Not all aid was created equal

Not all aid was created equal

As China and Japan spar for dominance, countries risk being trapped by loans disguised as aid

China's Belt and Road Initiative (BRI) and Japan's Indo-Pacific Strategy are trying to outdo each other with hard-term loans disguised as aid.
China's Belt and Road Initiative (BRI) and Japan's Indo-Pacific Strategy are trying to outdo each other with hard-term loans disguised as aid.

An academic has warned Southeast Asian countries to be cautious in responding to the wealth of opportunities created by the changing relationship dynamics between China and Japan.

Teewin Suputtikun, an international relations expert at Chulalongkorn University's Faculty of Political Science, said that the relentless pursuit of China's Belt and Road Initiative (BRI) and Japan's new Indo-Pacific Strategy -- which is seen as a counter policy to China's BRI -- has turned the Mekong basin into a battleground for influence, as both countries seek to establish dominance in the region through state-backed economic initiatives.

The academic said the growing use of Official Development Assistance (ODA) as a tool to court the support of recipient nations can lead to economic dependency in the Mekong basin.

Japan is the largest developmental assistance provider in the region, providing aid, grants and technical support for various sectors through its Official Development Assistance (ODA) and non-governmental organisations (NGOs).

While Japan has long established a reputation for providing better quality aid, China's economic assistance is often perceived as shrouded with ulterior motives.

"Personally, I think recipients of Chinese assistance run the risk of falling into a debt trap," said Mr Teewin.

"For example, when recipient countries fail to repay their loans, their projects were then simply taken over by Chinese companies," said Mr Teewin.

As such, Mr Teewin stressed the importance of understanding the ODA's Terms of Reference, before adding that Thailand should learn from the experience of African countries who defaulted on their ODA repayments and were then told to hand over the control over their projects to China.

"Japan has institutional checks-and-balances in place and Japanese ODAs are regulated by the Organisation for Economic Cooperation and Development (OECD), which helps guarantee the transparency of the schemes," he said.

"Meanwhile, China can easily manipulate economic policy because the country is politically less transparent."

Mr Teewin said that while Thailand has been receiving Japanese aid for quite some time, the relationship is set to change due to Japan's waning economic might.

Furthermore, he said, as China has no qualms about backing authoritarian regimes, many undemocratic states tend to gravitate towards Chinese aid, which do not come with institutional requirements, such as democratisation and protection of basic human rights.

"It is easier to court aid from China because it imposes fewer requirements on its recipients," said Mr Teewin.

He said Thailand should keep an eye out for opportunities that may arise from the competition between China and Japan, and suggested the kingdom should use its position in the region as leverage in future negotiations.

"Thailand -- being located in the strategic centre of Asean -- has received a lot of attention from both China and Japan," he said.

"Japan cannot simply pack up and leave, as it opens the possibility of the kingdom siding with China.

"Thailand has been really good at playing this game -- courting both China and Japan, while at the same time seeming to not pick sides in their battle for influence."

Mr Teewin said that in response to China's increasing ODA, the Japan International Cooperation Agency has been trying to differentiate its ODA from those of China's by putting an emphasis on "quality", sometimes going as far as pointing out that while China's ODA are often cheaper, the terms for repayment are often not sustainable.

He noted that in the beginning, Japanese ODA had terms that were similar to China's -- which meant that the ODA was designed primarily to yield maximum benefits for itself as the donor.

"However, Japan has learnt its lessons and has now become a responsible donor," said Mr Teewin.

As a member of the OECD, Japan's ODA is regulated under the organisation's 1992 charter, which focuses more on the need of the recipients.

Meanwhile, Chinese ODA is not regulated under the same charter, as China is not a member of the OECD.

However, Mr Teewin also said that ODA under Japan's Indo-Pacific Strategy -- which can be used to build the capacity of coastguards -- serve to allay Japan's security anxiety around the South China Sea.

"We have to remember that ODA will benefit the donors too," he said.

"It would be wrong to think of any ODA as an act of altruism on the donors' part."

"ODA is a also strategic policy instrument, so recipient countries should approach it with the utmost caution," he said.

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