Japan's Foreign Aid (Old continuities and new directions)

Japan’s Foreign Aid

Beset by fiscal problems, domestic critics, and international pressures for reform, Japanese official development assistance (ODA) policy has recently been marked by spending cuts, pledges of better quality, and a new national assertiveness. Studies of the effects of these changes on the ground, however, have been rare. This book fills the gap in existing research and reviews the status of Japan’s ODA at the start of the new millennium. Japan has earned praise for being the world’s single largest donor of ODA from the early 1990s through 2001, but it has also been criticized at home and abroad for a lack of transparency, a lack of sensitivity to recipient needs, and the lack of a coherent and coordinated policy that targets poverty. In the latter half of the 1990s, in response to fiscal problems, as well as to internal and external pressures for policy shifts, Japan began to address the need for change. This volume evaluates the state of Japan’s aid program through comparison with other donors in a variety of settings. The contributors are experts from various disciplines who have had direct experience of Japanese ODA, and they offer a wide range of donor and aid recipient viewpoints. The contributors shed light on the complexity of the Japanese ODA system, and give insight into the nature of its particular problems and issues. Many offer policy recommendations, and their views suggest how Japanese aid is perceived today by relevant expert communities. Essential reading for anyone interested in Japanese ODA policy, Japan’s Foreign Aid will also appeal to economists, scholars, and those with an interest in global development. David Arase is Professor of Politics at Pomona College in Claremont, California. He has published extensive research on Japanese foreign policy and East Asian relations, including Buying Power: The Political Economy of Japanese Foreign Aid and the edited collection The Challenge of Change: East Asia in the New Millennium.

Routledge Contemporary Japan Series

A Japanese Company in Crisis Ideology, strategy and narrative Fiona Graham Japan’s Foreign Aid Old continuities and new directions Edited by David Arase

Japan’s Foreign Aid Old continuities and new directions

Edited by David Arase

First published 2005 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN Simultaneously published in the USA and Canada by Routledge 270 Madison Ave, New York, NY 10016 Routledge is an imprint of the Taylor & Francis Group © 2005 selection and editorial matter David Arase; individual chapters, the contributors Typeset in Baskerville by Book Now Ltd Printed and bound in Great Britain by Antony Rowe Ltd, Chippenham, Wiltshire All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data A catalog record for this book has been requested ISBN 0–415–35999–6

Contents

List of illustrations List of contributors Preface and acknowledgments Abbreviations 1 Introduction

vii ix xi xii 1

DAVID ARASE

PART I

Donor viewpoints 2 The World Bank, Japan, and aid effectiveness

21 23

KEVIN MORRISON

3 Japanese and British overseas aid compared

41

DAVID SEDDON

4 Swedish perceptions of Japanese ODA

81

MARIE SÖDERBERG

5 An overview of Japanese ODA to Latin America: comparative observations on social development initiatives

95

KAY B. WARREN

6 Japanese and Australian ODA

104

ALAN RIX

7 Japan’s and the United States’ bilateral ODA programs DAVID ARASE

117

vi

Contents

8 Japanese ODA compared to Canadian ODA

133

MICHELINE BEAUDRY-SOMCYNSKY

9 ODA policy and practice: Japan and the Republic of Korea

152

SANG-TAE KIM AND DAVID SEDDON

PART II

Recipient viewpoints

191

10 Japanese aid to Pakistan

193

TAHIR ANDRABI

11 Japanese aid to China: a comparison of ODA from Japan and Europe

203

SHAOKUI FENG

12 Japanese aid to South and Southeast Asia: a comparative analysis

224

HAIDER A. KHAN

13 Japan’s ODA in the Pacific island states

235

SANDRA TARTE

14 ODA from Japan and other donors in Thailand

253

ANUMAN LEELASORN

15 Conclusion

267

DAVID ARASE

Bibliography Index

276 289

Illustrations

Figures 2.1 2.2 7.1 7.2 9.1 9.2 9.3

Sectoral allocations for the World Bank and Japan Percentage of ODA spent on economic infrastructure and social and administrative infrastructure, 1998–99 OECD data on Japan’s ODA OECD data on US ODA ODA as a development tool Aid administration in Japan and Korea Operation system of bilateral grants

27 28 124 125 164 167 188

Tables 2.1 2.2 2.3 2.4 6.1 7.1 7.2 7.3 7.4 8.1 8.2 8.3 8.4 9.1 9.2 9.3 9.4 9.5

Policy performance quintile of South or East Asian IDA countries IDA-eligible countries in Japan’s top 20 bilateral aid recipients Non-IDA countries in Japan’s top 20 bilateral aid recipients IDA-eligible countries in Japan’s top 20 recipients of grant aid Japan’s and Australia’s ODA Medium-term ODA policy outline, 1999 USAID strategic plan, 1998–2007 Japan’s ODA budget, FY 1998 US ODA delivery, 1996 Trainees, experts, officials and consultants, and JOVC overseas, 1998 Overall by region, 1998 Trainees and students in CIDA CIDA experts overseas by gender Major indicators of Korea’s economic growth Total and per capita GNP of South and North Korea (current prices) The structure and evolution of Korea’s ODA Geographical distribution of Korean grant aid Number of trainees accepted

32 33 33 33 109 120 122 127 129 143 143 143 143 154 155 156 156 157

viii Illustrations 9.6 9.7 9.8 9.9 9.10 9.11 9.12 9.13 9.14 9.15 9.16 9.17 9.18 10.1 10.2 11.1 11.2 11.3 11.4 11.5 11.6 13.1 13.2 13.3 14.1 14.2

Number of trainees accepted, by financial source Number of technical experts dispatched, by region Allocation of resources: the development study program, 1984–92 Trend of Korea’s ODA, 1991–9 Distribution of bilateral ODA by income group, 1999 Ratio of bilateral grants versus loans Distribution of bilateral grants by income group Distribution of KOICA bilateral grants by aid programs Budget allocation of JICA aid programs Korea’s ODA/GNP ratio Share of bilateral grants to ten top priority countries ODA restructuring targets Composition of Korea’s ODA by aid types Japan’s ODA relationship to Pakistan Pakistan’s outstanding external indebtedness, 2000 Ratios of grant aid in the ODA of the developed countries (an average level of 1996 and 1997) Projects and amount of grant aid to China by foreign governments, 1997 Regional allocations of the recipient countries of Japan’s bilateral ODA Grant aid to China by foreign governments, 1997 Statistics of China–Japanese trade between 1980 and 2000 Comparison of cumulative amount of direct investment in China by country and region, September 2000 Pacific islands basic indicators Bilateral aid flows to Pacific island countries, 1997 and 1998 (latest comparative figures) Japan’s ODA flows to Pacific island countries covered by JICA Fiji office, 1999 List of ongoing bilateral Thailand–Japan technical cooperation projects, 2001 List of 21 third country training courses (TCTP), 1997–2001

158 159 160 173 174 175 176 178 178 179 181 182 183 194 195 204 204 205 207 218 218 235 236 240 254 265

Contributors

Tahir Andrabi is an associate professor of economics teaching development economics at Pomona College in Claremont, California. He heads two NGOs promoting basic education for girls in Pakistan, and is the principal investigator in a World Bank-funded survey project on rural education in Pakistan. David Arase is Professor of Politics at Pomona College in Claremont, California. He has written on Japanese foreign policy and East Asian relations including, Buying Power: The Political Economy of Japanese Foreign Aid (1995), and is the editor of The Challenge of Change: East Asia in the New Millennium (2002). Micheline Beaudry-Somcynsky, now retired, was Senior Advisor on relations with Japan and other Asian donors in the Canadian International Development Agency, and before that she worked at the Japan International Cooperation Agency as an exchange officer for four years. She is a co-author (with Chris M. Cook) of Japan’s System of Development Assistance (1999). Shaokui Feng is a senior researcher at the Institute of Japanese Studies under the Chinese Academy of Social Sciences in Beijing. He is one of China’s leading experts on Japan, with extensive publications on Japanese foreign policy and Sino-Japanese relations. Haider A. Khan teaches development and international economics at the Graduate School of International Studies at the University of Denver. He has extensive field research experience in East Asian development, with a focus on Japanese aid effectiveness, and has published many articles. Sang-Tae Kim is an official at the Korea International Cooperation Agency (KOICA) and has served as KOICA’s chief representative in Vietnam. Anuman Leelasorn is an official in Thailand’s Department of Technical and Economic Cooperation and has been responsible for coordinating Thailand’s technical cooperation with Japan and other major donors. Kevin Morrison is an independent development consultant who has been a Fellow at the Overseas Development Council and was a member of the core team that wrote the World Bank’s World Development Report 2000/2001: Attacking

x Contributors Poverty. He is co-author (with Ravi Kanbur and Todd Sandler) of The Future of Development Assistance: Common Pools and International Public Goods (1999). Alan Rix has published numerous books and journal articles on Japanese foreign aid and foreign policy, including Japan’s Economic Assistance (1980) and Japan’s Foreign Aid Challenge: Policy Reform and Aid Leadership (1993). He is currently Executive Dean of the Faculty of Arts at the University of Queensland in Australia. David Seddon is Professor of Development Studies at the University of East Anglia in the United Kingdom, and author of numerous articles and monographs on international development, social movements, and race, class and gender in developing Africa and Asia. Marie Söderberg is an associate professor at the European Institute of Japanese Studies at the Stockholm School of Economics and is one of Sweden’s leading experts on Japanese aid and foreign policy. Among her many publications is The Business of Japanese Foreign Aid: Five Cases in Asia (1996). Sandra Tarte is a senior lecturer at the University of the South Pacific in Fiji and is a well-known expert on Japan and Pacific Islands development issues. Among her publications is Japan’s Aid Diplomacy and the Pacific Islands (1998). Kay B. Warren is Research Professor and Director of the Politics, Culture and Identity Program at the Watson Institute for International Studies at Brown University. She teaches anthropology and international development and has published several volumes on Latin American indigenous movements, most recently Indigenous Movements, Self-Representation, and the State in Latin America (coedited with J. Jackson, 2002).

Preface and acknowledgments

This volume has grown out of a study of Japanese official development assistance (ODA) that I organized in 2001. Up to that time, Japan had been the world’s single largest contributor of bilateral ODA, but it was clear that changes of policy direction were brewing due to factors explained in the introduction to this volume. My idea was to gather the views of experts from a variety of backgrounds to gain perspectives on the state of Japanese ODA at the start of the new millennium that might do justice to the many dimensions of this policy area. The contributors to this volume were chosen for their familiarity with Japanese ODA, the actual practice of ODA in general, and the trends and theories behind the global development assistance effort. The result is a collection of contributors from a variety of national and professional backgrounds who examine Japanese ODA policy in the above-mentioned ways and in a variety of recipient country settings. They share no common methodology because they are used to addressing different professional audiences, and their approaches range from formal regression models to reports as participant-observers. But what can be gained from this eclecticism may be a broader perspective on and a deeper appreciation of the complexity of Japanese ODA. As in the case of most other volumes about Japanese ODA, this one examines the policy concepts and political factors behind Japanese ODA policy, but at the same time it includes empirically informed discussions of headquarters and field operations issues where the translation of policy concepts into actual outcomes succeeds or fails. This volume gives unusual attention to this problem and it includes the views and biases of both donors and recipients in order to gain a more rounded appreciation of the challenges and opportunities facing Japanese ODA in the global context. It is also interesting that a large degree of consensus emerges with regard to Japanese ODA that may be more compelling simply because it is shared by such a diverse set of professional observers. There is also, however, a certain divergence of appraisal with regard to the continuing relevance of Japan’s traditional industrial development, which together with ongoing political developments discussed in the conclusion may suggest that the distinctive character of Japanese ODA may not disappear in the near future.

Abbreviations

ADB AfDB AID AOTS AusAID BFE BPS CEES CIDA CTBT DANCED DAC DfID DS DSP DTEC ECNEC ECU EDCF EPA EPB EXIM FAO FDI FSM GAP GATT GDP GEF GNI IBRD IDA IDEP

Asian Development Bank African Development Bank Agency for International Development Association for Overseas Technical Scholarships Australian Agency for International Development Board of Finance and Economy (Korea) Biro Pusat Statistik Central and Eastern European states Canadian International Development Assistance Comprehensive Test Ban Treaty Danish Cooperation for Environment and Development Development Assistance Committee Department for International Development development study development studies program Department of Technical and Economic Cooperation (Thailand) Executive Committee on the National Economic Council European currency unit Economic Development Cooperation Fund (Korea) Economic Planning Agency (Japan) Economic Planning Board Export–Import Bank (of Korea) Food and Agriculture Organization (UN agency) foreign direct investment Federated States of Micronesia grassroots assistance project General Agreement on Tariffs and Trade gross domestic product global environmental facility gross national income International Bank for Reconstruction and Development international development assistance International Development Exchange Program

Abbreviations xiii IEPCO IFI IMF IRTC JBIC JETRO JEXIM JICA JITCO JODC JOVC JTPP KAIST KDI KfW KIEP KOICA KOV KYV LDC LDP LFA LIC LMIC MDG METI MFE MITI MOCIE MOF MOFA MOFAT MOST MPB NAFTA NGI NGO NIS ODA ODM OECD OECF OFCF OTCA PBC

International Economic Policy and Coordination Office international financial institution International Monetary Fund investment-related technical cooperation Japan Bank for International Cooperation Japanese External Trade Organization Japan Export–Import Bank Japanese International Cooperation Agency Japan International Training Organization Japan Overseas Development Corporation Japan Overseas Volunteer Corps Japan and Thailand Partnership Program Korean Advanced Institute of Science and Technology Korea Development Institute Kreditanstalt für Wiederaufbau Korea Institute for International Economic Policy Korea International Cooperation Agency Korean Overseas Volunteers Korea Youth Volunteers least developed country Liberal Democratic Party (Japan) logical framework approach low-income country lower middle-income country Millennium Development Goals Ministry of Economy, Trade and Industry Ministry of Finance and Economy (Korea) Ministry of International Trade and Industry (Japan) Ministry of Commerce, Industry and Energy (Korea) Ministry of Finance (Japan) Ministry of Foreign Affairs (Japan) Ministry of Foreign Affairs and Trade (Korea) Ministry of Science and Technology (Korea) Ministry of Planning and Budget North American Free Trade Agreement non-governmental institution non-governmental organization newly independent state official development assistance Overseas Development Ministry Organization for Economic Cooperation and Development Overseas Economic Cooperation Fund Overseas Fisheries Cooperation Foundation Overseas Technical Cooperation Agency Planning and Budget Committee

xiv

Abbreviations

PCM PDM PNG PRC PRSP PTEC PTTC SIDA SWAP SWOT TCTP UMIC UNDP USAID WID WTO ZOPP

project cycle management project design matrix Papua New Guinea People’s Republic of China poverty-reduction strategy papers project-type economic cooperation project-type technical cooperation Swedish International Development Cooperation Agency sector-wide approach strengths, weaknesses, opportunities, and threats third country training program upper middle-income country United Nations Development Program United States Agency for International Development women in development World Trade Organization Objectives Oriented Project Planning

1

Introduction David Arase

This volume examines Japanese bilateral official development assistance (ODA) policy and practice at the start of the new millennium, a juncture that coincides with a major turning point in Japanese ODA policy. From the 1970s, Japan deliberately pushed up its ODA spending as it grew into an economic superpower, becoming the world’s largest bilateral ODA donor by 1989. Japan remained the top ODA donor in dollar terms from 1991 to 2001 in order to demonstrate Japan’s leading role in making a peaceful contribution to global peace and prosperity. A massive asset deflation in the early 1990s, however, stopped the postwar Japanese economic miracle that had fueled Japan’s ODA spending. Faced with mounting fiscal problems, in 1998 Japan decided to reduce its ODA budget for the first time in a generation. Subsequent budget cuts led in 2001 to the loss of Japan’s top donor ranking in quantitative dollar terms, and the downward trend in spending has continued. On the question of ODA quality, however, Japan has pledged improvement since at least the 1992 ODA Policy Charter, and even after deciding to reduce its quantitative effort, Japan continues to emphasize its desire to improve the beneficial impact of its ODA. It is, therefore, of interest to see how Japan has been responding to the challenge to improve aid quality as spending decreases, and even as Japan has become more assertive regarding the use of its ODA to pursue its own national interests. It is ironic that, given Japan’s desire for recognition as a leader in global development, its ODA effort has weakened as global concern over extreme poverty and economic stagnation in large areas of the developing world has strengthened. The unprecedented street protests at the Seattle WTO meeting in 1999, and the growing threat of global terrorism after September 11, 2001, have focused attention on the need to ensure that the benefits of globalization are shared widely. Given that poverty and state failure are closely associated with transnational terrorism, criminal activity, uncontrolled migration, and the spread of disease, it is disturbing that according to the World Bank roughly one-fifth of humanity still subsists on a dollar a day, and that the income of two billion people in the developing world actually declined in the course of the 1990s.1 Meanwhile, the one-fifth of humanity living in rich countries received 80 percent of growing global income in this period. In the next 25 years there will be only 50 million added to

2 David Arase the population of the rich countries; in contrast, the developing world will have to find a way to feed and employ an additional 1.5 billion.2 These facts suggest that even a limited effort by the rich to assist the poor might go a long way to turn the impoverished regions of the world from frustration and despair toward hope for the future. Conversely, if nothing is done, growing global disparities will only feed the causes of instability. It is inopportune that just as this global agenda is coming into focus, Japan may be reducing its commitment to lead global development. The implicit question raised by these trends, and what this volume seeks to address, is how Japanese ODA policy is fitting in with the contemporary global trend toward poverty-oriented international development assistance. Especially in light of its spending reductions, it is of interest to examine how well the Japanese government’s effort to improve aid quality has been progressing. Is Japan truly compensating for its reduction of ODA spending by raising the quality and effectiveness of existing efforts in commensurate fashion, or is it merely creating a rhetorical smokescreen to cover a general retreat in ODA? The contributors to this volume address this question by examining Japan’s ODA effort in various settings at the start of the new millennium. Significant reform efforts occurring after these chapters were written will be discussed in the concluding chapter. Exactly how one defines and measures quality and effectiveness is subject to debate among various stakeholders. Even if one can get beyond this issue, it can be difficult to see in practice whether an announced policy change is actually implemented on the ground or remains at the level of policy rhetoric. It is fortuitous, therefore, that in this volume 13 foreign experts on Japan and aid issues from diverse backgrounds assess the quality of Japan’s ODA in comparison to other donors. As a group they present North American, European, Asian, and Australasian donor viewpoints, as well as Chinese, Southeast Asian, South Asian, and Pacific island state recipient viewpoints. In terms of professional background, they are drawn from professional ODA administration as well as from a range of social science disciplines. They review Japanese ODA in a variety of settings (Oceania, China, Southeast Asia, South Asia, and Latin America), and they offer comparisons to World Bank, Swedish, British, Canadian, EU, US, Australian, and South Korean ODA. Although their approaches are eclectic, they offer important insights into the unusually complex and multidimensional area of ODA policy. The contributors tend to focus on Japanese bilateral grant and technical assistance, which is where Japan strives hardest to meet international ODA norms, but they also characterize Japan’s broader ODA profile including the substantial loan aid component. The reader may note that despite the disparate national and professional backgrounds of the authors, their evaluations feature a high degree of overlap in their assumptions and conclusions. Their shared assumptions, chiefly regarding the ways to engage recipients and other stakeholders in policy dialog in order to reach the underserved poor, generally reflect current thinking about ODA quality and effectiveness as articulated in key reports and declarations sponsored by the institutions driving the global development assistance effort such as the World Bank, the UN, and the OECD. Similarly, their conclusions reflect a slowly forming global consensus regarding aid quality and effectiveness, but there

Introduction

3

are slight differences among these experts in their evaluation of the contributions Japan’s distinctive style of ODA is making today.

Explaining the rise and decline of Japanese ODA spending Japan’s rise and decline as an ODA donor roughly paralleled its trajectory as an economic superpower. Japan’s arrival as an industrialized economy was marked in 1964 when it joined the OECD, whose functions promote economic cooperation among the advanced countries, and include the monitoring and coordination of its members’ bilateral ODA programs through its Development Assistance Committee (DAC). After it joined the OECD in 1964, Japan increased its ODA spending roughly in line with its GDP growth, and rose to become the fourthranked OECD donor by 1973. In 1978 Japan reached the number three ranking and announced an “ODA doubling plan,” which became the first of five successive ODA spending targets that would make Japan the world’s number two ODA donor in 1983 and the top ranked ODA contributor by 1989. The United States briefly regained the top spot in 1990, but from 1991 to 2001 Japan monopolized this position. Japanese ODA net disbursements peaked at $15.3 billion in 1999, but afterward steadily dropped to $9.8 billion in 2001, falling below the US figure of $11.4 billion in that year. After losing its number one status in 2001, Japan’s net ODA in constant dollars declined another 1.2 percent in 2002, while DAC total net outlays increased 7.2 percent. The future outlook is indicated by the fact that, at the International Conference on Financing for Development held in Monterrey, Mexico, in March 2002, Japan pointedly avoided any specific pledge to increase its ODA effort. In contrast, the United States and the European Union announced specific new spending commitments. The declining status of Japan’s economy appears to be the fundamental factor behind the decline of Japan’s ODA effort. By the end of the 1990s Japan was not an economic superpower, or even the dominant economic actor in Asia by some measures. According to World Bank indicators, Japan’s share of global GDP in purchasing power terms fell from 8.6 percent to 7.0 percent in the 1990–2002 period. In contrast, China’s share passed Japan’s in the 1990s by rising from 5.6 percent in 1990 to 12.1 percent by 2002, while the United States’ share remained constant at 21–22 percent. According to World Bank figures, as of 2002, Japan’s GDP in purchasing power terms was $3.4 trillion, well below the US figure ($10.3 trillion) and the Chinese figure ($5.9 trillion). Although Japan will remain a comfortably rich country, its future as a global and regional leader is overshadowed by the phenomenal rise of China, the resurgence of American economic and technological power, the expansion of the European Union, and strong growth in countries such as Brazil, Russia, and India. Along with a loss of relative standing, Japan experienced dire fiscal deterioration in the 1990s. In 2002, after a decade of fiscal stimulus plans that provided economic life support but failed to restart economic growth, Japan’s central government debt had climbed to 140 percent of GDP. In that year, roughly 21

4 David Arase percent of its annual budget spending was devoted to debt service, and 37 percent of its budget was financed through government borrowing. Meanwhile, in a separate negative demographic trend with important fiscal implications, the median age of its population rose above 40 years of age, indicating the rapid progress of a demographic bulge approaching retirement, with all the attendant implications for tax revenue, pension obligations, and medical care. This fiscal deterioration was already well in focus by 1997, when the Hashimoto cabinet enacted a governmentwide fiscal austerity measure and an FY 1998 budget that announced the first ODA spending reduction in a generation. This watershed development was followed by ODA cuts each successive year up to the present. By FY 2004 Japan’s ODA budget was ¥816.9 billion, down 30 percent from its FY 1997 peak. This ODA spending downturn may seem oddly sharp, however, in view of the facts that the Japanese economy did not shrink in absolute terms, and its public indebtedness is more than offset by the world’s largest domestic savings, the world’s largest foreign exchange reserves, and over 1 trillion dollars in foreign investments. Viewed in this light, the decline of ODA effort has been striking: Japan devoted 0.35 percent of GDP to ODA in 1999, but in 2002 it devoted only 0.23 percent of gross national income to ODA. To explain this sharp decline, which may reflect a fundamental policy reorientation in Japan, one can point to the domestic political climate surrounding ODA policy. In the late 1990s, Japan was traumatized by the loss of its status as an economic superpower, making its previous commitment to be the world’s ODA spending leader now seem literally too taxing, and in 2000 Japan’s ruling coalition could agree in principle that the ODA effort should be reduced. It was humiliating, however, when Moody’s Investor Services reduced Japan’s sovereign debt rating below that of Botswana, a recipient of Japan’s ODA.3 These developments fed a new sense that perhaps Japan should worry less about helping others and more about helping itself. Another factor reducing political support for ODA has been MOFA’s loss of credibility with domestic audiences. MOFA has been the public face of ODA policy at home and abroad, but its effort to untie Japanese ODA loans during the 1990s in order to bring aid practices more in line with international norms backfired. This change resulted in far fewer Japanese aid project contracts for Japanese firms: in 1987 when loan untying was getting started, Japanese firms won 55 percent of untied loan aid contracts, but by 1999, when virtually all aid loans had become untied, Japanese firms won only 19 percent.4 This convinced many in the Japanese business community and in the powerful Liberal Democratic Party (LDP), that ODA was no longer important to their interests.5 In addition, worsening relations between China and Japan from the late 1990s caused domestic critics to call for an end to ODA to China. They complain that the 1 billion dollars of ODA given to China per year gained no gratitude in return and even assisted the growth of Chinese military and economic capabilities that threatened Japan’s own interests.6 MOFA opposed these criticisms, fearing a loss of control over China policy and the ODA budget. MOFA suffered a defeat on both counts when in the summer of 2002 Chinese police intruded into the Japanese consulate in Shenyang

Introduction

5

to arrest North Korean refugees seeking asylum, causing a Japanese media firestorm of criticism of MOFA and its policies toward China. To make matters worse, from 2000 to 2002 there were scandals involving MOFA officials feuding with Foreign Minister Makiko Tanaka, embezzling secret funds for personal entertainment, and helping a powerful LDP politician, Muneo Suzuki, in his successful efforts to siphon off ODA project funds.7 The net effect of this unfortunate series of embarrassments was to undermine the credibility of MOFA and its advocacy of a strong ODA effort.8 This produced, in combination with the deeper structural trends affecting Japan’s economy and society, a critical turning point in terms of public support for ODA in the 1998– 2002 period. Before this, the public gave MOFA the benefit of the doubt when it argued that ODA was too important to be cut, but since then fundamental doubts have entered the public mind regarding the effectiveness of Japan’s ODA and MOFA’s credibility that will do little to stop further cuts unless Japan’s elected leadership steps in to carry out reforms that will restore the public’s confidence.

Japan’s bilateral ODA profile9 Aid types Japan has devoted 70–75 percent of its total ODA over the past decade to bilateral programs, with the remainder given to multilateral international development institutions and agencies. Japan organizes its bilateral ODA into grant aid and loan aid categories. The grant aid category is subdivided into general grant aid (i.e. mainly capital-intensive projects in social and cultural sectors directly administered by MOFA); and technical cooperation (i.e. knowledge transfer through human exchange and related equipment transfers that is mainly administered by JICA). The share of the grant aid category in total bilateral ODA has grown over time in response to international pressure to improve the concessionality and raise the impact of Japanese ODA on poverty. Within the grant aid category, the emphasis has shifted gradually toward technical cooperation. In 1970, this accounted for 18 percent of grant aid spending, but its share steadily grew to 41 percent by 2002. Nevertheless, Japan has given consistently less priority to technical cooperation than most other donors. In 2002, Japan’s technical cooperation as a share of total ODA (bilateral and multilateral) was 19 percent compared to 28 percent for all DAC members. The other bilateral category is loan aid, which consists of engineering and construction loans, mainly for economic and industrial infrastructure administered by JBIC. These loans used to be the core component of Japan’s bilateral aid. They made up 67 percent of total bilateral ODA in 1970, but on a net disbursement basis the loan share has decreased gradually to 35 percent in 2002, and the repayment terms have been softened considerably. Despite this change, loans have been, and continue to be, an outstanding feature of Japan’s ODA. The aggregate data for all DAC members (including Japan) shows that in 2002 the loan share of total bilateral ODA was only 2.3 percent, compared to 35 percent in Japan’s bilateral ODA.

6 David Arase Administration and policy process The reader will note that many contributors to this volume allude to the complexity of Japan’s aid administration. That is because Japan has perhaps the most complicated and opaque system of aid administration of any donor. Japan lacks a centralized aid agency or ministry, and the Diet, Japan’s national legislature, has not created a statutory basis for ODA policy. Bilateral aid policy today is coordinated among some 13 cabinet-level bureaucratic actors in accordance with an ODA Policy Charter, a vaguely worded policy statement promulgated by the cabinet without Diet deliberation or approval. To complicate matters further, Japan’s general grant aid, technical cooperation, and loan aid are implemented by separate bureaucracies, creating chronic problems of ODA policy coherence and coordination in ways indicated below. The bilateral assistance process is request-based, i.e. recipient governments must submit formal requests to the Japanese government through diplomatic channels for individual projects or programs. On the Japanese side, the relevant implementing agency differs according to the type of aid requested (i.e. MOFA for grants, JICA for technical cooperation, and JBIC for loans), and the functional category of the request introduces further actors and procedures. That is, different Japanese ministries (with different agendas) have a say in ODA policy and decision making in different sectors. For example, a technical cooperation project in food export development will involve MOFA and JICA, as well as requiring Ministry of Agriculture, Forestry, and Fishing involvement in decision making and implementation; or a loan-financed power dam project will involve MOFA and JBIC as well as the Ministry of Finance (which has formal supervision of JBIC) and the Ministry of Economy, Trade, and Industry (which supervises power dam construction). Due to the complexity of this system and the lack of a uniform standard or procedure, decisions on project approval are made on a case-by-case basis through an opaque process of consultation. Not surprisingly, this request-based system is often criticized for being overly complex, opaque, and lacking overall coherence and strategic direction. Compliance with DAC norms Japan has been known until recently as DAC’s leader in terms of the absolute quantity of ODA provided (“aid volume” in DAC jargon), but the picture is more complicated if one uses standard DAC methods for measuring a member’s ODA effort. Although Japan did top the list of DAC donors in dollar spending for many years, its effort in relation to its national income has always remained below the DAC median, and well below the target of 0.7 percent of GDP set back in 1970 by the UN and reaffirmed by all DAC members in 2002. For example, at the peak of its net spending in the late 1990s, Japan’s ODA/gross national income was 0.27 percent, ranking it fifteenth or sixteenth out of 22 DAC members. In 2002, its ODA/GNI ratio fell to 0.23 percent, ranking it eighteenth of 22 DAC members. The terms of Japan’s bilateral ODA have improved over the years, but they remain less concessional (i.e. less generous) than most other DAC donors due to

Introduction

7

the heavy reliance on loans. The grant element, which measures how close ODA resources come to being an outright unilateral transfer compared to the terms of a commercial loan, improved from 77 percent in 1991–2 to 88 percent in 2001–2 in the case of Japan, but the latest figure remains below the 97 percent average for DAC as a whole. To get at how well its members are targeting poverty and addressing broad humanitarian issues, DAC measures the distribution of ODA by geographic region, functional sector, and income level of recipient countries. A defining feature of Japan’s ODA is its geographic distribution, which has heavily favored Asia ever since its inception. In 1970, Japan’s net disbursements of ODA to Asia were 98 percent of its bilateral total. This share gradually decreased to 61 percent in 1991–2, but in 2002 the Asia share had risen back up to 66 percent. DAC as a whole devoted a 33 percent share to Asia in 2002. Japan’s sector distribution has also changed somewhat over time, but it retains a characteristic emphasis on modern industrial production-related sectors. In 1981– 2, Japan devoted 55 percent of its bilateral assistance to economic infrastructure and production sectors, compared to 33 percent for DAC as a whole. In 2001–2, the share devoted to these sectors by Japan had dropped to 38 percent, but the figure for DAC as a whole had dropped to only 16 percent. Japan’s focus on assisting the world’s poorest countries has increased over the years, but still lags behind the overall DAC effort. In 1991–2, the percentage of Japan’s total ODA directed to the least developed countries (LDCs) ranked it twentieth out of 21 DAC members; in 2002, Japan was eighteenth out of 22, still well below the median. The trends from 1970 to 2000 as measured by DAC standards show that Japan has made incremental progress toward meeting the broader international community’s expectations for ODA effort and quality. Pressures for change have come from civil society elements inside and outside of Japan, aid recipients, and international organizations such as the UN and the OECD. Japan’s ODA terms have become more generous and its allocation has changed to reflect a greater emphasis on poverty alleviation, but according to DAC standard measures, Japan’s performance is still below the median in almost all cases. Compared to other DAC members, Japan retains a characteristic ODA profile that features loan assistance, industry-related and trade-related projects, and a geographical preference for Asia. How this profile serves Japan’s interests and why it has proven hard to change will be discussed later.

Evolving global ODA norms To understand better how and why Japan’s ODA is evaluated primarily as a humanitarian enterprise, one cannot avoid considering the prevailing international expectations governing this policy area. To be sure, international ODA norms have changed over time in response to accumulated experience, the changing structure of the global economy, and global political trends. For example, the standard measures of bilateral ODA effort developed in the 1960s and 1970s

8 David Arase measured resource inputs – quantity, concessionality, and the allocation of ODA by region, sector, and income group – and this approach was codified in rich country commitments to reach a UN-sanctioned target of 0.7 percent of GDP devoted to ODA, and in the 1978 DAC Terms Recommendation.10 This made sense at a time when it was thought that a relatively straightforward transfer of resources from the rich countries to the developing countries was the key to closing the North–South income gap. By the start of the 1980s, however, it was noted that a trade-dependent, export-oriented, development strategy in East Asia had been relatively successful without large per capita inputs of ODA; that poor economic policies in Latin America had misused external capital resources, helping to create a debt crisis; and that in other regions ODA inputs did not show a clear and direct relationship to growth and development.11 Backed by these broad facts, the neo-liberal Washington Consensus that took shape in the 1980s downplayed the input-oriented ODA approach, and instead emphasized its use as a reward to recipients who agreed to liberalize and rely on trade and private capital flows to spur development. The efficacy of this approach came into question in the 1990s, however, when it became clear that policy conditionality in practice was hard to coordinate and enforce among donors,12 and that liberalization alone may not adequately address absolute poverty because market-driven solutions had little relevance to areas where market activities were unable to take root due to indebtedness, poor governance, absence of appropriate institutions, illiteracy, and instability.13 Reflecting these experiences, in 1996 the OECD produced a document entitled Shaping the 21st Century: The Contribution of Development Co-operation,14 which articulated a new “development partnership” approach to ODA that would shift the aid focus to effective and measurable poverty alleviation. The new concept retained the basic notion of policy conditionality, and widened the focus of performance from the measurement of ODA inputs to include the measurement of outputs in terms of stakeholder coordination and measurable progress toward achievable poverty alleviation goals. It called for the elimination of gender disparity in primary and secondary education by 2005, and for the achievement of core poverty alleviation targets by 2015. These were: (1) to halve the percentage of the world’s population living at incomes below 1 dollar per day; (2) to achieve universal access to primary education; (3) to reduce mortality from birth to age five by two-thirds and maternal childbirth mortality by three-quarters; (4) to provide access to reproductive health services through primary care systems; and (5) to arrest the net loss of environmental resources. This new consensus in ODA has been consolidated by the Millennium Declaration endorsed at the UN Millennium Summit in September 2000. Extending the ideas advanced in the OECD’s 1996 report, the Millennium Declaration set out the Millennium Development Goals (MDGs), which are eight poverty-alleviation goals that aid donors and recipients should cooperatively strive to attain. These goals are: (1) to eradicate extreme poverty and hunger; (2) to achieve universal primary education; (3) to promote gender equality and empower women; (4) to reduce child mortality; (5) to improve maternal health; (6) to combat HIV/AIDS,

Introduction

9

malaria, and other diseases; (7) to ensure environmental sustainability; and (8) to develop a global partnership for development, which emphasizes close coordination involving donors, recipients, the private sector, and all levels of civil society in each endeavor. These eight goals are broken down into 18 policy targets with 48 quantitative progress indicators that will allow donors to focus on certain targets and measure their success. The new results-oriented approach is prescriptive regarding the methodology of ODA delivery. The focus is on country-led strategies, or poverty-reduction strategy papers (PSRPs) in the jargon of international development, in which the recipient government defines an assistance framework in partnership with bilateral and multilateral donors as well as with other stakeholders such as international NGOs and local governments and grassroots organizations.15 With the opportunity to have more “ownership” over aid, recipients are expected to have more commitment, and with greater participation by international and local civil society actors, new efficiencies, effectiveness, and sustainability at the local level are hoped for. Donors and recipient are expected to collaborate within the framework of the country-led strategy by choosing areas of emphasis and harmonizing policies. Donors are encouraged to strike up operational partnerships and pool resources to ensure that their efforts are complementary and supportive of commitments made by all parties. The entire effort is to be oriented toward the achievement of the MDGs in the target country.16 This new agenda poses a challenge for all bilateral donors, especially Japan, who may not have the structures, procedures, or personnel to carry out the high degree of flexible interest coordination required by this new grassroots poverty-oriented development partnership approach.

Understanding Japan’s ODA Trade versus aid However much Japan may have wanted to win international distinction by spending large sums on ODA from 1978 through 1998, Japan has been less able than other donors to meet the development community’s ODA norms and agenda due to a persistent association between Japan’s ODA and its trade interests. From the time of Japan’s accession to the OECD in the 1960s, Western analysts such as John White looking at Japan’s ODA have noted strong commercial and foreign policy motivations accompanying it.17 In the 1970s, analysts such as Martha Loutfi continued to note Japanese ODA’s more-than-casual association with Japan’s economic and commercial interests in Asia.18 As the North–South confrontation sharpened from the start of the 1970s, and ODA norms moved toward better serving recipient needs, Japan faced greater pressure to improve (i.e. better serve recipient interests) in its ODA effort. To explain Japan’s ODA policy motivations in this period, Sukehiro Hasegawa relied on the counterpoised concepts of kokueki (national interest) and tsukiai (membership obligations) to explain what Japan was trying to accomplish in its ODA effort. National interest was at this time defined in terms of the advancement of Japan’s own strategic economic development needs in

10 David Arase the developing world, but altruistic ODA, which might be viewed as the antithesis of national interest, was an obligation imposed on Japan by its membership in the Western alliance and the broader community of nations. Japan’s ODA thus was shaped by the tensions between the endogenous kokueki factor and the exogenous tsukiai factor, and the actual result was a balance or compromise struck between these opposing tendencies.19 This dichotomous model has continued to organize much that is written about Japanese aid up to the present. As Japanese ODA grew rapidly in the 1980s and early 1990s, while acknowledging the basic dichotomy in Japanese ODA policy, observers such as Michael Hoffmann, Margee Ensign, and, more recently, work by Steven Hook and Guang Zhang, and Marie Söderberg have emphasized the national-interest aspect of Japanese ODA.20 Meanwhile, others such as Masamichi Hanabusa emphasized the benefits derived by recipients and other donors.21 Given the continuing nature of this dichotomy in Japanese ODA, this trade versus aid theme has been transmuted recently by the works of Saori Katada and Steven Hook and Guang Zhang into the question of who is more influential in ODA policy: the Ministry of Economy, Trade, and Industry (METI), which represents the (economic) national-interest agenda in Japanese ODA policy, or MOFA, which represents Japan’s interest in adhering to external norms.22 It should be noted, however, that although this METI versus MOFA competition is real, and may be taken as a shorthand version of a basic tension in Japanese ODA, it cannot be taken seriously as a model of how Japanese ODA policy is actually structured and governed because the actual political and institutional context for ODA policymaking is much more complicated in ways indicated below. Bureaucratic inertia Another theme in the literature on Japanese ODA policy is the role of the powerful and entrenched Japanese bureaucracy. At the start of the 1980s, Alan Rix introduced a focus on the influence of Japan’s bureaucracy on policy by calling attention to the four main bureaucratic actors then responsible for guiding ODA policy. These were the Ministry of Foreign Affairs (MOFA), the Ministry of International Trade and Industry (MITI), the Ministry of Finance (MOF), and the Economic Planning Agency (EPA), which were collectively called the yonshocho in reference to their policymaking role in ODA, a term which may be loosely translated as “the four ministries.” Rix’s point was that Japanese policy had been slow to change because individual bureaucratic interests and the bureaucratic decisionmaking process discouraged radical change and produced only incremental accommodation to demands for policy change.23 This bureaucratic focus was elaborated by David Arase who pointed out in the mid-1990s that the institutional origin of the yonshocho was in early postwar Japanese reparation policy which was expressly designed to serve Japan’s own economic recovery and development needs, even as it met the externally imposed need to give war reparations in the form of Japanese goods and services to Asian neighbors harmed by Japan in WWII. He also pointed out that the yonshocho coordinated a much larger bureau-

Introduction

11

cratic involvement in Japanese ODA, involving (at that time) 16 main ministries, each having links that extended down into JICA, the Overseas Economic Cooperation Fund (OECF) aid loan agency, and other subordinate agencies and private sector associations implementing ODA policy, thus creating a massively entrenched system which ensures that Japanese ODA, barring a radical structural reform, will continue in balkanized fashion to serve national economic and commercial interests and will stop short of meeting international ODA norms.24 Strategic ODA As Japan emerged as a potential economic rival to the United States in the 1980s, the latter harshly criticized Japan for “free-riding” on the free trade and security efforts of others. In response, MOFA pledged to use ODA as a distinctive Japanese alliance contribution, and began to coordinate its ODA funding with US strategic initiatives. Accordingly, analysts such as Robert Orr, Dennis Yasutomo, and others began to analyze the strategic implications of Japan’s ODA to US foreign policy and to broader issues of international politics.25 The recently published work of Akitoshi Miyashita continues this kind of inquiry.26 Generally speaking, there is ample evidence of Japan using ODA flexibly to support US allies and strategic aims, and this has helped Japan to maintain a stable alliance relationship with the United States. 27 In addition, as Japan came to aspire to a global political role of its own, MOFA came to see bilateral ODA as a critically important tool to advance Japan’s own independent political interests: for example, using its bilateral ODA to cultivate friendly relations with its Asian neighbors in a bid for regional leadership, and garnering broad developing country support for its bid to gain a permanent seat on the UN Security Council. To the extent that Japan’s ODA is guided by such political and strategic objectives, however, there is likely to be a tradeoff with the pursuit of the humanitarian goals of ODA. Corrupt and unaccountable ODA A third theme in the study of Japanese ODA has been advanced primarily by the Japanese media, opposition parties, and civil society actors who, since the 1980s, have been writing in non-academic media against an opaque ODA decisionmaking system that in their view has allowed powerful politicians and business interests to get away with waste, corruption, and poor ODA results. These domestic critics have assailed the ODA “iron triangle” (i.e. the interrelated bureaucratic, private sector, and ruling Liberal Democratic Party (LDP) interests that intersect and structure policymaking). This “structural corruption” fails to use tax revenue wisely, or to take proper account of recipient needs, especially in the areas of indigenous peoples, the environment, and poverty alleviation.28 These domestic elements have done much to introduce greater transparency and accountability into Japan’s ODA by pushing the government to create the 1992 ODA Policy Charter and to win some NGO participation in ODA activities (reaching 2.1 percent of bilateral aid spending in 2002).29

12 David Arase Converging with international norms Finally, the professional development community has tended to focus on the gap between Japanese ODA performance and international ODA norms. The issue for these analysts has been a narrow technical question of how to improve Japanese aid by bringing it in line with international standards, and they have tended to focus on issues of administrative organization and policy coherence in the administration of Japanese ODA. For example, Micheline Beaudry-Somcynsky has detailed the fragmented administrative system and the paucity of development professionals in high policymaking positions in order to explain the dispersion of policy goals in ODA activities, and the relatively poor coordination between the different types of Japanese ODA.30 The DAC Peer Aid Reviews of Japan conducted every few years consistently note these and other performance gaps, and suggest a set of reform measures for Japan to adopt in order to remedy the situation.31 Typically, the core recommendation is for the Japanese government to form a more coherent national ODA strategy, implemented by a centralized, cabinet-level agency if at all possible.32 Although this approach to Japanese ODA policy may seem politically naïve, in fact it is an important exercise that sheds light on actual Japanese ODA practices and focuses the attention of policymakers on core problems and possible solutions.

Japan’s difficulty in meeting international ODA norms As noted almost 40 years ago and repeated today, ODA donors serve multiple motives when they give assistance.33 Even Sweden, which enjoys a high reputation as an altruistic donor of ODA, may have agendas in addition to a humanitarian concern to alleviate poverty. Looking at the Swedish distribution of aid in SubSaharan Africa, researchers have found that, other things being equal, Sweden has preferred giving aid to socialist governments.34 Given the fact that bilateral ODA is influenced by a donor’s unique combination of values, ideologies, available resources, and interests, one might expect donors to have concerns in addition to simple poverty alleviation. Japan is no exception when it comes to multiple motives in giving ODA, with economic and security interests having a significant impact on policy over time.35 Foreign policy needs Japan’s rapid rise as a global economic power in the context of the Cold War drew attention to the fact that it did not make a global security contribution much beyond hosting US bases on its soil. This was not so much because Japan was unconcerned about the rest of the world. It reflected the constraints imposed by Japan’s postwar constitution and the difficulty of enacting a revision. To answer criticisms that it was a security “free-rider,” Japan could offer greater ODA spending as a means to support developing-country governments of strategic political and economic importance to the United States and its other Western

Introduction

13

allies. Japan was also interested in improving relations with its Asian neighbors, which had harsh experiences with Imperial Japan. In this context, ODA leadership signaled Japan’s intention to remain a non-military power. And by spreading ODA throughout the region, Japan could make amends for the past, gain stature as a regional leader, and create a more prosperous and stable neighborhood for itself. Finally, Japan could use ODA to build relations in developing regions with which Japan has little historical connection, to win their support for Japan’s desire to gain leadership positions in international institutions. The reason Japanese ODA is so impacted with foreign policy objectives has to do with the few tools available to Japanese diplomacy. Japan’s own painful and disillusioning experience with power politics, militarism, and war that led up to the fire bombing of Tokyo and the atomic bombings of Hiroshima and Nagasaki,36 together with Japan’s constitutional prohibitions against maintaining a strong military or using force to settle international disputes, have kept Japan’s diplomacy since 1945 on a strictly non-military track at least until very recently. 37 Thus, Japan has had to rely on ODA to support the Western alliance system and rebuild its international stature and security, even as it used ODA to pursue other ends. Economic and commercial interests From its inception as an early postwar reparations program, Japan’s ODA has always included the promotion of Japan’s own economic security and development among its priorities. After successful postwar reconstruction and its arrival as an industrialized country, Japan realized there were good reasons to devote a portion of its chronic structural trade and capital account surpluses to ODA. This could help Japan alleviate chronic trade friction, diversify the flow of capital away from the US economy, and build a more stable relationship with the developing world.38 As a nation heavily dependent on imports of energy, food, and strategic industrial materials, ODA could play a critical role in promoting Japan’s economic security. Moreover, as the pressures of global competition forced Japanese firms to move production to Southeast Asia and China in the 1980s and 1990s, to the extent that ODA could facilitate this process through the construction of economic infrastructure and the cultivation of more favorable investment and trade environments, it would support Japan’s global competitiveness.39 In these ways, ODA could be seen as a policy instrument to help the Japanese economy maintain its competitiveness in a rapidly globalizing world. This agenda in Japanese ODA policy may have a higher degree of overlap with humanitarian ODA objectives than does the foreign policy agenda implicit in Japan’s ODA, but it can still detract from the poverty alleviation focus of ODA.

