In his quest to restore Japan to economic relevance in the Chinese century, Prime Minister Shinzo Abe has happened upon an unlikely battleground: Africa.
China long ago became a top-tier Africa investor. Even before Xi Jinping’s Belt and Road initiative, Beijing was building roads in Uganda, dams in Sudan, power grids in Nigeria and conference halls in Ethiopia.
Japan, on the other hand, had long demurred on pouring big money into a cacophonous region its overseas-aid industrial complex didn’t quite fathom.
That’s about to change, as Abe recently declared to more than 20 African leaders in Yokohama. “We will do whatever it takes,” Abe said, “to assist the advancement of Japanese companies into Africa” and, in turn, help hasten growth and development there.
But when Abe, who was speaking at the Tokyo International Conference on African Development on August 30, got down to specific investment numbers, the tone among visiting dignitaries probably pivoted from glee to resignation.
The US$20 billion Japan aims to pump into Africa over three years is nice. But compared to the $60 billion China’s Xi Jinping is deploying, along with another $10 billion from mainland companies, Japan remains a laggard.
In Yokohama, Abe was unwittingly reminding the globe why Japan is likely to continue falling behind China. And why the economy will continue to disappoint.
Getting into the game
Tokyo’s $20 billion, properly targeted, could help narrow Africa’s financing gap. Abe also is tossing financial incentives at Japan Inc, including taxpayer-backed Africa-related loans. In late August, for example, Toyota signed a deal with Ivory Coast to put a giant factory into one of West Africa’s fastest-growing economies.
Nissan, meanwhile, is setting up operations in Nigeria, Kenya and Ghana. Honda is doing the same in Nigeria. Wooing more household Japanese names would help create new jobs across Africa and strengthen the quality of local labor pools.
This could catalyze a China-versus-Japan turf war from which Africa can benefit.
One pull factor for Africa is that Japan is selling a less exploitative model. Its “quality infrastructure” is an alternative to China’s reputation for shoddy quality and projects that can leave governments heavily in debt.
Beijing favors a turnkey model – flying in labor and materials in ways that benefit China Inc more than the communities in which projects are built.
Yet Abe’s Liberal Democratic Party really needs to get serious.
Data on Africa investment inflows show a lag. As of 2017, Japan’s $1.8 billion of foreign direct investment in Africa put it behind Italy – roughly $9 billion in total.
In 2017, Africa received more than $4 billion of Chinese money, roughly 10% of all inflows. That made China’s FDI into Africa 4.7 times greater than Tokyo’s.
Bulk up, build respect
Abe also needs to get serious at home. In a world dominated by strongmen – from Xi to Rodrigo Duterte in the Philippines – there’s no greater currency than economic strength. If Abe wants to project it globally, he needs to start by building real muscle at home.
Since 2012, he’s largely tried to export Japan’s way back to vibrancy. A weaker yen isn’t making Abe’s economy more productive or innovative. It’s not unleashing a startup boom to increase Japan’s tally of tech “unicorns.” It’s not curbing runaway national debt and it’s certainly not helping Tokyo get a handle on a rapidly-aging population and shrinking birthrate.
Nothing would turn Chinese heads faster than fixing these deficiencies and boosting gross domestic product. That goes too for US President Donald Trump, whose view of Japan as a subordinate power stems in part from its lack of economic oomph.
If Abe wants to build stronger ties with Africa, it follows, he must do more than write checks – he should open Japan’s markets. Abe has done just that with the European Union: He signed a giant free-trade deal.
He also spearheaded efforts to keep the Trans-Pacific Partnership alive after Trump pulled out of the deal.
Time for trade talks
Abe should send in his trade negotiators.
In 2018, Japanese trade with Africa was $17 billion, half the amount in 2008. China’s, by sharp contract, was $200 billion. Becoming a bigger blip on Africa’s radar screen would increase Tokyo’s clout in a resource-rich and geopolitically vital region.
At the same time, lowering Japan’s trade defenses would help consumers and import more competitive forces to modernize Japan’s financial system.
Africa is as good a place as any for Abe to engage in a proxy war with China. Unfortunately, his unimaginative strategy is a microcosm of why Japan is struggling to keep up globally.