Overseas Infrastructure Development 2. Effects of Promoting Overseas Infrastructure Development
Growing Government Debate and Economic Benefits
Against this background, the Japanese government established in April 2010 a meeting of practitioners for promoting the deployment of integrated infrastructure systems. The Cabinet adopted a New Growth Strategy for Japan in June, which referred to the infrastructure package as a vital way to promote Japan's growth. Then in September, the Ministrial Meeting on the Deployment of Integrated Infrastructure Systems was established to discuss infrastructure packages. In such ways, the Japanese government is taking stronger steps to encourage project packaging.
Production inducement figures (demand side) in Japan's manufacturing industries show that in 2000, 42.5% of production was driven by domestic consumption, with 27.3% by exports. In 2007 this relationship was reversed: 35.5% of production was driven by domestic consumption, with 37.7% by exports. On another front, of JBIC's total export loans provided for overseas projects during 2006 and 2007, a total of ¥314 billion was analyzed with an input-output table. The analysis showed that, of this amount, ¥109 billion went to primary contractors in Japan, ¥58 billion to secondary contractors (large Japanese corporations), ¥43 billion to smaller and medium-size Japanese corporations, and ¥104 billion to overseas contractors. These figures clearly demonstrate how overseas development projects yield economic effects for a wide range of firms within Japan.
Two Promising Sectors for Project Packaging: Electric Power Generation and Transportation
Two sectors where project packaging appears especially promising for Japan are electric power generation and transportation. In the electric power generation sector, supercritical pressure technology for coal-fired generating plants makes it possible to generate electricity efficiently with less fuel. An ultra supercritical pressure power plant raises efficiency levels even higher. Japanese companies have registered good performance in products embodying these technologies, primarily in Asian countries. As demand for electric power in emerging countries is projected to expand in the future, there are growing expectations that companies in developed countries will be able to participate in such projects by, for example, operating high efficiency generating stations and adopting smart grids that use digital technology to boost transmission efficiency.
In the transportation sector, momentum is building in developed countries for a modal shift from cars to more eco-friendly railway systems. Meanwhile, even in emerging countries, urbanization and economic growth are creating the need for high-speed railways. At the present time, large-scale railway projects are being planned in the U.S., Vietnam, China and elsewhere.
Plans for Infrastructural Development in Emerging Asian Countries
Major infrastructure projects are being planned in emerging Asian countries.
In Vietnam, economic growth rates are projected to average 6.2% per year from 2005 to 2030. This growth is rapidly driving infrastructure development. Demand for electric power is expected to increase at an average rate of 6.7% per year up to 2030, in which case power plant capacity is projected to quadruple during the same period. In the transportation sector, there are plans to construct a high-speed railway and expressway linking the country's northern and southern regions.
In Indonesia, demand for electricity is forecast to expand by 9% annually. The state-owned power company is planning new electric power supply sources that will generate an additional 55 gigawatts of power by 2019. This plan indicated a policy calling for about 40% of this new power to be generated by Independent Power Producer (IPP) projects financed by private capital. The Indonesian government has also set a voluntary target of reducing GHG emissions by 26%. To meet this target, the proposed environmental protection efforts include the promotion of greater efficiency in power-generating facilities and renewable energy.
In India, the Delhi-Mumbai Industrial Corridor (DMIC) Project is being promoted through the construction of a freight railway between Delhi and Mumbai and through development of industrial parks, distribution centers, power plants, roads and other infrastructure along the corridor with private investment. These sub-projects are said to require a total investment of US$90 billion, and the Japanese government and the private sector have teamed up to participate in some of the infrastructural development conceived for DMIC.