Japan: Southeast Asia's New Sugar Daddy - OZY | A Modern Media Company

Japan: Southeast Asia's New Sugar Daddy

Japan: Southeast Asia's New Sugar Daddy

By Ralph Jennings

SourceCarlos Barria/Corbis


Because Japan is bartering aid for influence in a strategically important region.

By Ralph Jennings

The last time the Japanese showed up in force in Southeast Asia, in 1941, they came as conquerers with guns. These days they come bearing gifts: aid, trade and investment. And many locals couldn’t be happier.

It looks like a mutual love affair, but much more is at stake. Despite an old pacificist Constitution in its closet, Japan is bolstering its military position and upping the cash flow to the region. And the goal is obvious: to put up a fight against its old nemesis, China, which has also been vying for Southeast Asia’s favor. The ultimate winner, of course, are the little countries comprising this poor region.

This has all been going on for a while, but it’ll surely be on President Obama’s mind as he visits Asia this week.  Numbers tell the story: Japan began a huge ramp-up of its economic development aid to South Asia in 2008, lifting it from 27 billion yen to 305 billion yen in a single year. In 2012, the last year for which complete statistics are published, it hit 581 billion yen ($5.06 billion), with China’s neighbors Vietnam and Myanmar raking in the lion’s share. It’s been planning to spend 600 billion yen in each of the following three years.

… Southeast Asia is really the only place close to Japan where Japan has geopolitical interests and has ability to cultivate them.

Scott Harold, Rand Corp.

“For Japan’s security and prosperity, it is very important to maintain and strengthen close relations with Southeast Asia,” says Chikahiro Masuda, senior representative of the Ho Chi Minh City office of the Japan International Cooperation Agency (JICA), executor of Japanese government aid.

In the Vietnamese capital, Hanoi University of Industry has nearly doubled enrollment to 600 people per year in three programs that have received equipment and expertise from the JICA. Graduates can triple average salaries of $113 per month with their degrees, says university international cooperation director Le Viet Anh. “We must say that with support from JICA we’ve upgraded our facilities,” he says. The university aid will total $13 million when it expires in 2016. JICA’ s total spending in Vietnam reached $1.5 billion in 2012. “Japan sees Vietnam as a largely untapped market and hopes to attain access to many of Vietnam’s natural resources, from mining to agriculture,” says Ralf Matthaes, partner in the Ho Chi Minh City market advisory firm Infocus Consultants.

Workers work on the assembly line at Honda Automobile in Thailand.

Workers assemble cars for Honda in Thailand.

Source Bi Shanghong/Corbis

It’s a regional strategy. Japan’s the top automotive producer, for example, in Thailand, which churns out 1.5 million vehicles a year. Japanese organizations offer Thailand infrastructure loans and university scholarships. “It’s a strategic shift to Southeast Asia, a view that Southeast Asia is really the only place close to Japan where Japan has geopolitical interests and has ability to cultivate them,” says Scott Harold, associate political scientist with the Rand Corp. think tank in Washington. Relations with close-in neighbors — Russia, North and South Korea, and China — have been more difficult.

The strategy shows signs of working. Southeast Asians seldom worry that Japan will revert to the aggression of World War II or demand concessions for development aid. In the Philippines, Japanese aid in 1997 funded the restoration of a backbone highway on Luzon Island, crucial to transport around the largely impoverished country. “The Japanese aid was instrumental in creating the road infrastructure of the country,” says Jonathan Ravelas, chief market strategist with Banco de Oro Unibank in metro Manila.

The Japanese government-funded Thilawa Special Economic Zone in Myanmar expects to bring in foreign investors by offering world-class amenities next year. Those perks would spare investors the poor infrastructure and labor shortages common elsewhere in Myanmar, which has been open to foreign capital since the end of 50-year junta rule. Aid disbursements for Myanmar exceeded $2 billion in 2012.

Japan is looking to provide some balance to counter Beijing’s influence in mainland Southeast Asia …

Murray Hiebert, Center for Strategic and International Studies

Hanoi and Manila embrace Japan’s military aid, which may include access to Philippine bases to let Japan help defend outlying islands, obviously, against China. Tokyo and Beijing have recently tested each other with ships and military aircraft over sovereignty in the East China Sea, part of a centuries-old friction between the Asian neighbors, as they now search for natural gas deposits.

To contain China’s military and offset its economic rise, Japan is helping countries that have their own disputes with Beijing. In August, for example, Japan promised Vietnam six used naval patrol vessels worth around $5 million, along with training and equipment. Vietnam and the Philippines oppose China’s expansion into the disputed 1.4 million-square-mile South China Sea and want to shore up their much weaker militaries. Coast guards from Vietnam and China clashed over a Chinese oil rig in May, touching off riots near Ho Chi Minh City. In 2012 vessels from China and the Philippines entered a two-month standoff over prime fishing waters.

China doesn’t disclose overseas development aid details, but in 2009 a government white paper said it had allocated a worldwide total of $39 billion that year, including grants and loans for 30 countries in Asia. Southeast Asia eagerly soaks up China’s aid, but some recipients fear sacrificing natural resources. China’s long-term farming and mining leases in Cambodia and Laos have locals worried about who controls the land, says Murray Hiebert, senior fellow at the think tank Center for Strategic and International Studies in Washington. “Japan is looking to provide some balance to counter Beijing’s influence in mainland Southeast Asia where China has long been the largest aid donor and investor,” Hiebert says. And, of course, it’s not shy about putting money behind it.

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