Interview: Shinichi Kitaoka
How can the Philippines create more favourable conditions for Japanese investment?
SHINICHI KITAOKA: Japan is a major source of foreign direct investment in the Philippines and was formerly the country’s second-largest trade partner. With its growing population and relatively inexpensive labour, Japanese companies view the Philippines as a promising investment destination. However, Japanese investors remain concerned about the Philippines’ security conditions, as well as its underdeveloped transport infrastructure. In 2019 President Rodrigo Duterte signed the Bangsamoro Organic Law, which was part of the 2014 peace agreement between the government and the Moro Islamic Liberation Front to end the protracted war in the southern region of the country. President Duterte’s Build, Build, Build programme also demonstrates the government’s strong commitment to infrastructure development. JICA supports these efforts to both rebuild peace and accelerate inclusive economic growth, which helps create a more attractive investment climate. It is true that the Philippines has also recently strengthened its economic ties with China, which has now become its largest investor. However, Japanese investors, who are primarily manufacturers, may be able to not only provide more jobs to locals, but also provide increased opportunities to establish related local industries. I believe Japan and the Philippines can establish a trusting business partnership that provides mutually beneficial added value.
Which mechanisms can ensure that debt levels are sustainable in regional emerging economies?
KITAOKA: It is important to note that recent decisions by emerging economies to significantly increase their borrowings at market conditions have resulted in growing public debt. According to the UN Conference on Trade and Development, the share of non-concessional public debt to total debt in low-income countries doubled from 2007 to 2016 to reach 46%. JICA’s average interest rate on yen loans is 0.48% per annum, with a repayment period that can extend up to 40 years. Compared to such concessional loans from bilateral donors, the commercial borrowing terms of the private sector and some foreign lenders can quickly undermine a borrower country’s debt sustainability. To avoid debt crises, international institutions such as the IMF and the World Bank should carefully monitor these situations and urge greater transparency from all creditors. The donor community should also support capacity development in emerging economies to strengthen their debt management practices. In this regard, JICA has a lot of experience conducting specialised training in Japan and dispatching experts to advise various emerging economies on debt sustainability.
To what extent does ongoing economic cooperation between Japan and ASEAN members help steer countries away from trade protectionism?
KITAOKA: Even for ASEAN members that demonstrate strong potential for economic growth, recent global tensions and uncertainties have cast a shadow on international trade opportunities. JICA has worked to combat concerns that have resulted from the rise in protectionism by combining our assistance to help improve connectivity through quality infrastructure development, including ports and highways, with efforts to improve business environments and provide human capital development. These measures improve economic efficiency and productivity, making ASEAN members more resilient to external uncertainty.
Moreover, Japan remains committed to the concept of the Free and Open Indo-Pacific, including the shared values, protection of the rule of law, free trade and the freedom of navigation that this encompasses. Through this vision, we seek to further strengthen economic cooperation between Japan and ASEAN. In this way we can encourage intra-regional trade as an avenue to enhance regional stability and shared prosperity.
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