a cell phone factory.”

Obstacles frequently mentioned by Japanese companies are the small size of African markets and weak infrastructure. The present Japanese initiative emphasizes developing African infrastructure, and promoting regional development in Africa. JBIC is working with the African Development Bank. These actions are of a long-term nature. But there is potential for public-private partnerships that generate trade, subcontracting and business linkages.  

Emphasis is also now being given to triangular South-South investment in which Japanese companies are encouraged to partner with other Asian firms (like from Malaysia) which have been successful in investing in small economies, and in a business environment similar to their own in earlier years.

“Africa’s potential is often constrained by access to capital, not to lack of opportunities or smart entrepreneurs. In many ways, this is a similar dynamic to what the ‘BRICs’ faced fifteen years ago,” says Ajata Mediratta, Senior Managing Director at Greylock Capital Management, a global emerging market hedge fund that has been active in Africa for more than a decade.

Japanese companies are mainly present in the more developed South Africa, and are likely to be a second-wave investor in the rest of Africa. They thus differ from other Asian companies which seek first mover advantages. Triangular cooperation can be a win-win. 

For now, at least, Japan’s expanding development assistance and G-8 leadership are contributing to a much needed spirit of Afro-optimism.

-- Khalil Hamdani 

Labels: United Nations, Africa, FDI, Japan, TICAD, UNCTAD

 

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