JBIC’s on-the-ground support for Asia’s path to decarbonization

Climate change is being felt in daily life, making local action essential

“Local action tailored to each country or region’s characteristics is indispensable in achieving decarbonization and carbon neutrality. In that sense, the emergence of the AZEC framework is a natural development in line with today’s needs,” says SEKINE Hiroki, Global Head of JBIC’s Infrastructure and Environment Finance Group, who leads AZEC-related initiatives within the bank.

In island nations like Indonesia and the Philippines, for example, the threat from rising sea levels is already a reality, while in continental countries such as Thailand and Vietnam, extreme weather events including heavy rains and droughts are intensifying.

“For people impacted daily by climate change, decarbonization measures are a theme of everyday life,” says SEKINE. “It is not just a policy matter; it is a ‘bottom-up’ issue on which people are seeking a meaningful response. However, measures will only work if they are in balance with the reality of people’s lives, and top-down ‘global standards’ can often feel imposed.”

This is why flexible approaches that are aligned with each country’s situation are needed, rather than the imposition of uniform numerical targets. “The premise of the AZEC concept is that each country’s circumstances are unique, and that cooperation between partner countries is based on mutual respect.”

AZEC, which includes nine fast-growing ASEAN member states (excluding Myanmar), is naturally focused on “local action.” Decarbonization approaches and stages of progress vary by country.

A major Asia-Pacific framework, AZEC also covers Japan, Asia’s only G7 nation, and Australia.

Malaysia, which is the chair of ASEAN 2025, and also co-chairs AZEC with Japan, has made strengthening networks within the region its top priority.

Australia, with an abundance of renewable energy sources such as wind and solar power, is geographically close to Indonesia, making electricity transmission viable. Through its hydrogen and ammonia exports, Australia is an important regional partner that plays a role in addressing the uneven distribution of energy resources.

Since AZEC consists of diverse countries, Japan alone cannot set the agenda. Japan’s stance is to promote a “triple breakthrough” of decarbonization, economic growth, and energy security, while acknowledging the divergent pathways countries will follow.

Even decarbonization alone will not be easy to achieve, so something needs to be done to keep the momentum going. It was from this perspective that the triple breakthrough concept was conceived. “Since all three are integrated, no country will be opposed to this concept.”

Specific initiatives between four major AZEC countries and JBIC, which are deepening their partnership

• VIETNAM
  Established a Japan-Vietnam public-private framework (AZEC/GX Promotion Working Team).
  Established a financing scheme with a private commercial bank to support the development of a power transmission network.
  Signed a memorandum of understanding (MOU) with Vietnam Joint Stock Commercial Bank for Industry and Trade to support decarbonization and energy transition.
• INDONESIA
  Established a framework for Japan-Indonesia public-private dialogue, and is supporting the structuring of projects by Japanese companies through its meetings.
  Project financing for the Muara Laboh geothermal power expansion project.
  Signed a protocol of cooperation in the field of clean energy with a state-owned electric power company.
  Signed an MOU in the fields of hydrogen and ammonia with a state-owned fertilizer company.
• MALAYSIA
  Met with Prime Minister Anwar and agreed on three areas of AZEC cooperation. Agreed on future cooperation and promotion of practical efforts to increase Japanese investment.
• THE PHILIPPINES
  Established a framework for bilateral dialogue.
  Signed an MOU with major conglomerates to promote partnerships with Japanese companies in the decarbonization sector.

JBIC is strengthening cooperation with Vietnam, Indonesia, Malaysia, and the Philippines. It provides multifaceted support for institution building and project formation, including promotion of public-private dialogue and development of financial schemes. More concrete projects are in the pipeline.

Strengthening connectivity and shaping the direction of innovation

In order to unify local efforts for decarbonization and link them to concrete outcomes, “Strengthening connectivity will be key,” emphasizes SEKINE. A specific example is building power grids.

Renewable energy resources are also not evenly distributed and vary by region. Some land is suitable for solar power, other areas are rich in geothermal resources, while some landscapes are ideal for wind power. Efficient utilization of renewables is difficult if power grids are fragmented across countries.

“We need mechanisms that enable partners to fully leverage their renewable resources and share electricity with each other. Particularly in Southeast Asia, where there are many islands, and power grid coverage is limited even in mainland areas, interconnectivity is a challenge. Efficiently generating, transmitting, and using electricity requires a focus on building power grids and connectivity.”

