Japan Pledges $14 Billion In Aid To Africa

Japan Pledges $14 Billion In Aid To Africa
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That Africa is among the world’s richest continents in terms of natural wealth is no secret. Over the last several years China has been building up its presence across the region, while the United States has also upped aid and development efforts. Now, Japan is looking to join in on the race to forge stronger relationships with various African nations.

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Prime Minister Abe is launching a week-long tour of Africa, which will include visits to Ethiopia, the Ivory Coast, and Mozambique. These three countries are among the fastest growing in the region, though they remain deep in poverty. The massive injection of aid suggests that Japan will not be surrendering global political power to China at any time in the near future.

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Three countries targeted with aid by Japan

In Ethiopia, the Japanese government will support the development of a geo-thermal plant. Though it’s often perceived as a troubled country, Ethiopia has emerged as one of Africa’s best performing economies. In 2012, the GDP grew by some 8.5%, after enjoying double digit growth rates in 2010 and 2011. Industrial production grew by 9.2 percent, while national debt levels remain manageable.

Mozambique also appears set to enjoy strong economic growth in the years to come. Recent gas and coal discoveries are giving hope that the country could emerge as Africa’s next hot economy. Already the Japanese government and various Japanese companies are major players in the emerging market. Now, Japan is looking to up the ante with increased investments.

The Ivory Coast, meanwhile, remains among the poorer African nations. Following decades of war and conflict, the country has suffered from retarded growth. 2012 saw growth rates rise to nearly 10 percent, however, and the country’s political stability has improved in recent years. Most importantly, the Ivory Coast offers a gateway to Africa’s relatively untapped French speaking regions.

Aid driven by geopolitical motives

Japan’s massive aid package isn’t being made simply out of good faith and good hearts. The Japanese government is looking to increase its foothold in the fast growing continent and to compete against rising Chinese influence. While many assume that China’s ascent as Asia’s premier power is all but certain, the Japanese still remain as a powerful regional and global force.

It’s fair to wonder where and how Japan will come up with the money to pay for the aid program. Japan’s national debt now exceeds 200% of the GDP, held largely by Japanese citizens. The economy has now suffered from tepid growth for over 20 years, following a property and investment bubble that popped back in 1991. Further, over the next several decades Japan’s population is set to shrink by as much as one third and to age heavily.

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