Japan to woo ASEAN with $20-bn aid pledge

Japan will offer ¥2 trillion (about $20 billion) in aid to member countries of the Association of Southeast Asian Nations (ASEAN) to win back regional support and win influence in the region increasingly being dominated by China.

Prime minister Shinzo Abe will announce the ¥2 trillion loans and grants package at a three-day summit meeting with the 10-member ASEAN over the weak-end, public broadcaster NHK and business daily Nikkei reported.

The loans and grants will be paid over a 5-year period, according to the reports.

Abe is also expected to announce an expansion of the Japan-ASEAN Integration Fund by another ¥10 billion, aimed at economic integration of Southeast Asian countries, reports said.

At the three-day summit meeting in Tokyo to mark the 40th anniversary of ties between the two sides, Japan also announced the expansion of currency swap agreements with Indonesia and the Philippines and renewal of an expired agreement with Singapore amidst concerns of the possible impact of the US Federal Reserve scaling back its massive monetary expansion programme.

Japan said it has nearly doubled its bilateral swap arrangement with Jakarta to $22.76 billion, from $12 billion. It also agreed to boost its arrangement with the Philippines to $12 billion from $6 billion.

Philippines president Benigno Aquino III and Japanese prime minister Shinzo Abe on Friday witnessed the exchange of notes on at least $287 million worth of loans for the Philippines.

Separately, Tokyo and Singapore agreed to renew a combined $4.0-billion swap deal, which expired two years ago.

The currency swap arrangement will help the ASEAN countries during times of stress in the normal foreign exchange market, allowing local authorities to buy foreign currencies that are more liquid, especially the US dollar.

Japan spearheaded the currency swap arrangement during the Asian crisis in the late 1990s, and has since extended this facility to several Asian countries, including India.

The regional currency swap agreement, now known as the Chiang Mai Initiative (CMI), has grown into a $240 billion programme.

A recent survey showed that the 10 ASEAN countries had re-emerged as Japan Inc.'s favoured investment destinations, with China falling off the top of the list for the first time in more than two decades because of higher labour costs and diplomatic tensions.

Japan, which is boosting bilateral currency swaps with some Southeast Asian nations ahead of its weekend summit meeting with ASEAN leaders, excludes China or South Korea from promoting closer ties.