Japan versus other ODA donors Overall, the contributors to this volume find Japanese ODA to be well intentioned, but its ability to respond to prevailing norms is often limited due to the traditional design features of Japanese aid administration. Aspects of Japanese ODA that

14 David Arase consistently draw comment include the following: a relatively underdeveloped field presence; a limited capacity to engage recipients and other donors in ongoing multilevel policy dialog at the country level; low coherence in overall ODA policy direction and implementation due to bureaucratic factors; and difficulty in meeting actual recipient needs in technical cooperation. The quantity and quality of project assistance is often appreciated, and efforts to improve the delivery of aid are noted. Potentially important ODA reforms implemented in 2003 after the chapter contributions were written will be reviewed and assessed in the conclusion. Donor perspectives One category of views in this volume is provided by eight advanced country experts who compare Japanese ODA to the efforts of other donors. After noting the distinctive profile of Japanese ODA, they tend to compare Japan on the basis of certain prerequisites for the implementation of partnership- and results-oriented ODA, e.g. the nature of field presence; policy coordination; user-friendly aid procedures; priority of lowest income countries; partnership with other government donors as well as with civil society actors above and below the national level; and priority accorded to human development (e.g. aid to health, education, and gender programs at the primary level). Whether consciously or not, this reflects the growing consensus among Western donors that they must engage in more comprehensive policy coordination and the pooling of resources in order to make headway toward meeting the MDGs. Kevin Morrison brings an insider’s knowledge of World Bank staff thinking on poverty alleviation to his comparison of Japanese ODA to World Bank policy. He finds striking differences in Japan’s comparatively heavy emphasis on infrastructure construction and its light emphasis on social sectors such as primary education and health. In addition, at a time when ODA donors are focusing on giving the poor access to aid policymaking, he notes the problems inherent in Japan’s relatively low field staff presence, centralized decision making, and request-based system. In suggesting future directions for Japanese ODA, Morrison underlines the potential for resource pooling with other donors in well-designed joint initiatives. He also suggests putting more emphasis on program assistance to develop the institutional capacity of recipient governments and to upgrade the local policy environment in key areas. The comparison of Japanese and British ODA policy involves two countries similarly situated as important but not predominant powers in the international system. David Seddon develops a historical comparison of Japanese and British ODA doctrine that emphasizes how in both cases ODA supports their respective national commercial interests and their international standing as major powers of global significance. He also points out that Japan has comparatively little experience dealing with the developing world. Thus, certain problems in Japanese aid such as a relative lack of development expertise, unfamiliarity with local needs, and awkwardness in dealing with other cultures are not surprising. With respect to the narrower question of aid doctrine, Seddon notes that Britain has swung

Introduction

15

between a focus on market-based solutions and poverty-oriented aid doctrines as the Conservative and Labour parties have succeeded each other in government. He suggests that in Japan’s case, long-term conservative rule by the LDP has created greater continuity but less clarity in ODA policy. He notes that Japan today seems willing to follow international ODA norms and, therefore, Japan needs to develop a coherent overall structure for the management and implementation of poverty alleviation. Marie Söderberg develops a comparison of Swedish and Japanese ODA through interviews with Swedish aid officials and experts. This comparison is interesting because Sweden has pioneered poverty-oriented assistance, country-specific aid programming, ODA partnerships among recipient, donor, and international NGOs, and transparent, publicly accountable administration to ensure ODA effectiveness and efficiency. In many ways Swedish ODA has set the international standard in humanitarian aid philosophy and practice. In comparison, Japan is still in the early stages of adopting this kind of approach. Perhaps reflecting Sweden’s pride in leading the international consensus on ODA, Söderberg indicates that among those Swedish aid professionals she surveyed, Japan’s level of expertise and staffing for a serious poverty alleviation effort is the focus of negative appraisal, but there is recognition that Japan has begun to improve its effort. Kay Warren is a professor of anthropology at Brown University who compares Japanese and Western ODA in Latin America in the area of social development. In Latin America, where state–society relations are often conflictual and development has sometimes excluded the interests of indigenous peoples, women, the environment, and the village-level poor, Japan is the single largest ODA donor, but paradoxically it reaps relatively little esteem among local populations or international development experts because Japanese aid seems less relevant to the most pressing Latin American poverty issues. Warren suggests that Japan’s aid system precludes the identification of many worthy poverty-alleviation efforts. Given the degree of social dislocation in Latin America, which is a legacy of painful, structural adjustment programs and internal warfare, all donors face challenges in refugee assistance, urban squatter assistance, demobilization of rebels and militias, support for peace processes, community rebuilding, and support for democracy and legal systems. In this regard, Warren finds that European donors have been setting the standard with even the United States beginning to follow suit despite the complications introduced by its militarized anti-drug policies. Alan Rix is a political scientist and Dean of the University of Queensland in Australia with well-known expertise in Japanese politics, foreign policy, and Japanese aid. In comparing Japanese and Australian aid, he points out that, in contrast to Japanese aid, Australian aid is smaller in scale, geographically concentrated in Southeast Asia and the Pacific, focused on basic social welfare sectors, and delivered in small-scale program activities built around the delivery of development expertise. Australian aid emphasizes country and sector programs, as opposed to Japan’s individual project focus and, unlike Japan, Australia relies entirely on grant aid, with about one-fifth being tied. In posing a series of questions

16 David Arase regarding the future of Japan’s ODA effort, Rix points to issues of core importance if Japan is to successfully reform its aid system. David Arase develops a comparison of Japanese and US ODA administration in order to highlight how the United States has revamped its bilateral ODA effort to make the US Agency for International Development (AID), which is responsible for the bulk of bilateral ODA, more accountable to Congress and to bring it in line with the new international ODA consensus. This US model may not be readily transferable to Japan, but it is still a useful reference case for a Japan that needs to address similar needs. Micheline Beaudry-Somcynsky notes that both Canada and Japan have moved in recent years to change their respective ODA policies in accordance with the evolving international consensus on aid-giving. The Canadian International Development Agency (CIDA) is a government department with full policy and implementation control over ODA in which development professionals are in charge of ODA policy and implementation. Thus, the implementation of a new partnership-oriented and people-centered policy direction in the Canadian context has been easier than it has been in Japan, where, Beaudry-Somcynsky notes, many government ministries pursue their own divergent interests, and where there is no central authoritative actor to create a strategic vision that fully reflects the international ODA consensus. Sang-Tae Kim and David Seddon offer a comparison of Japanese and South Korean ODA. It is worth noting that these two neighboring countries share a similar legacy of state-guided capitalist development under stable conservative rule, and, perhaps not coincidentally, South Korea has copied many aspects of the Japanese ODA model. In its brief history, Korean aid has featured a reliance on loans, aid tying, joint oversight by different ministries, and a weak field presence. The authors suggest that South Korea will face the same essential problem Japan has faced, namely, reconciling the vested interests of powerful domestic institutional and political actors that control the ODA system with the need to deliver aid that meets international expectations for poverty alleviation, recipient ownership, and partnership with a wide array of other donors and civil society actors. Recipient perspectives The reader may note that the some of the recipient evaluations show more appreciation for the benefits of Japan’s distinctive regional and sectoral emphases as well as the scale of funding, even as they point to the same issues that other donors tend to highlight, such as adaptation to local needs, appropriate project design, technology transfer, and sustainability. Tahir Andrabi focuses on JICA efforts in Pakistan to improve primary education programs for the poor, a key area in the new ODA agenda. He found that a hardware-oriented project delivered top-rate equipment, and in this sense it was a great success. But after the startup phase the project turned out to be a failure because it lacked sustainability, and so the equipment was diverted to other uses. This disappointing outcome suggests a lack of institutional capacity on the part of

Introduction

17

the recipient, but it also highlights a chronic problem afflicting Japan and other donors. Another JICA project involved a basic literacy program that targeted young female children in rural villages. With the notable exception of a single JICA officer with unusual commitment, JICA was of limited relevance because rules and the limitations of field staff prevented partnerships with other donors and NGOs important to the success of the program. Andrabi concludes that Japan needs to improve flexibility and soft aid capability, but another lesson is that effective field representation as represented by the praised JICA official would make a huge difference to the effectiveness of Japanese ODA. Shaokui Feng is a Japan expert in the Institute of Japanese Studies under the Chinese Academy of Social Sciences who looks at Japan’s ODA from the perspective of Japan’s largest ODA recipient. He shows great appreciation for Japan’s grant and loan aid in the social and economic infrastructure areas, and the support this has given to China’s rapid modernization. He notes that Japan prefers to give aid in the form of physical assets and in relatively large project packages in China. In contrast, European donors give greater emphasis to agriculture and economic reform measures, and they think of assistance in terms of providing expertise and smaller-sized projects. Feng notes frictions in the area of technical cooperation, which seem most serious in the various small programs run outside of the JICA framework by ministries and agencies with parochial interests. He also notes the rigidity of aid procedures that make project selection less effective than that of European donors, but on the whole Feng’s tone is positive and appreciative of the contributions Japanese ODA has made to China’s own industrialization. Haider Khan uses formal as well as qualitative methods to evaluate Japanese ODA in South and Southeast Asian settings. He uses a formal model to measure the relationship between ODA receipts and budget spending in Bangladesh and Indonesia. He finds that Japanese ODA has a higher than average positive impact on the recipient government budget, and in this sense Japanese aid is better than aid from other sources. In more qualitative terms, however, Khan finds from his field interviews in South and Southeast Asia that much Japanese aid is donordriven. Interestingly, there is a recipient perception that all large-country aid is donor-driven. He finds that Japanese aid tends to be identified with infrastructure projects that are too technology-intensive to be sustainable; slow or ineffective technology transfer; inadequate partnership with local NGOs; low involvement in basic health, education, and gender-related programs; and field staff unable to engage with local groups and needs. He concludes: “the manner of giving aid is more . . . bureaucracy-to-bureaucracy than people-to-people.” Thailand has had a high priority in Japanese ODA from the 1970s and is something of a showcase for Japanese ODA achievements. Anuman Leelasorn, who is a Thai official in the Department of Technical and Economic Cooperation (DTEC), notes that Japanese ODA was an important contributing factor to the successful industrialization of Thailand from the 1950s through 1992, when its growing national income made Thailand ineligible for grant assistance. Since then, Japan has continued to give ODA in the form of technical cooperation appropriate to Thailand’s changing needs and abilities. He suggests that a qualitatively new

18 David Arase and more positive partnership and ownership dimension now informs JICA’s relations with Thailand. However, Leelasorn does note a shortage of Japanese field staff and the complexity of having to deal with many different Japanese technical aid schemes and procedures. He suggests that too many bureaucracies play a role in Japanese ODA, complicating aid procedures and impacting policy coherence. Sandra Tarte is a senior lecturer at the University of the South Pacific in Suva, Fiji, and she provides a perspective from the Pacific island states. She notes the difficulty small island state recipients have in dealing with the Japanese aid system. For example, there are three different Japanese aid field offices in Suva: a JICA office, an Overseas Fishery Cooperation Foundation (OFCF) office, and the Japanese embassy, with little coordination between them. Tarte notes that Japan is willing to provide expensive fishing vessels that are greatly appreciated, but she notes that there is a perceived linkage of this aid to Japanese access to local fishing grounds.

Notes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16

17 18 19 20 21 22 23 24 25 26 27

World Bank (2002). World Bank (2004: 5). Brooke (2002: C1). Nikkei Weekly (2002). Kawai and Takagi (2001: 10). Daily Yomiuri (2002a); Naoto (2001). Daily Yomiuri (2002b). Japan Times (2002). Data cited in this section is the latest available in the statistics section of the DAC website at www.oecd.org. This may be downloaded from the Development Cooperation Directorate page of the OECD website, www.oecd.org. Robert Cassen and Associates (1986). Mosley et al. (1995). Rodrik (1993). OECD/DAC (1996). See http://www.worldbank.org/poverty/strategies/index.htm. Press statement by the chairman, Mr. Jean-Claude Faure, Development Assistance Committee High Level Meeting, April 22–23, 2003 (April 23, 2003). Available at http:// www.oecd.org/document/57/0,2340,en_2649_34471_2508089_1_1_1_1,00.html. White (1964); Hollerman (1967). Loutfi (1973); Olson (1970); Emmerson (1971). Hasegawa (1975). Hoffmann (1985); Ensign (1992); Hook and Guang Zhang (1998); Söderberg (1996). Hanabusa (1991). Katada (2002); Hook and Guang Zhang (1998). Rix (1980). Arase (1995). See, for example, Orr (1990); Koppel and Orr (1993); Islam (1991). Miyashita (2003). The latest examples are Pakistan, India (where Japan dropped the aid sanctions it imposed after these two countries tested nuclear weapons in 2000), and US-occupied Iraq.

Introduction 28 29 30 31 32 33 34 35 36 37

38 39

19

Asahi Shimbun (1985); Mainichi Shimbun (1990); Doi et al. (1990). Hirata (2002). Beaudry-Somcynsky and Cook (1999). See the Development Assistance Directorate section of the OECD website at www.oecd.org for links to Peer Aid Reviews available in summary form. Kawai and Takagi (2001). Ohlin (1966); Alesina and Dollar (1998). Schraeder et al. (1998). Cooray and Shahiduzzaman (2004). Berger (1998). In 2003, Japan’s decision to send Self-Defense Force troops to post-invasion Iraq as a US ally to engage in reconstruction activities set a new precedent. Earlier overseas dispatches of troops were done at the request of the United Nations and were for UNauthorized peacekeeping purposes in non-combat situations. Okita et al. (1986). Hatch and Yamamura (1996).

Part I

Donor viewpoints

2

The World Bank, Japan, and aid effectiveness Kevin Morrison

This chapter explores recent trends in the international community’s view of how aid can be most effective, particularly as articulated and implemented by the World Bank, and evaluates aspects of Japan’s aid program in this context. The comparison is important and interesting because of one similarity and one difference between the World Bank and Japan. The similarity is that they are both the largest donors in their respective donor categories – the World Bank as a multilateral donor and Japan as a bilateral donor – and therefore have a great influence in international development cooperation. World Bank lending totaled about $15.3 billion in fiscal 2000 (concessional lending from the International Development Association was $4.4 billion of that). Japan’s bilateral aid totaled $8.6 billion in 1998 and $10.5 billion in 1999. The major difference between them is, however, the fact that one is multilateral and the other bilateral. As a multilateral donor, the Bank is pressured by many international groups – mainly its member countries and non-governmental organizations – to succeed in its mission of alleviating world poverty. As a bilateral donor, Japan’s aid program is more subject to domestic pressure, to spur development in poorer countries but also to support domestic (mainly commercial) interests as well. Because a donor’s approach to aid has an impact on its actions – and thereby on the effectiveness of its aid in promoting development – this chapter begins by examining Japan’s and the World Bank’s philosophies on aid, and how they have been influenced by evolving conceptions of poverty and how to reduce it. The paper then moves on to look at the donors’ actions, examining how sectoral allocations of the World Bank and Japan have changed over time, and whether they are generally in line with the philosophies they have been advancing. The third section goes one level deeper, looking at the mechanisms by which aid is delivered, focusing in particular on recent international emphases on country ownership, less intrusive mechanisms for aid delivery, and donor selectivity (i.e. giving aid to those countries who will use it best). It will be shown that one of the essential components of the international development community’s strategy for improving aid effectiveness is to put much more responsibility on the recipient country for managing aid. However, this will no doubt present problems for countries with limited capacity, which almost by definition will include most poor countries. Therefore, the fourth section

24 Kevin Morrison examines technical assistance – donor efforts at building capacity – and looks at the record of Japan and the World Bank in this area. A final section offers some conclusions and recommendations.

Changes in the philosophy of aid The international community’s approach to aid policy has been in transition since the end of the Cold War. This is a result of at least three factors. First, the end of the Cold War has enabled development agencies to focus more on development than they did before, when political goals were a large determinant of aid allocations.1 Second, the international community’s conception of development has broadened over time. Third, this broadening has led to a gradual expansion of the international strategy for aiding development. This section examines the broadening conception and strategy, as reflected both in the World Bank and in Japan. Development is closely related to the eradication of poverty. Thus, as the international community’s conception of poverty has expanded, so has its conception of development.2 For most of the twentieth century, until the 1980s, poverty was conceived of solely in terms of income or expenditure. Those in poverty lacked, for example, the means for “minimum subsistence” or lacked the “minimum necessaries for the maintenance of merely physical efficiency.” But in the last two decades, the international conception of poverty has broadened considerably. The World Bank’s World Development Report – the flagship publication of the Bank, which every ten years focuses on poverty – provides a good indication of this trend. The 1980 World Development Report on poverty, for example, signaled a change by not mentioning income or consumption in its definition of absolute poverty, but rather focusing on, “a condition of life so characterized by malnutrition, illiteracy, and disease as to be beneath any reasonable definition of human decency.” 3 The 1990 World Development Report on poverty further advanced this conception, supplementing “a consumption-based poverty measure with others, such as nutrition, life expectancy, under 5 mortality, and school enrollment.” 4 The 2000 World Development Report: accepts the now traditional view of poverty . . . as encompassing not only material deprivation (measured by an appropriate concept of income or consumption) but also low achievements in education and health . . . [and] also broadens the notion of poverty to include vulnerability and exposure to risk – and voicelessness and powerlessness. 5 Why has this broadening of development and poverty occurred? To a great extent it is because of research that has shown that income is too narrow a measure of human well-being.6 Instead of being only an end in itself, greater income has come to be seen as a means to an end. The end goal has been transformed into something resembling what Nobel Prize-winning economist Amartya Sen calls, “the capabilities that a person has, that is, the substantive freedoms he or she enjoys to lead the kind of life he or she values.”7

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The importance of this shift in the conception of poverty and development does not lie in the people identified as being “poor” and therefore targeted by policy actions. While there are some differences in the groups of people who suffer from the various dimensions of poverty, on the whole these differences are not great.8 Rather, the importance of the broadening conception is in the strategies and policies used to fight poverty. The various dimensions of poverty are closely related – this is in fact why the groups of people who suffer from each dimension overlap so much. For example, an income-poor person is less able to buy medicines to protect herself from illness; a family in which the breadwinner is sick may pull children out of school; uneducated people are less able to make themselves heard by political institutions; political institutions that do not listen to the poor may bias market regulations against them; and so on. Attacking poverty, therefore, requires a wide approach to policy options. It is not surprising that this change in the conception of development has led to changes in the philosophies and approaches of aid agencies. The income conception of poverty prevalent when development assistance started in the middle of the twentieth century led to a focus on economic growth. And because the Great Depression was a not-so-distant memory for many policymakers, most of them believed that growth required a strong state to correct the significant failures of the market. The result of this thinking was an emphasis on rapid industrialization by central state planning, and most resources went to heavy industry. Between 1950 and 1959, 61 percent of World Bank lending went to infrastructure, and none of it went to the social sectors.9 However, as the conception of poverty has broadened – and as the consensus opinion on state-led versus market-led growth has shifted back and forth – aid agencies have changed their operations. The World Bank, for example, now lends 15 percent of its money to infrastructure and 22 percent to the social sectors (the figures are lower and higher, respectively, when only concessional lending is counted – see below).10

Japan’s aid philosophy Japan’s ODA approach has changed significantly too. Like other bilateral donors, Japan’s aid has always served many non-development purposes. In Japan’s case, these purposes were largely based on either domestic economic interests or international political interests. Domestic economic interests included securing markets for Japan’s goods and establishing and maintaining friendly relations with countries endowed with energy and natural resources that are scarce in Japan (this was especially true after the first oil shock in 1973). International politics, and particularly Japan’s relationship with the United States, meant that part of Japan’s aid during the Cold War went to supporting America’s geostrategic and ideological interests.11 Japan’s aid philosophy changed after the Cold War, as reflected – at least in principle – in its 1992 ODA Charter. The new approach included four principles to guide aid allocations, including nods to environmental conservation and “basic human rights and freedoms.”12 The broadening approach to development is

26 Kevin Morrison certainly apparent in these principles. In addition, Japan was instrumental in seeing that this broad approach was set out in an important 1996 OECD/DAC strategy document entitled Shaping the 21st Century: The Role of Development Cooperation.13 Japan has publicly supported the strategy’s international acceptance, including at the Tokyo Conference on the DAC’s New Strategy in June 1998 and at the second Tokyo Conference on African Development in October 1998. In addition, in its 1999 “Medium Term Policy on Official Development Assistance,”14 the Japanese government committed to “manage its ODA in a manner consistent with its ODA Charter and with an eye to the goals of the [DAC] Development Partnership Strategy.” It would seem, therefore, that Japan is in line with the international community and the World Bank in terms of aid philosophy. However, doubts have been raised about the extent to which the ODA Charter has guided aid flows, as it seems to have been applied inconsistently, particularly in major recipient countries.15 Furthermore, the ODA Charter has also been criticized for not providing clear directions on actions to take in particular circumstances.16 This lack of direction has been alleviated to some degree by the Medium Term Policy on ODA, which sets out priority sectors and issues, both in general and by region. However, it remains to be seen how this will be translated into practice. Up until now, as the next section shows, while Japanese pronouncements on the aid agenda have been in line with the international community’s, its aid allocations have not followed suit.

Priority sectors Japan’s aid has long been heavily focused on infrastructure – in fact, the percentage of bilateral aid committed for economic infrastructure in 1977–8 (40.5 percent) was almost identical to that spent in 1997–8 (41.2 percent). As discussed above, this was the fashion of most development agencies a few decades ago, but most donors have downsized their infrastructure allocations and increased their lending to other dimensions of development. Figure 2.1 shows a comparison of the most recent sectoral breakdowns of development finance from Japan and the World Bank.17 The World Bank’s lending is shown both as combined lending from the International Bank for Reconstruction and Development (IBRD, non-concessional lending) and the International Development Association (IDA, concessional lending), and only IDA lending, which is targeted at the poorest countries (generally those with less than an annual GNP per capita of $885). The differences in two categories are immediately noticeable: infrastructure and human development (mainly education and health). Japanese spending on infrastructure as a percentage of its ODA is more than double the percentage of combined IBRD/IDA spending, and about 2.5 times that of IDA spending alone. There is almost a mirror image with regard to human development, with the percentage of combined IBRD/IDA spending more than 2.5 times that spent in Japan’s aid.18 When IDA spending is considered alone, the percentage spent on human development is almost five times the percentage spent in Japanese aid.

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40

Percent of bank lending/Japanese aid

35 30 25 20 15 10 5 0 Public Finance and Infrastructure sector private sector management development

Agriculture and environment

Economic policy

Japan, 1998 World Bank, FY2000 IDA, FY2000

Human development

Other, including multisector, electric power and energy, oil and gas, and mining

Source: Ministry of Foreign Affairs, Japan (2000) and World Bank (2000b).

Figure 2.1 Sectoral allocations for the World Bank and Japan.

As mentioned in the introduction, the World Bank is a multilateral institution whose sole mission is poverty reduction and, as such, it does not have to cater to domestic interests in the same way that bilateral donors do. So perhaps a “fairer” comparison is between Japan and its DAC peers. While the disparity is not as sharp, Japan in 1998–9 almost doubled the DAC average of the percentage of ODA spent on economic infrastructure (34.6 percent as opposed to 18 percent), and spent about two-thirds the DAC average of the percentage spent on social and administrative infrastructure (19.3 percent versus 29.3 percent). In fact, the DAC averages of spending percentages in these sectors are heavily influenced by Japan’s spending, because Japan is the largest donor. Therefore, Figure 2.2 shows a comparison between Japan and other major donors (“major” because of total aid disbursed or by ratio of aid given to GNP). The discrepancy is even more pronounced. It should, however, be noted that despite Japan’s lower spending on social and administrative infrastructure, this amount represents a large increase compared to the past. In 1977–8, Japan spent only 6.6 percent of its bilateral aid on social and administrative infrastructure (the DAC average then was 20 percent).19 And Japan’s Medium Term Policy on ODA calls for “greater emphasis on poverty alleviation programs and various aspects of social development, human resources development, policy-related assistance and other ‘soft’ types of aid.”20 However, Japan still has a long way to go in implementing the broader approach to development outlined in the DAC strategy and in its own policy statements.

28 Kevin Morrison

45 40 35 30 Economic infrastructure

25

Social and administrative infrastructure

20 15 10 5 0 Norway

France

Sweden

United States

United Kingdom

Germany

Japan

Source: OECD/DAC (2001a).

Figure 2.2 Percentage of ODA spent on economic infrastructure and social and administrative infrastructure, 1998–99.

ODA implementation As mentioned above, the end of the Cold War took some of the political pressure off aid allocation. But it also brought the issue of aid “effectiveness” clearly onto the agenda of the international community. If aid was no longer so crucial for geopolitical purposes, then it needed to be effective at spurring development – or else it was not worth the cost to taxpayers. Thus, especially toward the end of the 1990s, there was an increased push to discover how aid could be delivered (not just allocated) more effectively. The World Bank provided its latest thinking about aid delivery in its World Development Report 2000/2001 on poverty. It argued that aid should ensure “ownership” by the recipient country, should be delivered in ways that are less intrusive to the government than past delivery mechanisms, and should be allocated to those countries who would use it best. This section explains these points and examines Japan’s ODA in light of them. Ownership and partnership Aid in the past has catered more to the desires of donors than to the needs of recipients. While this was not such a problem for achieving the political goals of aid, it has been shown to be ineffective when the goal is development.21 This is largely for two reasons – one of substance and one of process. Substantively, in line with a broadening conception of development, it has been shown that development is largely determined by local conditions, including social

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institutions, social capability, ethnic fragmentation, inequality, and geography. These variables significantly account for the variation in growth rates over the past 30 years.22 Not surprisingly, these factors also affect aid effectiveness.23 If development depends on local conditions, and donors are not paying attention to local conditions, it is unlikely that their aid will be effective. From a process standpoint, it has been shown that “ownership” of projects – that is, whether or not the local population believes in and subscribes to the project – has a large impact on whether or not the project is successful.24 If people do not think that the project is in their best interests, they will not contribute their own effort or funds in times of difficulty, and they will not continue the project once the donor has left – two key elements of project success. Understanding local needs and conditions is therefore essential to effective aid. The World Bank, understanding this (a bit late), has moved to decentralize its staff and decision making in the past few years. Ironically, the share of field staff to total staff in Japanese ODA is already higher than the World Bank’s presence in the field (31.3 percent to 23.8 percent), but it too has long been criticized for its lack of field presence and has talked about increasing it.25 There are two important factors that likely account for repeated complaints about a lack of Japanese staff presence.26 The first is that while the share of employees in the field is relatively high, the number of total staff is extremely small. Japan’s total bilateral ODA ranges between half and two-thirds of total IBRD/IDA lending, and yet Japan’s total ODA staff is less than a fifth the size of the IBRD/IDA staff.27 The second factor is that decision making in Japanese ODA is heavily centralized in Tokyo and can take a long time as [for consensus to build] consensus is built. The OECD/DAC review of Japan’s aid in 1999 said that this centralization was hindering Japan’s partnership with both the recipient country and other donors, and the issue was also raised in the Japanese evaluation of its aid to Peru.28 In principle, because of Japan’s “request-based” system of project identification in the past – whereby aid projects were supposedly identified by the recipient country – the aid program might not need to have as great a field presence as other donors. In fact, a request-based system might be close to the ideal put forth by those who favor recipient country ownership, if projects are truly requested and designed by the recipient country and then funded by the donor. In practice, however, Japan’s request-based system has not worked like this. As Arase has explained, the administrative work required to request an aid project is immense and often far beyond the capacities of developing countries. The result is that projects have usually been “injected” by Japanese companies or trade associations working with the Japanese government.29 The result, not surprisingly, has been a lack of ownership on the part of recipient countries. Japan has recently said it will be moving away from the request-based system and more toward coherent country programming. In doing so, it should be aware that the problem with the request-based approach was not the principle, but rather the practice. In principle, the request-based approach is very much in line with the international community’s push toward greater recipient country ownership. In moving to a more

30 Kevin Morrison strategic and programmatic approach, Japan should attempt to move, in fact, more toward the principle of the request-based approach and away from the way it has been implemented until now. Delivery mechanisms Along with a greater focus on recipient country ownership has come an acknowledgment that donor practices have often overwhelmed developing country governments with limited capacity – either because of poor coordination or overly onerous reporting requirements. Thousands of donor projects can be going on at one time in a given country – sometimes in one sector in a country – and they are often disbursed outside the national budget and can be stopped at any time by a donor. This makes accurate budget planning almost impossible. The time spent coordinating donors and solving problems caused by poor coordination could certainly, from a development perspective, more usefully be spent responding to local citizens. A radical proposal to solve this problem is a “common pool” approach to development assistance.30 In this approach, donors would simply provide budget support (the common pool of resources) to an overall medium-term strategy designed by the recipient government in consultation with donors. Financial support would reflect the comfort level of each donor with both the strategy and the ability of the government to monitor expenditures. Individual donor-financed projects and tied aid would end, as would the administrative burden of coordinating different donor preferences into a coherent agenda. Recipient country ownership would be assured, but the approach also ensures that donors have a voice and can support the policies and programs they prefer. Because of weak capacity in developing countries, international use of such an approach to development assistance is likely several years away in most countries. However, some sectors in individual countries have better capacity than others, and in many countries donors are beginning to experiment with “sectorwide approaches” (SWAPs). Disbursements for sectorwide programs in Africa have increased every year since 1997 and are likely to exceed $500 million in 2001.31 Though the goal is that eventually most of this support will go through the recipient country’s sectoral budget, a survey by the Strategic Partnership with Africa of 16 SWAP-like sector programs found that 80 percent of disbursements were using donor project procedures, and only 17 percent used direct budget support. However, it is still in the early days of these approaches, and 40 percent of donor replies indicated that they used direct budget support for at least part of their support.32 Because of regulations on the use of their funds, neither Japan nor the World Bank can participate in budget support in these programs. The World Bank’s procurement and disbursement regulations on investment loans prevent the mixing of World Bank money with other donor and government money.33 This is somewhat ironic, as the World Bank in three of its most major recent publications has looked favorably on the idea of the common pool approach.34 Pressure is now being put on the institution to change its regulations so that it can participate more effectively in these types of arrangements.

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Japan cannot participate in pooling arrangements because of concerns for accounting for expenditures. There is also a concern that pooling arrangements limit the ability of a donor to “raise its flag” over a given project, and Japan is worried it will not be able to show taxpayers the results of their money. Perhaps more significantly, common pooling arrangements do not enable donor money to be “tied” to particular suppliers (since once money enters a common pool, it ceases to be, for example, “Japanese” money), as much of Japan’s grant aid is. Therefore, Japan participates in sectorwide approaches by taking a defined segment of the overall plan and providing equipment, supplies, facilities, and technical cooperation.35 This, however, does not allow the ownership that use of a common fund would. For example, an independent assessment of a sectorwide approach in Zambia’s health sector found that: Some donors have insisted on placing their own advisors in the Ministry, perhaps to reassure themselves of the proper use of funds. Donors have also continued with projectized grants, and have attempted in recent years to support more integrated activities and fewer vertical ones. Nevertheless, despite these efforts for integrated projects, the very effect of the project itself, when felt in a district, is that of a “vertical” programme which comes in from outside the system.36 The use of sectorwide approaches is likely to continue to increase, particularly as learning continues and donors become aware that rigorous monitoring of spending is possible in these programs.37 In addition to the endorsement of the sectorwide approach by the World Bank, the DAC poverty guidelines issued in May, 2001 endorse budget support as a means to deliver aid, saying it “allows financial resources to be disbursed with minimum transaction costs. By giving the partner country fuller responsibility for financial decisions and management, such support underpins the principles of partnership and ownership.”38 As sectorwide approaches are increasingly used, Japan’s inability to participate in budgetary pooling may hinder its participation in some sectors. Although it is not an immediate problem, Japan should be aware that in the medium term it will likely need to revise its regulations that inhibit its participation in sectorwide and budgetary approaches. Selectivity The final recommendation in the World Development Report 2000/2001 with regard to aid effectiveness is that donors pay more attention to the policy environment in which they are giving aid. Research has shown that while aid overall has had little relationship to growth in developing countries, aid has had a large effect on growth, poverty reduction, and social indicators when it has flowed to countries with good policies – such as “stable macro-economic environments, open trade regimes, and protected property rights, as well as efficient public bureaucracies that can deliver education, health, and other public services.”39

32 Kevin Morrison Since 1980, the World Bank has been evaluating borrowers’ policy and institutional performance related to economic growth and poverty reduction. These assessments are currently the main factor that drives allocations of IDA lending (the poorest of the eligible borrowers receive higher allocations for a given performance level).40 The assessments contain two factors – overall policy performance (80 percent) and a measurement of the success of past IDA projects (20 percent). The policy evaluations include 20 performance criteria, spanning the categories of economic management (such as inflation and debt management), structural policies (such as trade policy and environmental sustainability), policies for social inclusion and equity (such as human resources and safety nets), and public sector management and institutions (such as property rights and transparency of the public sector). The project portfolio measurement rates countries in terms of “number of projects at risk.” There are many questions that surround using such a system, including whether or not the criteria are the right ones, and whether the subjective measurements of Bank staff are correct. However, when this performance measurement is put into regression analyses as a variable to explain growth, it has statistical significance and other common variables do not, implying that it is a reasonable predictor of success. In fact, one estimate says that if all aid were allocated solely on the basis of severe poverty and adequate policies (as represented in the IDA assessments), current aid disbursements would lift about 80 million people per year out of poverty instead of the current estimated 30 million.41 How does Japan’s aid relate to these assessments? Japan’s aid is already biased toward Asia, where a majority of the world’s poor live, and where many countries have reasonably good policy performance. Unfortunately, the actual IDA assessments of individual countries are not publicly available, but IDA does categorize its recipients into quintiles of policy performance. Table 2.1 shows where Asian countries fall in these rankings (top quintile being the best performing countries). Table 2.2 lists the IDA-eligible countries among the top 20 recipients of Japanese aid (representing about two-thirds of all Japanese aid – both loans and grants – given in 1998) along with the quintile they fall into.42 Ten countries not eligible for IDA funding (generally meaning they are not poor enough to qualify) fall into the top 20 recipients of Japanese aid, and they are listed in Table 2.3. Finally, Table 2.4 shows the IDA-eligible recipients among the top 20 recipients of Japanese grant funding. Table 2.1 Policy performance quintile of South or East Asian IDA countries Top quintile Upper quintile Middle quintile Lower quintile Lowest quintile Not eligible

Samoa, Bhutan, Maldives India, Indonesia, Vietnam Bangladesh, Sri Lanka Cambodia, Kiribati, Mongolia, Nepal, Pakistan, Solomon Islands, Tonga, Vanuatu Laos Afghanistan, Myanmar

Source: World Bank (2000c).

Table 2.2 IDA-eligible countries in Japan’s top 20 bilateral aid recipients 2. 4. 5. 6. 9. 11. 15. 16. 18. 19.

Indonesia (upper) India (upper) Pakistan (lower) Vietnam (upper) Bangladesh (middle) Ghana (upper) Mongolia (lower) Laos (lowest) Tanzania (top) Cambodia (lower)

Source: Ministry of Foreign Affairs, Japan (2000) and World Bank (2000c).

Table 2.3 Non-IDA countries in Japan’s top 20 bilateral aid recipients 1. 3. 7. 8. 10. 12. 13. 14. 17. 20.

China Thailand Philippines Sri Lanka Malaysia Brazil Uzbekistan Kazakhstan Egypt Peru

Source: Ministry of Foreign Affairs, Japan (2000).

Table 2.4 IDA-eligible countries in Japan’s top 20 recipients of grant aid 1. 2. 3. 5. 6. 7. 8. 9. 11. 12. 14. 15. 17. 18. 19.

Bangladesh (middle) Indonesia (upper) Tanzania (top) Laos (lowest) Cambodia (lower) Vietnam (upper) Bosnia and Hercegovina (upper) Pakistan (lower) Yemen (lower) Myanmar (not eligible) Madagascar (upper) Guinea (middle) Malawi (middle) Palestinian administered areas (not eligible) Ghana (upper)

Source: Ministry of Foreign Affairs, Japan (2000) and World Bank (2000c).

34 Kevin Morrison A few important observations can be made from these tables. Firstly, all of the top ten recipients of total bilateral aid are Asian, as one would expect from Japan’s ODA. This is probably the main reason why five of the top ten recipients of Japanese aid are not poor enough to be eligible for IDA funds (though this figure rises to eight out of ten when only grant aid is considered, in Table 2.3). In addition, the emphasis on Asia likely raises the profile of some countries with lower policy performance. One of Japan’s top five recipients (Pakistan), and four of its top 20 aid recipients (Pakistan, Mongolia, Laos, and Cambodia) fall into the bottom two quintiles of policy performance among poor countries. If one only considers grant aid, as in Table 2.3, three of the top nine recipients are Asian countries in the bottom two quintiles of IDA policy performance. It should also be noted that Japan’s Asia focus does not account for many of the top 20 recipients. Table 2.4 shows that five of the ten non-IDA-eligible countries among Japan’s top 20 recipients of total aid are not in East or South Asia. Some of these countries – notably Brazil and Peru – are very much above the cutoff for IDA lending. Therefore, neither Japan’s Asia focus nor a concern for poverty reduction seems to account for these countries being such large recipients of Japanese aid. As Japan moves more toward an ODA policy directed at broad-based development, it should also move more toward allocating aid where it will be most effective from a development perspective. This would likely entail a drop in the aid flows to some countries (for example, Pakistan, Laos, and Brazil) and a rise in others (for example, Vietnam in Asia, and Ghana, Uganda, and Tanzania in Africa).

Technical cooperation It should be easy to note in the preceding discussion that the principal direction in which development cooperation is moving is toward recipient country governments having more responsibility for the way aid is used. Evidence shows that there is no real alternative to this if development is the goal. But it also means that developing country governments will have to increase (rapidly) their capacity to manage their affairs if they wish to receive development assistance – and more importantly, to develop. The question then is: how can governments acquire this capacity? The logical answer might be “technical cooperation” – training provided by donors. But, unfortunately, technical cooperation has, in many ways, been a microcosm of all that has failed in development assistance more broadly. It has been donor-driven, often aimed at developing skills directly useful for a donor project. It has usually been tied to the services of a donor company. It has disrupted local processes. Broadly speaking, after almost 40 years and billions of dollars spent on technical assistance and training in developing countries, there is little evidence that it has done much to improve local institutions.43 In 1996 the Operations Evaluation Department of the World Bank reviewed the Bank’s technical assistance, which at the time occupied about 10 percent of the Bank’s portfolio, comprising 136 free-standing loans (averaging about $20 million each) and technical assistance components (ranging from $200,000 to $50 million each) of about 1,300 other loans (this is in addition to the hundreds of millions of dollars

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that flow through the Bank’s grants and trust funds). The result: “Outcomes have varied widely, but overall the efficacy and cost-effectiveness of TA [technical assistance] has been disappointing, especially in sub-Saharan Africa.”44 The recommendations of many reviews of technical assistance are usually common. The Development Assistance Committee reiterated its recommendations in its Guidelines for Poverty Reduction. These include: ●

●

●

●

●

Setting self-reliance as a strategic objective by focusing on long-term capacity building, rather than achieving short-term performance improvements by filling gaps in competence. Planning technical cooperation activities in the context of partner country poverty-reduction strategies and sector programs, instead of making isolated supply-driven TC [technical cooperation] proposals. Defining objectives in terms of outcomes to be achieved, rather than inputs to be provided. Encouraging greater use of local expertise and defining specific roles for international experts where needed. Building on existing institutions and capacity, both public and private, rather than promoting parallel structures.45

Technical assistance occupies a large role in Japan’s aid program, accounting for about a third of it. It is primarily delivered through the Japanese International Cooperation Agency ( JICA). Part of the emphasis comes from Japan’s philosophy of “self-help” – the idea being to enable countries to help themselves. Unfortunately, it is hard to know how much Japanese technical assistance is achieving in this area, as the evaluations done of Japanese technical assistance are all reasonably positive, relying on the selected comments of beneficiaries or government officials for evidence.46 It would be surprising in the extreme if Japan’s technical assistance has not experienced most of the problems that other agencies have. However, few of the evaluations are hard-hitting, and few offer any specific recommendations for change, except occasionally in “priority” areas for Japan’s assistance. Part of this reluctance to criticize may be cultural; yet, it does not help in improving the operations of technical assistance. In fact, some of the evaluations are evidence in themselves of the problems with donors and technical assistance. For example, one passage from the recent review of Japanese aid to China – Japan’s largest recipient of aid – reads: In order to restore a “request basis principle” limitation, in policy discussions Japan has made active offers to China concerning areas for [sic] it considers necessary for China’s development and for which cooperation is possible. To make such offered projects succeed, not only is Japan’s enthusiasm necessary, but also China’s budgetary measures, personnel assignment, and organizational and structural formation. Above all, it is necessary to make the Chinese side fully understand all concerned matters, as well as to put effort in creating an environment in which projects could be actively implemented.47

36 Kevin Morrison This does not seem to be of the “self-help” mindset. Not only is Japan pushing an agenda, but there is no discussion (nor is there anywhere else in the passage) about changes in Japanese operations that might make “offered projects succeed” – only a need for Japanese “enthusiasm”! A passage in the review of Japanese aid to Vietnam was not much more encouraging: even with all-out efforts in institutional building and human resources development, it will be quite some time before the benefits [of Japanese technical assistance] become manifest. Indeed, expecting significant improvements in the short term would be unrealistic. Hence, for now it will be essential for aid donors to offset the deficiencies in Vietnamese institutional frameworks through generous increases in their own personnel. We take pleasure in noting that efforts have been initiated to set up JICA and OECF offices in Viet Nam.48 It is certainly understandable that Japanese aid practitioners want to offset deficiencies in their recipients’ institutions. However, the drive toward recipient country ownership in international development cooperation has been led by evidence that no matter how much donor personnel is in a country, it will not be able to make up for institutional weaknesses in the recipient government. In line with the DAC recommendations, JICA should make more effort to make technical assistance demand-driven, encourage its incorporation into sectoral and national expenditure plans, and hire more local experts. This will not be easy for JICA to do, because Japanese technical cooperation is almost always “tied” to Japanese providers, which adds pressure for disbursement and reduces the ownership of the project by recipient countries.49 In general, the practice of tying aid has been estimated to reduce the value of aid by up to 30 percent, and the World Bank, in its 2000 World Development Report on poverty, called for an end to the practice.50 Unfortunately, after years of being a leader on aid, untying Japanese aid seems to be moving in the wrong direction. The year 1999 saw Japan’s highest proportion of tied loans in ten years – 16.4 percent – and Japan has drawn fire for putting on hold an OECD/DAC resolution that would have untied aid to the least developed countries. Instead of taking action to further untie aid, Japan, in its 1999 Annual Report on aid, called for efforts to “develop tied aid within the limits of international rules to make use of the special technology and management knowhow of Japanese companies.”51 In general, therefore, the problems that plague other technical assistance agencies – indeed that plague other development assistance agencies in general – also plague JICA. However, one favorable note is that JICA has recently reorganized itself along country and issue lines in order to provide precise responses to needs in developing countries. Given the need for technical assistance to be tailored to each country – similar to all development assistance – this should be viewed as a step in the right direction. It is also important because of the need for Japan to do a better job at providing its grants, loans, and technical assistance as an integrated and well-coordinated package.52 As Japan’s overall ODA is increasingly

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guided by country planning, coordination between the various types of aid instruments could improve.

Recommendations Aid effectiveness has meant different things to different donors through the history of development cooperation – being “effective” has often had little to do with development. Since the end of the Cold War, however, donors have coalesced around a vision of effectiveness that supports a broad-based strategy to fight poverty and promote development. This will not only require that the recipient country take more ownership and responsibility for aid efforts – it will also require changes in donor practices. Based on the findings in this chapter, a number of recommendations can be made to improve Japan’s overall aid. ●

●

●

●

●

Broadening sectoral allocations away from infrastructure and more into health and education, in line with Japan’s support of the broad-based international development strategy. In order to support this broadening, which will require greater knowledge of country circumstances, continuing to decentralize staff and decision-making authority to the country-level. Beginning internal discussions and processes needed to change the regulations that prohibit Japan from participating in budget support for sectoral aid and technical assistance. Reconsidering some of its aid flows to richer non-Asian countries and particular Asian countries with poor policies – evidence shows that aid flows to these countries are not in the best interests of aid effectiveness With particular reference to technical assistance – potentially a key ingredient in the international community’s assistance to development – it is urgent that Japan drastically improve the quality of its evaluations, so that it can learn better what works and what does not. In addition, in the move away from “request-based” aid, it should keep in mind that the problem with the requestbased approach was not the principle but the practice – efforts should be made to ensure that technical assistance is, in fact, recipient-driven and, as much as possible, channeled through sectoral and national expenditure plans. Relatedly, Japan should not increase the share of aid that is tied – Japan’s history of untied aid is of high value, and it would be unfortunate to backtrack now. Instead, more emphasis should be placed on using local expertise, in line with DAC guidelines.

Notes 1 Political goals do remain an important influence. See Alesina and Dollar (1998). 2 This discussion draws from Kanbur and Squire (2001). 3 World Bank (1980: 32).

