21 May 2013

Continent must drive its relationship with Japan

Written by  Kudrat Virk

No. 253: Continent must drive its relationship with Japan / Kudrat Virk / Business Day
21 May 2013

The hype surrounding the rise of the "southern powers" — particularly China — in Africa, risks overshadowing Africa's relationship with another Asian giant and development partner, Japan. Although still the third-largest economy in the world, Japan has increasingly appeared to play the role of handmaiden to China.

Yet the Tokyo International Conference on African Development (Ticad) predates its fierce Asian rival, the better-known Forum on China-Africa Cooperation (Focac), by seven years. Africa's relationship with Japan will crucial to its prospects of sustaining its dynamism as the world's fastest growing region and making progress towards improving the wellbeing of its 1-billion people.

Seven of the world's 10 fastest-growing economies are in Africa, which nevertheless remains the poorest continent.

If Africa is to reap the wider benefits of growth, its leadership must assert ownership of their own development agenda.

This has been a fundamental premise of development cooperation between Africa's 55 countries and Japan. Senior African and Japanese leaders recently met in the Ethiopian capital of Addis Ababa. Along with representatives of the United Nations and the World Bank, as well as private sector and civil society organisations, they met at the African Union (AU) Commission to discuss next month's Ticad V and to approve a draft declaration and action plan.

Since its inception in 1993, Ticad's five-yearly conferences have rested on the twin mantras of African ownership and international partnership for African development. Even so, this remains principally a Japanese effort to harness lessons from East Asia's development successes for the continent, and to implement its development approach that growth must be led by the private sector, with official development assistance acting as a catalyst.

The Ticad framework has been shaped by Tokyo — all summits are held in Japan — although the AU Commission is a co-organiser for Ticad V and an African ambassadors' forum in Tokyo now advises the Ticad Secretariat. Annual ministerial meetings have been held in Africa since 2009 to monitor implementation of Ticad initiatives.

Yet concerns persist that Ticad's notion of ownership lacks substance and the process must incorporate Africa's own needs and priorities. The Addis Ababa meeting acknowledged the need to ensure that Ticad initiatives are aligned with African institutions and programmes.

In Addis Ababa, Japan committed $550m in new aid to foster peace and stability in Africa. The draft action plan for 2013-2017 includes measures to be implemented not only by Tokyo and international donors, but also by African countries. This places a responsibility on Africa's policymakers to articulate a coherent strategy for engagement with Ticad.

Industrialisation is an imperative if Africa's full economic potential is to be realised, and it is to become more than the world's main supplier of raw materials — primary products comprise about 75% of Japan's imports from Africa. Enhancing public policy and business environments; human resource development; and infrastructure investment will be critical to strengthening African ownership of its own industrialisation. For example, in Ethiopia and Zambia, political leadership and policy-level commitment — alongside advisory and technical support from Japan — have been essential to creating growth-generating synergies between the public and private sectors.

However, individual countries cannot, on their own, tackle larger problems such as inadequate cross-border infrastructure and poor economies of scale, or lack of resource riches. The fragmentation of Africa's consumer markets is a deterrent to private investment from Japanese companies. Africa is the only region in the world in which intra-regional trade accounts for less than 10% of trade.

Accelerating regional integration through Ticad is thus necessary, underscoring the relevance of Japanese assistance for the setting up of "one-stop border posts" in eastern and Southern Africa.

In 2008, the Japanese government made a commitment to encourage its private sector to increase trade with, and investment in, Africa with the aim of doubling foreign direct investment to $3.4bn by last year.

Greater Japanese private sector investment in Africa presents a win-win opportunity. Africa is now the world's fastest-growing region, but faces persistent poverty and high youth unemployment. However, policy discontinuity, political instability and corruption remain key challenges faced by Japanese companies in Africa.

For Japanese companies, geographic and sectoral diversification is an imperative. Japan has an inward-focused economy, with a 30% foreign-trade-dependence ratio that is lower than the world average (which is more than 40%).

Most of this trade is concentrated in SA, which accounted for 62% of Japanese imports from the continent in 2010.

Meanwhile, the car industry comprises the majority of Japan's exports to Africa. Japan also faces competition from emerging powers, particularly China.

There are about 800 Chinese companies, but only 227 Japanese companies, operating in Africa.

Given China's appetite for resources, bilateral relations between the two Asian giants will inevitably expand to include African issues. As a member of the Organisation for Economic Cooperation and Development, Japan is bound by set standards for effective and transparent delivery of development aid.

Yet, both Chinese and Japanese approaches to development are based on the view that poverty reduction occurs through economic growth.

Tokyo's focus on bottom-up improvements in productivity, capacity-building, and soft infrastructure projects complements Beijing's emphasis on mega-infrastructure construction projects.

China and Japan also believe in the importance of the state's active role in the development process.

However, the opaqueness of Chinese development finance, particularly when it comes to loans, is a barrier to greater co-operation between the countries.

That said, Africa can act with greater determination and take more meaningful ownership for shaping its own future.

The AU Commission, as well as Africa's subregional bodies, such as the Southern African Development Community, as development partners of both Ticad and Focac, could seek greater co-ordination between Japan and China.

More important, Africa must put its own house in order. African countries must find ways to reduce their financial dependence on external donors.

They must also undertake public sector reform; implement programmes to effectively tackle corruption; and develop strong legal frameworks.

Clear and integrated development policies that can be implemented by more effective bureaucratic systems at the national, subregional, and continental levels are also essential.

The onus for whether this will indeed be an "African Century" rests squarely on African shoulders.

Virk is a senior researcher at the Centre for Conflict Resolution.

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