IA “FACT” already wrote that the Japanese agency JICA is considering the possibility of financing energy and infrastructure projects in Ukraine that were previously supported by USAID. This is a very timely financial alternative, because the Ukrainian energy infrastructure is constantly under attack from the Russian invaders, which puts the country’s energy security at risk.
The United States Agency for International Development USAID for many years worked on improving the energy sector in Ukraine. They helped integrate the Ukrainian electricity market into the European system, increase energy efficiency and develop renewable energy sources. USAID also helped protect energy infrastructure facilities and develop renewable energy. Unfortunately, American aid is in the past. But luckily there is a viable Japanese alternative.
JICA is considering financing energy and infrastructure projects in Ukraine on favorable terms
It is likely that JICA, which has extensive experience in financing infrastructure projects in Asia and Africa, will be able to finance projects aimed at restoring and modernizing the domestic energy infrastructure, developing green energy and strengthening the sustainability of the energy system. Ukraine filed to the Japanese project agency for financing. Among them are the supply of equipment for distributed generation and the construction of solar power plants.
JICA already provided significant support to Ukraine, in particular a grant of 2.548 billion hryvnias for emergency recovery programs in the fields of energy, security and infrastructure. The Japanese agency helps strategically – through soft loans, grants and technical assistance.
Funding from JICA was aimed at restoring the energy infrastructure, humanitarian demining, small business development, and support of the social sphere. Real opportunities for attracting Japanese investment have government agencies and the private sector.
They are especially attractive financing conditions. After all, JICA offers Ukraine preferential loans with a symbolic rate of 1.45% per annum for 30 years, and the first 10 years are exclusively interest payments, which allows not to burden the budget in the short term. It is much more profitable than standard international loans. And for critically important areas, JICA also provides grant support, in fact irreversible financial assistance.
JICA can attract Japanese companies to the development of the Ukrainian economy. This means that in the areas of infrastructure, industry and digitalization, Japanese technologies and standards can be established. Such projects are already being implemented, and their scale will only grow.
The difference between the approaches of USAID and JICA: America taught to manage, Japan taught to build
When we talk about international aid, we often imagine bags of money that just fall into the country’s budget. But in fact, behind every dollar there is a certain strategy, interests and methods.
USAID – aid whose loss we regret – at one time declared support for state development through the support of institutions, the fight against corruption, freedom of speech, justice, democracy, transparency and reforms. Yes, USAID in Ukraine financed Prozorro, eHealth, anti-corruption authorities, supported independent media and journalistic investigations. In particular, the “Media Program in Ukraine” project, designed to protect the information space from Russian propaganda, was financed precisely with the support of USAID.
JICA, on the other hand, works with governments and builds physical facilities – roads, power plants, and urban infrastructure. Their philosophy is simple: “economic growth is the basis of stability.” For example, JICA is financing the reconstruction of the Bortnytsia aeration station in Kyiv to solve the problem of water purification for the capital’s residents. The estimate of the project was 1.1 billion dollars.
USAID worked with grants – that is, Ukraine did not return these funds. For example, USAID projects for the development of the digital economy included free financing of startups engaged in the development of cyber security technologies. However, cooperation through grants meant a long process of submitting applications, reporting, and checking. Thus, the support of small businesses through the Competitive Economy Program of Ukraine involved careful selection of applications, but at the same time guaranteed the transparency of the selection.
Instead, JICA is working faster, because it uses loans contracted with the government. They were done quickly, without too much bureaucracy agreed upon preferential loans for the restoration of energy infrastructure in the amount of more than 500 million dollars.
JICA lends, but on preferential terms and with a long loan repayment period. Yes, the financing of infrastructure modernization involves the return of funds, but on terms that are more favorable than market ones.
The war is exhausting the country. In such a situation, international aid is not just money, but a strategic resource on which both the front and the rear depend. The two largest global agencies, from which Ukraine received the most support, use completely different approaches.
USAID is an echo of the political strategy of the USA during the time of democracy. Where the agency appeared, it was about the rule of law, anti-corruption and democratic institutions. USAID in Ukraine contributed to formation of effective management, which is important both for the development of the country and for its European integration.
For its part, JICA is apolitical. It operates according to the Japanese business model: quiet long-term investments in the real economy. After the Second World War, this strategy helped the country of the “rising sun” to recover, and now it is exporting its progressive experience to other countries.
USAID was part of American geopolitics: financing Ukraine, the overseas state sought to control its reforms. Therefore, this money was not directed to the construction of roads or factories, but to the creation of conditions in which these infrastructure facilities will not turn into corruption schemes.