38 Kevin Morrison 4 World Bank (1990: 26). 5 World Bank (2000a: 15). 6 The United Nations Development Program’s Human Development Reports have been instrumental in raising the profile of this research and in advancing the concepts of the Human Development Index and the Human Poverty Index. These indices combine income measurements with other measurements of human well-being, such as health and education. 7 Sen (1999: 87). Sen’s work over the past two decades (including Sen, 1981 and Sen, 1984) has been instrumental in the broadening of the conception of poverty. 8 Kanbur and Squire (2001). 9 Kapur, Lewis, and Webb (1997). 10 World Bank (2000b). 11 Orr (1990). Although common to many donors, the particular reasons that Japan’s ODA has had these purposes are unique. One is that Japan’s economic prosperity is based on importing raw materials, processing them (and adding value), and then exporting the finished products to earn foreign exchange. Subsequently raw materials, while important everywhere, are particularly crucial to Japan. And second, because of Japan’s history in World War II and subsequent lack of a standing army, aid has been seen as the most important instrument for promoting national and international interests, including domestic economic welfare and global strategic interests (Eyinla, 1999: 412). 12 See ODA Charter at http://www.mofa.go.jp/policy/oda/summary/1999/ref1.html. The four principles are: (1) environmental conservation and development should be pursued in tandem; (2) any use of ODA for military purposes or for aggravation of international conflicts should be avoided; (3) full attention should be paid to trends in recipient countries’ military expenditures, their development and production of mass destruction weapons and missiles, their export and import of arms, etc., so as to maintain and strengthen international peace and stability, and from the viewpoint that developing countries should place appropriate priorities in the allocation of their resources in their own economic and social development; (4) full attention should be paid to efforts for promoting democratization and the introduction of a market-oriented economy, and the situation regarding the securing of basic human rights and freedoms in the recipient country. 13 OECD/DAC (1996). 14 http://www.mofa.go.jp/policy/oda/summary/1999/ref2_01.html. 15 See, for example, Söderberg (1996); Eyinla (1999); and Randel, German, and Ewing (2000). 16 Lancaster (1999) and OECD/DAC (1999) 17 These figures should be seen as approximations for Japan, as the sectoral breakdown used is that of the World Bank. Because Japan’s 1999 annual report gives subsectoral details on ODA allocation, these were allocated into the sectoral breakdowns in the World Bank’s 2000 annual report. For example, the Japanese sector of “social infrastructure and services” includes the category “water supply and sanitation,” but the World Bank’s breakdown includes water supply under “infrastructure.” However, though there is therefore a lack of precision in the comparison between Japan and the World Bank because of differences in measuring sectoral allocation, the author is confident that the disparities discussed here are far too great to result from measurement differences. 18 It is also worth noting that when health and education expenditures are further disaggregated, Japan spends only about 2 percent of its ODA on basic education and health. Instead, the emphasis is more on higher education and “tertiary and curative health, such as hospitals and high technology equipment, medical research institutions, high level training, and posting of Japanese advisors” (OECD/DAC, 1999: 43). 19 OECD/DAC (2000).

The World Bank, Japan, and aid effectiveness

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20 http://www.mofa.go.jp/policy/oda/summary/1999/ref2_02.html. 21 See, for example, Killick, Gunatilaka, and Marr (1998) and van de Walle and Johnston (1996). 22 Temple (1999). 23 Hansen and Tarp (2000). 24 Van de Walle and Johnston (1996). 25 The share of staff in the field for Japan is taken from OECD/DAC (1999). The share of staff in the field for the World Bank is taken from the Bank’s website: http:// www.worldbank.org/html/extdr/about/. 26 See, for example, the case studies of China and Ghana in OECD/DAC (1999). 27 This lack of staff and field presence may be one reason why Japan has not moved into the social sectors and other “softer” issues of development – they require more project preparation time and, arguably, more knowledge of local conditions and more complex involvement and monitoring than traditional infrastructure projects. 28 OECD/DAC (1999) and Committee on the Second Country Study for Japan’s Official Development Assistance to the People’s Republic of Peru (1998). In addition to hindering relationships with partners, centralization of authority, Lancaster (1999) argues, may be the wrong kind of institutional design for a development organization, because the work requires awareness of local conditions and learning as one goes. She argues that the characteristics of aid work – i.e. uncertainty about how to accomplish risky tasks in unfamiliar environments (which aid officials cannot control) and often ambiguous goals and outcomes difficult to measure – suggest that aid agencies should have a number of key qualities. They include: “a maximum degree of decentralized staff and authorities to the field where their work must be accomplished (but not so much as to lose broad program and policy coherence) and with the opportunity to spend time outside of field offices learning about the society in which they are posted, programming systems that permit and reward experimentation and learning, a technically qualified staff capable of managing all the various types of activities the aid agency undertakes, the involvement of local individuals and groups in the planning and implementation of aid-financed activities (consistent with the maintenance of programming standards and accountability), a system of evaluation that is reliable, comprehensive, accessible, and with incentives for staff to use its findings, and incentives for aid officials to decide not to plan and obligate monies where conditions are not supportive of the success of their programs or projects. The bottom line is that aid agencies, probably more than any other government agencies, need to be flexible, ‘learning’ agencies with the ability to say no” (p. 226). 29 Arase (1995: 147–63). 30 Kanbur, Sandler, and Morrison (1999). 31 Secretariat of the Strategic Partnership with Africa (2000), cited in World Bank (2001). 32 Secretariat of the Strategic Partnership with Africa (1999), cited in Brown et al. (2001). 33 Brown et al. (2001). 34 World Bank (2000a; 2001). World Bank and partner institutions (2000b). 35 OECD/DAC (1999). 36 Working Group on Zambia’s Health Reforms (1997: 26). This working group was an independent review team requested by Zambia’s Minister of Health to study the sector. Members of the group were drawn from the Ministry of Health, WHO, UNICEF, and the World Bank. 37 See Brown, Foster, Norton, and Naschold (2001). 38 OECD/DAC (2001b: 15). 39 World Bank (1998: 14). 40 World Bank (1998: 14). 41 Collier and Dollar (1999). 42 Note that China no longer qualifies for IDA lending as it exceeds the per capita income threshold.

40 Kevin Morrison 43 44 45 46

47 48 49 50 51 52

The standard review of technical assistance is still Berg (1993). World Bank Operations Evaluation Department (1996). OECD/DAC (1999: 71). JICA’s country evaluations can be read at http://www.jica.go.jp/english/publication/ studyreport/country. The characteristics mentioned here are reflective of evaluations of Japanese aid in general: the DAC review in 1999 said that “a serious weakness of [Japanese] evaluations is that there is minimal reference to data on socio-economic impact of projects, and, instead, an emphasis on the physical conditions of constructed facilities and on how much beneficiaries have appreciated the projects. Attempts to link the cause and effect of how the projects have actually improved the lives of targeted beneficiaries are notably absent in the published evaluation reports” (p. 48). Committee on the Second Country Study for Japan’s Official Development Assistance to the People’s Republic of China (1999: 18). Committee on the Country Study for Japan’s Official Development Assistance to the Socialist Republic of Viet Nam (1995). In general, Castellano (2000). Jepma (1991); World Bank (2000a). Jepma (1991); World Bank (2000a). See OECD/DAC (1999), Committee on the Second Country Study for Japan’s Official Development Assistance to the People’s Republic of China (1999), and Committee on the Country Study for Japan’s Official Development Assistance to the People’s Republic of Peru (1998).

3

Japanese and British overseas aid compared David Seddon

Introduction There are some similarities and many differences between British and Japanese approaches to and implementation of official development assistance. Crucially, the British have had a long historical relationship with the developing world – over three hundred years; the Japanese have not. Britain developed institutions to administer and manage relations with its various colonial territories from an early date and gradually adapted these institutions over time to ensure the maintenance of close relations with those territories, through their struggles for political independence and thereafter. Japan, whose involvement with other territories as an imperial power is relatively recent ( just under a century), has been obliged not only to reconstruct relations with its former dependent territories in a relatively short period of time, after a traumatic military defeat and the obligatory surrender of those territories, but has had to develop a whole new range of relationships with the majority of the developing world, where its experience was limited, and to develop new institutions to enable it to do so. In Britain, those directly involved in the administration of the colonial territories and with managing relationships between the “home country” and these territories “overseas” were educated and trained (through school, university, and the civil service) to spend long periods “overseas,” often in remote locations. Furthermore, over the years, many traders and merchants, soldiers and missionaries, explorers and travelers, and more recently professionals and technical specialists, teachers, students, and volunteers from Britain have experienced life in “foreign parts.” The “overseas” experience of the Japanese is relatively recent, and even today those who have spent more than a short time in other countries (other than diplomats), particularly in the developing world, are relatively few. This lack of direct, lived experience overseas has critical implications for the design and implementation, and often for the effectiveness, of Japanese aid generally and for technical cooperation specifically. Both countries have been concerned to ensure that their relationship with the developing world brings benefits in return for the resources allocated for “overseas development”; in particular, there has been a concern to link aid to trade (for both national economies have always been exceptionally dependent on foreign trade), and to ensure that official development assistance also serves the

42 David Seddon national interest, both economic and political. Japan has always been quite explicit in its linking of national development to overseas aid, although in recent years there have been indications that it serves Japan’s global purpose better to broaden its approach and visibly “address the key issues of development.” Britain, however, has long tended, particularly as its empire has shrunk, to play down its national interests, and to represent its links with the developing world in broader terms – such as, for example, nurturing the “Commonwealth.” Both countries, however, have ensured that commercial considerations remain central. Even the pursuit, under the recent Labour government, of an “ethical” foreign policy has not prevented significant links between overseas aid and the arms trade, while the current Prime Minister accepts the basic premise that free trade (globalization) is generally beneficial – and can even work for the poor. British aid policy, although distinctive in its approach and implementation in the postwar period, has since the 1970s increasingly followed that of the United States and the international agencies, particularly the World Bank and the IMF. Japanese aid policy, by contrast, has tended, especially since the 1980s, to provide an alternative vision of development to that presented by the “West.” Both see aid as part of a historic mission – even if, in the case of Britain, that mission lies largely in the past; or, in the case of Japan, is for the most part in the future – to influence other powerful “players” on the international scene and to maintain (Britain) and establish ( Japan) their status as “Western” and “Asian” powers (respectively) of global significance. In order to appreciate the significance of a contemporary comparison, which is the main subject of this chapter, it is necessary to set the comparison in a historical and a broader political-economic context, for there have been significant shifts in the scale, scope, and priorities of ODA policy of both countries at various points over the last five decades, as governments have changed, and as national and global environmental, economic, political, and social priorities and concerns have changed.

Aid and imperialism Even if it is not always possible to see aid as imperialism,1 there can be little doubt that the two are closely linked. Although it is increasingly presented as a form of disinterested altruism concerned first and foremost with the welfare and wellbeing of the poor, any analysis of international aid (multilateral as a well as bilateral) reveals patterns and priorities which are not explained by need, but rather by a complex set of factors, in which the vested interests, whether narrowly or broadly defined, of the “donors” or lending agencies play a crucial part. In the case of both Japan and Britain, the imperial past plays an important role; so, too, do the more immediate contemporary concerns, in the case of the former to establish and in the case of the latter to maintain, not only power and influence but also the recognition and the approval of the international community. Despite its recent emphasis on “globalization”2 (and its significant allocation of aid through the multilateral agencies of the European Union, the UN, the World

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Bank and the IMF), British bilateral ODA remains strongly concentrated on its former colonies and subordinate territories, most (but not all) of them long independent, but still bound by the legacy of empire. In the case of Japan, East and Northeast Asia, where in the not-so-distant past Japan had imperial interests, remain especially important (particularly as regards technical cooperation), although Japanese ODA extends to Oceania and Latin America, and even Africa, and its contribution to the multilateral agencies has been increasing. While British ODA remains strongly linked to its receding imperial past, that of Japan is increasingly expanding beyond its regional concentration on East Asia to become global in scope. This tendency has become more marked in the last decade or so. British imperialism The Board of Trade and Plantations was established as a permanent committee of the Privy Council in 1696. Its remit was: to examine and to take an account of the state and condition of the general trade of England and of the several particular trades into foreign parts . . . to consider by what means profitable manufactures already settled may be further improved and how new and profitable manufactures may be introduced.3 The early colonies were seen essentially as British settlements overseas, but with increasing involvement in southern Africa and India it became apparent that “native administration” would be a crucial concern. By the 1830s, the East India Company had in effect become the instrument through which Britain governed India. One result of this was a vast increase in the volume and value of British trade with India, which provided a substantial market for Britain’s swiftly expanding industries. Increasing political difficulties, however, culminating in the Indian Mutiny of 1857, led the government to take more direct control. A report on the recruitment of the Indian Civil Service was commissioned, and within a few years the India Office had been created specifically to deal with the overall administration of this major colonial territory. The civil service reforms of the 1850s ensured that Britain’s other colonies – increasingly including substantial indigenous or native populations – acquired a departmental secretary of state of their own, and a Colonial Office. Over the next hundred years, the British government was to preside over an empire that included territories in every continent, but was concentrated in subSaharan Africa and South Asia. The costs of administration remained for most of this period relatively light, considering the vastness of the territories involved, in part as a result of the system of “indirect rule”; the returns, in terms of resources transferred from the imperial possessions to Britain itself, were enormous. British colonial policy, however, was usually justified in terms of its “civilizing mission” and its enlightened role in promoting infrastructural, economic, and social development in the colonies. It is rare to find references to the role of empire, or of overseas aid to developing countries, in promoting national self-interest and

44 David Seddon national development; rather, the emphasis has been on what Britain (the first industrial world power) brought to the rest of the world. The “development” of the overseas territories was an obligation – the “white man’s burden.” In the words of Colonial Secretary Joseph Chamberlain in the mid-1890s: It is not enough to occupy certain great spaces of the world’s surface unless you can make the best of them – unless you are willing to develop them. We are landlords of a great estate; it is the duty of a landlord to develop his estate.4 Also, the idea that the colonial edifice was, at least in the nineteenth century, the product of a more or less systematic state-guided imperialism is rarely expressed; rather, it is presented as a kind of loose association of equals. Lord Rosebery, Prime Minister in the early 1890s, was the first to refer to the diverse peoples and territories of the British empire as “the Commonwealth”; and Winston Churchill described “the new British Empire or Commonwealth of Nations” of the nineteenth century as being “based upon Government by consent, and the voluntary association of autonomous states under the Crown.”5 The notion of a “partnership in development” to describe what are essentially relations of inequality and subordination is one that continues to be popular among development policymakers.6 The Commonwealth in the modern sense did not come into being until the 1940s, after the independence of several colonial territories in South Asia, but throughout the half-century between the 1890s and the 1940s, Britain established, as an integral part of the “business” of empire, a wide-ranging set of institutions, both administrative and technical, to contribute to the “development” of its overseas territories. The Tropical Products Institute – originally the Scientific and Technical Department of the Imperial Institute, established in 1894, then the Natural Resources Institute operating under the government’s Overseas Development Administration (ODA), and most recently the Natural Resources Institute linked to the University of Greenwich – is an excellent example. Another example is the British Council, established in 1934 with the financial support of the Foreign Office. In developing countries, the British Council is concerned, in cooperation with the Department for International Development (DfID), with the administration of education and training in Britain financed by the Ministry of Overseas Development (ODM) and the DfID. A third example is the Directorate of Overseas Surveys, established in 1946 to carry out development planning in British dependent territories. In 1964, together with many other colonial technical institutions, it was incorporated into the new ODM and its services – including practical in-country assistance, training or the secondment of experts overseas – were made available to all developing countries as part of British technical cooperation or of UN development programs. Japanese imperialism In the case of Japan, the relationship between its overseas links and its own national development has always been clear and explicit. Certainly, from the late nineteenth

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century onwards, as Japan embarked on its program of expansion in Northeast Asia, nationalism and imperialism went hand in hand. This can, in part, be explained by the circumstances of its more recent, comparatively rapid emergence as a major economic power. Japan was to transform itself in less than a century and the role of the state in this rapid transformation has always been strategic – and recognized. Japan underwent a major political transformation with the Meiji Ishin (Restoration) of 1868, which involved not only the restoration of the Emperor, but reforms of government and administration, as well as the increasing opening up of the economy to international trade. The domestic economy grew rapidly as exports doubled between 1878 and 1890, and again between 1890 and 1910. As Japan underwent an explosive – indeed revolutionary – economic transformation, its expansionist ambitions also grew. In 1894, Japan sent forces into Korea to counteract Chinese influence, and war ensued. Within a year, Japan effectively controlled Korea, the Chinese port city of Weihaiwei, possessed Taiwan and the Liaotung (Kwantung) Peninsula, and had signed a commercial treaty with China that put Japanese privileges there on a par with those of the Western powers. In the next few years, Russia emerged as Japan’s main rival in Northeast Asia, increasing its presence in Korea and invading Manchuria. The implementation of fukoku-kyohei (enrich the country, strengthen the military) during the 1890s greatly increased Japan’s military and naval power, and when war broke out in 1904 between Japan and Russia, Russia proved no match for the new Asian power and a peace treaty was signed in 1905. Korea became a protectorate the same year, and a strong presence was established in Manchuria; but this was not enough for some (particularly the military). By 1910, Korea had been annexed. During World War I, Japan concluded first a secret treaty with Russia in 1916, which included recognition of Japan’s expanded railway and mining interests in Manchuria, and then an agreement with Britain in 1917, which secured support for a claim to former German rights in Shantung and the Pacific Islands. France, Italy, and the USA all eventually agreed that “territorial propinquity” gave Japan a special position on the Asian mainland that it was entitled to protect. For a while, in the early years of the interwar period, Japan’s foreign policy was dominated by what might be termed “economic diplomacy” – the strategic promotion of Japanese trade and investment abroad. As regards the Asian mainland, this policy ruled out territorial adventures likely to damage trade (although Manchuria remained a special case). Increasingly, however, the vision of an “imperial Japan,” strong at home but with an “Asian mission” abroad, attracted widespread sympathy and support. Towards the end of the 1920s, the struggle for power between different factions and warlords in China began to impinge on Japanese interests in Manchuria; and in September 1931, the occupation of southern Manchuria by sections of the Japanese army took place, not only against the wishes of the cabinet but also without the authority of the army high command. The General Staff and the War Ministry insisted, however, that the fait accompli should be supported, and by the end of January 1932 hostilities had spread to China further south. By 1933, despite protestations by Japan to the effect that it

46 David Seddon had no territorial ambitions on the mainland, Manchuria was in effect under Japanese control and its armies were in China. Japan now had a regional empire which would enable it to fuel its own economic development, through assured sources of raw materials and access to privileged markets, while at the same time speaking of the “development” of the subordinate territories – just as Britain had done for centuries. Japan’s new empire contributed, through the exploitation of the resources, human and physical, of its “colonies,” to the further expansion of Japan’s international trade. However, as in the case of Britain, the imperial relationship was presented as one of equal benefit to Japan and its “partners”: the notion of a Co-Prosperity Sphere was deployed to describe this situation during the 1930s. The importance of foreign trade in Japan’s own development had always been considerable; in the mid-1930s, trade with its dependent territories (China, Korea and Taiwan) – where Japanese traders enjoyed special privileges – accounted for 40 percent of total exports and 35 percent of imports. Intermittent fighting went on in northern China until the summer of 1937; it then escalated into full-scale campaigns, extending to the whole of the country. Although not recognized as a state of “war,” hostilities in China continued until 1945, merging during the last four years into a wider conflict, the Pacific War, which began in December 1941, when Japan attacked the United States and the colonial territories of the European powers in Southeast Asia. Japanese imperial strategy was guided not only by economic considerations but also by something both more vague and more powerful. Beasley has argued that: in the most general sense, the aim of Japanese policy-makers in mounting these operations at the beginning of the 20th century was to create a Japandominated international order in East Asia to replace that which, as they saw it, the West had devised in the 19th century for its own advantage.7 Japanese “imperialism” was thus explicitly counterposed against “Western imperialism” – the distinctive character of the new Japanese “nation” and of the Japanese “way,” linked to a program of expansion justified as a racial and cultural mission. Significantly, although accepted as a member of the Council of the League of Nations in 1918, Japan’s proposal for a racial equality clause in the Charter went down to American and Australian opposition; and in 1933, after the Manchurian Incident, Japan withdrew from the Western-dominated League. Japan’s distinctiveness as the only major “non-Western” economic power has remained a significant issue since that time and continues to pose a challenge to the dominance of “the West.”

The postwar period: 1945–1975 The immediate post-war period Japan’s postwar leadership recognized that economic reconstruction and development at home must be the priority; and the first diplomatic White Paper in 1957

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concluded that the only way to raise living standards and to increase national power lay in the peaceful development of economic strength.8 Export growth was seen to be an essential part of this process. Once industrial production had been restored, Japan’s export trade recovered rapidly, growing dramatically throughout the late 1950s and the 1960s. During the 1950s, two-thirds of Japan’s exports went to developing countries, mainly in Asia. The Japanese External Trade Organization ( JETRO) was established in 1958 to implement Japan’s trade promotion projects in a comprehensive fashion; and the Association for Overseas Technical Scholarships (AOTS) was set up the following year to provide training for employees of foreign private companies. Aid and trade and support for the private sector in developing countries were evidently closely linked priorities for a Japan emerging from the aftermath of postwar reconstruction. Even in the 1950s, Japan began making payments of various kinds, initially as “war reparations” but increasingly as development assistance to those Asian countries it had occupied during World War II. Ozawa has argued that, “in the 1950s, Japan’s reparations program helped pave the way for the advance of Japan’s trade and private overseas investments into the Asian region.”9 For Britain, like Japan, the immediate postwar period was one of domestic reconstruction, aided by US support – in this case through the Marshall Plan for Europe as a whole, as well as other forms of support for Britain in particular. As in the case of Japan, postwar recovery was rapid and linked to the speedy reconstruction of international trading links. The period was also one in which former colonial territories were increasingly achieving formal political independence, and substantial efforts were made to maintain links with these newly independent states. Aid for the new members of the Commonwealth was one form that these efforts took. India and Pakistan came into being as independent dominions in 1947, Burma and Ceylon (Sri Lanka) became independent in 1948. The India Office was dismantled, but British aid to India, seen as a huge potential market after independence in 1947, was a major feature of British ODA in the 1950s; so too was assistance to Pakistan. The commitment of a significant proportion of British aid to South Asia has continued to the present day (although gradually declining as a proportion of total ODA). The Movement for Colonial Freedom was formed in 1952 – the same year that the Mau Mau uprising broke out in Kenya – and included many members on the left of the Labour Party, including future Prime Minister Harold Wilson, who wrote (in the same year) a pamphlet on War on Want, which argued for an International Development Agency, and the devotion of 10 percent of the arms budget and 2 percent of national income to the relief of world poverty. In 1953, Wilson published a book, The War on World Poverty, in which the developed countries were called upon to contribute 3 percent of their national income to the alleviation of global poverty. There was considerable discussion during the 1950s, particularly in the Labour Party and the associated Fabian Society, of political independence and colonial “development,” mainly with reference to Africa but also to Southeast Asia. The second half of the 1950s saw the emergence of the NonAligned Movement and of the theory and practice of a Third World. For old

48 David Seddon imperial and colonial powers like Britain and France, “the end of empire” was marked not just by the conference at Bandung, but by the forced retreats from Suez and from Indo-China and Algeria respectively. The first development decade – the 1960s During the 1960s, Japan was less concerned with overseas development than with its own national development. By the mid-1960s, Japan’s growing economic strength was recognized; it was admitted into the OECD in 1964, at which time it had become the sixth-largest economy in the world. The links between aid and trade became even more important than in the previous decade – Ozawa has suggested that “in the 1960s, aid loans further opened up many markets [for Japan] in Asia and Latin America.”10 In fact, throughout the postwar period (1945 to 1975), Japan was predominantly concerned to develop a strong economic base and to establish strategic international economic relationships, with a strong focus on East Asia. Particularly helpful were reparation agreements with several Asian countries, which prepared the way for entry into these markets, and the gradual relaxation of foreign-exchange regulations to permit Japanese foreign investment in Asia. Analysts of Japanese aid in the 1960s have tended to emphasize the promotion of economic self-interest.11 They differ, however, over which specific interests shaped Japanese economic priorities in ODA in this period. The majority point to the big business community, particularly those with a vested interest in export and foreign direct investment policy who, aided by influential politicians recruited and amply rewarded for their efforts, served as an “aid lobby”; the aid bureaucrats then accepted and carried out aid allocations accordingly.12 A minority disagree.13 Rix, for example, argues that aid policy was “not the child of political pressures, elite decision-making or development arguments,” and that “bureaucratic interests were the main determinants of the articulation of Japan’s aid and economic cooperation policies.”14 For Rix, this explains why aid policy and practice – divided as it was between numerous different government agencies – lacked innovation, initiative, coordination, flexibility, and speed in formulation. Some analysts – mostly Japanese – paid more attention to political and securityrelated motives for aid. They argued that aid policy in Japan, at least until the mid1970s, was a child of the Cold War and American policy in Asia. The cabinet of Yoshida Shigeru considered aid a cooperative venture with the United States and concentrated on Southeast Asia; each successive cabinet followed this course by extending ODA to anti-communist or neutral countries in the region. Japanese policy lacked a clear-cut, indigenous rationale from the very beginning; it merely followed in the footsteps of America.15 As the Vietnam War escalated, the Japanese government increased the scale of its grants and loans to Indonesia, Taiwan, Malaysia, Thailand, and especially those countries more immediately involved (South Vietnam, Laos, and Cambodia). Relations with South Korea were normalized in 1965 and resulted in $500 million in aid; Japan also joined the Asian and

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Pacific Council (ASPAC), a politically significant regional association founded at Korean instigation in 1966. Whatever the broader motives and approaches to overseas aid, there were early efforts to provide direct assistance through technical cooperation. Looking back, it is argued that: From the earliest days of Japanese technical co-operation, efforts were made to expand with project types such as technical training participation and recruitment of experts. With the emergence in 1966 of the Medical Co-operation Department of the Overseas Technical Co-operation Agency (the precursor of JICA) the operational structure was improved in specific fields, such as agriculture, mining and heavy industry, and social development.16 Technical cooperation during the early years, however, was dominated by the perceived demands and requirements of specific project types and sectors, with relatively little specialist knowledge or experience of particular countries and their environmental, economic, political, social, and cultural specificities. Aid to specific countries was conceived essentially as a combination of project types and sectors, and was not therefore subject to a coherent overall policy; also it failed to provide an adequate response to the actual specific needs. Recognition of the need for a more comprehensive approach led to the establishment of JICA in 1974, to replace the OTCA. In fact, in Japan in the 1960s, there were few agencies or institutions able to contribute to the intake of training participants and the recruitment of experts. Unlike Britain, where the long history of colonial (and postcolonial) involvement with the developing world had resulted in the establishment relatively early on in the twentieth century of a range of institutions – including those linked to the universities (such as the School of Oriental and African Studies in London, and the Institute for Development Planning and Management at Manchester, as well as more specialized centers for agriculture, forestry, and other technical subjects – which were able to provide suitable training for British and foreign students and for professionals in practical work, as well as research in the colonial territories, Japan had no such long-established tradition. A volunteer program – the precursor of the present JOVC program – was, however, initiated on a small scale in the mid1960s to enable young Japanese to gain experience of the developing world and to provide service overseas. Numbers increased to the point where some 233 volunteers were sent to developing countries in 1969 – a level maintained more or less throughout the 1970s. This was of course the era when John F. Kennedy established the Peace Corps in the United States to provide an alternative face to US imperialism. In Britain, a number of similar schemes and institutions, including the Voluntary Service Overseas (VSO), had been established for some time; by the 1960s, large numbers of young people from Britain, many of them students, were traveling and working abroad in developing countries. In addition, there were large numbers of colonial civil servants either still working in the colonies (under

50 David Seddon the Colonial Office), or in the newly independent developing countries, either retained by local governments with additional support from the British government (from 1961 through the Overseas Service Aid Scheme) or employed by the Commonwealth Relations Office. In Britain, the 1960s marked the beginning of a major expansion of ODA and interest in “development” issues more generally. While the 1950s had seen a growing interest in the future of the British empire, and selected students from both former colonial territories and countries still under colonial rule came, with support from their governments, to receive their higher education in Britain,17 it was not until the 1960s that significant institutional changes were instigated to respond to this growing interest. In February 1960, Harold Macmillan had spoken of “the winds of change” blowing through Africa; these required Britain to adjust its relationship with its colonial territories. In 1961, in addition to the Colonial Office and the Commonwealth Office, the Conservative government established a Department of Technical Cooperation (DTC), with a minister of state, to deal with the technical cooperation aspects of the aid program. Specialist technical departments and institutions, often built upon experience gained from the colonial service, were developed to provide technical expertise and research. In 1961, the Colonial Secretary introduced the Overseas Service Aid Scheme, to encourage former colonial civil servants to stay on in newly independent countries – some 22 percent of the technical cooperation budget in 1965 went on pensions and “compensation” to retired expatriates. In October 1964, the new Labour government created, for the first time, a separate Overseas Development Ministry (ODM), formally bringing together the functions of the former DTC and the overseas aid policy functions of the Foreign, Commonwealth Relations and Colonial Offices and of other departments. This acted, under a succession of ministers, to raise the profile of Britain’s ODA and to encourage – directly or indirectly – the establishment of a number of institutions outside the government bureaucracy to provide expertise for research and advisory services, technical cooperation, training, and other development-related activities. The Institute of Development Studies (IDS) at Sussex, the Overseas Development Institute (ODI) in London, and the Overseas Development Group (ODG) at the University of East Anglia, all date from this period. Other universities and research institutes also provided research and consultancy expertise and hosted students from overseas, creating a dense “hinterland” from which the government could draw for its technical cooperation programs. In 1965, around 30 percent of the technical cooperation budget (about £40 million) went to support educational and research activities; a further 11 percent went to support overseas students and trainees. The new minister, Barbara Castle, observed that previously Britain’s aid program had been fragmented among a cluster of departments: the Colonial Office dealing with dependent territories, the Commonwealth Relations Office dealing with those which had become independent; the Department of Technical Co-operation (DTC), which dealt with the non-

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financial side of aid; the Foreign Office, which considered itself the arbiter of the political purposes of our aid; and the Board of Trade, which was interested only in promoting British exports. Over all brooded the Treasury, which had a finger in every pie.18 The result was that the aid program was unplanned and uncoordinated and was far more concerned with the interests of the donor than with those of the recipients. Castle writes how she was: delighted to be in a position to end all this and establish a revolutionary new principle: that the purpose of aid was to promote the development of the backward countries of the world and that all other considerations must be subordinated to this test.19 She brought in as advisers a number of left-wing economists (including Dudley Seers, a former economic adviser to the UN, as head of her new Economic Planning Department, and Paul Streeten, Fellow of Balliol College, Oxford, and Associate of the Oxford University Institute of Economics and Statistics, who became Seer’s deputy; Cambridge economist Robin Marris and Peter Ady, his senior assistant, were other members of the team) to develop policy documents and to advise the countries to whom aid was given on how to make the best use of the aid available. Cost-effectiveness was a major consideration, as was improving coordination within the ODM between the departments responsible for financing programs and projects and those responsible for technical assistance and training.20 But the commitment to “aid for the poor” was underlined when it proved possible to announce to the House of Commons in June 1965 that in future British loans to the poorest developing countries would be interest-free. This minister was evidently committed to aid for development, but Barbara Castle was moved to the Ministry of Transport in December 1965 and was followed in office by a series of incumbents, who each remained in post only about a year. The lack of continuity made it difficult for any one minister to make a lasting impression and to hold at bay the special interests of other ministries, particularly the powerful Foreign Office and Treasury, not to mention the Board of Trade (later the Department of Trade and Industry). Castle’s Economic Planning Department broke up, for example, when she moved on, and the two leading economists moved to the newly created government-funded IDS at the University of Sussex. The commitment of the government to overseas aid and to focusing on the poorest weakened. Although the first ministers of the ODM had a seat in cabinet, by 1967 this was no longer the case. Britain’s gross aid volume stagnated at around £210 million between 1964 and 1970. Balance of payments problems were cited by the government as the reason for this stringency, but Seers and Streeten (who were themselves in charge, during Barbara Castle’s ministry, of the Economic Planning Department of the ODM) argued that cuts in ODA “were due more to Labour’s political priorities than to economic difficulties, real though these were.”21

52 David Seddon In 1970, the incoming Conservative government downgraded the ministry to a department within the Foreign Office, and when Labour returned to power in 1974, although ministry status was reconferred, the minister was now more clearly subordinate to the Foreign Secretary. Nevertheless, the new initiatives under the ODM between 1964 and 1969 ensured a degree of continuity in aid policy, and the persistence, even after a change of government, of this new administrative structure with a single government agency (whether ministry or administration) responsible for aid policy and programs, and the development of a significant institutional framework for the formulation of policy and the management of overseas aid, extending beyond government bureaucracy into the universities, specialized research institutes, and other non-governmental organizations. In a decade when the possibility of British entry into the European Economic Community (EEC) was much debated, the Prime Minister was skeptical about the advantages for Britain, and believed rather in the idea of the Commonwealth as not just “a sentimental association, or even just as a trading area, but as a multiracial community and potential force in the world, and one in which there was a post-colonial role for Britain, guiding the development of poorer regions.”22 Certainly, the attention of the new ODM was strongly concentrated on Britain’s ex-colonies/Commonwealth countries in South Asia and sub-Saharan Africa, where a wealth of experience from earlier decades could be drawn upon to provide a program of technical cooperation which was proven relevant and appropriate to the needs of the specific countries concerned. The transition from the colonial civil service to the ODM was made, in effect, during this decade. The Colonial Office was by now a department with dwindling responsibilities, but administrative continuity was provided by the appointment of the previous Director-General of the DTC – “the nearest the Conservative government had got to giving overseas development a distinct identity”23 – as Permanent Secretary to the new minister. This senior civil servant had himself been Governor-General of Uganda from 1952 to 1957. The first Bill introduced by the new minister to the House of Commons included measures to encourage expatriate British officials to remain in the service of developing countries (by underwriting and financing the standards of service which would encourage them to stay on), which built on and extended the existing Overseas Service Aid Scheme. This kind of continuity between the old colonial civil service and the new overseas development administration was something that Britain was uniquely able to provide.

The “Western crisis” and the “rise of Japan” Responses to the crisis The 1970s mark the end of the period of postwar reconstruction and “development” and the beginning of a new era of global restructuring. The “global crisis” of the late 1970s, involving two successive oil crises and a major recession in many parts of the world, ushered in a period in which the bilateral agencies of the

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Western developed countries, together with the multilateral agencies, increasingly argued for and implemented a policy based on a deep faith in private enterprise, structural adjustment and “free markets” to restore economic growth and promote development, while in East Asia, a strategy of state-guided and promoted capitalist development prevailed, and seemed to have more success. Brooks and Orr identify the third of four phases in the evolution of Japan’s aid policy as involving a “concentration of aid . . . on resource-rich countries and countries along shipping routes in order to achieve economic interdependence” in the 1970s; and Yasutomo quotes a Japanese Foreign Ministry official as saying that “in the 1970s, especially after the oil crisis, the role of economic assistance as a means of securing raw materials such as oil came to be stressed. In other words, the reinforcement of economic interdependence became the main objective.”24 The expansion of Japanese aid in Africa provides an interesting example of the shift in emphasis.25 Even as late as 1970, over 98 percent of Japanese aid went to Asia; and, in 1972, Africa absorbed only 1 percent of Japan’s official development assistance. But this was soon to change. In 1973, Japan joined the African Development Fund and the next year Foreign Minister Toshio Kimura visited Africa – the first Japanese Foreign Minister to do so. He spent time in Zaire, Ghana, Tanzania and Egypt. Afterwards, he explained how the “oil shock” forced him to recognize the vulnerability of the Japanese economy, and the need not only to maintain good relations with specific oil-producing countries, but also to develop a more strategic approach generally. After the second oil price rise of the late 1970s, Kimura’s successor, Naoshi Sonoda, visited Nigeria, the Ivory Coast Senegal, Tanzania and Kenya. During the second half of the decade, as the Western economies began to experience a deepening crisis, often interpreting it in terms of the “threat” from the oil-producing states of OPEC and the “challenge” from the newly industrializing countries, governments increasingly began to question the value, and indeed appropriateness, in this context, of overseas aid – although a survey of the British public’s attitude to overseas aid and development carried out in 1977 revealed that 60 percent supported the basic idea of giving help to poorer countries, with 42 percent giving a humanitarian motive as against 4 percent who felt “we would benefit by trade” and 3 percent who felt “it would improve our political relations with other countries.” In fact, however, British overseas aid actually increased significantly during this period, with bilateral aid increasing from £305 million to £639 million at current prices, while declining as a proportion of overall aid from around 90 percent in the period 1965–70 to around 70 percent in the period 1975– 80 and ODA as a percentage of GNP rising from 0.38 to 0.52 percent. In this period Japan also began to increase its commitment to overseas aid. By the 1970s, Japan’s economic status was essentially assured and the government began to seek a broader role for ODA within a more “global” perspective. While one immediate concern was to seek relationships which might ensure a more secure supply of oil, broader objectives also came into play. Japan increasingly came to dominate the rapidly growing regional economy of East and Southeast Asia, but at the same time it sought to broaden its involvement beyond East Asia.

54 David Seddon JICA was established in 1974, marking a new commitment to overseas aid and a new vision of its role. Yasutomo notes that: While “aid fatigue” afflicts citizens of many other donor nations, public opinion polls in Japan taken between 1977 and 1981 register a consistent 75 to 80 per cent support rate [higher than in Britain – DS]. A recent poll reveals that close to 40 per cent of the people support an expansion of aid to developing nations.26 The government acted accordingly and aid outflows doubled between 1977 and 1980, from $1.4 billion to $3.3 billion in annual disbursements. It was during this period that a vision of comprehensive national security was actively developed and promoted. One consequence of this was a wider geographical spread of Japanese ODA and the beginnings of a “global perspective” on aid. In such a context it is clear why successive foreign ministers visited not only Nigeria (as a major oil producer) but also other leading countries with influence within sub-Saharan Africa. Japanese ODA to Africa multiplied steadily in the decade between 1973 and 1984. By 1981, Africa’s share of total Japanese ODA had increased to nearly 10 percent – a proportion that has been maintained more or less since then. The development of bilateral relations was complemented by a greater Japanese involvement in the regional multilateral agencies. Japan joined the African Development Fund in 1973 and became a full member of the African Development Bank in 1983; it also expanded its involvement in Latin America, becoming a member of the Inter-American Bank in 1976. And while the geographical focus began to shift and expand, the total volume and scale of Japanese ODA also grew. Yasutomo, draws attention to the fact that, prior to the 1980s: Japanese aid studies rarely give prominence to political motives or security implications of ODA. Most assume their irrelevance or subordination to foreign economic policy. These works did not anticipate the rise of strategic aid and remain ill equipped to explain adequately strategic aid’s birth, rationale, speed of implementation, and selection of recipient nations that do not possess deep economic ties with Japan.27 The 1980s were indeed to see the emergence of a new, more confident Japan, expanding its influence not only in the Asian region but globally, and showing greater sensitivity to the humanitarian needs of countries of strategic importance.28 Britain: from Labour to Tory In Britain too, despite the deepening recession, the commitment to overseas aid was still strong. Under Edward Heath, Britain had eventually joined the Common Market and the implications for its relationship with the Commonwealth and

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remaining dependent territories were still unclear. The Labour Party was back in office in 1974, with Harold Wilson as Prime Minister, but its hold on power was tenuous (34 seats short of an overall majority); the economic situation was deteriorating and the government White Paper on Public Expenditure envisaged serious cuts in spending. Overseas Development was, however, once again made a separate ministry after four years as an Administration within the Foreign and Commonwealth Office under the Conservatives. Judith Hart, a left-winger who had been the last minister of the ODM in the previous Labour government, once again took on the job, although she was replaced a year or so later by Reg Prentice, a right-wing Labour MP who in 1977 crossed over to the Conservatives and in 1979 joined Margaret Thatcher’s government. The summer of 1976 saw a run on the pound and the government agreed to apply for credit on IMF terms and initiate one of the earliest programs of structural adjustment under IMF auspices. Overseas aid continued, however, to increase both in real terms and as a percentage of GNP (as we have seen). Furthermore, there was a real increase in the grant element in total aid (from 54 percent in 1966, to 87 percent in 1973 and again to 97 percent in 1979) and the proportion of aid going to the “poorest countries” increased from 69 percent in 1974 to 91 percent in 1979.29 But there was also increasing pressure to ensure that ODA was cost-effective, and the introduction in 1977 of the Aid and Trade Provision (ATP) – a “window” (normally no more than 5 percent) of bilateral aid to finance development projects of commercial and industrial importance to Britain and to increase the “tying” of British aid – was one consequence of this. At the end of the decade, around two-thirds of public expenditure in aid was tied to the purchase of goods and services from Britain, or in the case of EC multilateral aid from EC member states. During the early 1970s, the proportion of British aid channeled through the multilateral agencies ran at around 30 to 35 percent of the total; but it fell to around 25 percent in the last years of the decade. In 1979, the Conservatives, under Margaret Thatcher, replaced Labour in government. For Britain the 1980s were (as they were for many “Western donors”) a period of retrenchment in government ODA. The growing dominance of neo-liberalism – with its vision of a reduced role for the state and intervention more generally, with “free market forces” providing the engine for recovery and growth in the developed and developing world alike – undermined the logic of giving assistance. Right-wing theorists even argued for an end to aid. The welfarist sentiments and state intervention implied in the conception of overseas aid were increasingly less attractive than they had been to governments in the 1950s and 1960s, and this shift in ideology, combined with pragmatic considerations and efforts to constrain public expenditure, tended to produce significant real cuts in overseas aid as well as an increasing concentration on “value for money.” As far as the latter was concerned, the ATP rose under the Thatcher government to average well above the 5 percent limit and reach, on occasion (1986), as much as 9.2 percent of total bilateral aid. The ATP helped British exporters to secure contracts in developing countries; the funds were allocated in response to requests coming in through the Department of Trade (not the ODA) from British

56 David Seddon companies, and tended to be less carefully scrutinized for their “development” implications than for the benefits to the British companies involved. Furthermore, as IGBA explains,30 during the 1980s funds were also being offered from the regular aid budget for purposes virtually identical to the ATP. Although the total of tied aid as a proportion of public expenditure on aid declined slightly during the first half of the 1980s (to 53 percent in 1984), it rose again thereafter (to reach 62 percent in 1990). The proportion of total ODA that was tied was 41.5 percent in 1982–3, and the proportion of bilateral ODA was 41.3 percent, excluding commitments to the EEC, the figures for Japan, by comparison, being 17.1 percent for both.31 Bilateral technical cooperation, which was very largely tied, accounted for between 18 percent (1981 and 1984) and 26 percent (1987 and 1990). In 1982– 3, Japan’s bilateral ODA was 41 percent untied, with a further 15.7 percent partially tied; the figures for Britain were 13 percent and 0.6 percent respectively. In 1988, the DAC Review noted Britain’s high proportion of tied aid, and expressed particular concern at the use of ODA in association with export credit. British ODA slumped in 1980 to $1.1 billion in constant prices (from over £1.6 billion in 1979) and then fluctuated between £1.1 and £1.2 billion until 1988, when it rose for two years (1988, 1989) to above £1.2 billion, before slipping to around £1.1 billion again in 1990. Public expenditure on aid as a proportion of total public expenditure (which had reached 1.1 percent in 1979) declined, to reach a low of 0.77 percent in 1987; ODA as a proportion of GNP slumped in 1980 to 0.35 percent, before rising briefly for a couple of years and then declining again to reach a low of 0.28 percent, again in 1987, the end of Margaret Thatcher’s second term in office, and then, in 1990, to an all-time low of 0.27 percent of GNP. A disproportionate share of the cuts in the aid program fell on a group of government-funded institutions known collectively as the ODA Scientific Units. These included some large and well-known institutions with an international reputation, such as the Tropical Products Institute, the Land Resources Development Centre, the Centre for Overseas Pest Research, and the Directorate of Overseas Surveys. These centers provided an invaluable service for development work overseas, acting as repositories of knowledge and accumulated experience, and also as channels of communication between research centers in developing countries and those in Britain. They had an important role in training and in institutionbuilding in developing countries. Other institutions which suffered cuts with reductions in the aid budget included the British Council, which also played an important role in providing support for students and trainees from overseas; between 1979 and 1987, the government’s grant-in-aid to the British Council was cut by over 20 percent in real terms. ODA staffing was reduced by 600 (25 percent) between 1979 and 1989. The number of staff posted overseas to work in “development” was reduced and reliance was increasingly placed on “special missions,” flying visits of “experts” for project identification, and other purposes. The Development Education Fund, introduced by the Labour government and with a budget approaching £3 million a year by 1979, was axed as soon as the Conservative government came to office.32 The reduction in aid was, however, not merely a pragmatic response to an

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economic crisis, nor even an inevitable corollary of the espousal of the monetarist doctrine; it was also part of a wider retreat of the British government from international affairs and, more specifically, from its commitment to the development of the “Third World.” Hugo Young, writing at the end of the 1980s, remarks that “the time is long past when more than a small handful of MPs took seriously Parliament’s role as a cockpit of global debate”33 and notes that: in 1981, for example, Mrs Thatcher, while answering Prime Minister’s Questions twice a week for the nine months the Commons sat, faced fewer than thirty which had an international dimension. Even adding European Community questions into the count, the number was a derisory fraction of the total.34 The crucial international relationship during the Thatcher years was that with the United States under Ronald Reagan, although her relationship with Mikhail Gorbachev became increasingly important after 1985, when he became SecretaryGeneral of the Communist Party of the USSR. Apart from the extraordinary episode of the Falklands War, arguably her most important international intervention outside Europe during her first term of office was her visit to Japan and China in autumn 1982 (her first foreign journey in three and a half years). In Japan, where the task was trade promotion, she ignored the Japanese support for the Argentinians and lectured grandly on Japan’s place in the world as one of the “Western” democracies and the need for Japan to reduce the barriers to British trade. In China, she upset the Chinese government with her remarks about British rights over Hong Kong, the lease to which was due to expire in 1997. Under successive Thatcher governments, as the relationship with Europe and with the United States became increasingly the twin foci of attention as far as “foreign affairs” were concerned (including Northern Ireland within the sphere of domestic affairs), and the developing world receded into the background, overseas aid was, once again, downgraded to fall under an Overseas Development Administration (ODA) within the Foreign and Commonwealth Office, and made subject to the priorities of the FCO, the Department of Trade and Industry (DTI) and, ultimately, the Treasury – all concerned with ensuring close links between aid and trade, and keeping costs down. As regards the Commonwealth, the major issue through the 1980s was that of sanctions against South Africa. Here, the government took a position strikingly at variance with that of the majority of this group of ex-colonies and dominions. But this was consistent with its general position on Commonwealth demands: at the 1983 Commonwealth conference in New Delhi, the entire British effort was devoted to resisting declarations calling for greater justice between the countries of the rich North and the poor South. As Hugo Young put it, “most people closest to the prime minister communicated her special impatience with the demands and hypocrisies of a multi-racial organization excessively dominated by representatives of the Third World.”35 It is not surprising that overseas aid became a somewhat marginal concern within the overall sweep of government policy under Margaret Thatcher.

