Japan to fund only high-impact projects in Africa to save it from impending crisis

Monday October 15 2018

The Jica-funded berth expansion at the port of Mombasa in 2015.

The Jica-funded berth expansion at the port of Mombasa in 2015. FILE PHOTO | NMG 

ALLAN OLINGO
By ALLAN OLINGO
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Japan has said that it will henceforth assess the economic viability of projects as well as debt sustainability of African countries before granting them loans as it pushes for high-impact projects that can generate enough income for loan repayments.

Tokyo’s stance, announced last week, comes amid growing concern over loan repayment defaulting by some African countries that have borrowed heavily, particularly from China.

Japan’s Foreign Affairs Minister Taro Kono, while addressing African foreign ministers at the Tokyo International Conference on African Development (Ticad) Ministerial Meeting, said that his country will push for sound debt management by African governments.

“Any form of international aid, be it through grants or loans from us, will always be provided within international standards.

‘‘This means that we will always insist on transparency, openness, and economic efficiency. We also want to look at projects’ lifecycle costs as well as debt sustainability of recipient countries before funding them,” Mr Kono said.

Influence

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Japan and China have in recent years been wooing the continent with project loans as they jostle for influence.

In 2016, at the last Ticad summit in Nairobi, Japan’s Prime Minister Shinzo Abe pledged $30 billion in investment in African countries over three years ending 2019.

The ministerial meeting in Tokyo was a curtain raiser for the seventh Ticad summit, set to take place in August next year in Yokohama, Japan.
“We want to focus on high quality infrastructure projects for Africa. We want our contribution to steer clear of debt trap fears and have a positive effect on African economies,” Mr Kono said.

“We have made some progress in funding some projects but the deterioration of debt sustainability in some African countries has prevented us from extending our loans to them.”

Different model

Japan has provided more than $10 billion in infrastructure loans to the continent in the past three years, with its latest coning through in February, when it signed a $700 million agreement with the African Development Fund, an arm of the African Development Bank, to provide an overseas development Loan to African countries.

Tokyo has avoided the Beijing model of government-to-government funding, preferring aid agencies and private sector financing.

China has also now shifted its Africa project funding profile, with President Xi Jinping noting that they will no longer fund vanity projects, but those that impact countries.

Last month, Beijing upped its three year pledge to the continent to $60 billion in mix of commercial loans, aid and grants to the continent's various projects, amid debt pile up concerns.

The new funding will include $15 billion of aid, interest-free loans and concessional loans, a credit line of $20 billion, a $10 billion special fund for China-Africa development, and a $5 billion special fund for imports from Africa.

“China-Africa co-operation must give Chinese and African people tangible benefits and successes that can be seen, that can be felt. Resources for our co-operation are not to be spent on any vanity projects but in places where they count the most,” President Xi said.

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