China and Japan's Battle for Influence in Southeast Asia

It turns out that Beijing is not the only player in the burgeoning strategic competition in Southeast Asia.

On his inaugural visit to Southeast Asia as president of China, Xi Jinping announced a plan to build a “maritime silk road.” In November of the following year, the Chinese government established the Silk Road Fund, and contributed an initial $40 billion, which will be used to invest in both overland transportation infrastructure and in “expanding ports and industrial parks in Asia, the Mideast, Africa, and Europe.” Given Southeast Asia’s market size, economic potential, and location, it is a key link in China’s maritime silk road plans.

Earlier this year, with significant international participation, China established the Asian Infrastructure Investment Bank or AIIB. The bank “will focus on the development of infrastructure and other productive sectors in Asia, including energy and power, transportation and telecommunications, rural infrastructure and agriculture development,” among other areas. Much of Southeast Asia is in need of such investment, and countries in the region may be first in line for loans when the bank formally opens it doors.

Both the maritime silk road and the AIIB are aimed at tying China’s economy more closely to those of its neighbors. China here aims not only to accrue economic benefits, but to expand its economic penetration of Southeast Asia, with associated increases in influence and power.

Such is a potentially troubling outcome, both for Southeast Asians—who desire stronger economic ties with China, but would rather not find themselves under Beijing’s thumb—and for external powers, including the United States, that have interests in the region.

Although these developments have caused some heartburn in Washington and among U.S. allies, at least one of those allies has refused to sit still. Indeed, Japan, which is an important source of foreign direct investment for Southeast Asia, has long had ambitious plans for infrastructure investment in the region. Tokyo is acting on them.

In July, Japan committed to a project it had been circling for several years, agreeing to take part, in conjunction with Burma and Thailand, in developing the Dawei industrial zone along Burma’s Andaman Sea coastline. Japan may also invest in Ennore, an Indian port across the Bay of Bengal from Dawei, thus developing its own industrial and shipping hubs along China’s maritime silk road.

More broadly, Japan and the Asian Development Bank, which it leads, have long been investing in the East-West Economic Corridor, linking Vietnam to Burma through Laos and Thailand.  Japan has also provided grant money to Cambodia for the building of a bridge spanning the Mekong River to Vietnam. In July of this year, Japanese Prime Minister Shinzo Abe “pledged 750 billion yen ($6.1 billion) in aid [to Mekong River nations], part of his plan to increase by 25 percent Japanese and ADB funding for infrastructure projects.”

Finally, the Japan Bank for International Cooperation (JBIC) has invested in the Challenger Emerging Market Fund LP and the CapAsia ASEAN Infrastructure III LP, which invest in infrastructure primarily in Asian emerging economies.

Such investments are only one piece of Japan’s broader approach to Southeast Asia. In the region, Japan’s imperial history is not the albatross that it is for Tokyo’s ties to Seoul and Beijing. When it comes to aggressors, the only country the region’s states are truly worried about is China. Southeast Asians have generally welcomed Japanese engagement, both for the economic benefits that engagement brings and as a counterbalance to growing Chinese influence.

For its part, Japan aims to build broad-based partnerships with the region’s key states. Indeed, it has established so-called strategic partnerships with Vietnam, Malaysia, Indonesia, and the Philippines. The Japanese Ministry of Defense has likewise signed memorandums on cooperation and exchanges with Vietnam, Indonesia, and the Philippines, while a Malaysian agreement is forthcoming.

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