58 David Seddon The long years of Conservative rule saw four incumbents of the ODA, from May 1979 to July 1989, all appointed by Margaret Thatcher. One of them was Lynda Chalker ( July 1989 to May 1997), appointed first by Margaret Thatcher and then reappointed by John Major, who recognizes in his autobiography that she “was to become something of a legendary figure in sub-Saharan Africa, where they adored her, and called her the Great White Mother.”36 The long “reign” of Lynda Chalker was welcomed by those working within the ODA, in part because it gave continuity and clarity to the overall policy and practice of overseas aid, and in part because it was widely recognized that she was genuinely and actively committed to a job generally regarded by MPs as at most a second-best government post. But, even if the ODA was formally responsible for overseas aid, other ministries could still not only influence but actually implement measures which might affect, sometimes complementing and sometimes contradicting, ODA policy and practice. The Foreign and Commonwealth Office, in particular, the Department of Trade, and the Treasury all had considerable and sometimes determining influence on overseas aid policy. For example, one of John Major’s first actions as Foreign Secretary in July 1989 (following the cabinet reshuffle that also put Lynda Chalker in charge of the ODA) was to advise the Overseas and Defence Committee of the cabinet whether or not to permit the export of British Aerospace Hawk aircraft to Iraq. The Ministry of Defence was in favor, believing it could be justified within the guidelines for arms sales; Major was opposed, fearing that the aircraft could be used for internal repression. The sale did not go ahead on this occasion, because both the Foreign Secretary and the Prime Minister agreed to oppose it, although other arms sales did on other occasions; as Major himself put it, “foreign-policy decisions cast a long shadow.”37 At the meeting of the UN General Assembly in September 1989, he clearly argued that “apartheid cannot survive and does not deserve to survive”, and announced a scholarship scheme for black South Africans, which was well received; nevertheless at the Commonwealth Heads of Government meeting in October he defended the official British policy, which was opposed to sanctions.38 In 1989, Major was made Chancellor of the Exchequer; the following year, at the Commonwealth finance ministers’ conference, he launched a debt initiative for the world’s poorest countries: he proposed a package of relief including a rescheduling of the whole stock of debt, a doubling in the amount of relief from one-third to twothirds, the capitalization of interest due on the debt with no further payment for five years, and an increase in the repayment period to 25 years. The reaction was positive, and the package was later endorsed by the IMF conference in Washington and warmly welcomed by the Secretary-General of the UN. The net effect was to wipe out $18 billion of debt from the poorest and most highly indebted countries at a UK “cost” of $900 million.39 These examples reveal the extent to which, despite the formal coordination of aid under the ODA, the actions of other departments and ministries often had profound effects on what was in effect aid and development policy and practice. Those who contrast the fragmented Japanese ODA administration and diffused procedures with the integrated structure of Britain’s aid policy and practice need to

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recognize that the reality is more complex than this stark contrast would suggest. Also, it is important to recognize that although there may be a dominant tendency in approaches to aid at any one period under any one administration, there is usually room for counter-tendencies, as long as they do not fundamentally challenge the overall thrust of ODA policy – which is usually broadly in line with that of the Ministry of Foreign Affairs, which in turn represents the general government line. Ministers and other government officials who contradict the overall thrust of policy do not last long, either in Britain or in Japan. The thrust of policy during the 1980s and into the 1990s as far as overseas aid was concerned was all too evident. The negative value of private flows to developing countries (flows of investment that had declined to virtually zero by 1987 and went into the red in 1989) was too large to be offset by government aid. British banks were recovering more from developing countries in debt repayment than they lent, while the level of British foreign direct investment (FDI) reached its lowest in four years. The result was an excess of debt repayments over export credits, new loans, investments, and voluntary grants (aid from voluntary organizations or NGOs), of £4.3 billion – more than three times the level of government aid. As a result, total net flows (grants, loans and investments, not the purchase of goods and services) from Britain to developing countries dropped from a high point of just over £10 billion in 1979 to virtually zero in 1989. The UN target for total net flows, set in 1968 at UNCTAD II, is 1 percent of GNP. In 1987 and 1988, Britain’s total net flows dropped to half that, and by 1989 to 0.19 percent; in 1990, for the first time, total net flow was negative (–0.46 percent of GNP). This was despite the fact that the government had argued that “it is the total flows, rather than just government aid, that are crucial for the development of the poor countries.”40 By 1990, ODA as a percentage of GNP was lower in Britain than in Japan – 0.27 percent as compared to 0.31 percent – and Britain had fallen from tenth to fourteenth in the league table of “donors.” Among the OECD countries, only Ireland, the USA, New Zealand, and Austria were lower, while the total value of British ODA was around £1.5 billion as compared with Japan’s £5.1 billion. At the end of the 1980s, only France and the United States provided more ODA in total than Japan, although the US record was even worse than that of Britain, given the size of its economy. The two areas in which there was, arguably, progress, was: (1) with respect to the proportion and the amount of aid channeled through the multilateral agencies; and (2) with respect to the balance between grants and loans. The proportion of public expenditure on aid going to the multilateral agencies fluctuated during the period 1975 to 1981 between a quarter and a third; from 1982 onwards it hovered between 37 and 41 percent. This was explained largely by increased contributions to the European Community (nearly half of which went into the European Development Fund), which came by 1990 to account for about half of all payments and subscriptions to multilateral agencies: £332 million, as compared with £183 million to the World Bank, £113 million to the various UN agencies, £36 million to the regional development banks, and £17 million to other agencies. The proportion of public expenditure on aid spent on grants (aid flows which do not have to

60 David Seddon be repaid), as compared with that on loans, generally ranged between 83 and 89 percent during the period 1976–81, and between 91 and 94 percent between 1982 and 1990.41 This trend was in part a response to an UNCTAD resolution in 1978 that developed countries should cancel the official debts of the poorest countries. Debt cancellation continued to be a (minor) part of the aid program through the 1980s, and it could be argued that Britain had a better record than most other countries on debt cancellation for the poorest countries. On the other hand, the trend towards untied aid during the 1980s came to an end with the decade; as far as bilateral technical cooperation is concerned, it came to an end before then – from 1987 onwards. At the same time, the proportion of technical cooperation in the bilateral aid program as a whole increased substantially, rising from between a quarter and a third, in the period 1979 to 1984, to between 35 and 43 percent in the period 1986 to 1990. Project aid declined significantly (from 39 percent of bilateral aid in 1981 to 17 percent by 1990), as did debt cancellation in the second half of the 1980s, but loans and investment through the Commonwealth Development Corporation (CDC) doubled in importance (six percent in 1979 and 1980 to 13 percent in 1989 and 1990). Just over half of all bilateral aid went to the poorest 50 countries (including the 42 least-developed countries), but other low-income countries received only 5 percent of the total, and nearly 20 percent went to lower- and upper-middle-income countries. The proportion of British aid to low-income countries and the proportion to the 42 least-developed countries was about equal to the DAC average.42 But the per capita value of Britain’s bilateral aid to the poorest countries was only £0.19. The five countries receiving the largest amount of aid – India, Bangladesh, Pakistan, Kenya, and Malawi – were all members of the Commonwealth; together they received £273 million in 1990 and accounted for 60 percent of bilateral aid. But a significant amount went to the 11 Dependencies (remaining British overseas territories), which were regarded as “the first charge on the aid program,” but none of which were amongst the 50 poorest countries (here the average per capita value of aid was £5.26, with Hong Kong getting £196.20, Saint Helena, £2,448 and the Falklands, £4,082). In all, 70 percent of Britain’s bilateral aid went to Commonwealth countries and a further 8 percent to the Dependencies. In regional terms, bilateral aid from Britain at the end of the 1990s was heavily concentrated in sub-Saharan Africa (45 percent) and South Asia (29 percent), with a relatively small proportion going to the transitional states of Eastern Europe and the former Soviet Union (17 percent) and an even smaller proportion to Latin America (9 percent). Japan, by contrast, was heavily involved in East and Northeast Asia, with a somewhat smaller investment in Latin America and around 10 percent in Africa. Three-quarters of British bilateral aid (excluding humanitarian assistance) went to low-income countries, with 15 percent to lower-middleincome countries and 9 percent to upper-middle-income countries. The mantra of the British Department for International Development (DfID) was poverty alleviation and the major focus was on poor countries and poor people. Even so, only one-third of aid commitments (judged by the Poverty Aim Market, or PIM)

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were “focused” (33 percent), while 21 percent were “enabling” and 46 percent were “inclusive” (meaning better-off as well as poor were intended to benefit). Japan: broadening horizons As British aid took on a generally narrower, more self-interested focus during the 1980s, the critique of Japanese aid that emerged towards the end of the 1970s encouraged a broader and more strategic, if not altruistic approach in the following decade. Looking back, many were now critical of Japan’s previous performance with respect to ODA in the light of its own strong economic performance over the previous years. Yasuba vividly expressed the view that Japan’s economic assistance policy needed an overhaul: Any Japanese who has taken a look at international statistics on economic assistance should be shocked to learn how poor Japan’s performance has been in the past. Take any relevant statistic: the ratio of official development assistance to GNP, the ratio of untied assistance to total assistance, or the proportion of “grant element” in the total assistance. According to these indicators, Japanese performance has been among the worst in the OECD.43 Furthermore, the Japanese government was said to have extended aid to developing countries without an explicit aid philosophy for over two decades – even if its policy had been implicitly to promote Japanese interests and broader economic interdependence. Rix’s important study of Japan’s aid policy was able to argue that Japan lacked any philosophy in granting aid beyond economic motives. During the global recession of the late 1970s and early 1980s, Japan was also adversely affected, but its economic position remained strong relative to that of its major rivals. The rate of growth in GNP slowed from the 10 percent average of the 1960s to a mere 4–6 percent during the late 1970s and early 1980s.44 The Japanese government – like the governments of most other developed economies – embarked on policies of fiscal reconstruction and administrative reform designed to improve government efficiency and reduce public expenditure overall. But in the case of Japan, the government at the same time, extraordinarily, made a commitment to increase expenditure on overseas aid. This apparently contradictory policy resulted in part from its assessment of the global security situation (as encapsulated in the Ohira study group’s Report on Comprehensive National Security, 1980). The Report places the onus on the developed states for improving North– South relations and prescribed a special role for Japan – “Japan’s world historic mission is to play a leading role in creating an order between the North and the South.” The Report assumed that Japan’s economic growth would continue to outpace that of other developed states; it would possess the capacity to become a major aid-giving power. In the spring of 1980, the Ministry of Foreign Affairs (MOFA) initiated a study of aid policy, which was published in April 1981 as a booklet, The Philosophy of Economic Co-operation: Why Give Official Development Assistance?

62 David Seddon This argued the case for humanitarian motives in giving aid, but also emphasized the importance of economic interdependence and comprehensive security. It also noted that Japan could offer not only a successful model of development, but could draw on its experience as the most successful of all NICs to provide effective technical cooperation. According to Yasutomo: Suzuki Zenko enthusiastically embraced the [Ohira study group] report’s findings upon taking office as prime minister in the summer of 1980, and in December, he adopted comprehensive national security as national policy. Suzuki singled out economic co-operation as a pillar of comprehensive national security, and government officials thereafter linked aid with the nonmilitary sector of national security policy.45 In 1981, his cabinet pledged another doubling of ODA over the next five years: using aggregate spending for the last half of the 1970s as its base ($10.7 billion), the government vowed to reach an aggregate spending target of $21.4 billion by the end of fiscal year 1985, and to increase aid as a proportion of GNP far beyond the 0.32 percent of 1980. The next year’s budget recorded the lowest rate of expansion in 26 years (at 6.2 percent) and the 1984 budget hardly increased over the previous year (0.5 percent). In 1984, domestic social welfare spending increased by only 2 percent; and the government’s domestic austerity policy, as well as foreign exchange rate fluctuations, recipient state’s absorptive capacities, and other problems, prevented the fulfillment of the aid-doubling pledge. Nevertheless, between 1981 and 1985, Japanese ODA enjoyed a 31.5 percent increase, as a result of which Japan had become by 1983 the world’s third-largest aid-giving state, and by 1984 had beaten France to become number two. It still retained a fragmented structure for the formulation of policy and for the implementation of overseas aid, with numerous government ministries and other agencies involved, and the whole system was largely “donor”-driven, with relatively standardized approaches to its various assistance programs. It was not until 1981 that a Regional Department was created as a division specifically charged with the comprehensive coordination of JICA projects at a national (recipient) and regional level. It was then that country-specific aid studies began to be undertaken, the first such being in the Philippines in 1986. A start was made in 1989, with the formulation of implementation guidelines for country-specific aid and basic plans for country-specific projects. The Regional Department was expanded into two in 1989, and into three in 1991. Up to 1998, country-specific studies had been undertaken in a total of 32 countries and regions, and implementation guidelines had been developed for 64 countries. In September 1985, the cabinet approved its third consecutive aid-doubling plan. It established an aggregate spending total for ODA of $40 billion by 1992. Annual aid outflow was expected to reach $8 billion, constituting 0.42 percent of GNP. In fact, by 1989 Japan had the largest bilateral aid program in the world, and

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by 1991 it had become the world’s largest aid “donor” – a position it was to maintain over the next decade. As Japan has become an increasingly important source of foreign aid throughout the developing world, it has also sought to increase its global political and diplomatic influence, both through its bilateral relationships with other states and within and through the multilateral agencies. During the late 1980s and early 1990s, it began to challenge the “Washington consensus” which had established an ideological hegemony over the international development community, with its essentially neo-liberal doctrine of “free markets” and “globalization.”

Challenging the “Washington consensus” In the early 1980s, when the Bank started to champion liberalization and the “free market,” the Bank and the Japanese government proceeded along independent paths. In 1987, the Ministry of International Trade and Industry (MITI) published the New Asian Industries Development Plan, setting out a regional strategy of industrialization for Southeast Asian countries. In this document it was indicated that: “Japan will increasingly use its aid . . . as seed money to attract Japanese manufacturers or other industrial concerns with an attractive investment environment.”46 Directed credit – meaning subsidized and targeted or earmarked credit – was to be a key instrument of this strategy. In the late 1980s, Japan’s Ministry of Finance established the ASEAN–Japan Development Fund, which offered directed credit to support private sector development. The Fund was administered by OECF, Japan’s largest aid agency. Japan’s development strategy, for itself and for developing countries, was significantly different from that which the Bank had been advocating and effectively obliging the governments of developing countries to follow – with an emphasis on free trade and nearly free financial markets. Whereas the Japanese tended to see trade and managed trade policy as a subordinate part of industrialization and industrial strategy, the Bank economists tended to see trade and free trade policy as the motor of industrialization. The former recognizes the crucial role of the state, the latter ignores or denies it. In 1989, this strategy and the actions of OECF were strongly criticized by the World Bank. In response to the Bank’s criticisms, Japan initiated a campaign directed at making the Bank drop its blanket opposition to directed credit policies, to change its core ideas about the role of the state in development strategy, and to pay closer attention to the specificities of the East Asian development experience. In this way, it hoped, the Bank would appreciate Japan’s contribution to the development experience and recognize Japan’s role as a leader in development thinking.47 In 1991, the Japanese MOF pressed the Bank to undertake a thorough study of the East Asian development experience. Japan would pay for it; the study got under way in January 1992. In the meanwhile, in October 1991, the OECF publicized a policy paper that had been produced on the World Bank’s approach to structural adjustment. It conceded that structural adjustment lending had produced some

64 David Seddon positive results in some cases, but that a review of the experience as a whole revealed the limits of the market mechanism in the less-developed countries and registered several doubts regarding the adequacy of de-regulation, privatization and import liberalization widely recommended by the Bank. In particular, it criticized the fact that the Bank adopted much the same set of measures whatever the circumstances, even in sub-Saharan Africa, where, it argued, the private sector is very underdeveloped. The paper recommended instead the need to adopt measures to foster industry and to learn lessons from the experience of the East Asian countries. The initial drafts of the document on the East Asian experience were much discussed and revised; there were many compromises. Wade concludes that: The final document bears traces of the three-way tussle between Japan, the research vice-presidency and the East Asian vice-presidency. It concedes for the first time in a major Bank publication the fact of extensive government intervention in most of East Asia. It also grants the argument that some of these interventions, in the area of exports and credit, may have fostered growth and equity in some parts of East Asia.48 But the bulk of the document gives a strong endorsement to established Bank ideas. The text is replete with contradictions. In September 1993, the final report was published by the World Bank as, The East Asian Miracle: Economic Growth and Public Policy. Its contradictory text allowed for contradictory interpretations of the main message and contradictory responses. But it undoubtedly had the effect of generating new debate around the alternative strategies and paths of development available for developing countries. In particular, it drew attention to the evident importance of long-term commitment by the state to the development of human resources as a crucial prerequisite for economic development, as well as a valued social good in its own right; it also brought back into proper focus the role of the state in economic and social development. Finally, it raised the profile of Japan and the East Asian states more generally and challenged the monopoly of the hitherto hegemonic “Western” (US and UK) model of development. Japan’s willingness to challenge the “Washington consensus” on models for development was evident but somewhat more muted when the Japanese government sponsored the Tokyo International Conference on African Development in October 1993, although the relevance of the East Asian experience for African development was discussed.49 At this conference, the Minister for Foreign Affairs and deputy Prime Minister, Tsutomu Hata, set out five key objectives for Japan’s aid policy in Africa: to contribute to progress in the political process, to democratization in particular; to assist economic reforms in cooperation with structural adjustment programs; to assist human resource development; to pay attention to environmental problems; and to put emphasis on effectiveness and efficiency in ODA. These objectives were not in any way at variance with those of the “Western” development agencies.

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Supporting the “Washington consensus” If Japan was prepared during the late 1980s to challenge the “Washington consensus,” both by argument and by example, Britain was not. The close relationship between Thatcher and Reagan, and the whole tenor of the Conservative government, militated against an independent and critical stance, whether towards the United States or towards the Bretton Woods institutions throughout the 1980s. Under the successive Conservative governments of Margaret Thatcher, an increasing proportion of Britain’s overseas aid went through multilateral channels, with almost half of it to the European Community. The first half of the 1980s saw a substantial shift towards aid funding through multilateral assistance to reach around 40 to 45 percent in the mid-1980s; the second half of the decade saw a gradual reduction in the proportion until 1990–1. Throughout the 1990s the proportion was maintained at just below half of the total of ODA. This is substantially higher than the DAC average, and higher than the proportion provided by Japan to multilateral agencies. (On the other hand, although Japan’s contributions to multilateral agencies account for significantly less in terms of proportion of GNP than Britain’s, in mid-1984 Japan became the second-largest provider of funds to the World Bank and has been for many years the largest contributor to the Asian Development Bank.) After the contribution to the European Community (around 47 percent in 1990), the largest share (26 percent) went to the World Bank and a smaller amount (16 percent) to the UN agencies. Maintaining a global “role” is important for British governments. John Major recognized that: Over decades, Britain’s influence had waned. By 1990 we had the lingering impulses of an imperial power, but no empire. Yet Britain still mattered. We were one of the five permanent members of the UN Security Council, and of the Group of Seven (G7) leading industrial nations. The disproportionate effectiveness of our armed forces, the special bonds of the Commonwealth, and our close links with the United States all ensured that our voice counted at the top table.50 Britain was now committed to the European Community, but Major, like Thatcher before him, believed in the “special relationship” with the United States; he also believed in the special relationship with the countries of the Commonwealth. Major supported the Washington consensus, for very good reasons: “in 1994, the World Trade Organization began work, policing the free-trade policies of the world’s economic powers, opening new markets. This has been almost entirely to our benefit, since British markets were mostly open already.”51 He was less convinced of the value of, for example, the UN social summit, which was held in Copenhagen in March 1995. He did not go, even though the Foreign Office pleaded with him to change his mind.

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Aid and the “new world order” New agendas After a decade during which the World Bank focused almost exclusively on the role of markets in development and on sectoral development, the World Development Report of 1990 appeared to mark a turning point. Its focus was “poverty” and it signaled a growing interest on the part of the Bank in human resource development – issues of social development, gender, education and health became more prominent than they had ever been during the 1980s. This new concern was not unrelated to the critique of the “Washington consensus” that had begun to emerge in the 1980s within the UN family itself. As early as 1987, a study commissioned by UNICEF, published as Adjustment with a Human Face: Protecting the Vulnerable and Promoting Growth, had developed a critique of neo-liberal thinking on structural adjustment and economic reform whose theoretical antecedents were the series of reports by the Brandt Commission in 1980 and 1983 which adopted an essentially social democratic, neo-Keynesian approach to development issues. From 1990 onwards, a series of annual reports on human development (UNDP, 1990 onwards), produced by the United Nations Development Program with substantial inputs from a range of academics and professional development experts – and also identified with the social democratic, neo-Keynesian tradition in development thinking which can be traced back through the Brandt reports to the Pearson Commission report of 1969 – progressively broadened the development agenda to include not only issues of social welfare and well-being but also political concerns and human rights. The collapse of the communist party regimes of Eastern Europe and the disintegration of the Soviet Union in the late 1980s and early 1990s also raised questions about democracy and development, while issues of “good governance” were brought to the fore by the Gulf War and the notion of a “new world order” announced by President Bush. Political conditionality increasingly began to be applied to aid, by both bilateral and multilateral agencies during the 1990s.52 The British government first set out its policy stance on political conditionality in a speech by the Conservative Foreign Secretary, Douglas Hurd, in June 1990. Political liberalization was explicitly linked with economic liberalization. Based on the premise that, “economic success depends to a very large extent on effective and honest government, political pluralism, and I would add, observance of the rule of law, freer and more open economies,” he further declared that: Countries which tend towards pluralism, public accountability, respect for the rule of law, human rights, market principles, should be encouraged. Governments which persist with repressive policies, corrupt management, wasteful and discredited economic systems should not expect us to support their folly with scarce aid resources which could be used better elsewhere. In the same month President Mitterrand affirmed at the summit of African heads of state that France would be less generous with its aid towards regimes “which

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conduct themselves in an authoritarian manner.” In February 1991, the head of USAID stated that it would, “direct an increasing amount of funds to those countries that are moving towards economic and political liberalization.” In June 1991, the British Minister for Overseas Development, Lynda Chalker, listed the following as components of good governance: sound economic and social policies, free markets and an enhanced role for the private sector, the provision of essential services, curbs on military expenditure, competent government, improved administrative capacity, pluralistic political systems (open and accountable to reduce political interference and corruption), and respect for human rights and the law. In October 1991, Germany stated that its criteria for supplying aid now included the state of democracy, the rule of law, reductions in military spending, and moves to strengthen market forces. Finally, in December 1991, the OECD’s DAC high-level meeting highlighted democratization, human rights and “good governance” as basic conditions for achieving sustainable development. But, if there was now greater emphasis on a broader vision of development, the dominant approach among the bilateral aid agencies was one which continued, despite the publication of The East Asian Miracle, to adhere to the basic premise that economic liberalization and the “free market,” combined with political liberalization and pluralism, were the key to economic growth and ultimately to poverty alleviation. The idea that extending the neo-liberal “rules of the game” under the auspices of the World Trade Organization was the key to establishing a global framework for sustainable development was barely challenged. Japan and the multilateral agenda By the mid-1980s, Japan was already the principal co-financier of World Bank loans, the number two shareholder in IDA, and the second shareholder in the World Bank (IBRD) after the United States. In 1990, it became the second-biggest shareholder in the International Finance Corporation – the Bank’s affiliate for private sector lending; and in 1992 it became the second-biggest shareholder – equal to Germany – in the IMF. Its voice within the Bretton Woods agencies was now second only to that of the United States. One of the five executive directors representing single countries in the World Bank, as in the IMF, is Japanese (the others being the US, Germany, Britain, and France). Japan had also become by now the world’s largest source of foreign investment, and the biggest manufacturing economy in the world. By 1995, it was firmly established as the leading source of bilateral and multilateral aid, accounting for about $14.5 billion a year out of a total of $60 billion from the 21 OECD countries as a whole, allocating nearly twice as much as the United States, which had slumped by then to a position below France and Germany in terms of total amount allocated. Japan’s contributions to the multilateral agencies, however, while substantial, accounted for only around 11 percent of its total ODA budget – a striking contrast with Britain’s level of commitment. About two-thirds of this went in 1998 to the UN agencies, while the other third went to the international financial institutions (including the World Bank, the IMF, and the regional banks) – the opposite of

68 David Seddon Britain’s commitment to these two sets of multilateral agencies. In the last two years of the decade, however, while contributions to the latter went up significantly, contributions to the former stagnated overall, with cuts in some cases. Clearly influenced by the emerging apparent consensus on a broader vision of human development, with a range of concerns in addition to the central emphasis on economic growth and poverty alleviation, Japan adopted a special “Official Development Assistance Charter” in June 1992, emphasizing poverty relief, human rights, democracy, environment and reduced military spending,53 and delineating clearly for the first time an “official philosophy” and the principles now underlying Japan’s ODA. Along with humanitarian concerns and recognition of global interdependence, the Charter included a concern for the environment, with the explicit recommendation that programs to assist self-help efforts by developing countries should take proper account of environmental and other key issues, such as the extent of democratic reform and military spending.54 Since that time there has been evidence of a broadening of approach, if not a shift, to include social and political as well as economic concerns, and to recognize the need for a global as well as a national role for Japan. Increasing recognition of issues which either transcended the regional framework and were effectively global (such as population, the environment and, more recently, HIV/AIDS), or could be regarded as pervasive and cross-cutting (such as gender), led to the creation in 1993 of Environmental and Women’s Departments and could be said to mark the start of a serious attempt by JICA to confront these issues. There has been no systematic attempt to mount a serious overall challenge to the priorities as defined by the international aid “community,” which remains very much under the hegemony of the World Bank and the IMF. But several initiatives are suggestive of a continuing intention to mark Japan’s approach to development and to development policy and practice as distinctive. With respect to political conditionality, in particular, Japan continued to pursue a line of “constructive engagement” and appeared not to be concerned to press for political reforms in the countries which were recipients of its aid. Its position was that strict conditionality and enforcement may be justifiable economically, but not politically. In this respect it may be said to be generally soft on conditionality. With respect to South Africa, however, its position gradually hardened through the late 1980s and early 1990s. Already a major trading partner with South Africa by 1987, Japan introduced tougher sanctions against the apartheid regime and demanded that Japanese enterprises be “self-disciplined” in their dealings with South Africa. From 1990 onwards, Japan actually began to provide aid to antiapartheid groups in South Africa through international NGOs and other organizations. After the inauguration of the ANC government in 1994, Japan pledged a large “aid and trade” package worth $1.3 billion ($0.3 billion in ODA, $0.5 billion for a loan from the Japan External Trade Bank and $0.50 billion for trade insurance). In 1993, Japan sent troops from the Japan Self-Defense Forces (SDF) to take part in the peacekeeping operation in Mozambique (ONUMOZ). This was its first such

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involvement in Africa and its second anywhere after its participation in UN operations in Cambodia. Foreign Minister Hata stressed that Japan’s involvement in ONUMOZ was a good example of Japan’s contribution to conflict resolution and political progress in Africa. In his assessment of Japanese aid strategy in Africa, Makoto Sato concluded, however, that, “the Japanese government did not send SDF to participate on ONUMOZ as a deep consideration or sympathy for the Mozambican people. Japan was more concerned with its strategic position in the Western world, particularly with its relationship with the ‘big seven.’”55 It was seen, in other words, more in terms of North–North co-operation than in terms of North–South assistance. Certainly, it is possible that Japan was concerned to further strengthen its claim to a place on the UN Security Council – after all, the US Senate had adopted a resolution in January 1994 to the effect that Japan should not become a permanent member of the Security Council unless it could fully participate in UN peacekeeping operations. But, in 1994, Japanese peacekeeping forces were sent to the Rwandan refugee camps in Zaire as part of the international humanitarian assistance initiative, and it seems likely that these initiatives were part of a more general commitment to wider involvement in the new agendas of the international community. In October 1996, prior to a meeting of the UN General Assembly, the Ministry of Foreign Affairs announced the publication of the most recent version of the ODA White Paper, which suggested that assistance to Africa was to be seen not just in a regional, but also in a global context – humanitarian crises, environmental problems, and the spread of HIV/AIDS (all particularly acute in Africa) were also global issues. As a specific measure, it was proposed that the second Tokyo International Conference on African Development in 1998 (the first was in 1993) focus on support for primary education, a program for the extermination of poliomyelitis and an increased commitment (to invite 3000 Africans to Japan) to training. In 1996, Japan was elected for its eighth term as a non-permanent member of the UN Security Council, for a two-year term from 1997; pressure is growing to secure a permanent place on the Security Council for Japan. With its growing weight in the global economy, and importance in the international aid community, one might have expected Japan to have acquired a more authoritative, and possibly more divergent, voice. But, despite the challenge of its own development experience and that of East Asia as a whole to the conventional wisdom of the neo-liberals, and its moderately successful efforts to persuade the Bank to publish an objective empirical analysis of that experience (in The East Asian Miracle) in the early 1990s, Japan seems not to have pursued that initiative too explicitly in its own most recent reformulations of its aid policy and practice. The Asian crisis of 1997 and its aftermath may well have obliged Japan, together with other East and Southeast Asian NICs, to reconsider the “East Asian miracle” and “the Asian crisis,” and to refrain for the time being from emphasizing the extent to which significant differences exist in development ideology, policy, and practice among the “donors” themselves, as well as in the development experiences of African, Latin American and Asian countries. Even if, despite the “Asian crisis” of 1997 and afterwards, the East Asian model

70 David Seddon still provides an alternative to the “Western” conventional wisdom, it seems to be the case that it has been increasing criticism of Japan’s ODA program from within the country (as well as from outside) which has prompted major reforms during the last few years of the decade, rather than a desire to promote a distinctive approach to development and to development aid. Britain: new wine in old bottles? In 1997, the year of the “Asian crisis,” a Labour government came to power in Britain after nearly two decades of Conservative rule. It adopted an approach reminiscent of the social democratic, Keynesian tradition which, while not fundamentally challenging the previous government’s clear commitment to promoting market forces and identifying “globalization” as a progressive project/ phenomenon, nevertheless believed in the need for strategic and selective intervention to “manage” capitalism, both at home and abroad, to ensure both economic growth and broader-based development. A renewed interest in international development meant that, once again, ODA came under the responsibility of a separate ministry and once again there was a commitment to increase both the overall volume and the targeting of aid towards poverty alleviation. The underlying philosophy on aid and development was in line with that of the government as a whole – the promotion of economic growth through a combination of domestic market reform and liberalization and the expansion of “free” international trade and private investment would be complemented by strategic and selective assistance by bilateral and multilateral development agencies. Although the new government made clear its commitment to maintaining strict spending limits, at least during its first few years, overseas aid was once again made the responsibility of a separate ministry, with a left-wing cabinet minister (Clare Short) in charge, and there were signs of a willingness to increase aid expenditure as well as to re-focus on “aid to the poorest.” A change of name, to the Department for International Development (DfID) signaled an initial willingness to consider new approaches to development. One significant measure adopted early on was the closure, in November 1997, of the Aid and Trade Provision scheme tying aid to the purchase of British goods and services. Within a few months, the DfID had produced a “White Paper” setting out the “new vision” for British overseas aid: Eliminating World Poverty: A Challenge For The 21st Century. Broadly, this reasserted many elements of the agendas of the Labour governments of the 1970s and 1960s, and of the social democratic tradition in development thinking epitomized by the Brandt reports, but at the same time “recognized” the far-reaching process of global restructuring that had taken place during the 1980s. There was little sign of a major concerted challenge to the dominant “Western” conventional wisdom on development aid policy and practice. But this “conventional wisdom” had also been slowly shifting. In the years since the World Bank produced its World Development Report on “poverty” (in 1990), there had been continuing concern among some of the “Western” bilateral and multilateral agencies to address poverty alleviation and other broad development issues.

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Various initiatives by the UN – the social summit in Copenhagen, the environmental summit in Rio, the women and gender summit in Cairo – had not, however, effectively undermined or produced a coherent alternative to the widespread belief in the fundamental role of markets and more “open” trade to promote sustainable economic growth and ultimately well-being, despite evidence to the contrary. The position of the new British Labour government and the DfID was little different in this respect from that of most other OECD countries. But there were some indications of a retreat from the “social democratic alternative” to neo-liberalism and a new embracing of “the liberal agenda.” In 2000, DfID produced a second White Paper – Eliminating World Poverty: Making Globalisation Work For The Poor – which made abundantly clear its central belief that poverty alleviation would be achieved essentially through embracing globalization and “making it work for the poor.” In February 2001, the government introduced the International Development Bill (thereby repealing the 1980 Overseas Development and Co-operation Act introduced by the Conservatives), which sought to establish the reduction of poverty as the central aim of British development assistance, and thus to enact the policies set out in the two White Papers. The new Bill provided new powers for the Secretary of State to support civil society organizations undertaking development awareness and advocacy activities and to engage more effectively with the private sector, by taking shareholdings in companies and using convertible instruments, options, and guarantees.56 This emphasis on the need for pluralism in policy formulation – and a belief in the effective combination of public, private, and non-governmental agencies – both at home and abroad distinguishes the present Labour administration from its predecessors. The growth of the importance of NGOs in development aid policy and practice dates back to the 1980s, but it became an added component of the new conventional wisdom during the 1990s, when some of the limitations of previous poverty alleviation strategies became increasingly apparent. It was now widely felt that the provision of aid with efficiency and effectiveness could be achieved best in many cases by non-government organizations working closely with the involvement and participation of local communities. Increasing funds were channeled directly from government to the development NGOs, and these took on a new importance in the “aid industry,” constituting a new “sector,” particularly in the various areas of technical cooperation, and scaling up accordingly. 1997 and after – Japan In Japan also, as we shall see, there is a new emphasis on the role of participatory cooperation projects and of NGOs in the “delivery” of technical assistance and project aid. This is part of a far-reaching overhaul of aid policy and practice that has been undertaken by Japan in the aftermath of the Asian crisis. After 15 years of massive expansion in the volume of overseas aid provided by Japan, the late 1990s saw a growing concern in various quarters that aid should be more cost-effective and focus more on quality than on quantity.

72 David Seddon Japan’s bilateral ODA accounted, at the end of the 1990s, for about 80 percent of total ODA, with subscriptions and contributions to multilateral agencies slightly less than 20 percent. This is in striking contrast with Britain, whose contributions and subscriptions to multilateral agencies (including the European Union) amounted to not far short of 50 percent throughout the second half of the 1990s, having risen from a low point in the late 1970s and early 1980s of around 30 percent (even then a higher percentage of GNP than that of Japan). Britain spent GBP 958 million on multilateral contributions in 1997–8; this rose to GBP 1,158 billion in 1999–2000. The bulk of this (GBP 543 million and 674,000 in 1997–8 and 1999–2000 respectively) went to the European Union, much of which was then transferred into the European Development Fund (EDF). The proportion going to the World Bank group remained reasonably steady – declining slightly from GBP 189,851 to GBP 170,631 in the same period. On the other hand, the actual value of Japan’s contributions to multilateral agencies is greater than that of Britain. Bilateral grants account for about 46 percent of Japan’s total ODA, with bilateral loans accounting for about 34 percent. Japan had gradually increased its contributions to the multilateral agencies during the 1980s and early 1990s; but towards the end of the 1990s, it began to cut back on ODA. In 1998, the budget for the fiscal year indicated a reduction of 10 percent.57 Doubts about the usefulness of development assistance expenditure, of the kind long used in the West to justify reductions in aid budgets, had began to surface. The reduction of trade ties to aid – which adversely affected the benefits to Japanese companies of the “development business” – lost ODA the support of the country’s influential commercial and industrial associations, which have a powerful advocate in the Ministry of Trade and Industry. A series of scandals also helped undermine the legitimacy of development assistance as a government activity, while even those who support the basic commitment to increased international assistance are asking what the aid has actually achieved in the recipient countries. The most drastic cuts immediately affected Japan’s inputs into UN organizations, although subscriptions to the World Bank and IMF increased. This recent pull-back from multilateral into bilateral lending, which serves, more directly, the commercial links and Japanese national interests that remain matters of central concern, is likely to have widespread repercussions throughout the OECD. Although there is no doubt that Japan intends to remain a global force in international aid, its major focus may now be on the impact it can have through bilateral aid. In fact, ODA was one of the focal areas of the debate on structural reform of public finances that started in 1997, with proposals from many different directions. Towards the end of the millennium, following the Asian crisis, Japan began to reposition itself significantly with respect to its overall aid policy. In January 1998, the Discussion Group on ODA Reform for the twenty-first century, an advisory body to the Ministry of Foreign Affairs, produced a report recommending comprehensive reforms, including measures such as clarification of country-specific approaches and priority sectors. On the basis of these recommendations, JICA, as the leading institution charged with development policy and practice, embarked

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on a comprehensive project review and came up with a reform plan in April 1998. The aim of this operational and organizational reform, according to JICA itself, is “qualitative improvement, to be achieved by making more efficient use of limited aid resources in a tight financial environment.”58 The aims of the restructuring were: (1) strengthening functions for dealing with priority issues affecting developing countries and the international community: (2) strengthening project control and examination functions: and (3) strengthening functions for dealing with the promotion of participatory cooperation and for recruiting and fostering aid personnel. But behind these was the objective of changing from a situation in which technical cooperation was undertaken in response to the rapid expansion in ODA, with a broad scope and making use of existing type-specific menus, to one in which cooperation emphasized qualitative improvements and definite results with (a) an emphasis on priority issues and (b) a precise response to specific countries and development issues. Country-specific planning and a new set of issue-specific guidelines are intended to complement basic policy on priority concerns. The “Medium-Term Policy for Overseas Development Assistance,” officially announced in August 1998, provided specific guidelines for the implementation of Japan’s ODA for the next five years or so. This policy is rooted in the Basic Ideals and Principles of ODA Guidelines approved by the Japanese cabinet in June 1992. The Medium-Term Policy consists of six sections. After the foreword, which stresses the importance in the future of the appropriate, effective, and efficient implementation of aid and of the need to work towards linkage with diplomatic policy and national interest, is followed by a section on the basic approaches. These emphasize the importance of: ●

●

●

●

●

●

the ODA Guidelines and the targets set out in the DAC New Development Strategy; self-help efforts by developing countries, strengthening cooperation and partnership with other “donor” countries and international agencies; on the basis of preliminary dialogue and studies, providing effective and efficient support appropriate to the conditions of individual recipient countries; understanding the need for a division of responsibility according to the available expertise of different parties (including NGOs and the private sector) and for achieving linkage with other parties; from the standpoint of “people-centered development” giving particular attention to the least-developed countries; and from the standpoint of “human security” to major threats, including environmental deterioration; ensuring that aid has a clearly visible profile and that Japan’s efforts are trusted and commended at home and abroad.

Within JICA, the four major functional departments (Planning; Project Formulation Study; Training; and Human Resources) will be complemented by four regional departments (Southeast Asia; the rest of Asia, the Caucasus, and Oceania; Latin America and the Caribbean; and Africa, the Middle East, and Europe). This will make it possible to improve:

74 David Seddon ● ● ● ● ● ●

coordination and use of country- and region-specific information; country- and region-specific planning; ascertaining country- and region-specific project implementation conditions; project identification and formulation; flexible response centering on dispatch and training; cross-sectional country- and region-specific approaches.

Under the new organizational structure, links with NGOs, local government authorities, universities, and other institutions, and promotion of participatory projects, will be dealt with by departments such as the Partnership Promotion Department, the Human Resources Management Department and the JOVC Secretariat, as well as by JICA’s domestic agencies throughout Japan. One of the main priorities of the new approach in Japanese ODA delivery is technical cooperation. The slogan “human development, national development, bringing people together” underlines the new orientation and a greater concern with the issues of the 1990s for JICA.

Japan and Britain at the end of the millennium: some comparisons The structure of administration For over 35 years, the responsibility for British overseas aid and development has been strongly concentrated in one government ministry or department, although other ministries, notably the Foreign and Commonwealth Office (FCO), the Department of Trade and Industry (DTI) and the Treasury, continue to have a major influence on Britain’s overall international policy and practice. This agency has been given more prominence and independence under Labour administrations than under Conservative ones, although the influence of the FCO and the DTI has always been strong. At the same time, the DfID (as it is at the moment) is embedded within a much broader network of development-related institutions, including quasi-autonomous NGOs (QUANGOs), NGOs, and independent institutes. The long history of British imperialism has ensured a depth of experience and expertise regarding the problems facing developing countries which is virtually unmatched by any other country. This ensures that technical cooperation is not only a major “sector” of British overseas aid, but a most effective one in terms of building effective international development capacity. Japan’s general account ODA budget for 1999 (¥ 1049 billion) for the government as a whole is vastly greater than that of Britain and clearly has the potential to have a massive impact, when linked systematically with Japan’s broader international policy. There are clear signs that Japan is rethinking and restructuring its wider foreign policy in both theory and practice. But the responsibility for the overseas aid funds is still highly fragmented, with 19 government ministries and other agencies receiving government allocations and having responsibility for

Japanese and British overseas aid compared

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overseas aid. Those with the largest allocations are the Ministry of Foreign Affairs (¥558.2 billion in 1999), the Ministry of Finance (¥365.9 billion), the Ministry of International Trade and Industry (¥50.5 billion), and the Ministry of Education, Science and Culture (¥44.9). Others receiving smaller but still significant allocations include the Ministry of Agriculture, Forestry and Fisheries, the Ministry of Health and Welfare, the Ministry of Labor, the General Affairs Agency, and the Economic Planning Agency. JICA received ¥177 billion from the Ministry of Foreign Affairs, which represented only 31 percent of the budget for the ministry as a whole). The bilateral technical cooperation budget amounted to ¥354.6 billion, of which JICA was responsible for about 50 percent. About 70 percent of grant aid is implemented through JICA. JICA also receives a part of the study costs allocated in the ODA budget of the Ministry of International Trade and Industry (MITI); in 1999, this amounted to ¥8.53 billion for the provision of technical cooperation. Apart from JICA, the organizations implementing projects under the government’s technical cooperation budget include the Japan External Trade Organization (JETRO), the Association for Overseas Technical Scholarships (AOTS), the Japan Overseas Development Corporation ( JODC), and the Japan Foundation. Since the late 1960s, JETRO has worked especially to encourage imports from developing countries. This has been achieved by inviting officials responsible for trade policy and executives of private companies in developing countries to Japan, giving its support to the promotion of economic reforms, encouraging developing countries to export to Japan, and by sending its own experts to developing countries to help in the dissemination of appropriate levels of technology. It merged with the Institute of Developing Economies in July 1998 and is now also engaged in research on economic and other conditions in developing countries. AOTS, established in 1959, continues to provide training for employees of foreign private companies. The JODC, which comes under the auspices of the Ministry of International Trade and Industry is a foundation established in 1970 to encourage industrial development in developing countries and to promote trade between Japan and these countries. In response to requests from local companies, the JODC sends Japanese specialists and experts from the private sector to assist. The Japan Foundation is a special government corporation, founded in 1972, to enhance understanding between nations and to promote international friendship. It receives part of its project budget from the ODA budget managed by the Ministry of Foreign Affairs. Its projects are aimed at both developed and developing countries. Projects involving exchange programs with developing countries, dissemination of Japanese-language education, and presentation of Japanese culture are financed primarily from the ODA budget. It broadly resembles the British Council, which has a very similar function and which until recently came under the auspices of the Foreign Office. The British Council, like so many previous government agencies, was, however, hived off during the Conservative era to become a QUANGO involved not only in education and training, but also in managing development projects.

