JAPAN: New Initiative Bridges Asian Businesses with Africa

By Suvendrini Kakuchi Reprint | | Print |

Suvendrini Kakuchi

TOKYO, Mar 7 1999 (IPS) - It opens this April Fool’s Day, but Asia’s first official information centre on investment in Africa means serious business.

Aimed at promoting trade between Asia and Africa, the still unnamed centre is expected to stimulate Asian business interest in more African countries.

This despite the current economic crisis in Asia, which has seen business slowing down in this side of the world.

“There are many small Asian companies that might want to invest in an African country but cannot do so for lack of expertise and information on joint ventures,” says an optimistic foreign ministry official who declines to be named. “The centre will fulfill this role.”

According to the official, the centre, which will have a site on the Internet as well as host workshops and seminars, was the “result of strong urging from African officials, aid organisations, and Asian governments”.

But it could also very well be due to the diminished capacity of Japan, which is going through its worst postwar recession yet, to come to the aid of Africa.

Economists say the prospects of Japanese investment in Africa do not look good because companies these days are more bent on cutting expenses at home rather than expanding. They say that Japan is hoping other Asian countries will be able to help out Africa despite their own troubles.

Japan, the world’s largest aid donor, had been at the forefront in Africa’s foreign assistance this past decade.

Last November, the Japanese government invited other donors and African nations to the Second Tokyo International Conference on African Development conference where they discussed ways to bring economic development in that region.

An Agenda for Action was adopted at the end of the three-day meeting in which it was declared that the time had come to put action into words. Donors pledged to reduce poverty levels to half the present level by 2015.

For this to happen, it was agreed that growth levels in Africa must rise more than five percent annually for meaningful poverty reduction.

Tokyo now says the centre will play a vital role toward this purpose. It adds that Japan will encourage seminars and workshops on the different aspects of investing in Africa, while educating both African and Asian officials about the legal frameworks covering such investment.

The Japanese government estimates that it will cost 850,000 dollars to run the information center for the first two years. Funding will come from Tokyo and Kuala Lumpur through the United Nations Industrial Development Organisation.

Meetings are currently going on with Malaysia — where the centre is to open — the United Nations and other international donors as well as African countries to finalise the centre’s objectives and programmes.

To analysts here, though, the centre represents one of Japan’s major overseas development assistance (ODA) policies, which have been emphasising greater South-South cooperation.

They say it also dovetails neatly with Japan’s belief that forcing Africa’s agricultural economies to accept expensive high- level technology from industrialised countries is not the way toward development, and that Asian countries can provide cheaper technologies geared to develop smaller industries.

“Japan has pushing for a long time the concept of more trading and technical exchange between developing countries,” says development expert Katsumi Hirano of the Institute of Developing Economies. “The centre will facilitate this goal in a big way.”

Hirano explains that Asian developing countries can contribute to the development of African countries through private investment that focuses on industrialisation. at present, African economies rely mostly on the export of primary products.

Miwa Tsuda, a development expert on Africa apparently agrees, adding that “the policy is the bicycle before the car”. Taking that into a more literal level, Tsuda says that several member countries of the Association of South-east Asian Nations (ASEAN) “are making their own bicycles, so Africa can start here”.

In truth, researchers say many Asian companies, notably those from Malaysia, have already begun investing in Africa, mostly in Ghana, Kenya and South Africa.

According to the foreign ministry official, Asian countries are “playing a more active role in the privatisation schemes in African countries” today.

On the trading front, South Africa’s imports from Asian countries rose 40 percent in 1997 compared to 1990 figures. Interestingly enough, the widest increase – 15 percent — has been observed in the last three years, which may indicate that the Asian crisis may not have been detrimental at least to Asian business in South Africa.

Researchers say South Africa imported mostly industrial machinery and textiles, buying from India, China, Malaysia and Thailand.

Asian companies can introduce small-scale industrialisation such as simple product manufacturing skills, pharmaceuticals and packaging to Africa, say experts.

Hirano, meanwhile, observes that Asia buys mostly primary products from Africa and this should be addressed by Japan’s South- South cooperation policy. “But the Information Center will definitely improve the situation,” he predicts.

Ikuo Sato of the research section of Japan’s Overseas Economic Cooperation Fund, the loan arm of the ODA budget, says South-South cooperation was started by Japan in a bid to reduce waste in overseas aid by cutting down on expensive projects.

Analysts say the centre represents Japan’s growing role in Africa, a continent Tokyo had ignored in preference to Asia, which gets a little more than 60 percent of Japan’s ODA budget. Africa’s share hovers between 10 to 15 percent.

Japan’s 1998 ODA budget was around 5.55 billion dollars. The government plans a 0.2 percent increase for this fiscal year, which starts April 1.

Hirano says Tokyo realises it can no longer keep giving minute slices of the aid pie to Africa. “Japan’s ODA budget represents its most important diplomatic role,” he says, “and therefore the focus has been expanding.”