Japan’s new trade insurance policy timely

On Tuesday Japan announced a new policy of providing trade insurance to cover infrastructure-related exports and loans in Africa. The policy is designed to encourage deeper economic ties between Japan and African states. Insurance coverage will be provided in the context of a partnership between the African Trade Insurance Agency, ATIA (an agency led by African states and their international development partners), the Nippon Export and Investment Insurance (Nexi) and the Islamic Development Bank of Saudi Arabia. While Nexi will shoulder the bulk of the coverage, the specifics of the distribution across the three partners will vary by sector. For example, Nexi will insure 90 per cent of construction projects, with the other partners sharing 10 per cent of the coverage.

This policy should be a major game-changer in terms of facilitating Japanese investment in Kenya and the wider region. Presently, no policy exists to provide full coverage for Japanese investments in Africa. And because Japanese firms typically do not enjoy the robust public backing that their Chinese competitors enjoy, they have been less willing to take significant (political and commercial) risks by investing in the region. This will certainly change once the new policycomes into effect later this year. The formal commencement will begin after the Tokyo International Conference on African Development in August.