76 David Seddon The importance of technical cooperation JICA remains, however, the key implementing agency for Japanese official technical cooperation. JICA projects, as clearly visible forms of aid, constitute key elements of the Japanese contribution to international technical cooperation. But today, the technical cooperation implemented by JICA is aimed at human resources development and building institutions in developing countries, the importance of which has been much emphasized in recent years. As regards human resource development, to the end of March 1999, JICA had sent a total of about 212,700 technical cooperation experts, study team members, and Japanese Overseas Cooperation Volunteers to developing countries, and had trained more than 183,000 administrative officials and technicians from developing countries. This is a major cumulative achievement. JICA is also closely connected with the yen loans that account for 34 percent of Japan’s total ODA. It carries out development studies to support public development planning, and some of the plans developed are then realized with yen loans. JICA also provides technical support (after completion of grant aid and yen loan programs) for the operation, maintenance, and administration of these projects – by accepting technical training participants, dispatching technical cooperation experts to other countries, and by implementing projects on an even larger scale, thereby increasing and improving operational capacity in developing countries. Here again, Japan is gradually building up a capacity as well as a familiarity with the particular circumstances of specific countries and their needs. On the basis of the 1999 figures for Japan’s overseas aid, technical assistance (cooperation) accounts for about 32 percent of total bilateral ODA, while grant aid accounts for around 25 percent; loans account for the remaining 43 percent. Technical cooperation is receiving increasing attention from the government and from the development agencies; increasing the proportion of funds allocated in this area, and improving the coordination and management of technical cooperation, must now be a priority if the commitment to more appropriate and specific overseas aid is to be met. In Britain, technical cooperation (which up until 1997 included Aid and Trade Provision Technical Cooperation) accounts for a high proportion of DfID’s program of bilateral aid (40 percent in 1999–2000), making it by far the largest single form of bilateral aid. Grants and other aid in kind amount to 12 percent, humanitarian assistance accounts for 17 percent, and debt relief for 2 percent; project or sector aid with program aid constitute 23 percent, and advances to the Commonwealth Development Corporation a further 3 percent.59 In Britain, if technical cooperation and grants and other aid in kind are combined, the largest single item was expenditure on consultancies (15 percent of all bilateral aid), which include feasibility and evaluation studies as well as projectrelated work. Spending on “other personnel” accounts for 10 percent, with “knowledge and research” accounting for 7 percent, unallocated technical cooperation for 5 percent, and grants, and training, and scholarships for 4 percent each. The remainder went to other aid in kind (3 percent) and the small grants scheme (1 percent), with 4 percent in unallocated grants. Within the British

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technical cooperation budget, training and scholarships (always a relatively small item) were severely pruned in the late 1990s, from GBP 69 million in 1997–8 to GBP 47 million in 1999–2000.60 This, together with cumulative cut-backs in the funding of the British Council, has seriously reduced the provision of training for development professionals and students from developing countries. The big increase at the end of the millennium was in “knowledge and research,” up by nearly half, from GBP 69 million in 1997–8 to GBP 93 million in 1999–2000. Much of this is administered by DfID through the Economic and Social Committee for Overseas Research (ESCOR) which allocates funds to other more specialized technical and development research institutes outside government. Japan’s technical cooperation costs (excluding administrative costs) were ¥157.4 billion and ¥155.8 billion in 1997 and 1998. Expenses for Overseas Technical Cooperation programs (which exclude expenses for the emigration program, for studies on overseas development, and for basic studies on resources development cooperation) amounted in 1998 to ¥146.7 billion. In regional terms, of the total of ¥155.8 billion spent by JICA in 1998 on technical cooperation, ¥67.3 billion (43.2 percent) was spent on Asia, ¥32.2 billion (21 percent) on Latin America, and ¥22.4 billion (14 percent) on Africa. Expenses for youth invitation, however, were incurred overwhelmingly (82 percent) for Asian beneficiaries, with 6 percent (the next largest proportion) going on young people from Oceania; expenses for development cooperation were also mainly (56 percent) for Asian countries, with 33 percent for Latin America. Finally, expenses for the very substantial “project-type technical cooperation” were also mainly (54 percent) for Asia, with 22 percent for Latin America and 12 percent for Africa. In fact, generally, the largest proportion of expenditure under any technical cooperation heading was spent on Asia. The exceptions (in 1998 at least) were: “expenses for the supply of equipment,” of which 35 percent went to Latin America and 27 percent to Asia; “expenses for JOVCs,” of which 33 percent went to Latin America, with 25 percent going to Asia; and “expenses for international disaster relief,” of which 42 percent went to Latin America and 20 percent to Asia. It is clear from these figures that Asia is still a privileged region for Japanese technical cooperation, as indeed it is for ODA as a whole. Global considerations have not precluded “favored status” for the region that Japan clearly identifies as its “own.” Technical cooperation in Japan is divided in several different ways: a sectoral classification divides it into planning and administration; public works and utilities; agriculture, forestry, and fisheries; mining and industry; energy; commerce and tourism; human resources development; public health and medicine; social welfare; and others. The main types of programs include: ●

●

acceptance of overseas technical training participants; youth invitation; and overseas emigration; and project-type technical cooperation; dispatch of technical cooperation experts; disaster relief; aid efficiency promotion; dispatch of Japan Overseas Cooperation Volunteers.

78 David Seddon Any of these components may include: supply of equipment and materials, dispatch of experts, dispatch of study teams and dispatch of JOVCs. The largest single item, by a long way, is “expenses for project-type technical cooperation,” which accounted in 1998 for ¥40.5 billion. Other substantial items were “expenses for acceptance of overseas participants for training” (¥26.4 billion), “expenses for development studies” (¥24.8 billion), “expenses for JOVCs” (¥18.7 billion), and “expenses for dispatch of experts” (¥17.5 billion). There has been an increasing emphasis within the Japanese technical cooperation program in the last few years on development studies. In 1998, nearly 8500 members of study teams were dispatched abroad to undertake what were predominantly feasibility studies for subsequent projects and programs. The vast majority of these (269) studies were “hard” – technical, concerned with infrastructural, environmental or agricultural projects; some were studies for regional or sectoral development plans. A very small minority appear to have been “soft” – directly concerned with economic, or social and welfare issues, although there were several health-sector and health-project-related studies. The same could be said broadly for the focus of the projects undertaken under “project-type technical cooperation,” the largest single expenditure heading. But there is some indication, at least on the basis of the data provided in the JICA Annual Report for 1999, that if projects are reviewed taking expected completion date into consideration, there is a somewhat higher proportion of economic, social, and welfare-related projects among those ending in 2002, 2003, or 2004 (as compared with those ending earlier), although they are still in a small minority. JICA’s grant aid is also overwhelmingly directed towards infrastructural, technical (improvement or supply of materials and equipment), or agricultural (mainly for food production) purposes, although again a significant minority of grants were health-related. The capacity to provide the specialist services and expertise required for these studies and projects is increasing, but Japan still lacks the array of non-government development institutions to provide the experienced personnel required that Britain enjoys. At the start of the new millennium, Japan’s potential for influencing the prevailing conventional wisdom on paths and strategies for development, for supporting new and urgent global initiatives, and for deepening its experience of, and expertise to respond appropriately to, specific country and regional issues and needs, is evidently very considerable. The government needs now to establish a coherent overall structure for the management and implementation of policies, programs, and policies which efficiently and effectively deploy the distinctive comparative advantages of the Japanese “way” to development, in the interests of the needy majority in the developing countries.

Notes 1 Hayter (1971). 2 DfID (2000). 3 Hennessey (1990: 24).

Japanese and British overseas aid compared 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56

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Churchill (1958: 289). Churchill (1958: viii). Pearson (1969). Beasley (1995: 176). Drifte (1990: 8). Ozawa (1979: 34). Ozawa (1989). Caldwell (1972); Hasegawa (1975); Loutfi (1971); Ozawa (1989); Rix (1980). Yasutomo (1986: 8). Rix (1980); White (1964). Rix (1980: 287). Matsumoto (1983); Suzuki (1983: 53–4); Shishido (1973); Yasumoto (1986). Japan International Co-operation Agency ( JICA) (2000b: 18). Castle (1993: 259). Castle (1993: 344). Castle (1993). Castle (1993: 355). IGBA (1982: 6). Young (1991: 434). Castle (1993: 343). Yasutomo (1986: 9). Seddon and Sato (1997: 153–6). Yasutomo (1986: 3). Yasutomo (1986: 8). Brooks and Orr (1985: 322–40). IGBA (1982: 9). IGBA (1982: 14). NUCPS (1989: 32). NUCPS (1989: 17). Young (1991: 247). Young (1991: 247). Young (1991: 484). Major (1999: 116). Major (1999: 117). Major (1999: 125–9). Major (1999: 165). Woodroffe (1992: notes to table 5). Woodroffe (1992: table 8). OECD (1991: 174). Yasuba (1982: 28). Yasutomo (1986: 1). Yasutomo (1986: 27). Tadao Chino, then Deputy Minister of Finance, in 1991, cited in Lincoln (1993: 124). Wade (1994: 4). Wade (1994: 23). Sato (1994: 108–9). Major (1999: 495–6). Major (1999: 514). Stokke (1995). Stokke (1995: 22). Seddon and Sato (1997: 155–6). Sato (1994). DfID (2000: 21).

80 David Seddon 57 58 59 60

Seddon and Sato (1998: 132). JICA (2000b: 19). DfID (2000: 179–80). DfID (2000: 185).

4

Swedish perceptions of Japanese ODA Marie Söderberg

Although the budget for Japanese technical assistance is larger than the total Swedish aid budget, very little is known about it in Sweden. In fact, there is a very low awareness of Japanese ODA in general. If you inform Swedes that Japan is the top donor of ODA, even among the well educated, most people just look at you with amazement. This is something they find very hard to believe. What Swedish aid officials do know is that Japan is a large donor. There was an exchange of visits by Japanese and Swedish aid officials at the beginning of the 1990s. These have recently decreased, as has the interest in Japanese ODA. Today, there are very few mutual projects ongoing. Swedish and Japanese officials meet in various multilateral forums but nothing more. Aid is not something that is generally associated with Japan. There are no articles about Japanese aid in Swedish newspapers, and Japanese aid is never presented as a model that other industrialized countries could learn something from. New global trends in ODA, and policies advocated by DAC, are never presented as influenced by Japanese thinking, although they sometimes clearly are. The lack of knowledge about ODA is not due to a lack of interest. There is a long tradition in aid in Sweden and there are many NGOs active in the field. Aid is fairly well presented and discussed in the media. Swedes generally believe that this is a field where they have considerable knowledge. They see themselves as frontrunners and are more likely to believe that they can teach other donors something than that they can learn from them. I will start with a description of Swedish aid, but unfortunately Sweden does not divide its aid into the categories of loan aid, grant aid, and technical cooperation. This makes it hard to compare with a special emphasis on technical cooperation. In fact, BITS, the agency that used to deal with what Swedes called technical cooperation, was closed down in 1995 and merged in with the new SIDA (Swedish International Development Cooperation Agency), that is, the agency in charge of all bilateral ODA as well as aid to Central and Eastern Europe. A considerable amount of the Swedish aid budget, however, is allocated to activities that in Japan would be labeled technical cooperation, and I will try to put some emphasis on those. I will also point out recent trends and draw some conclusions on the directions in which Swedish aid is heading.

82 Marie Söderberg I will then continue with a section where Swedish ODA is compared with Japanese aid. I will not give any description of Japanese aid in general, but rather bring forward areas where a comparison is relevant. Here special emphasis will also be put on what in Japan is labeled technical cooperation. Next will follow a section with Swedish opinions on Japanese ODA. This will reflect the answers I received during my interviews in this field. Interviews were conducted with people from the Swedish Ministry of Foreign Affairs, SIDA, people from the business world, NGOs, and politicians, some with direct field experience of Japanese ODA, others with mostly theoretical knowledge or who had mostly encountered Japanese ODA through various officials participating in multilateral meetings. Finally I will conclude my findings and try to spell out some recommendations for the future directions of Japanese ODA.

Swedish ODA The overall objective of Swedish ODA is to eliminate poverty. In the Fundamental Development Assistance Bill of 1962, it was indicated that the aim was to raise the standard of living of people in poor nations. Parliament further confirmed this in 1978 stating that the aim was, “achieving a higher standard of living and fairer conditions for poor people, to ensure that their fundamental needs are met and that they are involved in political decisions which determine the way society develops.” A number of secondary objectives through which the elimination of poverty should be achieved have been expressed as follows: ● ● ● ●

economic growth economic and social equality economic and political independence democratic development.

In 1988, parliament adopted a fifth development assistance objective requiring: ●

sustainable use of natural resources and protection of the environment.

A six objective was established in 1996: ●

equality between women and men.

The government and parliament have decided that there should be no ranking order of these six objectives, but that they are all equally important for the overall objective to eliminate poverty. Decisions on Swedish aid policy, as well as on the aid budget, are taken by parliament. The implementing agency for bilateral aid is SIDA. This is governed by a board that consists of representatives of the different political parties, NGOs, and academics, as well as some development experts. SIDA’s organization consists

Swedish perceptions of Japanese ODA 83 of regional and sector departments, and functional departments that serve the entire organization. The field organization consists of personnel stationed by SIDA at Swedish embassies in the developing countries. Country strategies are drawn up for those countries with which Sweden has programs of long-term cooperation. These strategies govern the cooperation for a period of up to five years. Normally, a new strategy is produced every third year. In its annual letter of appropriations the government specifies those countries for which country strategies are to be produced. The strategy is usually supplemented by a development cooperation agreement between Sweden and the partner country, and a financial frame (country frame) that covers three years. When the government has approved the country’s strategy, SIDA’s regional departments draw up a country plan. This plan can give a mandate for the assessment of an individual project or for a number of tentatively identified projects in a specific sector. Regional departments have the overall responsibility for the support to a given country. They prepare the strategies and ensure that projects proposed are in line with it. The sector departments make analyses of project proposals and see to it that they are appropriately organized. They work with embassy personnel concerned with the implementation. The embassies prepare data for strategies and conduct a policy dialog with the partner. SIDA does not “own” any projects; they support projects which are “owned” by the cooperation partner. The projects are selected partly on the basis of the political goals for Swedish ODA and partly on the basis of the partner country’s priorities. SIDA has no regulation as to how project proposals must be constructed. They do not have to follow a given format. In the assessment process, SIDA uses the so-called Logical Framework Approach (LFA). While there was a dip in the support for ODA among the general public in Sweden during the 1980s, interest has now grown again. Opinion polls show that 84 percent of the population think that it is important for Sweden to support developing countries.1 Fifty-seven percent want to increase the size of the ODA, while 33 percent want to decrease or stop it completely. Among the people who want to increase foreign aid, there are more women and young people. Foreign aid through NGOs gets the highest scores on trust in Sweden, while ODA through the European Union ends at the bottom.2 Swedish ODA that used to hold a level of 1 percent of GNP was cut down at the end of the 1990s, due to the severe fiscal situation when the Swedish state budget ran at a huge deficit. In 1999 it reached its lowest level, at 0.7 percent of GNP. As the Swedish economy improved, however, ODA is now being increased again. DAC calculations show that Swedish ODA in the year 2000 amounted to 0.81 percent of GNP. It is predicted to increase even further, and the foreign committee of the parliament have stated that they want to reach the 1 percent goal again in five years’ time. Swedish ODA in 1999 was 14.3 billion SEK (¥160 billion).3 Of this, 8.6 billion SEK (¥96.6 billion) was distributed by SIDA, 3.4 billion (38.2 billion) went on multilateral aid mainly distributed through various UN organizations and 763 million (8.5 billion) was used for receiving refugees in Sweden. In the

84 Marie Söderberg latest SIDA annual report (2000), SIDA got 10 billion SEK (¥112 billion), and its budget was predicted to increase to 15 billion (168 billion) by the year 2004. It is now planning to expand and deepen the development cooperation, both geographically and in terms of different sectors. Twenty percent of total Swedish ODA is distributed through NGOs. SIDA has so-called “frame contracts” based on several years with 13 major organizations. They in their turn channel the aid money to other organizations as well, so that there are more than 300 NGOs involved in 100 different countries that get support from SIDA besides their own fundraising. The experience of the frame organizations is incorporated when land strategy reports are formulated by SIDA. NGOs are increasingly focusing on human rights and democratic systems of governance. In SIDA’s annual report, aid is evaluated according to how well it has contributed to achieving the six objectives (economic growth, economic and social equality, economic and political independence, democratic development, sustainable use of natural resources and protection of the environment, equality between women and men) as well as to the overall objective of reducing poverty. Every project is evaluated according to the six objectives, but is also divided on a countryby-country basis as well as a sector basis. As an example, SIDA’s 2000 annual report states that 1.3 billion SEK (¥14.6 billion) was spent on programs for democracy and human rights and 62 percent of disbursements were made to projects which had the promotion of democracy and human rights as an important component. Humanitarian aid and conflict-preventing measures got 1.7 billion (19.1 billion), the social sector 1.6 billion, and infrastructure development 1.6 billion SEK (¥17.9 billion). Infrastructure development has risen considerably recently due to rebuilding efforts after natural catastrophes as well as armed conflicts. Geographically speaking, the southern part of Africa (south of the Sahara) is where most of the Swedish bilateral aid is going. Of all aid, 41.7 percent went there. The largest recipients of Swedish aid are Tanzania and Mozambique. Asia and Africa north of the Sahara got 25.4 percent, with Vietnam the top recipient country. Latin America got 17.1 per cent and Honduras and Nicaragua were the top recipients there. Europe and Central Asia got 15.9 percent, with Russia being the main recipient. SIDA has a staff of 650 people of which 100 are stationed abroad. It was supporting more than 4600 different initiatives. The trend has recently been an increase in the number of initiatives, although SIDA tries to reduce the number by grouping initiatives together in programs or sector programs support. With the major cooperation partners there has been a reduction in the number of initiatives, but in other places there has been an increase. There are fewer large infrastructure projects and more “soft” aid in the form of competence building. There is a clearer link between development cooperation and the pushing of Swedish aid objectives on a global level. About half of the initiatives in the field of human rights and development are to support the building of sound government structures, including legal systems and universities. Supporting local government structures as well as the parliamen-

Swedish perceptions of Japanese ODA 85 tarians are important components. Institution building as a part of Swedish ODA is increasing. Recently there has also been a turn towards so-called sector-wide approaches (SWAP), where Sweden gets together with other donors and supports a specific sector in a country without specifying a particular project. While the overall picture of ODA in the world might seem gloomy, with many countries cutting their contributions, in Sweden foreign aid seems to have gained a new momentum. Support for it is increasing and so is the budget. Methods used to eliminate poverty are becoming more indirect and much more sophisticated.

Comparing Sweden and Japan It is difficult to compare two countries that have such a difference in the size of their ODA budgets. Although Sweden contributes 0.7 percent of GNP, which is much higher than the 0.354 that Japan contributes, the total Swedish budget size only amounted to around one-tenth of the Japanese budget in 1999. This fact by itself also affects the content of aid. In Sweden, there are very few large-scale bilateral infrastructure projects. There is no loan aid in a Japanese sense given by Sweden.5 The average amount of an ODA initiative is 2.2 million SEK (¥24.7 million).6 Projects are on a smaller scale than Japanese ones and often more personnel-intensive. Part of the SIDA budget is also used for receiving refugees in Sweden. To a certain extent the basic philosophy of Swedish ODA is a reflection of the society at large. Sweden is a Christian country, with a long tradition of aid giving. In the old days people paid one-tenth of their income to the church, money that was used for, among other things, aiding the poor. Christian missionaries went abroad to build schools and teach the bible, but they also helped poor people with healthcare and building societies. In most schools in Sweden today they have activities through which the children by their own efforts raise money to support various projects in the third world. Aid is seen as a moral duty, and it is imposed at a very early age. Giving makes people feel good and they do not expect anything back. It is often enough to know that you have been able to help somebody. In this sense aid is a one-way process going from the donor to the recipient, not a cooperative process where you expect to get something back. This kind of charity is of course different from ODA, but part of the philosophy behind it is carried over into government aid, although when it comes to taxpayers’ money, the politicians are the ones that decide. They have their own political agenda and are also lobbied by vested interests such as the Swedish business community, labor unions, and different NGOs. In Japan, the ODA processes are to a large extent driven by the bureaucrats in charge. They decide on projects and their implementation. There is not much debate except in extraordinary cases, such as if the media get involved and some irregularities are revealed. In such cases politicians might face questions and criticism in the Japanese Diet and from grassroots organizations. In Sweden the churches as well as other grassroots movements have created an engagement among the general public in questions of aid. Almost every project in

86 Marie Söderberg every country has a constituency at home. People coming from that country, Swedes who have lived and worked there, labor unions, politicians with contacts, and various NGOs working in related fields will engage. They want to debate projects and participate in decisions on what and how things should be done. To a certain extent the aid process is a reflection of the society from which it emanates. Sweden is an open society with a long experience of transparency in government processes. This is also the case in the field of aid, where the public at large can get access to decisions taken and the motivations behind them. The constituencies interested in a project ask for information and will get it, as well as access to the officials and politicians involved. Japan has a much more closed process, where the general public is less used to demanding information, and where the bureaucracy is less inclined to spend their time servicing the general public with information on their work. Only recently has Japan implemented a freedom of information law. The elimination of poverty is the overall goal of Swedish aid and all aid is evaluated according to what it contributes in this field, as well as any of the six secondary objectives mentioned above that lead to the elimination of poverty. Economic growth is one of these objectives, but only one out of six, and not considered more important than democratic development and gender equality in the elimination of poverty. In Japan, reflecting its own historic process, there is a strong belief in development through industrialization. That is one of the reasons why the proportion of aid going into the field of economic infrastructure is considerably higher than among other donors. A second reason is that loan aid, which is a large proportion of total bilateral aid, has to be paid back, and developing countries have generally not been inclined to borrow money to improve, for example, gender equality and other so-called “softer” types of aid. A third reason is the shortage of personnel. With much higher amounts of money distributed by each official at the implementing agencies than is the case among other donors, they do not have time for many small projects, but need a few big ones to be able to disburse the money. The Japanese emphasis on technology transfer in technical cooperation can also be seen as a reflection of the domestic situation. First of all, there is an abundance of good Japanese engineers qualified to help in this area. The engineering consultancy firms are a well-developed industry with their own organization, and there is support from the Japanese business community for this type of aid. Their employees are included in various teams that develop projects and assist in feasibility studies. The dispatch of technical experts and equipment is supported by the Japanese industry that is usually going to get the orders. Environmental aid is also an area where there is considerable know-how in Japan and this field is increasing. In Sweden, there are also a number of good Swedish engineers that have the capacity to give technical assistance to developing countries, but this is only a minor part of the aid. Swedish aid in general is much more ideological and more politicized than the Japanese. All the six above-mentioned secondary objectives for eliminating poverty are considered equally important. Education and healthcare

Swedish perceptions of Japanese ODA 87 as well as rural development are important factors in achieving economic and social equality. Conflict prevention and initiatives for promoting democracy, human rights, and good governance are some areas in which initiatives are taken to promote economic and political independence. Debt forgiveness for the leastdeveloped countries is another. Democratic development where one is working with policy, method, analyses, and competence building is an area that is steadily increasing. Sixty-two percent of all initiatives had this as either its main (20 percent) or its secondary purpose (42 percent). The environmental aspects should be integrated in all aid: there is an environment policy unit at SIDA and environmental aspects are integrated into every country’s programs together with gender issues. At a number of the embassies in the developing countries (such as Bangladesh, India, South Africa, Tanzania, etc.) Sweden has people with special competence on gender issues. The main part of Japanese ODA goes to Asian countries, which might seem natural as they are Japan’s neighbors and the part of the world the general public feel closest to. Japan’s failure to make up for the legacy of the war has, however, created considerable tension and latent anti-Japanese feelings. This makes it very difficult for Japanese aid to intervene in domestic processes trying to promote gender issues, democracy, human rights, and good governance. With reference to the war, Japan’s own morals could also be questioned. The Japanese have considerable private economic interests in Asia. The policy of request-based ODA provision and non-intervention in domestic political matters is one way to keep good relations with other Asian countries. The largest part of Swedish ODA goes to Africa. There are no large Swedish economic interests there. Sweden has not been to war during the last century, and contact with Africa has been rather scarce, but there is a long tradition of missionaries going there. The largest recipient, Tanzania,, has for many years had a social democratic leadership with connections to the governing Social Democratic Party in Sweden. Officials in the developing countries interested in Japanese ODA have three different counterparts to turn to: that is, JBIC, JICA, and the Japanese embassy (Ministry of Foreign Affairs). For an outsider, it might not be totally clear who is responsible for what. In the major recipient countries these three have their own offices. Even if cooperation is officially encouraged, and the Ministry of Foreign Affairs has a coordinating function, this division of responsibility leads to all kinds of practical problems. In this sense Sweden has a more streamlined organization. SIDA officials are in charge and they have their office at the Swedish embassy. Project assessment is done by the regional and sector departments in combination with SIDA staff at the embassy. Usually, there are several people involved, and SIDA has considerable in-house capacity for assessments, whereas the Japanese implementing agencies seem to borrow people for this from other ministries or tend to use outside experts. If a project is very large and complex, however, Sweden might also let independent experts make an appraisal. Many of the Swedish ODA schemes seem similar to the Japanese ones, at least on paper. Both have international training programs. SIDA sponsors some 75

88 Marie Söderberg different training programs with 20 to 30 participants a year. They are normally arranged in Sweden and not in a third country as some of the Japanese ones are. Courses are held in English. The aim is to enhance managerial and technical skills of strategic importance to economic and social development, such as transport, communications, energy, environmental protection, health, conflict prevention, and human rights. The courses normally have a duration of three to eight weeks. There is Swedish support for private sector development that includes among other things development of institutional frameworks, restructuring state-owned companies, alliances between Sweden and the partner countries (the Start South Program). There are ODA schemes for IT and micro-finance, election observers and election experts, and efforts to prevent sexual exploitation of children. So-called twinning – cooperation between organizations in the public sector – is one of the main schemes used by SIDA’s Division for Democratic Governance to channel support into fields such as auditing, statistics, and tax collection, as well as into programs of public cooperation. The objective of twinning is not to copy Swedish solutions but to help sister organizations in the partner countries to develop on their own terms, on the basis of their own cultural, political, economic, and social situation. At the same time the programs should be compatible with the objectives of Swedish ODA, particularly with respect to democracy and human rights. This form of cooperation is long-term. Agreements are normally concluded for three years, but cooperation often continues for between seven and ten years. Unlike Japan, Sweden does not have any support schemes for Swedish emigrants or people of Swedish descent living abroad. Part of the ODA money, however, is used for supporting foreign refugees staying in Sweden. There is no special dispatch of expert schemes, although such experts are dispersed in connection with different programs and projects.

Opinions about Japanese ODA7 Japanese ODA has been considerably modernized during recent years. The Japanese have grown in their capacity as donors and are not promoting their own interests as strongly as before. They are moving in the right direction. Officials engaged in various multilateral forums are well acquainted with the issues discussed and they are willing to learn from others. Still, the general feeling is that Japanese ODA is 20 years behind. JICA people out in the field isolate themselves and are difficult to get in contact with. It is also difficult to get information on what they are doing. To a certain extent this might be a language issue, as their English is often not adequate enough. Japanese aid officials also seem to have difficulties in adapting to local conditions. In Bangladesh, officials complained about communication problems with the Japanese. In Hanoi, there was a special brothel that had all its signs in Japanese. Many of the customers were connected with aid projects, and they were catering to Japanese only. The bureaucratic structure of Japanese ODA is considered complicated. As one official put it, you do not really know who is responsible for what. There is both a JICA office and then someone at the embassy who is responsible for aid.

Swedish perceptions of Japanese ODA 89 A reflection of a Swedish aid official was that JICA does not seem to have any developmental experts of their own. Several raise the point that Japanese aid very much seems to be development aid that is distributed by paper-pushing bureaucrats in distant Tokyo. JICA has a coordinating function and seems more like an employment office. They have administrating experts, but do not possess any expert knowledge themselves. They are very concerned about making sure that Japanese companies or consultants are getting the orders. If the Japanese are really interested in untying their aid – that is, open it to foreign consultants and companies – they should provide better information on their projects. They should learn from the big banks and the international financial institutions. They should put up homepages with links to the different projects, the way the Asian Development Bank has done. They have to do something on the information flow, such as announcing project pipelines, and clearly explaining procedures for purchasing and who is responsible for making decisions. As it is now you have to work with Japanese partners as leaders, otherwise it is practically a closed market. One Swedish consultant said that she did not pursue invitations to bid on Japanese aid projects, because she found that, no matter what happened, outsiders never seemed to get the contracts. Even if outsiders learn about a project, JICA wants all proposals in Japanese, and they are always very short of time. He claimed that Japanese consultants were twice as expensive as others, and that no one could afford this except the Japanese themselves and to a certain extent the Asian Development Bank (ADB). The Japanese consultants’ technical knowledge is very good. They are so expensive, however, that they are never included in projects except when requested by the purchaser. JICA’s procedures are formal and rigid. A Swedish aid official gives an example of how they were working in Central America after Hurricane Mitch left large areas devastated. Both Sweden and Japan participated in the reconstruction of infrastructure and got some projects to rebuild bridges. The Swedes were very quick in building eleven different bridges. They started right away using Swedish consultants and construction companies, dividing the order between them, and telling them to go ahead at once without any formal procedures. The first bridge was ready in May 2000, only a year and a half after the catastrophe in Central America. The Japanese went through a formal bidding procedure and were not ready to start any construction until six months after the first Swedish bridge was ready. They did not take any consideration of the time aspect, even though the projected bridge was a very central one. Through the formal procedure they might have saved money, but people would have appreciated having the bridge functioning more quickly, especially this one as it was so central. Japan’s Overseas Cooperation Volunteers, at least the ones that were working in India, were seen as junior, with very low competence. One interviewed aid official commented: “They went around everywhere on their small motorbikes without seeming to know what they should do. This type of volunteer aid was something other countries did in the 1960s. Now the recipients’ needs are much too sophisticated to get anything out of this.”

90 Marie Söderberg Concerning good governance and transparency, one official thought that the Japanese lacked credibility. To explain this, an example was given. There was a recent corruption scandal with some Swedish consultancy firms involved in World Bank projects. Swedish officials did nothing to help the accused consultants, and helped the case against them. The officials thought it was important to bring it out into the open, as they focus on transparency and good governance. The Swedish consultants were cut off from further work for the World Bank. In contrast there had been a similar Japanese case that was covered up. The Japanese are big contributors and therefore have much influence in multilateral organizations. Their commitment to untied aid is very important because of this. At the same time, it must be said that their support is very superficial. The vice-president of the World Bank is Japanese and the Japanese have used the influence gained through their large contributions to push the Bank further toward aid untying than Japan itself is willing to go in its own bilateral program. This is not good. They must show good governance themselves to achieve credibility. The Japanese way of treating human rights and democracy also makes them lose credibility. They say that these questions are important, but their actions tell a different story. A recent example is giving new aid to Myanmar, despite the human rights situation. It need not be difficult to raise questions of human rights. Japan cannot talk about human security, if they are not credible on human rights and democracy. Taking these questions seriously would increase their credit in the West. Today, people are more suspicious of Japan than of other countries. There is still a focus on infrastructure in Japanese ODA as there is on the domestic scene. The only problem is that things do not work the same way internationally. According to Japanese business culture, all aid should go to Japanese companies if there are any. They are always asking what Japan will get in return. The Japanese want thanks, and they want the countries to which they give aid to be loyal to them. That is the way things work in politics at home, and they expect it to be the same abroad. The only problem is that it is not. Japan should, however, be given credit for doing some good things as well. Within the World Bank, the Japanese put up a consultation and trust fund with the Dutch that is wider in scope than trust funds established by other donors. This makes it more useful as well as being innovative and new. The Japan Center for Preventive Diplomacy is another new aid project. It is a very concrete initiative, much more concrete than anything Sweden has done in this field so far. There is a general surge of NGOs in Japan and this is something very positive. Women’s groups are becoming more active in international questions and questions of refugees. JICA’s reorganization into departments representing geographical areas instead of more thematic organizations will make a difference in the long run, but they will have to have more experts with knowledge on the countries they are working with. There are several good think tanks in Japan dealing with aid, such as the Foundation for the Advanced Study of International Development, and there is an increased interest among students. Recently, a number of new educational

Swedish perceptions of Japanese ODA 91 programs on developing economies and development studies have started. Unfortunately, they are still of low quality. There are few professors who have conducted fieldwork themselves and there is a lack of experience. Japan is on the right path, but it takes many years to build up a good educational program.

Conclusion and recommendation for the future It is really astonishing how little impression the world’s largest ODA donor has managed to make on the active debate on developmental questions in Sweden. Knowledge about Japanese ODA is scarce, there are few things that have impressed, and there seems to be a lack of credibility in the Japanese way of aiding the developing countries. The Swedes have their goals for ODA: to eliminate poverty and the six secondary objectives on how this should be achieved. They do not seem to think that there is anything that they can learn from Japan in this field. That Japanese aid has failed to impress the Swedes does not mean that it has not been effective, however. If the goal is to help poor countries and not to improve Japan’s image in the world, whether others are impressed or not is irrelevant. What really counts are the results that are achieved in the recipient countries, at least, if the main purpose really is to help them. One of the reasons there is such scarce knowledge is probably the fact that the Japanese tend to keep to themselves. They do not cooperate with other donors as much as OECD countries in general do. There is not only a language barrier but also a lack of experience and a cultural barrier. What is striking is how much ODA is a reflection of one’s own society and a continuation of politics at home. That goes for both Sweden and Japan. In Sweden, there are a number of active NGOs that engage in the process and the objective of eliminating poverty, as well as the way this should be done, through democratic development, gender, social and economic equality etc., is a mirror of politics at home. Japanese ODA processes are to a large extent driven by bureaucracy. Many decisions are made by bureaucrats in Tokyo, and there is a lack of influential NGOs. This is equally true for domestic Japanese politics. What has characterized Japanese ODA in comparison with other donors is a large amount of loan aid as well as a heavy emphasis on economic infrastructure. DAC’s way of measuring quality in strict economic terms by looking at grant share and grant elements immediately placed Japan at the bottom of the list and its ODA got a label of low quality. There are different rationales for the large proportion of Japanese aid given in the form of loans. One often hears a philosophical justification from Japanese officials based on the conviction that recipients should raise themselves up through their own self-help efforts. If the recipient knows that they will have to pay the money back, they will be more careful before spending it. At the implementation level, explanations can be found from an economically realistic point of view. Politicians promised a huge increase in ODA at the same time as they decided to freeze or even decrease the General Account Budget. The money was then taken out of the Fiscal Loan and Investment Program, which is labeled “the second

92 Marie Söderberg budget” and where many other items are also placed. This program consists of money from postal savings, pensions, and other savings that people expect to be repaid with interest. The choice of loan aid in this way became natural and follows regular domestic policy patterns. The heavy emphasis on economic infrastructure also reflects Japan’s domestic situation. This is what they have been using at home to try to improve economic growth. Infrastructure is an area where Japan is strong. They have considerable know-how, a number of well-trained engineers and many construction companies. The only problem with it is that it does not create all that much goodwill among the poor people in developing countries and it does not give a face to Japanese aid, even if the governments that get the loans and the construction companies that get the orders are pleased. During the 1990s there have been considerable changes in Japanese ODA, and there is a turn towards softer types of aid. Poverty elimination is now also a goal for Japan, although it is motivated by the fact that it is a necessity for Japan’s own well-being in a globalized world rather than by a moral viewpoint (which is the case in Sweden). Besides economic growth, sustainable use of natural resources, democratic development, human rights, and gender equality are also issues that are taken up in Japanese ODA programs. The problem with this turn to “softer” areas of aid is that these are not necessarily Japan’s strong points, and they require much more personnel with field experience, something that Japan has a shortage of today. There is a lack of expertise in democracy, gender issues, transparency, and many of the other soft issues, even at home. This will not make it easier to work in developing countries and it will take many years to build up human capacity in these fields. To speed up the process of learning, Japan could cooperate more with other donors: for example, creating joint projects with experienced people with a good reputation who have been working in the field; inviting foreign professors with long experience to teach courses on development economics and development aid at Japanese universities; sending Japanese students to various aid courses abroad; and creating a special scholarship for university students who wish to do fieldwork in developing countries for their thesis. Japanese NGOs are an underutilized resource. Some of them have extensive experience of working in developing countries, others do not; give them financial support to plan and implement field projects in the third world together with experienced NGO people from other countries. Today, Japan’s ODA programs seem rather mainstream and cover much of what the programs in other donor countries do. There are many ways of helping developing countries, however, and in a restructuring of its own aid, Japan has to decide if it really wants to cover all fields. The starting point must of course be to conduct a dialogue with the developing countries to get to know what kind of help they are asking for. Then one has to have a look at one’s own country and identify its strong points, which can then be transmitted to developing countries, as well as what capabilities need to be developed to be able to do this. It is important that the

Swedish perceptions of Japanese ODA 93 things the Japanese are promoting abroad are also well established in their own country and are widely supported among the general public at home. Rather than covering every area, it might be wise to pick a few and do them really well. If Japan wants to make an impression on other donors it has to create a few really innovative new “showcase” projects. They should be built on Japanese cultural traditions. Such projects or programs might be controversial, but that is not negative as long as the results at the implementation level are satisfactory. Protection of the environment is an obvious area where Japan is already heavily involved. There is considerable know-how in this field in Japan that has combated some serious pollution problems. Environmental aid has wide support among the general public at home. This area is well suited for further technical cooperation. More preventive programs can also be imagined where measures are taken before pollution or other environmental destruction becomes a fact. At the end of the 1980s, there was a considerable debate concerning Japanese aid, which was criticized for being aid without a human face and lacking any humanitarian feeling behind it. Since then, Japan has adopted the ODA charter and things have improved in the sense that the goals have become more specific. There is still considerable work to be done in this area, however. Goals need to be analyzed and divided into secondary objectives. Programs and projects should be planned and evaluated according to their contribution to the secondary objectives as well as the goals. This becomes more important as Japan moves away from economic infrastructure into softer types of aid that are more difficult to evaluate. Japan needs to refine the methods for evaluating the effectiveness of its technical cooperation. To a certain extent this is connected with the overall organization of its ODA policy. It is far too fragmented: too many ministries, all pushing for their own interests, are involved. When all these different interests become incorporated into the ODA policy, it is no wonder that the goals become blurred. Japan needs to streamline its organization.8 The increase in technical cooperation that has occurred during recent years should also be reflected in JICA’s organization. It might be high time for JICA to get more expertise of its own, rather than function as an “employment office” of outside experts.

Notes 1 2 3 4 5

Survey by the Swedish Institute for Opinion Research in July 2000. Polls conducted by SCB (Statistics Sweden) in 1998. SIDA (1999). Figures for 1999 in OECD/DAC (2000). There are, however, guarantees to facilitate the financing of infrastructure by private capital. There are also concessionary credits consisting of funds borrowed on the international capital market combined with funds from SIDA. 6 SIDA (2000). 7 This part builds on interviews with around 20 people of different backgrounds, such as aid officials (stationed both in Stockholm and in developing countries), people at the

94 Marie Söderberg Swedish Foreign Ministry, scholars, politicians, NGO members, and people from the business community. Identities are withheld to allow them to speak more freely. 8 One way of doing this would simply be to do away with the ODA loans and instead create concessionary credits through a combination of funds borrowed on the international capital market with grants from JICA. That would also improve the quality of Japanese ODA as measured by DAC. The present organization with JBIC that deals both with ODA and other official flows is confusing and is blurring the boundaries.

5

An overview of Japanese ODA to Latin America Comparative observations on social development initiatives Kay B. Warren

Introduction This overview attempts, in brief, to balance a characterization of Japanese ODA to Latin America with a concern for the social issues that have shaped Latin American realities over the last 25 years. The distinction is an important one because it is clear that, for Japan, political issues have been much less important than economic issues in motivating ODA practices. For instance, Japan continued ODA relationships with Chile during the violence of the 1980s because Chile was seen as an important source of timber, fish products, and other commodities. From this perspective, Japan can been seen to be just as concerned with its own economic needs as with the altruism that accompanies discussions of social development assistance internationally. On the other hand, this chapter attempts to rebalance economic concerns with a consideration of the social problems that accompanied Latin American countries’ struggles with endemic violence in the 1980s. As many have argued, violence has created a cascade of social issues in the present, which need to be addressed for social development assistance to meet the social problems that currently challenge Latin American countries. Latin America has occupied a special place in Japan’s ODA programs for historical and business reasons. In most years since 1985, Japan has been the region’s largest bilateral ODA donor. Of course it is difficult to generalize about a region as diverse as Latin America, and Japan’s ODA follows a country-focused approach. Japanese involvements in Latin America fit the larger pattern of its ODA practices, in which, since 1991, Japan has been the largest bilateral ODA donor, for all forms of aid combined, among the 21 DAC members and is currently the largest donor in 55 countries. Nevertheless, it is expected that the government will continue the trend of cutting its ODA budget, which it began in 1997 with the decision to cut the budget by 10 percent over three years. This policy was rescinded in 1998 with the Asian currency and subsequent wider economic crises. Japan’s expenditure of US $10.4 billion of ODA in 2000 represents a decline of 0.2 percent from the 1999 figure. A 3 percent cut was discussed in 2001, although the JICA budget has not been cut this much at this point. Nevertheless, the trend is definitely for a reduction in ODA expenditure which will affect programs in Latin America.

96 Kay B. Warren In 1998, Latin America and the Caribbean received 6.4 percent of Japan’s bilateral ODA (grants, technical cooperation, and loans). No Latin American country was in the top ten of the recipient countries for Japanese ODA. The major recipients in the region in 1998 included Brazil (US$105 million), Peru (US$85 million), and Ecuador (US$49 million). There is a range of historical and economic factors that shape Japan’s engagement and its balance of business and social development concerns. First, Japan has special historical ties to Brazil, Peru, Bolivia, and other countries to which surplus Japanese labor was sent in the early twentieth century. Early assistance programs in Latin America were, in fact, established to support Japanese communities in these countries. The recruitment of Latin American workers of Japanese descent for work in Japan during the bubble economy of the 1980s reinforced this historical connection. Second, economic motivations account for a variety of Japan’s ODA programs in Latin America.1 Some Japanese ODA has followed its investments, as in the case of the steel industry in Brazil. Japan has long supported infrastructure construction programs because they showcase the technical prowess of Japan’s engineering consulting firms and develop export markets for its plant and machinery industries. Business interests are perceived by Latin Americans as the chief reason behind Japanese ODA, a view that was reinforced by its practice of offering tied loans which directed business back to Japanese companies rather than to Latin American firms. While most loans are now untied, the perception continues that Japanese businesses have enjoyed preferential treatment for large technical projects. Current ODA is related to new projects for supplying Japan’s huge seafood market, including shrimp projects for Mexico and salmon for Chile. Third, another historical connection involving the presidency of Fujimori in Peru was followed with special interest in Japan because of his Japanese descent, the invasion of the Japanese embassy by the MRTA guerrillas, and Fujimori’s striking success in defeating the Shining Path guerrilla movement that pursued a brutal campaign to overthrow the government. Fourth, though in the sphere of America’s national interest, Latin America has often taken a secondary place in US development priorities, especially after the end of the Cold War and the refocusing of US programs to Eastern Europe and the former Soviet Union. Since 1985, Japan has been Latin America’s major international donor, followed by Europe and the United States. This overview deals with the irony that strikes many observers: Japan has not been given credit for the fact that it is Latin America’s largest foreign aid donor, and many Latin Americans have only recently become aware of Japan’s role in their region.2 On the one hand, one could argue that this is due to the high-profile character of certain kinds of aid at this post-Cold War juncture in which Japan has not been highly involved. On the other hand, one could also argue that, in different measures, this is the result of Japanese political concerns, which have tended to emphasize direct technical cooperation for infrastructure projects and de-emphasized other kinds of social development initiatives.

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Another factor, which has shaped perceptions of Japanese ODA, has been the Japanese emphasis on the state-to-state endorsement of development projects. This is a crucial issue because it means that when ODA projects are negotiated through country embassies and high-level officials, there is little room left for grassroots NGOs and other organizations that represent civil society to be involved in decisions regarding priorities for social development. From the perspective of local needs, such a strategy faces serious problems, in that it structurally limits the scope and extent of participatory development. This is especially unfortunate when governments are distant from the concerns of the urban and rural poor. On the positive side, local NGOs can tap into small amounts of support for local initiates through the “Grant Assistance for Grassroots Projects” and the “NGO Project Subsidy” fund which are supported by MOFA and run through Japanese embassies. For its part, JICA, which implements 50 percent of Japan’s technical cooperation,3 is a multifunctional entity which implements projects for MOFA, administers Japan’s JOVC program, administers emergency disaster relief (which has been important in cases like Hurricane Mitch which devastated Central America), conducts development studies, and since 1997 has run the Community Empowerment program for technical cooperation at the grassroots level to NGOs working in the developing countries, the Partnership Program with NGOs, local governments, and institutes, and a smaller Mini-Partnership Program begun in 2000 for small projects lasting one year. JICA does not solicit competitive bids from the private sector and NGO community to implement large-scale PTTC, but rather draws on government ministry staff to provide services for these projects. Basic design studies for infrastructure and facilities projects are open to Japanese rather than international consultancy firms. The expectation is that these consultants will continue throughout the life of the project (CIDA, 2001). Other factors at work that shape the character of Japanese ODA in Latin America include organizational, cultural, and individual issues. An additional factor is that Japan has tended to do more innovative programming closer to home in its own sphere of influence. It takes time for the lessons learned from projects in Asia to be applied to other world regions. One important approach that has been developed by the Japanese has been “strategic partnerships” in which one Latin American country undertakes projects in another. Chile has done projects in Bolivia, for instance. This is seen as an innovative move in Latin America, and it obviously overcomes some of the cultural and linguistic problems that confront Japan’s direct bilateral aid projects. In this essay, selected comparisons with other major donors highlight the Japanese practices, illustrate the costs and benefits of alternative visions, and draw attention to international divisions of labor in ODA. Under the government of Prime Minister Junichiro Koizumi, many issues are being reconsidered with regard to Japan’s international activities, bureaucratic structuring, and economic policy. Reexamining social development practices in Latin America may allow Japan to deliver aid in more effective and efficient ways in terms of both Japan’s interests and Latin American countries’ interests. This can

98 Kay B. Warren be done in a way that is consistent with Japan’s core values in ODA, such as fostering self-reliance.

Latin American challenges for donors Latin American countries have presented special challenges for international donors in general and for Japan in particular. The situation looks very different if one looks primarily at business concerns or, alternatively, if one is interested in onthe-ground social issues. Analysts interested in the latter tend to see more conflict and dislocation in the region as a whole. First, Cold War politics have had profound impacts on the internal politics of these countries. The 1970s and 1980s were a period of military dictatorships during which national armies were used to control civilian populations and to mount counterinsurgency wars. Civil wars intensified rural–urban migration and international refugee diasporas, feeding into longer-term patterns of urbanization since 1960, which have created massive squatter settlements that ring capital cities in many Latin American countries. Second, the process of returning to civilian rule since the mid-1980s has been an uneven one. Some countries have successfully gone through United Nationssponsored peace processes which have sought to demobilize rebels and counterinsurgency armies, to expand democratic institutions and the rule of law, and to engage in social development projects that address the legacies of these internal wars. Peace efforts have failed in other cases. In still other cases, there have never been peace processes or the demilitarization and political introspection through truth commissions that other countries have experienced.4 Chronic violence has become one of the region’s most serious problems, though the particular reasons for social fragmentation and the loss of community vary with each country’s political and social history. Third, the intensification of global economic change, international pressure on Latin American countries for neo-liberal reforms, and population growth have put special pressures on this region’s poor. Rural and urban families have struggled with a growing flood of consumer goods, inadequate educational and job opportunities, and declining social services in the face of economic instability and rampant government corruption. While some sectors have benefited from neoliberal reforms, and in some cases there has been the emergence of new middle classes, a large percentage of the population has been left at the margins. The issue is how countries can meet the needs of the rural and urban poor, who have not benefited from the transition to democracy and the market reforms of the 1990s, but rather find themselves in increasingly chaotic circumstances because of economic uncertainties which have contributed to increasing economic polarization, social disorganization, and rising crime rates. Marginalized families have sometimes found help through grassroots social movements that respond to their needs; yet, without wider support, these efforts must continually struggle with repressive states and the fragmented lives of the poor. Rather than development programs designed to answer generic problems facing impoverished countries, social development programs are needed that respond in specific ways to these historical developments in Latin America.

