On March 2, 2023 the Mansfield Foundation convened a roundtable discussion with Hiroyuki Suzuki (The Japan Bank for International Cooperation (JBIC)), Dr. Shino Watanabe (Sophia University), and Courtney Weatherby (Stimson Center Southeast Asia Program) who spoke on the ambitions and challenges in meeting the growing infrastructure demands across Asia.
Ms. Weatherby opened the discussion by highlighting the pressing infrastructure needs of Southeast Asian countries in the face of climate change. Specifically, she pointed out that the estimated cost of building resilient energy, transportation, water, health, and sanitation infrastructure is approximately $26 trillion. Given Southeast Asia’s historically low spending of 2.1% of their GDP on infrastructure, and projections of a 9% increase in the region’s fossil fuel consumption by 2040, it is imperative to catalyze foreign investments. Ms. Weatherby emphasized the crucial role that the United States and Japan can play in this effort by leveraging bilateral cooperation, through initiatives such as the Japan-U.S.- Mekong Power Partnership (JUMPP) or the Indo-Pacific Economic Framework for Prosperity (IPEF).
Mr. Suzuki continued the conversation with an explanation of JBIC’s efforts to facilitate Japan’s cooperation with the United States to finance Indo-Pacific infrastructure development. JBIC helps Japanese companies explore foreign investment opportunities, by offering to finance and support Indian and Indonesian state-owned enterprises under the Quad’s framework. However, JBIC faces two major challenges: ensuring decarbonization without hindering economic growth, and managing investment expectations to compete with China. Mr. Suzuki noted that Japan should continue to collaborate with like-minded countries such as the United States to find the “sweet spot” between decarbonizing and economic growth.
Wrapping up the discussion, Dr. Watanabe raised concerns about the potential risks associated with Chinese development projects. Given the relatively extended duration of Chinese Build-Operate-Transfer (BOT) contracts, nations involved in these agreements may be vulnerable to falling into a debt trap. To illustrate this point, she highlighted Cambodia’s Chinese-built Phnom Penh-Sihanoukville Expressway. Although the road is of high quality, it has failed to attract many truck drivers, and as a result, struggles to generate sufficient revenue from tolls to cover its costs.
During the Q&A portion, the three speakers discussed how cooperation between the United States and Japan can fill the gap between the needs for infrastructure and the lack of financing in Southeast Asia. Ms. Weatherby recommended that the United States and Japan create a regulatory environment in Southeast Asian countries that will encourage investments. Mr. Suzuki suggested that Southeast Asian countries should stop relying on private companies for infrastructure projects, which often lead to debt traps, and instead collaborate with Japanese institutions known for their expertise in devising roadmaps and working with local communities. Lastly, Dr. Watanabe called for increased information sharing between the United States and Japan.