Japan’s South Asia Strategy Takes Shape

With an eye towards Beijing, Tokyo seems set to increase its outreach to nations like Bangladesh and Sri Lanka. 

Earlier this month, Japanese prime minister Shinzo Abe wrapped up a three-day visit to Bangladesh and Sri Lanka, adding to the list of his extensive travel itinerary since retaking office in December 2012. The trip followed a key visit to Japan from new Indian prime minister Narendra Modi, which served to add emphasis to a growing strategic relationship between Tokyo and Delhi. And, like many other of Abe’s travels over the past several months, the visit was very closely aligned with a trip to the region by Chinese leader Xi Jinping this week.

While in Bangladesh, a state traditionally more influenced by China, Abe scored an important victory with Dhaka’s backing of Japan’s bid for a nonpermanent seat at the UN Security Council. This was an important concession as Bangladesh had previously indicated its own desire to bid for a seat on the Council. During the bilateral summit in Dhaka, Bangladeshi prime minister Sheikh Hasina agreed to drop these plans, however, and lend support to Japan’s bid. Abe’s visit follows up a three-day visit to Japan from Hasina this past spring, through which both sides agreed to elevate their bilateral partnership to a new level. As part of this, both sides agreed last week to launch foreign-minister-level dialogues beginning next year in Dhaka.

Traditionally, Japan has always been a generous donor of overseas development assistance (ODA) to Bangladesh. Moreover, Japanese companies have looked at Bangladesh—with its large population and rising GDP growth—as an alternative business destination to China, thanks to the country’s massive cheap labor force. But what Bangladesh lacks to keep its engine running toward sustainable development is key foreign direct investment (FDI). Long-term political instability, bureaucratic procrastination and corruption have all marred Bangladesh’s image as an internationally business-friendly place. Worse, the wave of violence instigated by the uncertainty of a credible election has only prolonged the country’s woes since industries, including the ready-made garment—the world’s second largest—have been badly hit. Furthermore, the Prime Minister Sheikh Hasina’s disputed reelection has further spooked foreign investors.

During these uncertain times in Bangladesh, Abe’s announcement of a number of Japanese investments has come as a relief to Dhaka. Moreover, Shinzo Abe is the first foreign leader to visit Bangladesh since the one-sided election held in January this year. Abe’s visit had a decidedly investment-orientated angle, as he brought along a number of high-ranking Japanese business executives. The trip also followed a joint private-sector economic dialogue between Japan and Bangladesh held last month in Dhaka. One of the key outcomes from this dialogue and the leader’s summit was an optimistic but cautious Tokyo, which indicated interest in upping its investment. Abe, however, stressed that Bangladesh still has critical work to do first in areas, such as its investment regulatory authority and its energy infrastructure for industry.

Although it is not clear if Dhaka is prepared to put aside its domestic politics to pace Bangladesh with the changing Asian dynamics, it is apparent that Japan is devising plans to enhance its strategic influence in South Asia. The “Bay of Bengal Industrial Growth Belt” initiative, also known as Big-B, forms a centerpiece of Japan’s regional strategy. Japan vows to integrate Pacific and Indian Ocean at the Bay by tapping Bangladesh’s huge potential and geostrategic location. As part of this program, Abe has reiterated his pledge to provide $5.9 billion over next four to five years to help Bangladesh build a deep-sea port and other major infrastructure. Japan’s deal to construct Bangladesh’s largest power plant (ultra supercritical coal-fired) in Maheshkhali is one of the most important of these projects.

But the charm offensive is not strictly from Japan’s business sector. Dhaka is also looking to build its relationship with Tokyo, partly in order to wean itself off an overdependence on China. One example is Bangladesh’s desire to have Japanese investors help it build Special Economic Zones (SEZ) for exclusive Japanese use. In kind, Abe has introduced an entourage of business delegates, including chief executives of heavy-machinery makers IHI and Mitsubishi Heavy Industries, as well as the construction giant Shimizu, to Dhaka. As Abe noted during his trip, “I am convinced to extend cooperation to Japanese entrepreneurs to invest in Bangladesh.”

Following up on the trip to Bangladesh, Abe also made a quick trip to Sri Lanka. Ties between Colombo and Tokyo have also been growing over the past year and Abe’s visit followed up a stay by Sri Lankan president Mahinda Rajapaksa last year. Apart from the financial incentives aimed at development projects in Sri Lanka, Japan also did something else that remained somewhat overlooked. In March, Japan abstained on the vote at the UN Human rights Council that launched war-crimes probe against Sri Lanka. Not only that, Tokyo now examines the possibility of providing the island-nation with patrol ships in an attempt to enhance its maritime security.

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