Japan still reigns in South-East Asian infra

China is trailing behind its neighbour in infrastructure projects across the region by $66 billion, notwithstanding Beijing's Belt and Road Initiative.

Despite Beijing’s much-discussed Belt and Road Initiative to boost connectivity across Asia and Europe, Japan still outmatches China in infrastructure spending in South-East Asia, according to data from market intelligence provider Fitch Solutions.

The data, which include projects at the planning or construction stages involving state-owned and private entities, show that Japanese involvement in the region totals $321.8 billion, while Chinese-backed projects stand at $255.32 billion.

South Korea, which also has a large presence in South-East Asian countries, is currently developing projects valued at $165.4 billion.

Operational, cancelled and suspended infrastructure projects are excluded from the dataset.

James Su, an infrastructure analyst with Fitch Solutions, said Japan’s lead in South-East Asian infrastructure could be attributed to the country’s role in some big-ticket projects, such as Vietnam’s revived North-South high-speed railway, and its historical presence in the region.

“China started investing in South-East Asia five or six years ago, and it’s still catching up,” he said.

However, he added that “political preferences” might also play a role in the competition between Tokyo and Beijing. More notably, Japanese firms are leading investors in Vietnam and the Philippines, two countries embroiled in a territorial dispute with Beijing in the South China Sea.

Involvement in transportation far exceeds projects in other infrastructure subsectors, with Japan participating in a total of 100 transportation initiatives across the region.

According to a study by the Asian Infrastructure Investment Bank, South-East Asia will require $83.8 billion of investment in transport infrastructure per year in order to adapt to  economic and population growth. The study said that more than half of that figure should be spent on road building and maintenance.

The dataset reveals that, despite not being the main investor in the region, the value of Chinese projects “on hold” far exceeds that of Japanese ones. China currently has 17 cancelled or suspended projects, valued at $44.3 billion.

China’s Belt and Road Initiative has been accused of financial opacity and, in some cases, of constituting a dangerous “debt trap” for developing countries. In recent months, the governments of Malaysia and Pakistan have sought to renegotiate conditions on BRI infrastructure projects inherited from previous administrations.

Su says that details about financial arrangements are especially difficult to find for projects in frontier markets – such as Cambodia, Laos or Myanmar (Burma) – where Chinese financiers and contractors do not face competition from their South Korean and Japanese peers.