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Factors that have shaped Japan’s choice of ODA strategies JICA has been responsive to international trends in ODA, to discussions about the widening agendas for social development, and to promoting new frameworks for people-centered development assistance, participatory development, and partnerships between donor and recipient countries.5 Programs in Latin America reflect shifting priorities and strategies that are used in other parts of the world. Beyond adopting a common agenda of issues with other major donors, a range of intersecting factors – some structural, others normative, and still others individualized – appear to channel Japan’s efforts in Latin America. Political concerns Japan has been inhibited by the policy of avoiding “political” involvements, which are seen as interventionist in the countries in question. While this recognition of sovereignty is important, in practice it is difficult to extract social development concerns from their political contexts. The act of attempting to avoid political issues may render areas of great importance off limits for assistance. This is especially the case with the growing importance of social movements and grassroots organizations in civil society across Latin America’s transition from open warfare and authoritarian states to emerging democracies that must battle corruption, violence, and growing socio-economic cleavages. Perhaps what is at issue is the definition of “political.” In the education field, for example, northern European countries have long been involved in supporting programs that deal with minority rights, language revitalization, and intercultural educational reform. While Japan has long engaged in building schools, it has been reluctant to be involved in such pro-active programming, teacher training, and curriculum reform.6 The key to these programs has been the recognition of local institutions run by groups that represent minority concerns in education. With carefully designed projects from these groups, which have involved language research, training in local languages, and textbook design, funding has both supported educational efforts and promoted a wider array of culturally attuned local institutions which are attempting to reform national institutions such as the school system. Interestingly, in the 1990s, the United States was reluctant to be involved in projects concerned with ethnic schooling and minority rights in countries such as Guatemala. After seeing the successes of European-supported initiatives, though, the United States has come to increase funding for college scholarships for minority students and to support other research projects on multiculturalism and textbook production for primary schools. USAID has also co-sponsored major international conferences with UNESCO, which deal with indigenous educational issues that have brought together experts from throughout the Americas to exchange findings and models for reforms. These conferences have been excellent venues for practitioners and activists to exchange experiences, assess development efforts, and develop strategies for dealing with donors. It is clear that issues that at

100 Kay B. Warren one time were thought to be unacceptably political in Latin America have become mainstream concerns over time.

Organizational issues and dilemmas7 JICA is an organization that is bureaucratically embedded in the Ministry of Foreign Affairs in a role that leaves it in charge of the implementation of policies designed by the ministry. Furthermore, retired members of the line ministries are assigned or seconded to JICA’s executive positions (amakudari). The lack of bureaucratic autonomy has many implications. Practitioners speak about the dilemmas faced by JICA because of the bureaucratic, sectoral approach of government decision-making (tatewari gyosei) which focuses authority and responsibility on distinct bureaucratic territories and functions that are characteristically emphasized by their incumbents wherever they are posted. As a result, members of line ministries who are seconded to Japanese embassies or to JICA itself tend to promote the interests of their ministries regardless of local needs. This greatly complicates and slows decision-making processes. Within the JICA headquarters, there is a small professional staff with overwhelming duties. JICA development professionals are relocated to new positions on 18-month cycles. This leads to great pressure to gain competence in a new position, learn the bureaucratic norms, and balance sectoral concerns with the regional concerns of specific geographical areas. Most importantly, as JICA takes on new social development priorities, the staff is under still additional pressure, given that inevitably there are fewer Japanese experts available in new areas. Understaffing is a very serious problem on the professional level, given JICA’s wide mandate and global scope. Japan’s ODA is implemented by an expert-driven system that relies on Japanese consultants to oversee project development, implementation, and development. This expert-driven system allows JICA to maintain a smaller staff than might otherwise be the case. In such systems, the tendency is to depend on a range of consulting firms with which one has worked successfully in the past. An alternative is to support the development of new teams of experts, to foster the development of new consulting firms which have the background and analytical skills to respond to the social dilemmas faced by countries in transition, and to acknowledge the growing importance of social and cultural issues in ODA. New trends in social development call for new kinds of experts, as opposed to technology transfer which focuses on purely technical issues requiring engineering solutions. At issue in this instance is the development of the organizational capacity and the mission of JICA in a changing world. JICA’s recent move to create country-specific studies is a move in the right direction, because it recognizes the specific contexts and regional expertise that can serve as an important background for projects tailored to local needs. Furthermore, JICA’s collaborative work with other countries, such as Canada, is another way to cope with this dilemma. Discussions are also underway to expand the country’s work with Japanese NGOs that deal with social issues.

Japanese ODA to Latin America 101 Dilemmas stemming from nationally distinctive bureaucratic norms, and pressures to adapt to changing needs and development priorities, are also faced by European and American donors. The recent trend is for a greater demand for experts with social and cultural research backgrounds. The tradition of strong regional studies programs at the university level, and the importance of applied social science within fields such as anthropology, mean that there are larger pools of experts available to deal with social and cultural issues in the American system. Over half of all anthropologists in the United States work in applied positions outside academia. Cuts in the support of regional studies research in the United States, however, will be a cause for concern if they persist and influence the pool of available experts. In sum, while major donors are under serious staffing pressures and are dependent on consultants to carry out their work, JICA is in a particularly difficult position given the changing profile of social development priorities that have emerged during the 1990s.

Cultural issues in Japanese ODA Democracy Japan has great national pride in its own cultural achievements, yet a strong aversion to imposing its culture on other countries. Nevertheless, Japan does see features of its democratic system as appropriate for countries that are attempting to strengthen democratic institutions after long periods of authoritarian rule. At issue here is whether the practice of Japanese democracy – currently a system in flux – should be the basis for training programs in Japan, or whether more research needs to be done on alternative forms of democracy so that Japanese initiatives might be attuned to regional and local differences in democratic practice. This is a dilemma that other major donors share with Japan. It is clear that voting is only one measure of democracy, though a crucial one to democratic transitions after long periods of dictatorship. The current question for donors is how to foster longer-term democratic development and to support institutional building that will generate wider options for participation in civil society. Gender Japan has been undergoing a period of domestic introspection with regard to gender issues, and in 1999 JICA widened its commitment to WID/gender projects and to participatory development. Nationally, new gender equity laws have been passed that stress gender neutrality versus gender difference in Japanese domestic policy. Paradoxically, in the case of ODA, WID/gender development programming focuses on women’s political and economic marginalization and often reinforces local systems of gender differentiation. The question for all social development donors is how to develop culturally sensitive projects that do not reinforce an invidious gender hierarchy and will respond to new and intensifying

102 Kay B. Warren patterns of gender violence and social dislocation with the instability of the global market economy. In this case, Japan has developed a small but extremely wellprepared number of experts within JICA and in major universities who have excellent backgrounds on gender issues. In recent years, Japan’s WID/gender projects have taken an innovative turn, especially in Nepal where the issue of women’s empowerment and working through local institutions has been central to project planning. This is an important example of context-sensitive project design. Latin America has not been a focus of WID/gender programming up until this point, with the exception of a girls’ educational project in Guatemala, but there should be important lessons learned from the Nepali situation which would be useful for projects that work with local institutions in Latin America. Individual issues Latin America is a huge region with two predominate national languages, Spanish and Portuguese, and many minority languages. Very few Latin Americans speak Japanese. Thus, one barrier for JICA staff and for experts working in Latin America has been the language divide, which makes it more difficult for experts who focus on sectoral projects without reference to their social and cultural context to be directly involved in ongoing projects with social dimensions. While JOVC volunteers often become fluent in the national language of the country where they work, many other experts must rely on translators in their consultations and may know little about Latin American culture or history. JOVC returnees represent an important pool of development workers with language skills and regional experience, which has not been fully taken advantage of, in part for reasons of career tracking in Japanese bureaucracies.

The resulting international division of labor in ODA to Latin America8 One consequence of the foregoing patterns is an international division of donor styles and efforts, with Japan taking more than its share of technical and infrastructure projects in certain parts of the world and less of its share of social development initiatives. At this point, in Latin America, for instance, European donors and NGOs have taken on the widest scope of peace building initiatives, working in areas of former violent conflict on decentralized community-focused projects to promote wider understandings of democratic participation, including, but by no means limited to, electoral politics. As social movements born of the war and peace process periods have sought new organizational roles, some have become conduits for ODA projects because of their knowledge of and experience with local community issues. There has been an emphasis on rural development in these cases, at the expense of building national organizations that represent indigenous issues on the national level. Clearly working directly through national NGOs has great

Japanese ODA to Latin America 103 advantages, even as it raises new dilemmas, such as their success in retooling after their wartime efforts and their rapport with rural populations. This is an issue that donors need to rethink if local organizations are to achieve wider effects. For its part, the United States has tended to pour money into programs dealing with drug eradication, such as the Colombia Plan, in zones of heightened conflict. There have been criticisms when these efforts have led to military and paramilitary build-ups and resulted in corruption and violent conflict rather than in democratic institution building.9 This has raised concern about the relocation of drug production and violence to neighboring countries and about the limited funds available to other regions of Latin America. Another trend in US and European NGO and foundation funding has been the support of decentralized research centers and public intellectuals who will be able to develop their own research initiatives that document social problems on regional and community levels. This is an extraordinarily important program, in that it feeds directly into leadership development and institution building in Latin American countries in a way that avoids the individualism of other kinds of training programs, which take people outside their normal social contexts for a period of time for training in specialized skills and topics. If development efforts are aiming toward the notion of effective transnational partnerships in development, then network building in situ merits further support. It provides for a whole new scope of agenda building that is context-sensitive rather than being imposed from above.

Notes 1 My thanks to Hernán Gutierrez for feedback on the issues in this section, though he is not responsible for the stress on anthropological approaches given to social issues. 2 It is also the case that Japanese citizens are largely unaware of Japanese ODA to Latin America, though this concern is beyond the scope of this overview. 3 The other 50 percent is budgeted to 16 line ministries which manage their own initiatives. 4 Good examples of UN-brokered processes, which have set the stage for postwar reconstruction projects, are peace processes in El Salvador and Guatemala. Failures to achieve a negotiated peace would include Mexico and Colombia. The lack of a peace process at all is exemplified by Peru where the insurgency was defeated when the leader of the insurgents, Abimael Guzmán, was captured and jailed. In the final case, the lack of a full-fledged process meant that there was never an investigation of human rights violations by the military versus the guerrillas or a consideration of postwar reconstruction that would involve democratic institution building. 5 JICA (1999). 6 This is part of a long history of European involvement with minority rights, language rights, and federalist models for self-administration. See Warren (1998) for this history. 7 These observations are based on interviews in 2000 and 2000 with JICA staff and with a variety of consultants who have worked in Asia, Latin America, and Africa as well as with individuals who have been seconded from MOFA. 8 Illustrations and issues for this section have been gathered from my field research in Latin America on war and peace issues over the last 12 years. 9 The United States certainly merits criticism for not dealing more effectively with the demand side of the drug problem.

6

Japanese and Australian ODA Alan Rix

A comparison of Australian and Japanese ODA is a study in contrasts: although the ODA programs of each country began in the 1950s, the original rationales were very different, the economic and humanitarian objectives of each were dissimilar, and the experiences of each country in its ODA program bear little resemblance to each other. In 2002, according to OECD figures, Japan disbursed nearly ten times the ODA of Australia, with US$9,283 million compared to US$989 million from Australia. The scale of the total ODA program of each country is vastly different, although in terms of effort against gross national income Japan lags Australia by 0.23 percent to 0.26 percent. At the same time, there are some parallels between the political and diplomatic roles that ODA plays for each country. This chapter will compare and contrast the two countries’ ODA efforts in recent years, paying particular attention to the way in which each country deals with “technical cooperation.”

Origins of ODA The ODA programs of both countries developed in the aftermath of World War II. In Japan’s case this was linked to its desire to settle reparations agreements with a number of Asian countries, and in Australia’s case it was linked with the need to rebuild Papua New Guinea (PNG) (an Australian territory at the time) and to contribute to multilateral efforts at postwar reconstruction in the region. Yet the path towards an ODA program for each country brought radically different outcomes. The Colombo Plan was an important stage in this process of development. For Australia, the Colombo Plan represented its first major contribution to human resource development in the region. Japan joined the Plan in 1954 and, although it provided an opportunity for Japanese technical assistance, involvement had more to do with Japan’s broader international push to gain reacceptance into the major multilateral fora. The real beginnings of Japan’s aid program came with the extending of yen loans to India in 1958.1 In the ODA programs of both countries the terms, conditions, and aid philosophy have remained remarkably stable over time, and the original experiences that

Japanese and Australian ODA 105 encouraged the growth of the aid programs have had a profound influence on the respective aid philosophies of the two countries. Those philosophies are, like the size and shape of the programs themselves, distinctly different. For Australia, as a small industrial nation on the edge of the Asia-Pacific region, aid has had primarily strategic and diplomatic purposes, linked to the desire for regional political stability to be achieved through economic growth and development-aid was unabashedly seen as having a “triple mandate” of humanitarian, foreign policy, and commercial objectives. The OECD’s Development Assistance Committee (the DAC) states in its 1999 Development Cooperation Review of Australia (the most recent) that “Australia’s security and economic progress are more closely linked to the fortunes of a particular set of developing countries than is the case for most other Member countries in the Development Assistance Committee.”2 The “developing countries” referred to are, of course, the Pacific and Southeast Asian countries. This recognition has driven Australia’s aid program since the 1950s, from when it was seen also that “political advantage would accrue from high quality aid, together with the judgment that it would be impractical to associate loans with such a small volume of bilateral aid.”3 Thus, the pattern was established of a program directed at neighboring countries, small in volume, high in quality, and with bilateral project aid as the central focus. Food aid and technical assistance (mainly for educating foreign students in Australia) were the supporting elements. Japan also had political and security motives, but, by contrast, its early motivations were predominantly economic, using aid to assist its return to regional trade and economic forums and to revive its export trade. The reparations agreements of the 1950s and 1960s were tied, as were the loans at that stage. Yet there were stronger historical roots to the philosophy behind the aid program, specifically in the philosophy of “self-help” and the notion of aid as “cooperation,” where there is an exchange rather than a one-way transfer of funds or goods. Japan’s own experience of economic development was that of self-help and not charity.4 Current official explanations of Japan’s ODA expressed in the ODA Charter (1992), the Charter revision of 2003 and the Medium-Term ODA Policy (1999) still maintain the emphasis on “self-help” and the development of good governance as a basis for economic development through effective aid partnerships. This is set in the context of Japan’s responsibility in contributing to economic and social development in the developing world, and its own reliance on world peace and stability. The way in which the general principles of Japan’s approach to aid are expressed has changed over the years, particularly as the Ministry of Foreign Affairs has come to exert more influence over ODA and Japan’s public promotion of ODA. Yet the fundamentals have not altered. At the same time, the incentive for Japan to extract economic benefit from ODA has been strong, expressed most clearly through the influential voice of the Ministry of International Trade and Industry in the 1950s through the 1970s. Export promotion and trade influence were constant themes in the early days of Japan’s aid program, but take a back seat today in official explanations.5 There is no doubt, however, that the bilateral loans

106 Alan Rix component of much of Japan’s aid program has had the development of economic infrastructure in the developing world as its primary objective. Where did technical cooperation or assistance fit into this wider picture of the rationale for ODA? For both countries technical assistance has been an important element of their ODA programs, but it has necessarily played a much larger role in Australian ODA overall than in Japan’s. The emphasis on the development of human resources, the lack of loans, the small scale of many projects, and the concentration of aid on PNG and the Asia-Pacific, gave technical assistance a major function in the Australian objective of nation-building as a basis for economic and political stability. For Japan, technical assistance was a smaller part of the overall ODA picture, although it was by no means neglected. An Overseas Technical Cooperation Agency was established in 1962 and became the Japan International Cooperation Agency ( JICA) in 1974. Indeed, for Japan, technical aid was essential in building a recipient capacity for “self-help” and creating independent economic growth through technology transfer and the creation of improved technical skills. Yet much of Japan’s technical assistance (in development studies of feasibility surveys) has always gone to support the loans program of infrastructure projects (for example, 16 percent of JICA’s technical cooperation expenditure in FY2001 was for this purpose).6

The experience of aid Japan’s ODA program has always been larger than that of Australia, even in the early days of the 1960s. The differences in volume have been stark since the 1980s, but then Japan’s program began to grow rapidly from the mid-1980s under a strongly pro-ODA policy and large budget increases. Just as basic objectives were set early in the two aid programs, so it was with the composition, direction, terms, conditions, and forms of aid.7 For Japan, as mentioned above, this involved a strong emphasis on loans as a form of aid, consistent with the Japanese view of the importance of self-reliance on the part of the recipient, and their strong trade promotion objective. Similarly, aid flowed primarily to Asia, and only in the mid-1970s did this emphasis begin to change. Bilateral aid typically formed two-thirds of ODA flows from Japan, and multilateral aid had a significant role in Japan’s aid profile. This was strengthened after the 1960s by Japan’s involvement in a range of regional multilateral organizations, notably the Asian Development Bank,8 and more active participation in UN agencies. These factors not only gave Japan a high aid profile but also imposed a heavy burden of expectation, from regional recipients in particular. ODA programs reinforced Japanese diplomatic efforts to maintain close trade and economic ties in the Asia-Pacific, to improve its access to resources, and to pursue a quiet form of diplomacy. The aid relationship with Indonesia was a prime example in this context, and Japan’s relations with China, after reestablishment in 1972, were

Japanese and Australian ODA 107 closely associated with an active aid program, such that China has remained amongst the top recipients of Japanese ODA. Australia, on the other hand, has not had the capacity to be aggressive or particularly bold in its aid initiatives. It has always sought diplomatic as well as humanitarian objectives, but the largest single recipient has always been PNG, still receiving 18.7 percent of Australian ODA in 2001–2 compared to two-thirds or more in the 1960s and 1970s.9 Australian aid to PNG was primarily in the form of direct budget support until 1992–3, after a major policy shift in 1989 that began to bring about “jointly programmed activities in agreed priority sectors.”10 This was designed to provide greater accountability and development effects from the aid, and to be a means to encourage “self-help” in building administrative and governance capacity. Again, in contrast to Japan, multilateral aid has not been as large a part of Australia’s program (although it is still just under one-quarter). Australia’s geographical distribution has focused very much on the Asia-Pacific region, with the South Pacific (including PNG) obviously featuring heavily. Australia has never given loans, but technical cooperation has always been important within Australia aid flows, which have been primarily managed on a country and sectoral basis. The direct economic and trade benefits of aid have not been as obviously critical to successive Australian governments as they have to Japan, since Australia’s program has always been 100 percent grants. Nonetheless, Australian aid has been heavily tied to Australian procurement, because there has been a continuing domestic political debate about the value of a small nation such as Australia giving aid at all. Indeed, Australia’s bilateral ODA (excluding technical cooperation) in 2002 was 43.3 percent tied, compared to 9.1 percent for Japan.11 Yet the diplomatic benefits of aid have been greatly prized by Australian governments, because of Australia’s real concern, as a small industrial nation with significant natural resources, about regional instability. For this reason, and the perceived need to foster strong ties with Australia’s second-closest neighbor, Indonesia has always been Australia’s second-largest recipient. Interestingly, the primacy of Indonesia to Australian aid is mirrored (in Japan) by Indonesia’s regular position as Japan’s largest recipient. For Australia, the concept of “technical cooperation” has not been widely used. Rather, distinctions have been made between bilateral and multilateral aid, geographic distribution, and sectoral distribution. There is only one form of aid (direct grants, no loans), only one source of budget funds, and one administering agency (the Australian Agency for International Development, or AusAID). As a result, there is no specialized technical cooperation agency as there is in Japan, and the focus has always been on broad country and sectoral programs, rather than (as in Japan) on projects distinguished by the nature of the funding – that is, loanbased projects or grant-based projects, including technical cooperation. This is a very significant difference between Australian and Japanese aid, and is one reason for the fundamental distinctions in approach to, and thinking about, the aid program. Because aid from Australia is free, given for charitable humanitarian

108 Alan Rix purposes (albeit with diplomatic objectives and procurement strongly attached), and there has been only one channel of administration, there has been little bureaucratic competition over aid compared with the excessive emphasis on administrative processes in Japan. The Australian system is more open and transparent, policy development is more integrated, and political responsibility for aid is precisely located (in the Ministry for Foreign Affairs and Trade). The huge administrative, policy, and political complexities of the Japanese aid system are not replicated in Australia, even though aid attracts a strong (and often heated) public debate and NGOs are a more formidable and influential presence in the debate in Australia than they are in Japan.12 In short, having clearer administrative pathways for aid in Australia has helped focus attention on the delivery of aid, rather than on the politics of aid. But smaller amounts, and the concentration of so much of Australia’s aid on PNG, has also helped simplify the debate. The perennial complications of implementing Japan’s ODA – due to its size, its participants, its reach, influence, and effects – are generally absent from Australia, yet both countries have spent, over the decades, considerable time in reevaluating the processes and effects of their respective programs. Japan’s attention to “technical cooperation” as a specific form of aid is understandable, given the history and importance of JICA, the large size of the technical cooperation budget and its complexity, and the division within the technical cooperation area between, on the one hand, cooperation to assist the advancement of the loans program (notably development surveys) and, on the other, cooperation for specific technical support purposes in the form of equipment, expertise, or technical training. An added complexity is that, even with a large technical cooperation agency like JICA, it is only responsible for part of the total technical aid program. In the 1999 aid budget, 17 ministries and agencies received a technical cooperation budget. Of these, the MOFA received two-thirds and, of that, JICA’s share was 69 percent. So JICA in fact was allocated only 45 percent of the technical cooperation budget in that year.13 The position has since improved marginally, with JICA’s share of the FY2002 technical cooperation budget rising to 50.9 percent.14 Technical cooperation helps to underpin the largest single component of Japanese ODA, the bilateral loans program, and therefore has a policy relevance well beyond its immediate purpose. No such relevance attaches to Australian technical assistance, so it is assessed purely on its contribution to country or sectoral programs. Again, the obsession in Japan with the distinction between types of financial flow is a minor issue in the Australian situation.

Current comparisons Table 6.1 is a comparison of current Australian and Japanese ODA performance. These figures indicate just how different the two programs are, Australia’s total ODA being only 10.6 percent of that of Japan in 2002. Australia’s performance in grant element is high – at the top end of the DAC list along with ten other donors,

Japanese and Australian ODA 109 Table 6.1 Japan’s and Australia’s ODA

Net ODA 2002 (US$ million) ODA/GNI 2002 (%) Technical cooperation expenditure 2002 (US$ million) Technical cooperation share of ODA 2002 (%) Technical cooperation share of bilateral ODA 2002 (%) Grant element of total ODA 2001–2 (%) Bilateral share of ODA 2002 (%) Major purposes of aid 2002 (% share of bilateral ODA committed) Social/administrative infrastructure (incl. education) Economic infrastructure Production (incl. agriculture) Program assistance Emergency relief Multisector Share of total aid to/through NGOs 2001–2

Australia

Japan

989 0.26 424 42.9 54.8 100 78.3

9,283 0.23 1,812 19.5 27.1 88.0 72.1

35.5 1.6 9.3 8.4 14.9 24.4 5.9

23.8 37.7 11.6 0.4 1.4 4.5 1.7

Source: DAC statistics (at www.oecd.org, Aid Statistics).

but its ODA/GNI share is down towards the bottom of the DAC list, along with Japan, compared with the high figures of the Scandinavian donors. This high grant element, taken together with the high percentage of ODA given in technical cooperation, and the fact that nearly half of ODA is directed to social and administrative infrastructure and production (in this case, just about all of the latter being agricultural), clearly indicates the emphasis of the Australian ODA program when compared to that of Japan. When we measure the geographic distribution of ODA, Japan’s large program is able to be spread more widely on a global basis, whereas 55 percent of Australian ODA goes to the Asia-Pacific region – as mentioned above, in large part to PNG (18.7 percent of total ODA in 2001–2). Japan’s largest recipient, Indonesia, received only 11.5 percent of total Japanese ODA in 2001. The administrative mechanisms managing ODA in Australia and Japan are also significantly different in structure and operation. This is because of the highly diversified involvement of government agencies in Japan (as mentioned above), compared to the single agency approach in Australia. As a recent major report into Australian aid put it, “AusAID is basically a policy, planning and contract managing agency,”15 and DAC assessed Australia as being “at the top end of management practices in DAC Member aid agencies.”16 However, in the case of technical cooperation, the systems are closer, since JICA plays such a central role in Japan, even though it is by no means the only player in technical cooperation. A further contrast is that JICA remains only an implementing agency, with the Foreign Ministry’s Economic Cooperation Bureau still maintaining a decisive role in policy. In Australia, the responsibility for aid policy and implementation rests with AusAID.

110 Alan Rix AusAID, however, is not an agency with staff or expertise to conduct projects, because it is organized along geographic rather than sectoral lines. Its task is to manage and coordinate projects and, as a consequence, it is one of the Australian government’s top purchasing agencies, awarding 1134 contracts in 2002–3 and managing 1528 contracts valued at about A$2.9 billion.17 It continues to monitor the performance of contractors, since aid implementation depends so heavily on this outsourcing process.18 JICA, by comparison, publicly recruited experts for the first time only in 1997, rather than draw them only from registered government and other sources, and is expanding this program.19 There are also significant differences in the current policy objectives and approaches adopted in Australian and Japanese ODA. Japan’s Medium-Term Policy on ODA provides a comprehensive and broadly based platform for policy development and, with its greater regional and sector priority emphasis, is a significant step forward, as DAC recognized,20 but its review in 2003 urged Japan to adopt a more country-based approach.21 Reorganization of JICA on a geographical basis will also assist this emphasis – JICA now has four regional departments. The DAC, in its latest aid review, does continue to question Japan’s emphasis on “self-help,” governance, and institutional and human capacity development, suggesting that more emphasis on policy coherence for development is required.22 Yet Japan today is expressing a far more problem-based and needs-based approach to development assistance, and if the aid system can be brought into line with this approach, a major advance will have been made. In that sense, JICA needs greater autonomy, greater decision-making capacity and greater control over project management and, as DAC recommends, a greater role in the management of grants. A strong country and sectoral focus by JICA in managing technical cooperation is an important step, but such an approach needs to be used for the whole of the technical cooperation budget. In Australia, the domestic review of the aid program in 199723 reasserted the primacy of poverty reduction and sustainable development as the foci of aidgiving. The government set out six key principles (focus on partnerships, response to urgent needs, practical approaches, greater targeting, Australian identity, outward-looking) and a new set of core priorities. Since Australia’s aid program is a small one, it has to focus its efforts, based on country programs. There are five priority sectors (health, education, infrastructure, rural development, governance) and a recognition of the importance of gender and the environment. The geographic focus will remain on PNG, the Pacific and East Asia. Close cooperation with NGOs and international organizations will continue and grants will remain the only form of aid.24 This Australian policy is far more focused than that of Japan, especially given its size, but Japan’s Medium-Term Policy is nonetheless quite articulate in its sectoral emphasis, and the types of support it will offer. It is a major step forward in making Japan’s policy more transparent. The revised ODA Charter reinforces this trend, but DAC has recently recommended that the “mainstreaming” of poverty reduction and similar cross-cutting issues is necessary.25

Japanese and Australian ODA 111

Technical cooperation in action Because Australia’s aid agency is organized along country programs, technical cooperation as a separate arm of overseas aid does not feature in the Australian aid program. Since Australia makes no ODA loans, technical cooperation is of necessity a substantial and essential part of the ODA effort. Official Australian statistics do not identify technical cooperation as a separate category of aid, since technical cooperation is integral to all country and sector activities. “Government and civil society” formed the largest single component of Australia’s technical cooperation in 2002, at 18.8 percent of total ODA.26 This reflected Australia’s strong concern with promoting effective governance in the region. Health and education contributed a further 10.2 percent, but a large component of ODA was “multisector (unspecified).” Other forms of technical cooperation include provision of equipment supplies and surveys. It will be helpful to review the focus of Australia and Japanese technical cooperation efforts by comparing the nature of aid flows to four countries of importance to the Australian aid program. Three are also major recipients of Japanese ODA. We will begin with Australia’s largest recipient, Papua New Guinea.

Papua New Guinea Australia’s professed objectives in aid to PNG are to strengthen governance, improve service delivery, build sustainable growth, and address conflict, including consolidating peace on the island of Bougainville.27 The shift in Australian aid in the early 1990s from untied budget support to jointly agreed, program-based aid was a profound change for both donor and recipient, although initially it was not welcomed by PNG. Performance benchmarks have been set and will be used to determine future aid. A key change in Australia’s approach is the use of a sector-wide approach, based on agreement with the PNG government about sector strategy, that involves working directly with different PNG government agencies. It moves away from project-based assistance and Australia has stated unequivocally that “this will not be a reversion to untied budget support. Australian assistance will be clearly tied to identified activities and budget items. It will not involve untied cash grants.”28 While this statement is largely aimed at answering Australian domestic critics of aid, it nevertheless reinforces the new direction in Australian aid practice. Associated with this shift is the creation of the Incentive Fund – AusAID’s largest ever multisector project – that is intended to direct Australian aid to the most capable and reliable PNG (government) agencies. Decisions will be made jointly by PNG and Australia. Importantly, funds are now able to flow outside the central government to provincial and local governments and community organizations. Australia’s approach to PNG targets key sectors (as above), with social infrastructure taking about half, followed by commodity aid and the economic sector. There is no real separation of “technical cooperation,” since all sectors directly involve technical aid. Education is one of the largest targets of Australian

112 Alan Rix assistance, as is the area of governance, notably in providing technical skills in public administration. Although Australia is by far the largest donor to PNG, Japan has of recent years been the second largest, although well below Australia. The South Pacific and Oceania is, in any case, a minor recipient of Japan’s ODA (only 1.6 percent of bilateral ODA in 2002), the total Japanese amount for the whole region fluctuating between US$150 and 200 million over recent years.29 Criticized by some for its slowness in adapting its aid to local circumstances in the South Pacific, and as overly concerned with resource interests (notably logging and fishing),30 Japan’s approach to PNG has been similar to that towards other Oceania recipients. In particular, Japan emphasizes support for social and economic infrastructure (healthcare is noted especially), economic structural reform, human resource development for the private sector, environmental conservation, and regional cooperation. But Japan explicitly recognizes its dependence on Oceania for marine and forest products, and the potential for undersea mineral resources. In August 2000, Japan signed an ODA loan agreement with PNG to support economic structural reform. This was the first loan to PNG since 1995. Japan is also providing support for education, health, and transport infrastructure in Bougainville, to underpin the restitution of peace on that island.

Indonesia When we look at donor approaches to Indonesia, Japan is the giant player (US$748 million in 2001–2) and Australia the smaller player (US$65 million), but Australia has of late still been among the top few donors to that country.31 Indonesia’s geopolitical importance to Australia is inescapable, just as it is to Japan. In Australia’s case, however, that importance has a lot to do with Indonesia’s geographical proximity. In 2001–2, 47 percent of Australian aid flows to Indonesia were given for social infrastructure, particularly education and governance, and in these sectors technical cooperation has been particularly important, especially to assist better economic and financial management, counter-terrorism, legal reform, human rights, gender equity, and environmental management.32 Australia seeks to help resolve the impact of the Asian financial crisis and assist structural and political reforms in Indonesia, and these objectives are reflected in the sectoral distribution of Australian aid and a large component of technical support in education, governance, health, and emergency assistance. Japan’s ODA policy acknowledges Indonesia’s important economic and political significance for Japan, notably in terms of natural resources, Indonesia’s key position in ASEAN, regional economic stability, and the problems caused by the Asian financial crisis. The focus of Japan’s aid is much broader, aimed at assisting macro-level goals in economic management and governance – notably preservation of class and regional equity, training and education, environmental preservation, industrial reform, and economic infrastructure. In terms of “equity,” the emphasis is given to the reduction of poverty, support for basic needs, family planning and anti-AIDS measures, and the development of eastern Indonesia.

Japanese and Australian ODA 113 Technical cooperation with Indonesia in recent years, however, has declined somewhat, at only US$117.7 million in 2001 compared with US$203 million in 1995.33 The basis of Japan’s aid program with Indonesia remains overwhelmingly on loans.

Vietnam Australia’s aid of US$37 million in 2001–2 to Vietnam, its third-largest recipient, is very focused, being primarily for human resource development, better rural services and market access, and economic reform, particularly in strengthening governance for market reforms. Aid flows were, therefore, heavily directed towards education, health, water supply, and transport infrastructure, but assistance to education and training is an important long-term goal for Australian aid in that country.34 Japan’s aid program at US$429 million in 2001–2 is some 12 times larger than that of Australia and is largely loan-based, so Japanese aid is more widely distributed across sectors. Technical cooperation flows are only about 18 percent of bilateral ODA to Vietnam, and there is a strong emphasis on economic infrastructure, notably for electricity, transport, and agriculture. Japan sees Vietnam’s economic strength and stability as essential for that of Indochina and Southeast Asia generally.35

China As with Indonesia, aid to China highlights the massive differences between Australia and Japan as donors. Australian aid in 2001–2 totaled US$27 million, focusing in an unavoidably restricted way on governance, health, rural development, water supply, and education.36 Agriculture and education attracted the largest allocations, but the Australian effort is still a minor (albeit helpful) addition to total aid to China. Japan is still the largest donor to China at US$1,202 million in 2001–2. Technical cooperation was just under a quarter of this total. The targets of Japan’s aid were primarily the environment, agriculture, economic infrastructure, health, and training. China’s overriding economic, political, and strategic importance to Japan, plus Japan’s own economic needs, give a strategic importance to Japan’s aid program that bears no comparison to the Australian aid relationship with China.

Two different aid programs When briefly comparing these bilateral aid relationships it is not possible to explain the full complexity or the complete nuances of what are, in most cases, long-standing and substantial aid ties. Australian aid overall, compared to that of Japan, is much more heavily targeted, given the place of PNG in the aid program. Australia is more accustomed to highly specific sectoral and country analysis, precisely because its total ODA flows are smaller than those of Japan, and they

114 Alan Rix have always been closely allied to Australian diplomatic objectives, and have also been subject to policy development and management within a single government agency. This is not to criticize the more diversified and less coordinated approach of Japan to technical cooperation, since that too is the product of a particular set of administrative histories. Certainly, Japanese technical cooperation has had a massive impact across the developing world over the last 40 or more years. Today, however, there is a need to expand the more structured approach to planning and executing technical assistance within the Japanese aid program. This was recognized by DAC in its 2003 peer review of Japan: “To enhance system complementarity and synergy, the entire sequence of project planning and implementation of both grants and technical cooperation could be delegated to an experienced developmental agency like JICA.”37 Comparisons are difficult between two aid programs of such differences in scale, structure, and emphasis. Australia has nowhere near the stretch and global impact of Japan through its ODA, but quantity of itself is not the only consideration. Australia’s 100 percent grant element is the factor that compensates for its relatively small quantity. Furthermore, Australia’s aid is closely targeted by country and sector, because there is active involvement by the Australian government in working with recipient governments to identify aid priorities and projects within the overall program structure. The relatively small size of the Australian aid program enables this degree of close monitoring of country and sector programs. Alongside governance, there is also a strong emphasis on human resource development and education in the Australian program. Governance was the largest single sectoral emphasis in 2002–3 (at 22 percent), followed by education, health, infrastructure, rural development, and emergency assistance. AusAID efforts are directed towards working with contractors through a tendering process to implement the aid, and therefore towards concentrating AusAID activity on developing policy and overseeing its implementation. AusAID itself is not a technical agency. As already discussed, Japan’s is an aid program in which bilateral grant aid plays an important but secondary role, and part of that role is to support the loans program. This does not of itself mean that Japan’s program is any less effective, but its targets are necessarily less specific than those of Australia. Japan can, in fact, afford to be less specific – its economic and political influence already in the large number of recipient countries for which it is the top donor make “self-help” and “request-based” procedures a necessity of sorts. Japan’s own capacity to monitor and assist the development planning of each of these recipients is limited. Likewise, the necessity for some technical cooperation to be devoted to development project planning is inescapable, if Japan’s loans program is to be appropriately informed. Conversely, Japan’s position as a leading donor means that Japan should be involved more directly in decisions about aid strategies for its recipient countries. Indeed, can it afford not to be, given its direct influence on such a large number of recipient countries? For example, should a donor of such influence continue to rely only on request-based aid? Japan’s aid could be more effective were Japan to

Japanese and Australian ODA 115 adopt a direct consultative process on aid choices, where at least the consultation would be more open and transparent. Similarly, Japan should arguably devote less emphasis in its technical cooperation to economic infrastructure, in order to give greater emphasis to social needs in its grant aid. Such a shift would need to be reconciled with the needs of the loan program, and this could take time to resolve. There should certainly be a closer alignment of policy decisions and implementation, as DAC suggests. Responsibility for recipient consultation and policy development should shift more to JICA, with the Foreign Ministry “ending its operational role and redistributing its limited resources towards the priority mandate of system coordination, strategy and policy development.”38

Conclusion There are obviously many opportunities for Japan’s ODA, especially technical cooperation, to assist economic growth in the developing world, but there are also a number of rigidities in its aid practice. The Australian experience is that of a small donor, using its limited aid funds in highly targeted ways. Japan’s position as a major world power and the leading aid donor, and the top donor for over 50 recipient countries, places quite different demands on its aid program. Yet the pressure in Japan for reform in aid management and policy continues, and in this context some aspects of Australia’s experience and practice can be informative, and perhaps a model for Japan.

Notes 1 There is a substantial literature now on Japanese foreign aid. In addition to Rix (1980), Viviani (1976), and Arase (1995), see Yasutomo (1986), Orr (1990), Islam (1991), Koppel and Orr (1993), Rix (1993), Potter (1996), Hirata (2002), and Miyashita (2003). On Australian aid, see Eldridge (1986), Jarrett (1994), Simons (1997), and Blackburn and Stensholt (1999). 2 Development Assistance Committee (DAC) (1999a). 3 Viviani (1976: 8). 4 Rix (1993). 5 Gaimusho keizai kyoryokukyoku-hen (1999); Government of Japan (2003). 6 Japan International Cooperation Agency ( JICA) (2002: 49, Fig. 1.15). 7 Viviani (1976). 8 Yasutomo (1983). 9 Australian Agency for International Development (AusAID) (2003b: 77). 10 Bilney (1995: 4). 11 DAC (2003b: Table 23). 12 L. Zivetz et al. (1991); AusAID (1999); Hirata (2002). 13 Gaimusho (1999: 142–5). 14 JICA (2002: 42, Table 1-7). 15 Simons (1997: 309). 16 DAC (1999a). 17 AusAID (2003a: 93). 18 DAC (1999).

116 Alan Rix 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38

JICA (2002: 125). DAC (1999). DAC (2003a). DAC (2003a). Simons (1997). Downer (1997). DAC (2003a). DAC (2003d: Table 19). AusAID (2003a: 31). AusAID (2000). Ministry of Foreign Affairs, Japan (MOFA) (2004). Tarte (1998). DAC (2003c). AusAID (2003a: 51–3) and (2003b: 34–5). JICA (2002: 204). AusAID (2003a: 53). MOFA (2004). DAC (2003d) and AusAID (2003a: 56). DAC (2003a). DAC (2003a).

7

Japan’s and the United States’ bilateral ODA programs David Arase

Objectives The main objective of this chapter is to compare Japanese ODA to the ODA program of the United States. The comparison is meant to address three general questions. First, what distinguishes Japanese ODA from American ODA? Second, how does Japanese ODA compare with American ODA with respect to efficiency and effectiveness? And, finally, what does this comparison imply for the future tasks of Japanese ODA? These questions will be addressed, on the one hand, by reviewing the distinctive aspects of Japanese ODA, which have been noted by foreign observers for some time, and, on the other, by reviewing how policy and administration in the US Agency for International Development (AID) have been reformed in the 1990s to improve policy coherence, effectiveness, and efficiency, which are areas in which Japan is striving to improve.

Japanese and American ODA profiles compared Japanese aid philosophy Historical background Traditional Japanese aid philosophy has grown out of Japan’s own developmental experience as well as its experience in using postwar reparations to reestablish normal relations with its Asian neighbors. A lesson that Japan took from its own developmental experience was that self-help efforts by a disciplined and development-oriented government administration were a key to success. In this view, Japan’s heavy reliance on ODA loans in its assistance profile makes sense. Loan aid is believed to be an appropriate way to finance economic growth enhancing production-related infrastructure, and it is also a valuable means of introducing accountability and discipline to recipient governments who otherwise might be less than careful in using aid that did not require repayment (i.e. grant aid). Another aspect of Japan’s traditional aid philosophy that grows out of this experience is a belief in the “request-based system.” This refers to the traditional Japanese policy of passively waiting for aid requests from recipient governments

118 David Arase communicated through official diplomatic channels. In Japan’s own successful experience development was state-led, and this naturally led to the belief that development is a matter that should be formulated and led by recipient government authorities. It should be noted that both substantively and procedurally this request-based system privileges the needs, desires, and priorities of the recipient government over those of domestic civil society and the international community. It also requires only minimal field presence, since the emphasis is more on coordination than donor initiative in the field. Japan’s war reparation agreements, mandated by the terms of the San Francisco Peace Treaty (1951), resulted in Japan giving economic assistance to Asian neighbors that had suffered wartime damage. The passive request-based system was institutionalized at this time and was particularly suitable as Japan sought to demonstrate its respect for the sovereignty of its Asian neighbors and to win back their trust. The need to give reparations also led to Japan’s emphasis on the provision of capital-intensive projects involving infrastructure and equipment of which Japan is a premier provider (e.g. dams, power plants, port and transportation facilities, along with medical, electrical, transport, and machine equipment). The lack of foreign currency led Japan to extend assistance in the form of goods and services tied to Japanese business contractors who would accept payment in yen from the Japanese government. This approach would also help Japan rebuild economic relations with its Asian neighbors. Thus the tendency to give Japanese aid in tied capital-intensive packages became a template for its later ODA efforts. In the 1960s Japan’s membership of the OECD brought its economic assistance under review within the DAC at a time when Japan was finishing its reparations negotiations. Requests by the Western allies for Japan to boost its aid volume and concessionality led Japan to introduce a relatively large loan aid program to finance industrial as well as economic and social infrastructure projects, to be administered by the newly created OECF. A new grant aid program administered by OTCA to finance social-welfare-related projects and activities helped to make Japan’s aid more concessional. This Japanese response to DAC norms illustrates another key aspect of Japan’s aid philosophy, i.e. its desire to make contributions through aid in order to win respect and acceptance from its Western allies. In the 1970s and 1980s Japan’s growth and financial resources allowed it to boost volume rapidly as well as make progress in untying its aid, thus winning greater international appreciation. Japanese technical assistance in the traditional ODA approach tended to play a subordinate and supportive role to project-based, capital-intensive assistance. It focused on the provision of skills needed to identify and design projects, and to ensure their proper operation at time of completion. The sectoral organization of OTCA and its successor JICA, and the schemes of technical cooperation emphasizing development studies, dispatch of experts, and receipt of trainees, with the later addition of project-type technical cooperation, reflects this traditional relationship to sector-oriented and project-based loan and grant aid. Japan has believed in this traditional aid formula because, in its own national development experience, infrastructure development is a key prerequisite of rapid

Japan’s and the United States’ bilateral ODA programs 119 industrial growth. And in conventional economic growth theory, other things being equal, the provision of infrastructure and production facilities (along with the necessary technical support) should have a positive impact on the GDP of the recipient. Using standard appraisal techniques the financial and economic contributions of such aid inputs can be projected based on assumptions in the original project design. The 1992 ODA Program Outline issued by the Japanese cabinet remained consistent with this basic aid approach, but called for greater efficiency and effectiveness. It also called for an accommodation of new concerns such as democracy, the military policies of recipients, and the environment. It should be pointed out that this “input-oriented” standard for aid design, appraisal, and approval was commonly used through the 1980s. Experience has shown, however, that this approach alone is not sufficient to achieve a satisfactory impact at either the macro or the micro level. Since the 1980s there has been a shift in development thinking toward client-centered and results-oriented aid concepts. This new approach features more clearly defined criteria for success, and this sharper focus on measurable and sustainable results has implications for the design, implementation, and evaluation of future ODA efforts. Contemporary trends Japan is seeking to introduce greater transparency, efficiency, effectiveness, and accountability into its aid programs. There are three key factors driving this effort. The first two factors are domestic. One is the dire fiscal outlook for the Japanese government, and the other is a general desire for political reforms that will result in greater government accountability to the public. The third factor is external to Japan, and it involves a fundamental change in thinking within the international aid community symbolized by the 1996 DAC report, “Shaping the 21st Century: The Contribution of Development Cooperation.” In effect, there is a growing conviction inside and outside Japan that traditional, state-centered, large-projectbased ODA has failed to address the needs of the poor. Japan itself supported this change, called the international development strategy (IDS), and introduced focused poverty alleviation and development partnerships as a key aid concept in its ODA Reports from 1996. The developing domestic and international factors mentioned above led to the formation of the ODA Reform Council for the Twenty-First Century during the Hashimoto cabinet. The Council issued a report in 1998 that demonstrated a desire to introduce basic reforms and new standards of best practice in aid. In terms of a basic philosophy this report called for a new focus on “human-centered development” and poverty alleviation. The Council asked that the new direction be set by a mid-term policy document. Among a host of other recommendations, the Council argued for better country-level planning and coordination, stronger field office initiative, wider participation by stakeholders in civil society, more partnership with other donors, better evaluation of aid impact, and greater transparency and accountability. These concerns, as well as more traditional Japanese aid concerns were reflected in the five-year Mid-Term Policy Outline published in 1999.1

120 David Arase Table 7.1 Medium-term ODA policy outline, 1999 Basic approaches 1. Adherence to the DAC Development Partnership Strategy 2. Promotion of good governance practices 3. Priority given to individual recipient needs 4. Role coordination among developing countries, donor countries, international organizations, private sector, and NGOs 5. Human-centered development, LLDC needs, and human security 6. More active domestic involvement in ODA Priority issues 1. Support for poverty alleviation and social development 2. Support for economic and social infrastructure 3. Human resources development and educational exchange 4. Environment, health, population, food, energy, and narcotics issues 5. Recovery and reform after the Asian financial crisis 6. Conflict, disaster, and recovery assistance 7. Debt relief

In the area of technical cooperation there has been some adjustment to Japan’s traditional role of supporting the design, construction, and initial operation of aid projects. As problems of sustainability are revealed through more systematic evaluation efforts, Japan is turning to technical cooperation to help rehabilitate troubled projects, and to give follow-up training to local personnel in operational and maintenance skills. While this extension of the role of technical cooperation is useful and necessary, technical cooperation in this sense is still reinforcing the traditional ODA philosophy that emphasizes expensive, project-based assistance. American aid philosophy Historical background Like Japanese aid, American aid philosophy was developed in the postwar period to serve foreign policy interests. Whereas Japanese foreign policy interests have focused on its own political rehabilitation in the international community, economic success, and its security alliance with the West, US foreign policy interests have focused on supporting political allies, global free trade, the spread of democratic values, and humanitarian concern. Differences between US and Japanese aid philosophies reflect the differences in the foreign policy priorities of the two countries, as well as differences in cultural factors that will be taken up later. Starting with assistance to Greece and Turkey under President Truman’s Point IV program, US aid philosophy has centered on helping countries of strategic interest to the United States. For this reason development assistance as narrowly defined by the OECD has been a subsidiary part of a larger and more broadly construed foreign policy effort. One problem with this philosophy is that US development assistance efforts must sometimes be directed toward governments

Japan’s and the United States’ bilateral ODA programs 121 who may lack the will or capacity to use aid effectively, but who nonetheless must be supported because of other foreign policy reasons. The first statutory basis for the US foreign aid effort was the 1954 Mutual Security Act, which consolidated the various types of foreign assistance that were being developed to support US Cold War strategy. This law was replaced by the 1961 Foreign Assistance Act, which laid out in some detail the aims and organization of US development assistance. The goals of development assistance would be to demonstrate humanitarian concern and to promote economic growth, political stability, and democracy in developing countries. This assistance would be allocated to recipient countries in the form of technical assistance, grants, loans, investment guarantees, and food under the general guidance of the Department of State. The Agency for International Development was established by executive order to carry out this mission, mainly in the areas of bilateral technical and grant assistance. AID was meant to be a consolidated administrative agency with a strong field organization able to devise regional assistance strategies and effective country programs to meet the aims of US aid policy. An aspect of American aid philosophy that is not often discussed is the expectation that the US Congress will review and mandate aid activities in some detail. This means efficiency and effectiveness must be demonstrated anew with each annual budget request to Congress. At the same time, each newly elected Congress and Administration has the opportunity to introduce new aid policy mandates and administrative arrangements. Ever changing political mandates can compromise bureaucratic efforts to show annual improvements in policy performance. Only ten years after the 1961 Foreign Assistance Act the US Congress refused in 1971 to pass a foreign aid appropriations bill out of frustration with the inability of the government to demonstrate clear progress toward meeting aid policy mandates. This US “aid fatigue” has continued, and is attributable to Congress’s continuing skepticism regarding aid effectiveness and efficiency. As of 2003 the United States has the lowest ODA effort in the OECD, devoting only 0.15 percent of GNI to this end. Contemporary trends Since 1971 there has been a search by advocates of development assistance in the US government for a cure for aid fatigue. Efforts have centered on defining assistance in ways that can lead to positive, measurable results that would satisfy Congress and the American public. In 1989 the House Foreign Affairs Committee issued an influential report that recommended a basic reform of foreign aid. Four goals of development assistance consistent with American aid philosophy were identified: economic growth, environmental sustainability, poverty alleviation, and democratic and economic pluralism. USAID field staff would be given greater authority and flexibility in implementing programs to achieve these goals, with greater attention paid to evaluation. This reform effort failed, but substantive aspects of the proposal found their way into reforms introduced under the auspices of the 1993 Government

122 David Arase Performance and Results Act (GPRA). This Act required US government agencies to create a goal-oriented strategic plan with performance-based evaluation criteria. US government agencies were also required to publish an annual performance plan and a performance report to allow the public to evaluate their efficiency and effectiveness. By 1997, USAID had formulated the required Strategic Plan. This Plan established a new set of aid goals with associated performance indicators and performance goals to guide it over the next ten years.2 Table 7.2 summarizes the goals, and to illustrate the nature of the measurable performance criteria one benchmark target per goal is provided (of several identified for each goal in the Plan). Also in the Plan was a management goal to upgrade efficiency and effectiveness through staff reductions, organization reform, and new systems to generate and collect program performance and financial information. These will be discussed below. The core values that would guide the new policy approach were customer focus, emphasis on results, emphasis on results, empowerment and accountability for all stakeholders, teamwork, and diversity.