SEKINE cites “directing innovation” as another key to promoting decarbonization through local action. Since approaches to decarbonization and carbon neutrality vary, AZEC serves as a framework for forming communities to promote transition that matches local circumstances. At that point, it is important to clarify issues of focus and create markets through government-led policy direction.

“Rather than one nation’s individual efforts, it is more important to set common challenges and nurture markets through policy steering. If countries coordinate around a common goal and each makes steady efforts in its own way, market expansion will naturally follow. In order to promote innovation, partner countries need to work together and align their directions while respecting each other’s sovereignty.”

Entering the financial support stage, involving the private sector in individual projects

After setting the direction for innovation and stronger connectivity, the next step is financial support, where Japan also has a major role to play.

“Japan is in a position to display leadership in AZEC. In addition to its role as a facilitator connecting partner countries, Japan is expected to provide technological solutions, bolster connectivity, and accelerate innovation.”

In terms of power grid development, Japan possesses high-voltage direct current (HVDC) technology. Attracting attention as a promising new solution, HVDC enables efficient long-distance, high-capacity power transmission, and integration of renewable energy and interconnectivity of power grids.

In the financing stage, executing individual projects involving the private sector is crucial; this is where JBIC comes into its own. JBIC not only provides financial support, but works closely with partners to realize projects while considering their environmental and social impacts. Its approach looks beyond just economic returns, focusing on the overall benefits of a project, with a track record of designing appropriate support structures.

“Decarbonization is gaining attention in international frameworks such as AZEC, but JBIC's fundamental operating policy remains unchanged. Supporting initiatives that are aligned with local action is deeply rooted in our organization.”

Power source composition of
four major AZEC countries

Coal remains the main source of energy in Southeast Asian countries, and differences exist among the countries in their transition to natural gas and introduction of renewable energy. Realistic approaches tailored to each country’s situation are needed.
Source: Agency for Natural Resources and Energy, Ministry of Economy, Trade and Industry (METI), Japan (May 2024)

Harnessing JBIC’s comprehensive support tools to realize action plans

JBIC has a history of implementing initiatives tailored to local circumstances, and SEKINE is confident about their results.

“Last year, AZEC released its 10-year action plan, focused on promoting rule formation and structuring individual projects. Naturally, this requires investment. JBIC’s mission is to continuously create and support projects over the next decade.”

While AZEC is focused on decarbonization, JBIC’s stance is to provide comprehensive solutions. These firstly require an accurate grasp of local characteristics and historical background. Then, after carefully evaluating environmental and social impacts, JBIC presents solutions through detailed communication.

Solutions encompass comprehensive support tools, ranging from technology and expertise to project design and incentive structures. In some cases, blended finance tools are employed: a combination of public funds, such as subsidies, and private capital. JBIC fully leverages this toolkit to execute multiple projects.

For projects demonstrating high feasibility, JBIC has a fast-tracking system for prioritized implementation. In ASEAN countries in particular, schemes to promote the realization of projects are being launched one after another.

“These are specifically for Vietnam, Indonesia, Malaysia, and the Philippines. Along with further accelerating existing activities, we are encouraging these countries to advance their projects to the implementation phase.”

SEKINE notes that JBIC is exploring a new approach to problem solving.

“Social issues and the necessary solutions are varied, and Japan’s technologies alone may not be enough. JBIC can introduce technologies and business models from other countries to address issues while encouraging investment from Japan. This will be invaluable because if Japan successfully leads a global initiative, it will become a trusted partner.”

As illustrated by AZEC, decarbonization is more than just an environmental policy. Its importance is growing as a strategy to comprehensively drive economic development, energy security, and regional cooperation. JBIC will no doubt play an increasingly diverse and broader role in its realization.

JBIC Senior Executive Managing Officer
Global Head of Infrastructure and
Environment Finance Group

SEKINE Hiroki

Joined the Export-Import Bank of Japan (now JBIC) in 1995 after graduating from the University of Tokyo, Faculty of Economics. Received his master’s in finance from the London Business School in 2005. Following appointments including the Infrastructure Finance Group, he was a visiting researcher at Chatham House in the UK from 2020 to 2021. Conducts a monthly meeting on AZEC within JBIC, attended by representatives assigned to their respective countries.

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