USAID worked through grants. It did not provide money for infrastructure directly, but financed anti-corruption projects, digital reforms, and modernization of public administration.
JICA works through loans. This is economic assistance. The Japanese invest in roads, energy, water treatment plants – in things that have a concrete material result. They do not interfere in politics, but they want investments to be effective.
“JICA does not give money for democracy. She gives money for roads”
Here is an apt description of Japan’s approach to international aid. Unlike USAID, which has invested in civil society organizations, human rights initiatives and the fight against corruption, JICA works only with the government and finances only infrastructure and the economy.
JICA is a state agency that, fulfilling the strategic tasks of Japanese foreign policy, operates according to the strict rules of “Official Development Assistance”: the Japanese finance only what can be physically seen: buildings, bridges, power plants. Anti-corruption non-profit organizations, investigative media or activists are not their format.
JICA does not interfere in domestic politics. Unlike USAID, which monitored the use of money and demanded reforms, JICA simply provides a resource and expects results.
The agency works only with the government. Government bodies receive the money, not independent organizations. Although JICA does not directly help non-profit organizations, the agency finances humanitarian initiatives through UNICEF, UNDP, which already work with non-profit organizations themselves. Another example is that environmental projects can receive funding if they are implemented in cooperation with the government. JICA finances educational projects for civil servants and students.
The fact that JICA does not support NGOs is not a drawback, but rather a feature of the approach. The Japanese do what they do best – build. Those who need funding for anti-corruption investigations, media development or democratic initiatives should look to Western funds.
Among these are the European Democracy Fund, which invests in the development of civil society, supports human rights organizations working with reforms, the Soros Foundation, which provides grants for investigative journalism, human rights protection, and social projects. In addition, the programs of decentralization, judicial reform, fight against corruption are financed by the embassies of European countries. These funds give non-refundable grants, but require results – analytical reports, publications, as well as changes in legislation.
JICA replaces USAID: a chance for reconstruction or a new debt trap?
China has already entered Ukraine through its infrastructure and industrial companies. Japan cannot allow the strengthening of Chinese dominance in Eastern Europe, and therefore expands its presence through JICA, perceiving Ukraine as an entry point to European markets. If large investments are to be made here after the war, Japan wants to be among the main players controlling strategic reconstruction projects.
JICA is funding projects that will give Tokyo access to critical infrastructure management. 1.1 billion dollars for the modernization of the Bortnitsa aeration station in Kyiv is a good example of such a project.
Japan enters Ukraine not just as a donor, but as a key strategic partner. A year ago, the Ministry of Economy of Ukraine and JICA signed memorandum of understanding. Volodymyr Kuzyo, Deputy Minister of Economy, emphasized that the main goal is to attract Japanese businesses that are ready to invest without waiting for the end of the war.
The authorities have already formed a list of priority areas of cooperation: automotive industry, energy, transport, restoration of destroyed infrastructure. Already are conducted negotiations on Japanese investment in the restoration of Ukrainian logistics and ports.
Last December, Ukraine officially presented to JICA a list of priority projects for financing in 2025. Main directions named energy – installation of solar power plants for critical infrastructure, restoration of distribution networks, industry – creation of joint ventures, development of auto parts production, as well as transport and logistics – reconstruction of destroyed bridges, ports, railway infrastructure. Our government leads negotiations regarding additional financing from JICA for the restoration of distribution networks, the construction of mini hydroelectric power plants and the development of renewable energy sources.
Already signed an agreement that allows Japanese companies to enter the Ukrainian market with long-term investments.
In Ukraine, there is a great demand for Japanese equipment for demining territories. The government offers to localize the production of special equipment in Ukraine, which it can become a unique chance to expand technological cooperation.
Production clusters for the production of auto parts and components, proposed by the negotiators from the Ukrainian side, may be of some interest to Japanese concerns. This can give a powerful boost to the economy, as some of the world’s largest manufacturers are winding down production in China and looking for new sites in Europe.
…Japan views Ukraine as a key springboard for entering European markets. JICA not only finances the restoration of energy, logistics and infrastructure, but also gains influence on strategic projects.
Unlike USAID, which provided grants, JICA offers mostly soft loans, which means accumulating debt. Japan seeks to prevent the strengthening of China in the region, so it is intensifying cooperation.
Ukrainian authorities are negotiating the financing of ports, roads, solar power plants and industrial clusters. But the main question is whether these funds will be used effectively, or will they simply dissolve in corruption schemes?
Tetyana Viktorova