Comparing Japanese and US aid philosophies The bilateral and developmental aid philosophies of Japan and the US grow out of very different national experiences, cultural values, foreign policy priorities, and political institutions. In an oversimplified but still meaningful sense, it may be said that Japan has focused on giving things, but the US has focused on teaching lessons. Looking at the 1990s it is clear that the very different aid philosophies of Japan and the United States are converging. As global problems come into sharper focus – development and poverty alleviation included – shared norms and management mechanisms are emerging. For example, DAC evaluation criteria as laid out in the DAC Principles for Evaluation of Development Assistance (1991), or the 1996 DAC-endorsed International Development Strategy (IDS), or the new Comprehensive Development Framework (CDF),3 derived from DAC member experience, and the lessons learned have become a stimulus to improve existing national norms and institutions toward a single global standard. Both Japan and the United States are moving toward a sharper focus on poverty Table 7.2 USAID strategic plan, 1998–2007 Goals

Performance target for main clients

(1) Economic and agricultural development (2) Democracy and good governance

Real per capita income growth by over 1% Index of freedom and participation raised (as compiled by Freedom House) Full primary school enrollment by 2015 with no gender difference Total fertility rate reduced by 20%; infant mortality cut by 25% National environment strategies drafted Refugee mortality rate brought to pre-disaster level within 6 months

(3) Human capacity through education (4) Population control and better health (5) Environment (6) Disaster relief and recovery

Japan’s and the United States’ bilateral ODA programs 123 alleviation, identifying measurable and meaningful aid objectives in this regard, involving a wider range of stakeholders in devising and implementing aid in order to improve impact and sustainability, and devising measures and evaluation procedures to allow for systematic improvements in aid policy effectiveness and efficiency. This convergence is driven by domestic pressures as well as by the emergence of a global consensus on the proper aims of development assistance. Yet certain key differences remain. Aid policy coherence in the United States is challenged by the need of development assistance to serve other strategic foreign policy priorities and to respond to changing domestic political demands. The need to address other concerns often detracts from the ability of development aid to serve its proper goals. The resulting policy incoherence then undermines public support for aid spending. On the positive side, however, a strong emphasis on field expertise and the results orientation that grows out of strong public oversight of aid activities have given the United States a stronger grasp of the emerging clientfocused, participatory and sustainable assistance philosophy. With its more modest foreign policy agenda and weaker legislative oversight of ODA, Japanese aid philosophy is not so affected by America’s dilemmas and weaknesses and can sustain a proportionally larger financial effort. But Japan cannot match America’s strengths, which derive from a strong emphasis on field presence and from intense, far-reaching efforts to reform and improve aid effectiveness. A more detailed discussion of this point can be found below. In addition, the traditional request-based system and the emphasis on capital and skill-intensive projects, which often bring with them loan repayment obligations, undercut Japan’s ability to develop aid approaches that use broader partnerships, promote good governance better, and target poverty alleviation more effectively. With respect to technical assistance, the United States traditionally has emphasized the transfer of know-how to aid recipients, and it views with suspicion the simple transfer of capital resources in development assistance. Also, US technical assistance is often managed through field offices and has developed a focus on building recipient capacity at various levels, in dialog with a variety of local and international donor actors. In comparison, Japan’s aid philosophy envisions technical assistance being extended from a base in Japan (evident by the relative importance of the temporary dispatch of experts, the receipt of trainees, and development survey teams). Japan’s technical cooperation has played a more limited and subordinate role in an aid philosophy that emphasizes costly capital- and skillintensive projects. Promoting technical assistance to a more independent, fieldoriented and central role, as required by the new client-centered and poverty alleviation development agenda, will require a basic rethinking of its aid philosophy. Aid spending Despite having a considerably smaller GNP, Japan outspends the United States to a considerable degree. In 1999 Japan’s net ODA spending was $15.3 billion compared to $9.1 billion for the United States. In terms of ODA/GNP ratio Japan’s effort was 0.35 percent, compared to only 0.1 percent for the United States. Japan’s

124 David Arase volume effort may fall back a bit, because special ODA commitments Japan made to help overcome the Asian financial crisis are only temporary, but its aid volume is expected to remain above that of the United States. American and Japanese ODA differ considerably in other respects as well. Regional distribution for the United States (including Other Assistance) is broad, with Latin America and the Middle East getting large shares given the relatively small number living in absolute poverty. This regional distribution, along with the list of top ten US aid recipients, reflect the US foreign policy interest in maintaining global stability and political influence. For Japan, the regional distribution is heavily weighted (about two-thirds in 1998–9) toward East and South Asia and this, together with Japan’s list of top ten recipients, reflects Japan’s preoccupation with promoting its political and economic objectives in Asia. A look at spending by recipient income group shows that both countries give only about 10 percent of total ODA to least-developed countries but, because of Japan’s large aid programs in China and India, Japan’s aid to low-income countries is about 32 percent compared to 10 percent for the United States. Comparing sectoral distribution, what stands out is the large proportion of Japanese aid devoted to infrastructure and production projects and programs Gross bilateral ODA, 1998–99 average, unless otherwise shown

Net ODA

1998

Current (USD m) Constant (1998 USD m) In yen (billion) ODA/GNP Bilateral share Net official aid (OA) Current (USD m)

10,640 10,640 1,393 0.28% 80% 132

Change 1999 1998/99 15,323 13,451 1,745 0.35% 68%

44.0% 26.4% 25.3%

By income group (USD m) Clockwise from top

1,211

1,367

102 601

LLDCs Other low-income Lower middleincome Upper middleincome

67 –49.2%

4,155

Top ten recipients 1 Indonesia 2 China 3 Thailand 4 India 5 Philippines 6 Vietnam 7 Pakistan 8 Bangladesh 9 Sri Lanka 10 Malaysia

(USD m) 1,749 1,510 953 814 690 541 365 318 238 235

By region (USD m) 1,139

10%

20%

30%

1,058

150 944

2,129

617

Sub-Saharan Africa South and Central Asia Other Asia and Oceania Middle East and North Africa Latin America and Caribbean Europe Unspecified

By sector

0%

High-income Unallocated

4,835

40%

6,234

50%

60%

70%

80%

90%

Education, health and population

Other social infrastructure

Economic infrastructure

Production

Multisector

Programme assistance Program assistance

Debt relief

Emergency aid

Unspecified

Source: OECD

Figure 7.1 OECD data on Japan’s ODA.

100%

Japan’s and the United States’ bilateral ODA programs 125 Gross bilateral ODA, 1998–99 average, unless otherwise shown

Net ODA

1998

Change 1999 1998/99

Current (USD m) Constant (1998 USD m)

8,786 8,786

9,145 9,010

By income group (USD m) Clockwise from top 841

4.1% 2.6%

LLDCs 899

ODA/GNP Bilateral share Net official aid (OA) Current (USD m)

0.10% 68%

0.10% 75%

2,726

3,521

High-income

29.2% 0

Top ten recipients (USD m) 1 Israel (OA) 1,100 2 Russia (OA) 905 3 Egypt 845 4 Ukraine (OA) 229 5 Bosnia and Hercegovina 218 6 Jordan 155 7 Peru 146 8 India 140 9 Indonesia 138 10 Colombia 126

2,338

By region (USD m) 840 1,849 619

580 668

20%

30%

40%

Sub-Saharan Africa South and Central Asia Other Asia and Oceania Middle East and North Africa Latin America and Caribbean Europe Unspecified

By sector

10%

Unallocated

124

1,252

0%

Other low-income Lower middleincome Upper middleincome

3,055

1,449

50%

60%

70%

80%

90%

Education, health and population

Other social infrastructure

Economic infrastructure

Production

Multisector

Program assistance Programme assistance

Debt relief

Emergency aid

Unspecified

100%

Source: OECD.

Figure 7.2 OECD data on US ODA.

amounting to almost 60 percent, compared to a little over 30 percent for the United States. Partly as a result of this characteristic, Japanese assistance in such areas as health, education, and the environment tends to focus on tertiary rather than grassroots primary institutional levels. Comparing the breakdown of ODA by type it is evident that both donors give around three-quarters of total ODA in the form of bilateral aid, but the difference is that bilateral grants account for about 80 percent of total US ODA while the number for Japan is only 12 percent. The US gives virtually no bilateral loans, while bilateral loans account for around 40 percent of total Japanese ODA. The difference in technical cooperation is also large, with Japan devoting only 16 percent of total ODA to this type of aid, while the US devotes about 25–30 percent of total ODA to technical cooperation.4 Aid schemes As indicated above, the United States does not place any weight on loan aid, but Japan places great emphasis on it. Japan believes that loans are a way to ensure

126 David Arase recipient government accountability in aid, but the United States believes bilateral development assistance should be used in areas that do not generate much fiscal revenue, and should therefore not create additional financial burdens on recipients. In bilateral grant assistance the interesting difference is the great emphasis on capital-intensive projects in the Japanese case in contrast to AID’s strong emphasis on grant funding through NGOs. Aid-tying has been an issue for Japan in the past, but there has been great progress in untying loan and grant procurement. Technical assistance is still tied, however, and this means exclusive reliance on Japanese managers and experts in these activities. This is a clear example of an area where donor-driven needs may still be given priority over the recipient’s need for the most appropriate and costefficient forms of assistance. There are two special initiatives by Japan that deserve mention. The first is the Tokyo International Conference on African Development, an ongoing process sponsored by Japan that provides a venue for building aid partnerships to address sub-Saharan development needs. Goals include improving frameworks for poverty alleviation, production development, social development, conflict prevention and recovery assistance, debt management, and good governance. The second special initiative by Japan is its assistance to victims of the Asian financial crisis. Japan created two packages, one in July 1997 and another in October 1998, to extend a total of over $75 billion in various forms of assistance within a three-year period. Of this amount the ODA component was about $10 billion. This boosted Japan’s ODA volume considerably after 1998. Administrative systems The Japanese administrative system There has never been a statutory basis for Japanese aid policy or administration. The legal basis for existing policy and administrative arrangements is provided by cabinet orders. The complexity of the budget and the streamlined budget process in the Diet means that legislative oversight via the budget process is weak. For these reasons the Japanese aid system has been relatively insulated from interventions by elected politicians and interest groups in civil society. Yet, as information disclosure and transparency increases in response to popular demands for political reform, and as a global consensus on effective development assistance develops, so does pressure on Japan to become more participatory and results-oriented in aid matters. In the old system policymaking authority was shared among four bureaucratic actors: MOFA, MITI, MOF, and the Economic Planning Agency (EPA). They ultimately decided which loan aid requests were approved. With respect to grant and technical assistance, MOFA was given official oversight of the main grant and technical aid agency ( JICA), but informal norms within the Japanese government made the exercise of authority by MOFA problematic. The situation was complicated by the fact that technical aid and policy advice was also given by most other functional ministries and agencies in their respective fields of competence.

Japan’s and the United States’ bilateral ODA programs 127 The implementation of grant and technical assistance has been handled mostly by JICA. Loan assistance has been implemented mainly by the OECF. These two implementing agencies have traditionally been organized to manage aid activity according to sectoral criteria rather than geographical or social criteria, although recent reform efforts, especially in JICA, indicate a desire to shift the aid implementation focus toward client need rather than technical input. As already mentioned, JICA is being reorganized on a country basis, and country planning is now supposed to be the normal framework for aid activity. How Japan’s ODA loan assistance will be reorganized, and whether it will be more poverty-focused and sustainable after OECF and the Japan Export–Import Bank are merged to form JBIC, is still unclear. Field presence has been relatively small due to the limited overseas staffing requirements of the traditional Japanese request-based system. In 1998 JICA maintained about 330 overseas staff covering 151 countries, while the OECF maintained about 54 staff members abroad covering both developed and developing country aid coordination tasks. Chronic problems in this system included policy incoherence due to competing bureaucratic agendas; a lack of client focus; lack of transparency; limited participation by civil society at home and abroad; Table 7.3 Japan’s ODA budget, FY 1998 Agency

US$ million a

MOFA JICA UN Grants and other MOF OECF IFIs Other MITI EPA Education Ministry of Agriculture, Forestry and Fisheries Ministry of Health and Welfare Ministry of Labor Management and Coordination Agency Ministry of Transportation Ministry of Posts and Telecommunication Ministry of Construction Environment Science and Technology Agency Ministry of Justice National Police Agency National Land Agency

4,718.6 1,493.2 639.8 2,585.5 3,117.7 2,744.9 368.6 4.1 430.9 8.6 380.7 71.8 69.3 28.1 13.9 7.1 4.7 6.9 6.0 4.7 4.7 1.1 0.4

53.2 16.8 7.2 29.1 35.1 30.9 4.2 0.0 4.9 0.1 4.3 0.8 0.8 0.3 0.2 0.1 0.1 0.1 0.1 0.1 0.1 0.0 0.0

TOTAL

8,875.1

100.0

Note a Calculated at ¥118 to US$1.

% Total

128 David Arase unsatisfactory effectiveness, efficiency, and sustainability; complex and timeconsuming aid procedures; and a scarcity of expert staff in aid administration. This last point was due to the practice within the Japanese government of cultivating policymaking generalists through short-term rotating assignments, and reliance on private sector expertise hired on a project contract basis or through short-term secondment of staff. Popular demands for greater government efficiency and accountability in all policy areas can be seen in the administrative reforms of the late 1990s, which reduced the number of main ministries and agencies from 22 to 12, and reduced the number of civil servants by 20 percent. This sea change in domestic politics is evident through the recent efforts to change the traditional aid system introduced by the ODA Reform Council. The problem of policy incoherence due to bureaucratic competition has been addressed by giving MOFA’s economic cooperation bureau primary responsibility in bilateral aid decision-making. The new concept of “human-centered development,” and a new mandate to devise more participatory and client-centered strategies, has given rise to country-specific aid plans. The reorganization of JICA on a country basis is intended to support this new approach.5 Funding to improve NGO participation has been expanded modestly. More information about aid activities is being released to the public. Evaluation procedures are being strengthened. And the government is making more systematic attempts to cultivate development expertise. The American administrative system USAID administers the bulk of American bilateral assistance. Its basic rationale is established by the Foreign Assistance Acts of 1961, 1973, and 1991 as well as 1998 legislation (the Helms–Gilman bill) that gave AID a statutory basis. Although it is an independent agency, AID reports to the State Department. AID coordinates its aid role with other US government agencies within the framework of the State Department-drafted International Affairs Strategic Plan (see Table 7.4 for USAID within the overall US ODA effort). As mentioned earlier, AID’s mission is spelled out in some detail in the GPRA-mandated Strategic Plan for 1998–2007. The AID budget is presented to Congress in the International Affairs section of the national budget, and Congress reviews and approves its funding annually through a foreign assistance appropriations bill. Although AID thinks of itself as a fieldoriented agency, in fact it is subject to detailed direction from Congressional and Executive authorities. USAID headquarters is organized at the upper tier to perform three key functions: agency management, policy coordination, and legislative/public affairs. At the lower tier there are regional bureaus overseeing field missions grouped below them. Over the 1990s total staff was reduced from 11,000 to around 7000. Today, there are roughly 2000 staff in the United States and close to 5000 staff overseas in field missions. The number of career field officers has been cut by about 30 percent down to about 700, but locally hired staff number about 4000 so there is still a significant field presence.

Japan’s and the United States’ bilateral ODA programs 129 Table 7.4 US ODA delivery, 1996 (gross disbursement in $ million) Agency USAID State Department Treasury Department Defense Department Agriculture Department Interior Department Peace Corps Other Total

Amount

% Total ODA

6,647 1,335 1,300 366 238 214 178 66

64.3 12.9 12.6 3.5 2.3 2.1 1.7 0.6

10,343

100.0

Source: OECD.

Administrative reform has focused on promoting efficiency, effectiveness, and partnerships. Staff reductions are meant to promote efficiency. Effectiveness is promoted by devolving more authority to operational units, reducing reporting requirements, but creating more accountability through new cost-based, and results-based evaluation techniques.6 Comparing Japanese and US aid administration systems With respect to policy formulation the Japanese and American aid systems are markedly different. As mentioned above, AID is subject to constant and significant external review by Executive and Congressional actors. This has three major consequences: there is great pressure to demonstrate efficiency and effectiveness; policy continuity and coherence are chronic problems due to the conflicting demands of external actors; and low public support for AID translates into a weak aid effort in terms of ODA/GNP. In the case of Japan, there are fewer and less effective external mechanisms to oversee and evaluate the bureaucratically driven aid policy system but, as mentioned above, domestic and international pressures to open up and make Japanese ODA more accountable are increasing and resulting in important reform measures, although it is difficult at this early stage to determine the extent to which these reforms are changing the basic character of Japan’s bilateral ODA. Headquarters organization of US and Japanese bilateral aid is also different. AID policy and implementation staff are combined in the same organization, whereas in Japan bilateral ODA headquarters functions are divided chiefly among MOFA, JICA, and JBIC. AID employs about 2000 in its headquarters staff compared to about 1330 bilateral aid staff in Japan (combining ODA staff numbers from MOFA’s Economic Cooperation Bureau, JICA, and JBIC minus the number of staff posted overseas). Aside from the difference in staff numbers, it is also important to realize that a far greater proportion of headquarters staff is devoted to policy research and evaluation in the United States than is the case in Japan. In contrast, the bulk of Japanese ODA staff in Tokyo are preoccupied with implementation.

130 David Arase With its regional bureau organization AID also has a stronger tradition of client focus, and this remains a distinctive feature, with 5000 AID field staff (about 700 career officers along with contract consultants and locally hired staff) distributed among 70 field offices. This contrasts with Japan, which maintained only 641 field staff in FY 1998. The different degree of field orientation must also be measured by the degree of initiative field staff have. In the case of AID, the field staff is relatively free to collaborate and initiate aid activity. In fact, this is required because each operating unit must draft in partnership with clients and other donors its own midterm strategic plan and objectives. Performance and accountability are maintained over each operating unit by annual reporting requirements backed up by performance audits. In the Japanese case, however, field staff are more tightly controlled by headquarters staff in Tokyo, and have more limited scope for free initiative. Evaluation is another key dimension of comparison. As explained earlier, frequent macro-policy evaluation by political actors outside the professional development assistance community is a pronounced feature of US bilateral aid. Within AID there is also an emphasis on evaluation, but this centers on aid effectiveness. At a general level the Center for Development Information and Evaluation (CDIE) carries out broad AID program evaluations that are highly regarded and publicly available. At the individual aid activity level, AID has implemented a reporting system in which each operating unit must annually identify measurable performance targets for each aid activity (within the context of its own strategic plan, as explained above), and then self-report actual performance with an analysis of relevant performance issues. This is a key evaluation tool that is integrated into the core management and policy implementation system. This reporting system is designed to provide the data for an information system (under construction) that will make instantly available the performance record of all AID operating units and activities. Finally, there is research conducted by policy bureaus to evaluate progress in each of the strategic goal areas. Aid evaluation in Japan has been conducted separately by small units within MOFA, JICA, and OECF/JBIC. These evaluations generally have been postcompletion project surveys. The main evaluation criterion seems to be project operation. Project failure is defined as complete non-operability, and project success is normal operation according to original project design. Partial success is some degree of operability even if it is less than originally intended. Such evaluation techniques typically lead to project rehabilitation efforts through follow-up technical advice and equipment, and calls for more careful project appraisal. Evaluation reports according to this relatively simple scheme have been released to the public in recent years. Key issues not addressed by such evaluation methodology, however, are whether program-wide poverty-reduction and sustainability needs have been met, or whether organizational units are performing to an acceptable standard. There is not a unit such as AID’s CDIE responsible for evaluating efforts to advance goals such as women in development (WID), environmental sustainability, or more effective partnership strategies. Nor is there a systematic way to measure the

Japan’s and the United States’ bilateral ODA programs 131 performance of aid implementation relative to development assistance goals. The ODA Reform Council has understood this issue and has recommended improvements in evaluation methods and feedback mechanisms, the introduction of third-party evaluations, and regular public release of evaluation reports. Japan is working to improve in this area. The next step for Japan to take is to redesign policy goals, management techniques, and reporting criteria to make evaluation and feedback a built-in feature of normal aid operations. With regard to participation and partnership strategies, Japan has articulated positions that are at the forefront of global thinking about development. The question is the extent to which management can implement these commitments. A simple question to ask is to what extent Japan has institutionalized concern for such values as NGO involvement, partnership in the field with local civil society and international donors, WID, and targeted poverty reduction. The institutionalization of such concerns is most effective when high-level policy bureaus include units able to require and evaluate implementation efforts on a program-wide basis, and field implementation units need to have the overseas staff presence and decision-making flexibility to implement these concerns effectively. In comparison to AID a few key indicators show where Japan can make improvements. With respect to NGO participation, Japan channels less than 3 percent of its ODA through this avenue, while AID channels about 30 percent of its budget ($1.4 billion in FY 1996) through private voluntary organizations. It is true that Japanese NGOs are relatively underdeveloped and underfinanced, but more Japanese ODA funds could be used to speed their development and through them cultivate a stronger field presence at the grassroots level. The ratio of field staff to headquarters staff in the case of Japan is roughly 1:2, whereas in AID the ratio is 5:2. To enhance partnership, poverty alleviation, and sustainability Japan could maintain a larger field presence. In addition, it would be important to give more authority to field officers to initiate and alter aid activities to meet local circumstances and needs.

Conclusions It is clear that both Japan and the United States, despite the fact that their respective aid philosophies and practices have been very different, are beginning to converge with respect to the rhetorical aims of development assistance. Both face growing pressure from domestic groups to increase transparency, effectiveness, and efficiency. And both face pressure from peer donors to join in the growing consensus about the proper ends and means of development assistance. As a result, Japan and the United States are searching for ways to focus on client needs, reduce poverty, improve sustainability, promote partnerships and broad stakeholder involvement, safeguard the environment, involve women more centrally, utilize NGO and private sector resources better, promote democracy and good governance, and improve results-oriented aid design and evaluation. The two differ in obvious ways in their traditional approaches to aid provision. There are differences with respect to field versus headquarters initiative; grants

132 David Arase versus loans; project versus program orientation; technical cooperation focused on operating equipment versus teaching primary skills at the grassroots level; higher versus lower technology intensity; and transparency and results-oriented management and evaluation. Generally speaking, AID’s results-oriented management and evaluation techniques, field orientation, and focus on community-building and capacity-building programs are closer to the norms set by the international donor community, and may offer useful concepts for identifying areas of possible reform in the Japanese ODA system.

Notes 1 See Ministry of Foreign Affairs, Japan (2000). 2 These strategic goals were revised in 2001 by the incoming Bush Administration to emphasize using aid to promote market opening and business participation. There are now only four strategic goals: economic and agriculture growth; health and population; conflict prevention and relief; and building cooperation with business, higher education, NGOs, and other actors in what is called a Global Development Alliance. 3 See Fox (2000). 4 US figures are from 1996 and Japan’s figures are from 1997 as reported by DAC. 5 It should be noted, however, that the reintegration of OECF and the Export–Import Bank of Japan to form the new Japan Bank for International Cooperation ( JBIC) may run counter to the aid reform efforts underway. Although JBIC may create more efficiency in Japan’s overseas project and program lending, it will combine “human-centered development” lending with lending for commercial and other purposes. 6 For details see the OECD (1999c).

8

Japanese ODA compared to Canadian ODA Micheline Beaudry-Somcynsky

Since the late 1980’s Japanese ODA has been changing considerably, bringing it closer to Canadian ODA and to the international donor community. On the one hand, through its increase in ODA, Japan had become the number one donor, propelling it center stage on the international cooperation scene. Japan found itself facing the responsibility of assuming greater leadership on international cooperation issues which until then had not really been at the center of its economic cooperation programs. On the other hand, increasing concern on the impact in Japan of global issues such as poverty, the spread of diseases, environmental degradation and pollution, and political instability and economic recession at home brought ODA much more into the limelight within Japan. Changes were also happening within the international community in relations between developed and developing countries and in the way of conducting the business of ODA. Likewise, Canada has also been undergoing changes in its approach to ODA during that period. Through its links with the Commonwealth and the Francophone countries, and its role as an honest broker in numerous circumstances, Canada had increasingly been requested to play a role on the international cooperation scene which went way beyond its ODA budget. International pressures to do more were offset by an economic recession at home, with people questioning the effectiveness and usefulness of ODA. At the same time, Canadian ODA had to respond to growing concerns by the Canadian public over global issues. In addition, because of its immigration policies, Canada was more affected than other countries with the increase since the late 1980s in the number of economic refugees and war refugees, mainly from developing countries, with pressure from the Canadian public for ODA to play a more effective role in reducing poverty and bringing about peace in developing countries. How did both countries respond to these pressures in their policy formulation, programming, and implementation?

Policy direction Both countries initiated a process which would lead to changes in policy direction to create a greater focus on addressing global issues. Both countries saw their

134 Micheline Beaudry-Somcynsky foreign policies integrating global development issues as part of their foreign policy interests. As reflected in the ODA Charter (1992) and in the Medium-Term Policy on ODA (1999), Japanese ODA was redirected to place an even greater emphasis on human-centered development, poverty alleviation, and social development, on promoting ownership in developing countries and partnerships with donor countries and international organizations, and tailoring ODA to the needs and circumstances of each country. For the first time, the role of NGOs was highlighted and the concept of human security was adopted. Meanwhile, trade and investment would continue to be supported by the improvement of the environment for private-sector activities and the inflow of private funds. Emphasis was also placed on the heightened public understanding, greater transparency, and visibility of ODA. This process of change was undertaken at a time when the public sector came under intense criticism, and when major reforms were about to be made. Yet these difficult times represented opportunities for change that many had advocated for many years. Refocusing ODA to address global issues was not so difficult for Canada as it had already started doing so since the mid-1980s. In 1995, the Canadian government announced a foreign policy statement which included ODA in “Canada in the World, the Government’s 1995 Foreign Policy Statement.” While respecting the principle that the interests of developing countries should come first where ODA was concerned, closer links were made with other aspects of Canadian overseas interests. The objective for ODA was to support sustainable development activities in order to reduce poverty and to contribute to a more secure, equitable, and prosperous world. Working with partners in the private and public sectors in Canada and in developing countries, and with international organizations and agencies, Canada would work with developing countries and countries in transition to develop the tools to eventually meet their own needs. Canada’s ODA would concentrate resources on six priorities: at least 25 percent of ODA would be allocated to basic human needs (primary healthcare, basic education, family planning, nutrition, water and sanitation, shelter, disaster relief); gender equality; infrastructure services with an emphasis on poorer groups and on capacity-building; human rights, democracy and good governance to strengthen both civil society and the security of the individual; private sector development to promote sustained and equitable economic growth; and help for developing countries to protect their environment and contribute to addressing global and regional environmental issues. As can be seen, the end result of these changes brought Canada and Japan much closer together in their cooperation with developing countries.

Fundamental revisions in the way of doing things The adoption of these new policy trends by Canada and Japan, however, posed serious challenges in the way each country had organized itself to deliver ODA. The major difficulty in Canada was that for the first time, in 1995, a Canadian foreign policy was adopted by the government which decided to address global

Japanese ODA compared to Canadian ODA 135 issues as foreign policy issues. In so doing, ODA became an integral part of foreign policy for the first time. This brought into question the respective roles and responsibilities of CIDA and the Department of Foreign Affairs. Until then, as a separate government department, CIDA had gone to great lengths to avoid being drawn in by the Department of Foreign Affairs in using ODA to promote or support Canadian foreign policies overseas, especially Canadian commercial interests. Now both departments were being challenged to work together; not only did new mechanisms have to be created but, more fundamentally, changes in the mentality of the bureaucrats had to take place. Consultation mechanisms at various levels and for the various regions and issues were developed by the two departments. However, CIDA kept the responsibility for all policy formulation and program implementation related to ODA. It was agreed that, in the implementation of ODA, the needs of the developing countries would take priority over Canadian interests, while efforts would be made to coordinate both Canadian and developing countries’ interests. But in Japan consultation and coordination may be quite frustrating where everyone does not share in the final decisions over the use of ODA funds. In Japan, the situation is much more complex. Unlike the situation in Canada, Japanese ODA policy formulation was part of Japan’s foreign policy under the Ministry of Foreign Affairs (MOFA). But the other ministries each had their own ODA activities guided by their respective interests and priorities. This system had been developed over a period of time when foreign policy under MOFA reflected their priorities as well. The challenge represented by the new directions was to bring the various ministries to consider integrating them into their respective programs. Human-centered development, gender equity, poverty alleviation, and social development were not necessarily compatible with the approaches taken by the various ministries or with their interests. This posed quite a challenge for Japanese ODA, especially for technical cooperation where MOFA/JICA account for less than 50 percent of the use of technical cooperation funds. Even then, they have to rely on the agreement of the various ministries to deliver technical cooperation. Various mechanisms are being developed. More systematic consultations are taking place among the various players over ODA activities. A country focus approach was adopted for the major recipients of ODA which provides the opportunity for the various ministries to exchange views over their respective ODA in the countries and for a general plan covering all Japanese ODA activities to be developed for each country. This provides a useful guideline, as well as bringing hopefully greater synergy among the players. In addition, as part of the reform of the public sector which has been taking place almost at the same time, under the July 1999 Law for the Establishment of MOFA, MOFA was given jurisdiction in three areas of ODA coordination in governmental agencies, in addition to the economic cooperation-related affairs of foreign policy, i.e. coordination of policymaking related to ODA; guidelines, policymaking and planning related to the provision of ODA loans; and policymaking and planning related to technical cooperation.

136 Micheline Beaudry-Somcynsky However, it will take time for this to take effect. One small indication of this is that MOFA’s website on ODA still does not include information on the ODA activities of various other ministries, even those involved in technical cooperation. It is necessary to go and consult the websites of each ministry for that information. In Canada, the changes required to adapt to the latest ODA directions are much more wide-ranging than can be guessed at first glance. The most difficult and yet probably the most important one is the change in mentality, which takes time. In Canada, the potential contribution of other government departments to ODA was recognized, and some of them (Foreign Affairs, Agriculture, Energy, Mining and Resources, etc.) had developed their own ODA activities in developing countries, sometimes under their financing and sometimes under CIDA financing. But these had been limited and the departments were not as deeply involved in ODA as departments in Japan. In adopting the new foreign policy agenda in 1995, it was relatively easy, therefore, for the government to decide that all ODA-related activities would rest with CIDA. The other departments would be allowed to engage in ODA only under contract to CIDA and only for those aspects of ODA which were exclusively in the government’s domain such as quarantine or taxation.

Changing role of donor countries Both Canada and Japan strongly supported the DAC in its efforts to promote the view that developing countries had to take charge of their own development, through self-help efforts supported by developed countries. From a policy perspective, this made a lot of sense. However, a whole series of implications surfaced which until then had not really been factored into ODA. Weaknesses in government structures and human resources made it difficult for many developing countries to plan and implement sound development. Issues of governance and corruption were suddenly pushed to the forefront, along with a questioning of the attitude which had been adopted so far of non-interference in the internal affairs of another country. And what about civil war and conflicts which were appearing in so many countries following the fall of the Berlin wall? These were either diverting important financial resources to the war effort away from development, or they were destroying years of development work. What about development plans which went beyond national boundaries, such as the use of water resources from a watershed basin, and what about decisions which affected the quality of air, water, and sea resources in other countries? Globalization has affected not only issues of pollution and the use of resources, but has also brought transnational terrorism and the global spread of infectious diseases. Market forces were also affected with deep changes in the nature of commercial relations and bringing into question the financial tools available worldwide to regulate market forces. These presented new challenges for ODA that were reflected in part in the ODA policies adopted during the period. But the greater challenge was in preparing ODA personnel to be more effective in tackling these changes. Canada had already developed a corps of development personnel that did not only program

Japanese ODA compared to Canadian ODA 137 administration but also had been trained in economic and social analysis and in policy development. Training programs were put in place regarding governance, human rights, peace-building, involvement of indigenous populations, etc. CIDA offices overseas had always played a diplomatic role in addition to looking after the ODA activities. And CIDA had been very active in promoting and supporting the creation of donor coordination groups in sectors where Canadian ODA was involved, to exchange views and try and build a consensus among the donors involved in the sector and the recipient government and organizations as to the respective activities in the sector. Therefore, the move to SWAPs (sector-wide approaches) did not present a major difficulty for CIDA’s overseas offices. But staff reduction in CIDA following the budgetary reductions during the recession years of the 1990s had greatly reduced the number of people available in overseas offices to do the kind of work required by the adoption of SWAPs and PRSPs (poverty-reduction strategy papers) for pilot countries. The demand for research and analytical work in the field offices put a lot of constraints on the available staff, who at the same time had to also continue dealing with the day-today work related to ODA activities in the country. However, CIDA was fortunate compared to Japan. Staff reduction had brought about a fundamental change in the way CIDA implemented its ODA activities. CIDA staff was unburdened of all the work related to administering trainees and experts. A decision was made that only project-type activities would be undertaken, and all technical cooperation would take place within these projects. Furthermore, the projects would be implemented by firms, NGOs, and non-governmental institutions (NGIs) under contract to CIDA, following a competitive bidding process so that all recruitment and administration of trainees and experts would be done by the executing firm. This freed CIDA staff from doing what was essentially clerical work to give them the time to dedicate themselves to professional work related to country analysis, project identification and planning, negotiations with the recipient government, development of policies, etc. This allowed CIDA to be better prepared in that sense than Japan was for tackling the new challenges. Unfortunately, in Japan, the corps of professionally trained development officials which mainly reside in JICA and JBIC is engaged, especially in JICA, in doing a lot of essentially clerical work. MOFA officials who are responsible for policy work and decisions on programming work only three years in ODA before being rotated to other positions in foreign affairs. Non-ministry officials in MOFA also rotate from other ministries, municipal governments, etc. Unfortunately, many of them also dedicate themselves to administrative work, checking up on JICA’s administrative work and recommendations, in many instances duplicating work already done. This leaves them with very little time to be involved in policy work. The other ministries involved in ODA, for their part, do not appear to have developed a group of ODA professionals to work on ODA issues. Now that ODA is changing from providing technology transfer and infrastructure development, where is the corps of ODA professionals in Japan with experience in tackling ODA issues from a policy and programming perspective to assist the Japanese government in facing up to the new challenges?

138 Micheline Beaudry-Somcynsky And what about the capacity of Japanese overseas offices to face up to the new challenges? A lot of the work related to PRSPs and SWAPs is taking place in developing countries themselves, in line with the greater responsibility on the part of developing countries to take charge of their development process. This requires an ongoing dialogue between government officials and officials from donor countries with in-depth knowledge of the countries. Many donors question the lack of participation of the Japanese in the regular meetings of donor coordination groups in countries. Usually, the Japanese embassy sends one of its officials to participate in these discussions. But these may not even be from MOFA but from one of the ministries. They are in a difficult position due to their lack of ODA experience and often their lack of knowledge even about the overall Japanese ODA in the country. They rarely participate in the discussions, even in those countries where Japan is the major donor and exercising an important influence on the country’s development process. So far, Japan’s approach has relied heavily on sending missions from Tokyo to link up with other donors in the country and holding discussions with the local governments; a few advisors have been stationed in the country. But how can this compare with the detailed knowledge of local conditions by staff posted in the country and the actual ongoing work being done in country by the other donors? CIDA also relies heavily on hiring local professionals as staff in its overseas offices, where they represent and implement CIDA policies. Not only does this tap into local knowledge but also provides continuity of knowledge in the country. Unfortunately, that route does not seem to have yet been explored by Japan, and where there is locally engaged staff they appear to enjoy a lower status than the Japanese staff. Canada also taps into the knowledge of the NGOs, either Canadian or local, with whom relationships have been developed over many years. They provide invaluable insights into local conditions and the underlying political tensions and factions in the country. The recent creation of an NGO liaison office staffed by NGO representatives in the Canadian Department of National Defence to assist in peacebuilding activities is an example of how new partnerships are being formed to address new issues. It is not clear whether Japan is using its network of relationships developed in the private sector to do likewise. After all, when it comes to SWAPs, who better than the Japanese private sector operating in the countries to have a deep-seated knowledge of the sectors? Japanese trading houses are famous worldwide for their network of offices and their capacity to gather intelligence on local political, social, and economic conditions, as well as their in-depth knowledge of the potential existing in various economic sectors in countries worldwide. Likewise, over the years, organizations like AOTS, JODC, JETRO, etc. have acquired firsthand knowledge of the countries. Are these being used to assist Japan in facing up to the new challenges of development? Surely the overseas offices of these organizations, and the networks of contacts and alumni associations which characterize Japanese ODA, would be very useful in this regard. However, for outside observers of Japanese ODA, there are no signs yet that these resources are being channeled to assist in the implementation of the tremendous changes facing Japanese ODA.

Japanese ODA compared to Canadian ODA 139

New national partners Another fundamental change seen in both countries since the 1990s has been the recognition in official documents of the importance of bringing in new national partners in the development cooperation process. For Japan, NGOs and municipal governments were specifically mentioned and in Canada, the business community. Even though the groups involved in each country are very different, it is interesting to see how similar the reaction of the bureaucrats and the approaches taken by governments in both countries were. This would lend some credence to a popular belief that government bureaucracies behave in the same way all over the world. Japan and non-governmental organizations At the policy level, it was obvious in Japan that working in addressing poverty, basic human needs, and human-centered development could not be done solely by doing more construction and providing equipment for economic and social infrastructure. People who could reach people and work with people; people who could work at the community level were required. Yet through JICA’s technical cooperation activities, it was mainly government officials who were being sent abroad, usually to do specific technical jobs which did not require too much attention to or adaptation to the culture and mentality of the recipient groups. Technical cooperation under the other ministries involved officials from their ministries and experts from the private sector working in the private sector in developing countries. In other donor countries, NGOs and NGIs were mainly relied upon to do the people-to-people work. (Note: NGIs refers to institutions, such as municipal governments, professional groups, cooperatives, private educational institutions, etc.) But Japanese NGOs working in developing countries were considered by government officials to be rather weak, not very professional, and not really capable of undertaking any kind of major responsibility in the delivery of official ODA. A history of mistrust on both sides prevented any rapid movement in the implementation of this aspect of the policy statement. Cautious steps were taken, starting with consultation mechanisms being put in place. But many NGOs did not trust the government’s intentions and refused to participate; they were concerned about the possibility of the government taking control of their activities. Funds were put in place but they were limited in scope and with built-in constraints which effectively obstructed and limited NGO activities, thus justifying the attitude of bureaucrats that NGOs are not really capable of “professionally handling” ODA. For example, apart from a limited number, most projects are funded on a year-by-year basis, whereas community-based work requires years of working with the communities to develop the trust and relationships necessary for effective cooperation in community development and work. There are no costrecovery mechanisms or funding of administration costs related to project identification, project development, implementation, and monitoring. No financing is provided for overheads that would enable NGOs to maintain a “professionally

140 Micheline Beaudry-Somcynsky managed” office with experienced staff on a reasonable “professional” salary basis. No private sector firm could function under the financing conditions imposed upon NGOs for their involvement in ODA work. When Canada decided to make a major push to involve NGOs and NGIs in ODA in the early 1970s, the government faced more or less the same situation as is being faced now by Japan. Confidence-building measures had to be taken. Probably the most successful one was by making NGO people contract employees of the government to work alongside regular employees to provide insight and understanding of how NGOs worked. Added to that, key figures in the NGO community were brought in at senior levels within CIDA to work alongside senior managers in the various aspects of ODA policy and program development in order to incorporate effectively the NGO viewpoints into the processes. Funding mechanisms were developed in discussion with NGOs and NGIs, which respected their independence while covering reasonable costs related to staff development and the introduction of more sophisticated management systems to handle a greater flow of funds and overhead costs associated with office expansion and modernization. For NGOs who did fundraising, a matching formula was developed. But CIDA recognized that fundraising was time-consuming and absorbing efforts and energy which could be better channeled towards doing ODA in developing countries. CIDA also recognized that some NGOs and NGIs had valuable experience to bring to the development process, even though they did not have the capacity to do fundraising. Other funding formulas were developed to take the various situations into account. Flexibility in funding approaches became key. CIDA also assisted in training NGO and NGI staff in the latest ODA tools being developed in areas such as project planning, monitoring, and evaluation. Throughout, however, the government had to be able to accept criticisms from NGOs and NGIs without threatening to cut financing if they did so. The strengthening of NGOs and NGIs to work effectively in development cooperation did not happen overnight. The process in CIDA is still ongoing. But since the mid-1980s, some NGOs and NGIs have been strong enough to bid competitively on the execution of major bilateral projects, handling millions of dollars in the process. Japan is at the beginning of this process and no doubt will following its own “Japanese way.” But unless strong measures are taken, especially in funding mechanisms, there may be little chance for Japanese NGOs to realize their full potential. For Canada, NGOs and NGIs represented not only a way to reach out at the people-to-people level, but also an opportunity for Canadians to personally become involved in ODA. This is a role that Japanese NGOs and NGIs could also play if they were given the chance.

