Japanese Prime Minister Shinzo Abe’s push for “quality infrastructure” investment in Asia is expected to be among the key items on the agenda of next week's G7 summit in Japan.
In May last year, Abe announced a $110 billion injection into Asian infrastructure funding over five years. The investment is to be handed out in bilateral donor assistance as well as channeling funds through the Asian Development Bank (ADB).
The move is widely seen as providing a counter to the rising influence of China, which over the past decade has been rapidly expanding its presence with investment in infrastructure projects throughout Asia.
Critics say Chinese projects lack the quality and standards demanded by international donors, such the World Bank, the ADB and Japan. Yet for several Southeast Asian nations like Cambodia, in dire need of infrastructure development, the “no strings attached" funding from China provides an immediate fix.
“The issue with infrastructure is the quality, sustainability and cost — also the timeliness,” said Chan Sophal, director of the Center for Policy Studies, an independent Cambodian think tank.
“For some donors they require a long procedure before we can get a loan and develop the infrastructure, so maybe there is a time/cost [decision] in there. But for other donors, like China, we get the funds quickly and can do it quickly, but there could be an issue with cost and quality,” he added.
Cambodia has been a beneficiary of funding from both Asian powers. For example, an analysis by the NGO Forum on Cambodia of foreign concessional loan projects between 2000 and 2011 found China had lent $1.16 billion while Japan had loaned the nation $386 million in the same time span.
However, in order for Cambodia to retain its growth momentum, which over the past decade has seen the economy grow at an average of 7 percent annually, infrastructure investment will need to be somewhere between $12 billion and $16 billion between 2013 and 2022, according to the ADB.
Takashi Ito, a senior representative at the Japan International Cooperation Agency (JICA) in Cambodia, the Japanese government’s aid arm, said that improving Cambodia’s roads that link to neighboring countries as well as expanding the country’s port capacity are key priorities for boosting trade and encouraging foreign investment.
“Japan cannot fund everything,” he said.
The JICA has developed a master plan for Cambodia’s infrastructure, which seeks coordination among all the country’s donors for sustainable infrastructure development that adheres to social and environmental construction standards — in line with Abe’s quality infrastructure mandate.
“Sometimes Japanese aid is criticized to be slow, but it is not a waste of time. It is necessary [to take] time for consultation or the necessary preparation, and based on that necessary process, we would like to construct something sustainable for a long period of time in the future,” he said.
The recently established Chinese-backed Asian Infrastructure Investment Bank (AIIB) — which last month entered a co-financing agreement with the ADB to fund a project in Pakistan — would be welcomed into the fold, Ito said, if it is working to the standards of traditional donors.
For its part, the Cambodian government continues to maintain its position of neutrality between Asia’s two economic powers, seeking assistance from both.
“Generally, China has helped Cambodia a lot, in terms of infrastructure, particularly roads and bridges … and electricity,” said Mey Kalyan, a senior adviser to the government’s Supreme National Economic Council. “Without having that help from China, Cambodia would have faced so many problems.
“At the same time, Japan has also helped in terms of roads and bridges, but not to the speed that Cambodia wants, because it is a different kind of speed,” he said. “Both are helping with infrastructure and energy.”
Sebastian Strangio, Phnom Penh-based journalist and author of Hun Sen's Cambodia, said Abe’s Asian infrastructure push is designed to counter the massive influx of Chinese money into Southeast Asia, and Cambodia is set to benefit.
“I think from a Cambodian perspective the Japanese money is welcome. It does provide a counterweight to China,” he said.
The government’s strategy of remaining politically nonaligned is not likely to change anytime soon, Strangio added.
“For a country like Cambodia, which is small and weak and dependent on outside money, diversification of its foreign relations is always going to be a priority,” he said. “The more friends that Cambodia can have, the better.”