Japan announced this week that it will lend around US$ 110 billion to help fund infrastructure development in Asia over the next five years via the Japan International Cooperation Agency, the Japan Bank for International Cooperation and the Asian Development Bank. The announcement by Japan comes amid the accelerating pace with which the Asian Infrastructure Investment Bank (AIIB) is taking shape. Founded by China and joined by 56 other nations including prominent EU member states as well as India, South Korea, Australia and Indonesia, the AIIB’s aim is also to fund Asia infrastructure development.
Notably, the United States vocally opposed the AIIB and did not join. Regionally, Japan joined the US in opting out of AIIB membership — and now is spearheading a larger, rival effort. Indeed, Japan will spend “10 billion more than the planned capital of the China-led [AIIB]”, as CCTV News has outlined.
Asia’s massive infrastructure economy
McKinsey & Company (@McKinsey) estimated in 2011 that Southeast Asia Infrastructure development would be worth $8 trillion (USD) during the course of this decade “to remedy historical under-investment and accommodate the explosion in demand.” A clearly profound opportunity for law firms seeking to serve the legal needs of those companies who might secure the work associated with this infrastructure boom.
Japan’s announcement of another $110 Billion in funding in addition to China-led AIIB funding of $100 Billion, is likely a precursor to even more spending over time as Asia’s vast infrastructure needs grow. As The Australian outlined this week: “HSBC estimates that to 2025 Asia will need $11.5 trillion of investment in infrastructure from urbanisation alone.”
China’s efforts accelerating
Meanwhile, Asia News Network reported that Chief negotiators met in Singapore last week on behalf of AIIB founding members to vie for the top five positions at the bank. “Media reports indicate that AIIB, which plans to be operational by the end of this year, will distribute 75 per cent of its shares to Asian nations. And stakes will be divided among the member countries based on their gross domestic product and purchasing power parity.”
Therefore, as a Bangkok Post report detailed after the meeting “[China will take] the most shares, followed by India, Indonesia, Germany and South Korea”, reflecting the share distribution the Korea Institute for International Economic Policy had estimated previously [as cited by Asia News Network]. Share distributions remain in negotiations which are likely to conclude in June.
Legal work increasing around regional construction
The recent announcement by Japan to increase spending on Asian Infrastructure by $110 Billion US – on top of the China-led AIIB spending of $100 Billion US – continues the strong trend-line of increasing infrastructure spend that McKinsey reported in 2011. Who’s Who Legal, A strategic research sponsor of the ABA Section of International Law reported this month that the growth in infrastructure construction in the region has meant an increase in legal work associated with that growth, including project finance and arbitration.
Japan’s bold expansion of spending provides law firms in the region focused on infrastructure to expect more and varied work in the years ahead.