Canada and the business community Relations between Japan and its NGO community, as a result of changes in ODA policy directions, appear similar to Canada’s relations with its business community following the adoption of the new ODA priorities under the 1995 foreign policy directions. The priorities clearly included private sector development and

Japanese ODA compared to Canadian ODA 141 the policy clearly mentioned the need to have the Canadian business community more involved in development. CIDA did not really have experience in working in partnership with the private sector. A word of clarification may be useful at this point. CIDA works very much like JBIC in that all of its government-to-government activities are carried out in the form of projects, which include the construction of infrastructure, the provision of plant and equipment, and related technical cooperation, as well as capacity-building. Like JBIC, all CIDA bilateral projects are executed under contracts to whomever submits the best bid, and bids are assessed on a competitive basis. For CIDA, private sector development was seen more in terms of providing support for community-based small enterprise development, helping poor people set up small businesses to earn a modest income, providing micro-credit and technical assistance to small community level enterprises, etc. This was very much in line with the community-based approach that CIDA had been focusing on. Only marginal support had been provided to the Canadian business sector, through the provision of financing to allow companies with a clearly defined partnership with a developing-country business to develop a business plan to set up a joint venture, or to allow Canadian firms to participate in feasibility studies by UN organizations and international financial institutions (IFIs). Otherwise, CIDA’s relations with the Canadian private sector had been mainly under the bidding process for the implementation of bilateral projects. Great pains were taken by CIDA to ensure that the needs of the developing countries would come first and not be tied to self-serving interests by the Canadian private sector. For example, any Canadian companies taking part in the feasibility studies and project planning exercise were automatically eliminated from taking part in the bidding and implementation. The changes now being required by the new policy directions have challenged the deep-seated mistrust by CIDA employees of the Canadian business community. For their part, the Canadian private sector doubted CIDA’s capacity to really understand how they worked, and their capacity to put in place funding mechanisms that would respect their approach to development. Consultation mechanisms were put in place as well as a few funding mechanisms. But, like the situation with NGOs in Japan, these are very limited in scope and have built-in constraints which limit the full use of the private sector in participating in the development process. Compared to what Japan does in this area, CIDA is still in its infancy. Canada could learn a lot from Japan, especially in looking at how the various ministries other than MOFA/JICA have been creating partnerships with the private sector. There is an amazing variety of funding for training programs to take place in Japan and for private sector experts to be sent to developing countries. These not only provide support for joint ventures, or for Japanese subsidiaries and partner businesses in developing countries, but also support human resource development in those areas of the public sector essential to support private sector development. From 1984 to 1997, 73,947 trainees from developing countries came to Japan for on-the-job training under AOTS where three-quarters of the training costs were

142 Micheline Beaudry-Somcynsky subsidized. Endowment funds have been created with the participation of the private sector; co-financing between the ministries and the private sector has increased tremendously the scope and impact of government ODA funding to assist in private sector development in developing countries. In the same way that Japan could learn from how CIDA works with its NGOs and NGIs, Canada could learn a lot from how Japan partners its private sector in the development of the private sector in developing countries.

Challenges for technical cooperation In 1998, Japan spent a total of ¥364.1 billion (US$2.781 billion using the rate of exchange on MOFA’s 1999 Annual Report on Japan’s ODA) on technical cooperation, of which JICA used up less than half (42.7 percent) for technical cooperation aid (¥155.8 billion or US$1.187 billion ). It is difficult to have a clear picture of Japan’s technical cooperation, and how it addresses the new policy issues emerging from the Medium-Term Policy on ODA. Essentially, this is due to that fact that, to this day, when MOFA reports on the use of Japanese ODA for technical cooperation, it only provides data on JICA’s activities. No information is provided on how the remaining 58.1 percent of ODA for technical cooperation is being used (¥208.3 billion). This represents US$1.594 billion, more than half of all of Canadian ODA. How are these funds being used to support the changes in policy direction announced in the ODA Charter and in the Medium-Term Policy? Why are these still not being reported on in what MOFA calls the Annual Report on Japan’s ODA? This is most probably linked to the situation described earlier in which ODA funds under the various ministries are controlled by those ministries. MOFA can advise and develop guidelines for technical cooperation, but one wonders to what extent the ministries will feel compelled to follow them. This is most probably the biggest challenge faced by Japan in using technical cooperation to reflect changes on ODA policies. JICA’s technical cooperation, according to the report, is composed of accepting trainees for training in Japan, in-country training by the dispatch of experts to target countries, sending officials and consultants on study missions, and assigning JOVC members. For 1998, the statistics are set out in Tables 8.1 and 8.2. Interestingly enough, JICA does not provide statistics by gender. This might be symptomatic of the difficulty the agency is still encountering in integrating gender in its activities, notwithstanding its official policy and discourses on the topic. Canadian ODA does not have a separate category called technical cooperation, but data are collected on trainees and experts funded through ODA. Under training, CIDA distinguishes between students, who follow degree-granting programs of studies, and trainees who receive on-the-job training. In both categories, training can take place in the country of origin, in Canada or in a third country. CIDA also provides the data according to gender (see Table 8.3). Under experts, CIDA distinguishes between long-term assignments of six months or more and short-term assignments of less than six months. Again the data are provided on gender (see Table 8.4).

Table 8.1 Trainees, experts, officials and consultants, and JOCV Overseas, 1998 Region

Trainees

Experts

Officials and consultants on study missions

JOCV

Asia Latin America Africa Middle East Oceania Europe, etc.

14,143

2,856

4,167

913

1,246 762

870 18

(No data) 1,822 1,119

422 410 (No data) (No data)

Table 8.2 Overall by region, 1998 Region

Percentage

Asia Latin America Africa Middle East Oceania Europe International agencies

43.2 20.7 14.4 8.0 2.7 5.2 0.7

Table 8.3 Trainees and students in CIDA Region

Africa and the Middle East Latin America and the Caribbean Asia Europe

Total

Students

Trainees

Location of study

Male

Female

Male

Female

Country Canada Third of origin country

3,067

666

230

1,595

576

944

1,567

556

2,618 4,175 1,302

153 195 4

113 185 7

1,405 2,378 689

947 1,417 602

1,113 2,313 284

1,144 1,626 969

361 236 49

Table 8.4 CIDA experts overseas by gender Region

Africa and the Middle East Latin America and the Caribbean Asia Europe Oceania Multiregion

Total experts

2,773 2,865 2,842 1,333 28 52

Long-term

Short-term

Male

Female

Male

Female

542 349 434 94 9 2

425 343 354 84 12 1

1,270 1,436 1,513 853 0 30

536 737 541 302 7 19

144 Micheline Beaudry-Somcynsky CIDA does not keep statistics on the number of consultants and experts on study missions. This is probably due to the fact that there is no separate scheme involved as there is for JICA. Also, JICA relies mostly on missions from Japan for project identification and planning. An average of four to five missions are sent for each project being prepared. CIDA, on the other hand, mostly relies on its CIDA staff and local professionals at its overseas offices to do this work. This substantially reduces the number of missions from headquarters and also provides a better knowledge of conditions in the country than the data that a study mission can accumulate during a two-week mission. This comes back to the different role assigned to the overseas missions by Canada and Japan. There is no doubt, however, that changes in policy directions did create challenges for technical cooperation in both countries. However, the changes brought about were quite different.

Changes to technical cooperation: the Canadian experience New policy directions moved programming to softer areas, where institutional development and capacity-building became crucial elements for achieving sustainable development. Studies on the effectiveness of technical cooperation showed meager results in the sustainability of the institutions that had benefited from technical cooperation. Worse still, technical cooperation often created a cycle of dependence. Emphasis on overseas training, skills transfer, and the counterpart system did not necessarily work. Technology transfer and the capacity gap could not necessarily be closed in the same manner as the resource gap. Institutional development, closely linked to technical cooperation, turned out to be a more difficult task than anticipated. The focus moved from the effectiveness of the individual expert or student to include more macro factors such as governance and the organizational state of institutions. Solutions proposed became less concerned with Western technologies and more with finding the right combination of people, incentives, methods, and institutions that would work and take root locally. Several new approaches to technical cooperation were developed as follows. Re-balancing the aid relationship The institutional weakness of many low-income developing countries, especially in Africa, created vacuums where CIDA, with the best of intentions, had moved in. In the process, operational control had shifted away from the recipient countries, often reducing their commitment to projects and to sustainability. This “donordriven” technical cooperation was now viewed as a major cause of ineffectiveness. The challenge was to change the relationship to “demand-driven” responses while ensuring the effectiveness of the use of the technical cooperation in building sustainable and well-functioning institutions. Improving the capacity of developing countries to manage technical cooperation In CIDA’s experience, developing countries had not always given technical cooperation the same attention as capital aid. As costs associated with technical

Japanese ODA compared to Canadian ODA 145 cooperation were not assumed by the recipient country, there did not appear to be much concern about its use and there was often little recourse to be had if performance was poor. Studies showed that ad hoc approaches had resulted in decisions disconnected from national training requirements, budgetary needs, and economic priorities. Few systems existed in developing countries to promote a rational choice between competing uses of technical cooperation resources (e.g. local versus expatriate personnel), and what could be alternative uses for the funds expended. At the same time, CIDA and other donors were encouraged to maintain volume and disbursements. The result was often an overuse of technical cooperation, a bias against local resources and less chance of sustainability. The system needed a better sense of costs, benefits, performance, and value. Work was done in partnership with other donors sharing the same concerns, to address these issues. Focusing on the institutions instead of individuals Trainees who came to Canada without being part of a capacity-building focus on institutional development encountered great difficulties on returning to their organizations: resistance from colleagues; superiors unfamiliar with and not willing to make the changes proposed by the trainees; difficulties in adapting their knowledge to the work environment, etc. Trainees often found better employment elsewhere or went to work in developing countries. This also contributed to major revisions in the way CIDA approached its training program. More effective advisors Likewise, the role of the experts dispatched was revised. The focus shifted from doing a task and training a counterpart to emphasis on how to assist the institution as a whole. A lot of work was devoted by CIDA in increasing the effectiveness of advisors, as they played a crucial role in the development of sustainable institutions. A successful overseas assignment was defined as one in which an advisor is able to provide information, training, and technology, thereby enhancing the host country’s capacity to manage and develop its own resources. Effectiveness did not refer simply to the technical success of a project, but was measured by the advisor’s ability to transfer skills, knowledge, and expertise to host country nationals. A prerequisite was the ability to live and work effectively in the cross-cultural setting of an overseas assignment. Three interrelated elements were found to be necessary for an individual to be effective overseas: professional expertise, adaptation, and cultural interaction. Previously, professional expertise had been the main selection criterion for overseas assignments. But now the selection process included looking at the candidate’s ability to assess the technical context of the overseas job situation, to be innovative in adapting existing technology and training methods to local needs and realities, and to work effectively with host nationals to develop solutions to problems using the knowledge and skills of both nationals and expatriates. Particular attention was paid to assisting the advisors and their families to adapt to the new culture and environment not only through

146 Micheline Beaudry-Somcynsky pre-departure preparations but also with support programs in the recipient country. Ability and skills in cultural interaction were looked for in prospective candidates, as they were found to be important to establish mutual trust and respect between the advisor and the nationals involved. In turn, this could lead to a greater understanding of local perceptions and attitudes towards the problems and issues to be confronted. A strong commitment to the transfer of skills was considered essential, because the transfer of skills in a cross-cultural setting is a complex, long-term process, which can be disrupted by a variety of factors and can be very frustrating. It is a very demanding task requiring a great deal of energy, perseverance, understanding, and patience in facing obstacles such as insufficient human resources, political interference and the lack of qualified counterparts, the absence of essential equipment, supplies, or back-up facilities, or the inappropriateness of a particular technology. Improving policies and practices regarding technical cooperation New programming resulting from the revised policy directions provided the opportunity to make changes to the provision of technical cooperation. Capacitybuilding now became the central purpose of technical cooperation, even in projects related to the provision of infrastructure. Training not related to projects and the dispatch of individual experts was largely abandoned. Longer timeframes for project completion were adopted in order to have the time to develop the human resources and institutional capacity of the recipient countries to carry out the task by themselves and to ensure that they could continue operating efficiently after CIDA’s completion of the projects. By incorporating all technical cooperation within project-type frameworks, CIDA provided the opportunity for the recipient country to make choices between the various types of technical cooperation available in order to achieve capacity-building and sustainable development. Flexibility was provided within the approved project, to move expenditures between the various types of technical cooperation, in order to adapt more thoroughly to the needs as they became visible within the scope of the project implementation. Funds could be easily switched between using experts or sending people on training, between long term and short term, between national or Canadian experts, between in-country training or training in Canada or in a third country. More attention was given to the social and cultural context and improving aid coordination with other donors involved in the same area. Special care was taken in the selection and preparation of experts hired for the project; support units were created in the country to assist the experts. Training became focused on the people in the recipient countries who were linked to the project and who were essential for the long-term sustainability of the projects. Special attention was given to preparing the Canadian experts for on-the-job training, which turned out to be more complicated than just presuming that their counterparts could learn by watching the experts work. Most experts had no idea how to go about knowledge transfer; they just knew how to do the job. Many knew how to do the job in Canada, but found it difficult to adapt their knowledge to local conditions.

Japanese ODA compared to Canadian ODA 147 This required more than expertise; attitudes were important. This facet became an important aspect of personnel selection. Importance of the environment for technical cooperation These new approaches to technical cooperation revealed that public policy in developing countries was as important for its success as project management, to the point where it appeared evident that the countries that needed technical cooperation the most were the ones which had the most difficulty in absorbing it. Until then, CIDA had dealt with technical cooperation issues in individual departments or public enterprises implementing discrete projects. But the new approaches created the necessity to become concerned with good governance, policy dialogue, and public sector reforms. Clear links between policies, programs and projects Because of these changes in the implementation of technical cooperation, instead of putting a lot of effort into adapting its technical cooperation programs to fit new policy directions, efforts were made instead to identify and develop projects that would support the new policies. In order to ensure that this would occur, CIDA also put in place a system whereby clear links were made between the policies, programming, and projects, and clear lines of accountability from the policy level down to the project level were established. Policy and programming frameworks were adopted at the regional and country level, as well as for every aspect of ODA activities. New projects had to support these frameworks and contribute to their achievement. Managers had to report on a yearly basis on progress made in implementing projects to support the new policy directions, and the agency had to present a progress report to Parliament. Results-based management was introduced at all levels of programming and for all the stages of project management. Reporting requirements and monitoring were modified to become an integral part of results-based management. Finally, and most importantly perhaps, a lot of effort was put into the training of staff, NGOs, and executive agencies, as well as counterpart institutions in developing countries. These changes have had a profound impact on the content and delivery of Canadian ODA. But as more issues surface, there is a need to be constantly vigilant and critical in order to adapt to the rapidly changing nature of international affairs and of the role that ODA is called upon to play on the international scene.

Changes to technical cooperation: the Japanese experience In response to changes in policy directions, Japan was more constrained by the system already in place than CIDA was. After all, as the sole center of responsibility for ODA, CIDA could undertake any changes judged necessary, and only when changes related to the accountability framework was approval required from the Treasury Board (Council of Ministers). But, in Japan, each ministry controlled

148 Micheline Beaudry-Somcynsky its technical cooperation program, and this continues to be the case to this day. Yet this system has its benefits. Each ministry offers training and technical expertise on a whole range of subject matter related to its area of activities, and a wide variety of training approaches are made available to developing countries. Meanwhile, MOFA can use JICA to orient training to respond more closely to new policy directions. In this way, former policy directions that were included in the Medium-Term ODA Policy could keep on being covered while new ones were being looked after. JICA has developed an incredible variety of training courses responding to the new policy directions. These range from highly technical to more policy-oriented training for officials of developing countries. Meanwhile, because of the huge budget allocated to training under Japanese ODA, the overall approaches to technical cooperation created by JICA and the ministries are most probably creating critical masses of trainees when they return to their country, thereby helping to ease their reintegration into their milieu and the implementation of what they have learned. The support provided by Japanese ODA for alumni associations is exemplary in this aspect. Nor is there much known about the effectiveness of the overall expert dispatch program. The same situation probably applies where the sheer number of experts being deployed overseas must create a critical mass necessary to achieve the desired impacts. Again, as they are deployed by various ministries, the range of expertise available to developing countries must be very wide indeed. It would be interesting to know if the Japanese government has encountered the same situation that CIDA found when it did its review of the provision of training and the dispatch of experts. It would be unusual if Japan’s experience in this respect was very much different from the Canadian one. Yet there appears to have been no major changes to either the provision of training or the dispatch of experts, at least in the past ten years. Are the developing countries really making effective use of the technical cooperation provided by Japan? If so, Japan should share the reasons for its success with other donors, as most other donors, like Canada, have abandoned the approach which Japan still favors, due to the waste in resources and the lack of sustainable results. However, it would probably be safe to assume that, given the fact that so far there is no one central reporting on the use of the whole of ODA-funded technical cooperation in Japan, an overall evaluation of the effectiveness of Japan’s technical cooperation most probably was never conducted. If ever coordination among the ministries can be achieved following the implementation of the administrative reform to be put in place in 2001, such an evaluation would most probably be very useful for the Japanese government in determining the advantages and disadvantages of the present approach, and in identifying ways to improve the delivery of ODA-related technical cooperation. It will be interesting to see what will happen under the new responsibilities for policymaking and planning related to technical cooperation given to MOFA through the 1999 Law for the establishment of MOFA. A number of major changes, however, have been implemented at a more macro level within JICA since the 1990s. Greater recognition appears to have been given

Japanese ODA compared to Canadian ODA 149 to the fact that JICA staff has acquired the knowledge and experience of development cooperation professionals. JICA’s role has been slowly transforming, from mainly administering trainees, dispatching experts, and provisioning equipment, to becoming more involved in planning and programming. Institutional development work and activities related to most of the “soft” areas related to global issues require more knowledge of ODA-related issues and more coordination with the rest of the donor community than the previous input delivery approaches to development which had characterized Japanese technical cooperation until then. The adoption of the country program approach has also increased the participation of JICA in the consultation process surrounding the planning and delivery of ODA to developing countries. Another innovation has been the increasingly more frequent links made between grant aid, JOVC, and project-type technical cooperation, which allows for better coordination of the inputs required to achieve more sustainable development. This is also in line with a greater focus on institutional development and capacity-building, which are closely related to the new policy directions. JICA and JBIC are working more closely together to complement ODA loans for infrastructure development with institution-building. All of these changes called for greater areas of expertise within the JICA staff, both in Japan and overseas. With the scarcity of ODA professionals in Japanese embassies in many developing countries, the embassies are increasingly calling on JICA staff to participate in donor coordination meetings. The development of country program frameworks also involves a greater participation from JICA’s overseas offices. Without any fanfare or official announcements, this has been steadily leading to the creation of a corps in JICA of dedicated professionals with expertise in the various aspects of ODA. Yet, while JICA has become involved in ODA work which is much more timeconsuming and which requires a deeper knowledge of ODA issues, at the same time it is still required to continue with the considerable clerical work required to administer the trainees and the dispatch of experts. What a waste of precious resources, especially since there are a number of organizations already set up and functioning under various ministries, which appear to be doing this clerical support work very efficiently and effectively. Now that there is increased coordination between the various ministries brought about by the country program approach, and now that MOFA has more responsibility for policymaking and planning for technical cooperation, would it not be possible to hand over the clerical work related to trainees and experts to one of these other organizations? Other agencies such as AOTS, JODC, the Japan International Training Organization ( JITCO), to name but a few, have specialized in the administration and support, both in Japan and overseas, for ODA-related trainees and the dispatch of experts. They have experience working with the ministries and with the private sector. Could they not do the job as well as JICA? And leave JICA and MOFA deciding on the best use for the technical cooperation? This would leave the ODA professionals in JICA time to do work more in line with the professional expertise they have been acquiring over the years. This is what CIDA did when it

150 Micheline Beaudry-Somcynsky delegated all of the administration of trainees and experts by making the executive agencies responsible and accountable for their management within the contracts signed for implementing CIDA’s projects. This has allowed CIDA staff to become more involved in analysis, policy development, donor coordination, programming, focusing on the production of results, etc.

Impact of these changes on funding allocation In order to see how well Canadian and Japanese ODA is adapting to the changes, it would be useful to go beyond policy statements and official announcements and look at actual disbursements. Statistics from 1998 will be taken, as these are the latest available in English for Japanese ODA. First, of course, the total ODA amount in each country is very different. Total Japanese ODA in 1998 was US$10.7 billion, whereas Canadian ODA was Can. $2.59 billion. This represented 0.22 percent of GNP for Japan and 0.30 percent of GNP for Canada. Disbursements by region: Japan spent most of its ODA in Asia (62.4 percent) with a sprinkling in the other regions: Africa (11.0 percent), the Middle East (4.6 percent), Latin America/Caribbean (6.4 percent), Europe (1.7 percent) and Oceania (12.2 percent), with some unspecified (12.2 percent). For its part, Canadian ODA was more widespread: Asia (24.5 percent), Africa and the Middle East (31.1 percent), Latin America/Caribbean (11.7 percent), Europe (1.0 percent), and Oceania (0.4 percent) with some unspecified (31 percent). If the new directions in Japanese ODA policy were evident, a significant portion of the disbursements would appear related to a greater emphasis on humancentered development, poverty alleviation, social development, and human security; NGOs would be receiving a substantial portion of the funding, and trade and investment would continue to be supported by the improvement of the environment for private sector activities. In 1998, only 20.2 percent was disbursed on social infrastructure and services, 1.0 percent on environment and 0.0 percent ($0.15 million) on women in development. Meanwhile, economic infrastructure received 39.0 percent and the productive sectors received 12.3 percent for a total of 51.3 percent. This is essentially similar to disbursements in 1995, when social infrastructure and services received 23.2 percent, while economic infrastructure and services used up 41.16 percent and the production sectors 12.26 percent, for a combined total of 53.42 percent. In 1989, the first year that the government introduced a subsidy system for NGOs, ¥110 million was allocated; this reached ¥787 million in 1998. This is a substantial increase in a short period, but it still only amounts to US$6.7 million. Meanwhile, in Canada, the social sector received 46.04 percent of total ODA in 1998, whereas only 3.18 percent was spent on economic infrastructure, showing how difficult it is for Canadian ODA to make a shift in this direction. However, 19.98 percent was spent on the productive sector, showing an important effort to support private sector development. NGOs and NGIs received Can. $40.84 million.

Japanese ODA compared to Canadian ODA 151 These figures show that changes in policy direction take time before they become reflected in actual programming and disbursements. Japan is having a harder time doing this because of the complexity of its ODA system, the strength of the various interests which are at stake, and the greater amounts involved. However, progress has been made and efforts continue to be applied relentlessly to overcome the difficulties.

9

ODA policy and practice Japan and the Republic of Korea Sang-Tae Kim and David Seddon

Introduction Devastated by the Korean War and the subsequent division of the country, the Republic of Korea (hereafter “Korea”) was one of the poorest countries in the world ($82 per capita GNP) in 1961. Thirty-five years later, as the world’s eleventh-largest economy and trading nation, with a per capita income of $10,548, Korea became the twenty-ninth member of the OECD. The volume of Korea’s ODA remains meager by OECD standards, but the Korean government plans to expand its ODA (currently 0.046 percent of GNP) to a level commensurate with its economy and to join the DAC as a full member in the near future. The main purpose of this chapter is to describe the development and contemporary characteristics of Korea’s ODA policy and practice, focusing on bilateral aid, with a view to a comparison with Japan. The first main section reviews Korea’s ODA in a historical context and assesses the extent to which, until the 1980s, its ODA policy was determined by its relationship with the North. The second section considers the changed circumstances of the late 1980s and the role of ODA in Korea’s development strategy during this period. Here, in particular, a comparison is made with Japan, whose experience strongly influenced the development of Korea’s ODA policy. The third section reviews the structure and administration of Korea’s ODA in the 1990s, while the fourth section looks at performance, in terms of quantity and quality. The fifth section looks to the future. Korea’s ODA consists of bilateral grants, bilateral loans, and multilateral aid. Most of Korea’s bilateral grants are administered by the Korea International Cooperation Agency (KOICA), supervised by the Ministry of Foreign Affairs and Trade (MOFAT), but, as in the case of Japan, several other ministries and institutions are also involved. KOICA implements two types of grants: (1) grant aid in the form of project aid, equipment and goods, and disaster relief; and (2) technical cooperation in the acceptance of trainees, the dispatch of experts, the Korean Overseas Volunteers (KOVs), and development studies. KOICA also provides assistance to NGOs working in developing countries. Bilateral loans, also known as Economic Development Cooperation Fund (EDCF) loans, are managed by the Export–Import (EXIM) Bank of Korea, supervised by the Ministry of Finance and Economy (MFE). As regards multilateral aid, the MOFAT is responsible for contributions to international organizations and agencies, while the MFE

Japan and the Republic of Korea

153

is responsible for capital subscriptions to multilateral development banks (IDA, ADB, and AfDB).

The historical context of Korea’s ODA strategy Introduction Korea has no special bilateral relationships with any developing counties as a result of a former colonial relationship, nor does it have global strategic objectives. Its ODA policy has been determined first by diplomatic and more recently by commercial objectives and, as in the case of most “donor” countries, these objectives relate closely to Korea’s national goals, which are themselves rooted in particular historical circumstances. Unified in AD 668, and with a long history as an independent country, Korea (“the Hermit Kingdom”) was little known to the outside world beyond China and Japan until the twentieth century. In 1910, it came under Japanese colonial rule and remained a dependent territory until the end of the Second World War. Shortly afterwards, it became a battleground for external powers, both regional and global, during the three years ( June 25, 1950 – July 27, 1953) of the so-called Korean War (in effect part of the Cold War), which resulted in the loss of over a million lives. The division of the peninsula after the war remains unchanged since the Armistice Agreement signed on July 27, 1953, although recently there have been indications of a détente. Despite subsequent UN recognition of the Republic of Korea as a legitimate government on the peninsula, North Korea has continued to dispute this fact. For many years, the North–South split led to a long diplomatic “war of attrition” in which the two Koreas competed in every international arena for predominance in what was seen as a zero-sum game.1 Therefore, it is not surprising that the Korean government places a high priority on international recognition of its national legitimacy and, to this end, will use ODA to establish diplomatic relations with as many countries as possible. In short, Korea’s ODA policy is a child of the Cold War. Korean ODA: the early years The history of Korea’s ODA dates back to 1963, when Korea first received trainees from developing countries with financial support from USAID. Korea began to fund foreign trainees itself in 1965 and to dispatch its own experts to developing countries in 1967. The government started the overseas placement of medical doctors in 1968, and the first project-type technical cooperation was initiated in 1969. During this period, Korea was itself in the early stages of economic development under its First Five-Year Plan (1962–6) and remained one of the principal recipients of ODA from developed countries (including the United States). In 1966, Korea’s per capita GNP was only $125 in current prices, and even by 1969 was only $210. As many government officials admit, the decision to provide foreign aid was taken because the Korean government was concerned

154 Sang-Tae Kim and David Seddon about gaining an edge over the North. In line with this concern, Korea’s ODA was initially characterized by a concentration on Africa, where many newly independent countries were modeling their programs for development on the Soviet experience and where, consequently, North Korea gained greater diplomatic credibility and kudos. In 1971, the Korean Development Institute was established as a think-tank on economic development in order to provide a rigorous academic perspective on economic policy issues at home and abroad. Korea first dispatched experts (in tae kwondo martial arts) abroad in 1972, and in 1977 initiated a grant aid program. In this period, the Sino-American rapprochement and the fall of Saigon increased Korea’s awareness of its serious security vulnerability. Meanwhile, the North joined the Non-Aligned Movement in 1975, while the South failed to do so. These developments led Korea to seek ways to develop friendly and strategic relationships, with non-aligned and Socialist countries in particular.2 As part of these efforts, President Park Chung Hee made a Special Declaration on June 23, 1973 that renounced a traditional policy principle, modeled on West Germany’s Hallstein Doctrine, whereby Korea would have no diplomatic relations with countries that had relations with North Korea. Korea’s bilateral grant aid program, started in 1977, aimed to counter North Korean influence among the non-aligned nations. ODA by a NIC By 1980, Korean per capita GNP had risen to $1589, and through early 1980s, at a time of global recession, the Korean economy maintained its meteoric growth. For six consecutive years (1983–8), the annual inflation rate remained at less than Table 9.1 Major indicators of Korea’s economic growth

1961 1966 1971 1975 1980 1985 1986 1987 1988 1989 1990

GNP per capita ($)

GNP ($ billion)

GNP growth Current account Trade rate (%) balance balance ($ billion) ($ million)

Export ($ million)

82 125 285 591 1,589 2,150 2,300 3,098 4,040 4,994 5,569

2.10 3.67 9.37 20.85 60.30 83.70 95.30 118.60 169.20 211.20 237.90

5.6 12.7 9.1 6.8 –4.8 5.4 12.3 12.8 12.2 6.8 9.0

41 250 1,132 5,003 17,214 26,442 33,913 26,244 60,649 62,377 65,016

–50 –100 –850 –310 –530 –887 4,617 9,854 14,161 5,055 –2,179

Sources: Revised from Song (1990: 60–1), Song (1992: 44–7). Note GNP and GNP per capita are at current prices.

–242 –430 –1,046 –1,671 –4,384 –19 4,206 7,659 8,848 912 –4,828

Japan and the Republic of Korea 155 Table 9.2 Total and per capita GNP of South and North Korea (current prices) GNP ($ billion)

1965 1970 1975 1980 1985 1987

Per capita GNP

South Korea (A)

North Korea (B)

Ratio (A/B)

South Korea (A)

North Korea (B)

Ratio (A/B)

3.0 7.8 20.2 61.2 83.7 118.6

1.3 2.8 7.4 14.7 15.4 19.4

2.3 2.8 2.7 4.2 5.4 6.1

105 243 573 1,605 2,150 3,098

108 198 464 822 755 936

0.97 1.23 1.24 1.95 2.85 3.31

Source: Song (1990: 207).

4.5 percent, with an average annual GNP growth of 10.5 percent. Among other things, the economy began to experience unprecedented current account surpluses. By the end of the decade, Korea had undergone a major economic transformation, the significance of which is only partially captured by the main economic indicators. Between 1960 and 1989, Korea moved from being the world’s thirty-seventh to its fifteenth-largest economy and from the fifty-first-largest to the twelfth-largest trading nation; in terms of per capita income, it went from eighty-third to fortieth.3 As a result of these developments, Korea no longer had to worry about economic rivalry with the North. The evolution of Korea’s ODA It is difficult to compare Korea’s ODA prior to 1990 with that of other donors because some early statistics of Korea’s ODA are unavailable, and its accounting standards were not consistent with international practice. Thus, distribution by geographical and income group is not available; the sectoral classifications did not follow DAC guidelines; and even classifications within programs could be contradictory. Bearing in mind these limitations, we shall briefly review the structure and performance of Korea’s ODA, up to 1990. General expansion Korea’s aid program developed as its economy expanded through the 1980s (Table 9.3). Even at the end of the decade, however, Korea’s ODA remained relatively small: in 1990, it was closest to that of New Zealand ($93 million), the secondsmallest DAC donor country after Ireland ($57 million). The largest share went to multilateral aid. The ODA/GNP ratio also remained low. Korea’s ODA in 1990 (and in 2000) was equivalent to 0.04 percent of GNP, well below any of the other DAC countries (even Ireland which otherwise was lowest with 0.16 percent) and far below the DAC average of 0.33 percent.4

156 Sang-Tae Kim and David Seddon Table 9.3 The structure and evolution of Korea’s ODA ($ million) 1985

1986

1987

1988

1989

1990

1. Bilateral aid Grant aid Technical cooperation Loans Administration cost

14.9 8.5 6.4 – –

15.0 8.5 6.5 – –

17.3 9.1 8.2 – –

19.9 11.4 8.5 – –

22.9 12.6 8.5 1.8 –

32.4 11.6 9.1 9.9 1.8

2. Multilateral aid Subscription payment Grants

33.4 28.5 4.9

96.5 91.6 4.9

57.4 51.6 5.8

42.4 35.7 6.7

75.6 66.9 8.7

56.8 46.5 10.3

3. Total ODA/GNP (%)

48.3 0.05

111.5 0.11

74.7 0.06

62.3 0.04

98.5 0.05

89.2 0.04

Source: Revised from Kim and Kim (1992: 27).

Bilateral grant aid The bilateral grant aid program began in 1977 under the jurisdiction of the Ministry of Foreign Affairs, with the provision of $1.66 million for 11 Third World countries. In the 1970s, Korean grant aid was distributed mainly in the African region, although this would change. As Table 9.4 shows, the number and geographical spread of Korea’s grant aid recipients steadily increased over time. For most ODA providers, bilateral grant aid promotes donor diplomatic and commercial relations with recipient countries, but it is also the type of aid that can Table 9.4 Geographical distribution of Korean grant aid ($ thousand) 1977

Africa Latin America Asia and Pacific Middle East Eastern Europe Others Total

1979 1981

1983 1985 1987

1989

1991

562 2,563 1,412 3,958 3,262 3,345 4,403 3,471 (7) (16) (18) (19) (23) (23) (27) (30) 130 161 1,728 1,994 2,727 2,927 3,531 3,369 (3) (3) (18) (15) (22) (26) (28) (26) 411 127 446 358 1,800 1,625 2,266 3,919 (4) (4) (4) (7) (11) (15) (19) (23) – 259 354 319 716 892 1,096 623 (3) (3) (3) (3) (7) (7) (6) – – – – – – 114 545 (1) (5) – – – 305 – 310 1,149 479 (1) (2) (7) (4)

1992

Total (%)

4,273 44,553 (35) (38.6) 2,711 32,878 (26) (28.5) 2,162 22,981 (22) (28.5) 1,117 8,468 (8) (7.3) 744 2,054 (10) (1.8) 562 4,476 (6) (3.9)

1,103 3,110 3,940 6,934 8,505 9,099 12,559 12,406 11,569 115,410 (14) (26) (43) (45) (59) (73) (89) (93) (107) (100.0)

Source: KOICA (1993b). Notes 1 Number of recipients is indicated in parentheses. 2 Total = the cumulative value of annual disbursement from 1977 to 1992.

Japan and the Republic of Korea 157 respond most effectively and quickly to the recipient’s needs. Korea’s grant aid was clearly directed primarily towards political/diplomatic objectives, rather than to humanitarian or even commercial ones. According to the MOFA’s Standard Operating Procedures on Grant Aid (October 1987), the program aimed, in strict order of priority to (1) further promote existing relationships with Third World countries including non-aligned countries; (2) improve relationships with countries with which Korea does not have diplomatic relations; (3) promote South– South cooperation and trade; and (4) promote disaster relief based on humanitarian considerations. Technical cooperation Korean technical cooperation is intended to contribute to the development of human resources by imparting Korean technology and know-how in a wide range of fields to people who are expected to play a leading role in the development of recipient countries, and is implemented in various forms: the acceptance of trainees and students, the dispatch of experts and volunteers, development studies, and forums, seminars, or workshops. Before the establishment of KOICA in April 1991, at least eight different central ministries were involved in implementing technical cooperation programs. The trainee acceptance program involved training key administrators, technicians, and researchers from developing countries in Korea. This program was aimed at transferring specialized technology and sharing Korea’s development experiences in a wide range of fields, including government administration, education, agriculture, forestry, industry, energy, public health and medicine, and social welfare. Table 9.5 reveals several distinctive features of this program. First, the number of trainees increased significantly in the 1980s. Second, as regards geographical distribution, the apparently strong bias in the early years Table 9.5 Number of trainees accepted Total 1963–76 1977–81 Total (%) Asia and Pacific

1982–6

1987

1988

1989

1990

7,883 (100.0)

1,687 (100.0)

1,298 (100.0)

2,917 (100.0)

470 (100.0)

479 (100.0)

501 (100.0)

531 (100.0)

5,394 (68.4) Africa 1,041 (13.2) Latin America 795 (10.1) Middle East 570 (7.2) Others 83 (1.1)

1,498 (88.8) 81 (4.8) 43 (2.5) 59 (3.5) 6 (0.4)

913 (70.3) 109 (8.4) 81 (6.2) 194 (15.0) 1 (0.1)

1,894 (64.9) 539 (18.5) 322 (11.0) 160 (5.5) 2 (0.1)

299 (63.6) 80 (17.0) 63 (13.4) 27 (5.8) 1 (0.2)

280 (58.5) 70 (14.6) 74 (15.4) 38 (7.9) 17 (3.6)

228 (45.5) 100 (20.0) 104 (20.8) 60 (12.0) 9 (1.7)

282 (53.1) 62 (11.7) 108 (20.3) 32 (6.0) 47 (8.9)

Source: Revised from MOST (1992).

158 Sang-Tae Kim and David Seddon towards other Asian countries gradually changed as the proportion of trainees from Asia declined to around half. It would not be surprising if Korea gave priority to Asia, given its greater geographical proximity, social and cultural affinity with Korea, and more importantly its similar level of industrial technology. But the “Asian bias” derives more from the influence of other funding sources. Between 1963 and 1990, the Korean government funded 3809 trainees (48 percent of 7883). Of those from Asia, the percentage invited by Korea was only 32 percent, whereas the percentages of those from Latin America, the Middle East and Africa were 96, 79, and 78 percent respectively (see Table 9.6). The low priority accorded to the Asian region reflects the Korean government’s concern to improve relations with countries in other regions, because Korea had already established a strong position in Asia relative to its North Korean rival. As another important pillar of technical cooperation, Korean experts in a variety of fields were sent to developing countries to share Korea’s development experience in the forms of technical counseling and guidance. During 1967–90, a total of 473 experts were dispatched overseas, and the number of experts steadily increased over the years. In terms of geographical scope, African countries were the main destinations early on, but Asia had emerged as a major focus of this program as early as 1972 (see Table 9.7). Korea also sends medical doctors and tae kwondo (Korean martial arts) instructors to developing countries under technical cooperation. Diplomatic considerations were particularly evident in these two programs, reflecting the direct control of the MOFA. The medical experts program started in 1968; a total of 108 doctors had been placed in more than 36 countries by 1990. In the early years in particular, there was a major focus on Africa, mainly to encourage sympathetic voting in the UN by newly independent African government representatives. The tae kwondo instructors program, which started in 1972, sent a total of 50 instructors to more than 20 countries, with a particular focus on Africa and the Middle East. This reached a peak in 1986 with 20 instructors in 17 countries. Table 9.6 Number of trainees accepted, by financial source

Total Asia and Pacific Africa Latin America Middle East Others

Total

Government

UN

USAID, etc.

7,883 (100.0) 5,394 (100.0) 1,041 (100.0) 795 (100.0) 570 (100.0) 83 (100.0)

3,809 (48.3) 1,721 (31.9) 813 (78.1) 766 (96.3) 449 (78.8) 60 (72.3)

1,692 (21.5) 1,574 (29.2) 86 (8.3) 3 (0.4) 95 (16.7) 22 (26.5)

2,295 (29.1) 2,099 (38.9) 142 (13.6) 26 (3.3) 26 (4.5) 1 (1.2)

Source: Revised from MOST (1992).

Japan and the Republic of Korea 159 Table 9.7 Number of technical experts dispatched, by region Total Total

473 (100.0) Asia and Pacific 242 (51.2) Africa 90 (19.0) Latin America 118 (24.9) Middle East 17 (3.6) Others 6 (1.3)

1967–71 1972–81 1982–6

1987

1988

1989

1990

18 (100.0) 1 (5.6) 15 (83.3) 2 (11.1) –

35 (100.0) 18 (51.4) 7 (20.0) 10 (28.6) –

49 (100.0) 16 (32.7) 15 (30.6) 18 (36.7) –

–

–

66 (100.0) 42 (63.6) 6 (9.1) 13 (19.7) 2 (3.0) 3 (4.6)

48 (100.0) 20 (41.7) 1 (2.1) 20 (41.6) 7 (14.6) –

–

80 (100.0) 36 (45.0) 23 (28.8) 14 (17.5) 7 (8.7) –

177 (100.0) 109 (61.6) 23 (13.0) 41 (23.1) 1 (0.6) 3 (1.7)

Source: Revised from MOST (1992).

The development studies program (DSP) provides a consulting service for development planning and projects in a variety of fields. The studies range from preliminary surveys to more detailed feasibility studies, master plans, and detailed technical designs.5 DSP covers the identification and preparation of projects, in project cycle terms. Major fields covered include agriculture, forestry, mineral resources, and construction of infrastructure such as roads, electricity, and telecommunications, as well as energy resources and socio-economic development. The DSP final report helps inform policy decision-making and funding applications to international and bilateral ODA donors. In 1981, the Korean Advanced Institute of Science and Technology (KAIST) initiated a program of joint project studies, but the DSP did not really start until a few years later. During the period 1984–90, the largest share (79 percent) of resources went to Asian countries (see Table 9.8). The DSP, which started as part of Korea’s effort to expand its overseas construction activities,6 was the first significant ODA program focusing on the economic linkages between development projects and Korean interests: those companies which participate in project identification and feasibility studies have a better chance of securing contracts.7 Support under this program was determined largely by the recipient’s potential for economic linkage with Korea. According to DAC’s Statistical Reporting Directives (1995), the program belongs to investmentrelated technical cooperation (IRTC). In 1982, the Korea Development Institute (KDI) initiated the International Development Exchange Program (IDEP). IDEP is Korea’s unique technical cooperation program to introduce Korea’s own experience of the development process to high-ranking government officials of developing countries through policy forums, seminars, and workshops. Over a nine-year period (1982–90), KDI invited a total of 890 people from more than 70 countries and nine international organizations. The Ministry of Labor began a package program to assist the establishment and management of a vocational training center in 1984.

160 Sang-Tae Kim and David Seddon Table 9.8 Allocation of resources: the development study program, 1984–92 Region

Number of projects

Share of total (%)

Amount (million won)

Share of total (%)

Asia Pacific Africa Latin America Eastern Europe Total

55 8 4 3 3 73

75.3 11.0 5.5 4.2 4.2 100.0

8,735.1 1,450.0 515.6 57.1 360.0 11,117.8

78.6 13.0 4.6 0.5 3.3 100.0

Source: Ji (1993: 71).

In 1989–90, the Korea Youth Volunteer (KYV) program (the Korean version of the US Peace Corps), was created (it was renamed the Korea Overseas Volunteer (KOV) program in 1995). It sent 44 volunteers to Indonesia, Nepal, the Philippines, and Sri Lanka. This program, under the spirit of “Share and Respect,” aimed to contribute to the social development of developing countries by sharing development experiences and transferring technical skills. It is distinguished from other forms of technical cooperation programs by its voluntary nature. Volunteers’ experience of living and working with the local people is expected not only to contribute to the growth of friendship with developing countries, but also to benefit the volunteers themselves trying to overcome various hardships in their activities, and thereby contributes to the development of their international perspectives. Bilateral loans In 1987, the government created the EDCF to assist developing countries by providing long-term, concessional funds for industrial development and economic stabilization. The financial resources of the EDCF consisted of contributions and borrowings from the government, including foreign exchange reserves. The EDCF offers two kinds of loans: (1) loans made directly to foreign governments, government agencies, or other eligible organizations to support the economic development of developing countries; and (2) loans to Korean corporations for overseas investment projects. The EDCF loans tend to be project loans, two-step loans, commodity loans, or preparation loans.8 An EDCF loan is virtually 100 percent tied, although officially acceptable procurement methods are: (1) international competitive bidding, (2) limited international budding and (3) direct contracting. First, the EDCF loan is offered in Korean currency. Second, borrowers are required to procure goods and services from a list of eligible countries, and to obtain the Korean EXIM Bank’s approval of procurement methods, bidding documents, analysis of bids, proposed awards, and contracts to be concluded.9 As a matter of course, the Korean government makes it a principle that the borrower procures goods and services from Korean firms. The loan amount may be up to 80 percent of total project cost, although in general a

Japan and the Republic of Korea 161 ceiling equivalent to $50 million is imposed on the loan amount for a single project. The interest rate is between 1 and 5 percent a year, with a repayment period of between 10 and 30 years (including a grace period of 5–10 years). Repayment of both interest and principal is every six months.10

Korea and Japan compared Introduction Already, during the 1980s, the OECD countries were looking for a degree of “burden-sharing” of ODA on the part of the NICs (notably after the adoption of the joint statement by the G-6 meeting in Paris in February 1987). Given Korea’s increased status as the world’s fifteenth-largest economy and eleventh-largest trading nation in 1991, there were specific calls for increased contributions by Korea to international development assistance.11 In addition, many developing countries and economies in transition had high expectations of Korea as one of the NICs that perhaps could provide a model for their own economic development. Significant changes can be identified in the orientation of Korea’s ODA (including its technical cooperation programs) after 1987. The two major features are a growing involvement in Asia, and an increasing commitment to economic and development ODA, as opposed to assistance for political and diplomatic reasons. The simultaneous entry of North and South Korea into the UN in September 1991 also heralded a new era for both. But it was the establishment of the KOICA as an aid implementation agency for bilateral grant aid and technical cooperation under the MOFA in 1991 that most clearly marked a new era in terms of Korean ODA. Economic cooperation, trade, and aid The Korean government took a positive stance towards foreign aid, but it was not seen as something separate from Korean national development. In an effort to manage the various new challenges surrounding the Korean economy in the late 1980s, the Korean government put greater emphasis on the promotion of economic cooperation with developing countries to reduce its economic vulnerabilities and to strengthen its international competitiveness. Commercial considerations began to gain ground over political/diplomatic considerations as the raison d’être of Korea’s ODA. In this regard, Korea resembled Japan. In fact, the Korean approach to ODA, and the structures and procedures that were established, were explicitly modeled on the Japanese experience. Korea’s relative lack of experience as a “donor” country heightened the attractiveness of using other “donors” as models; and Japan seemed the obvious choice. Most commentators share the view that in its early phase – the 1950s and 1960s – Japan’s foreign aid was largely commercially motivated and was heavily concentrated in Asia. Japan’s aid programs were basically designed to promote its exports, to assist its industrial activities in developing countries, and to ensure

162 Sang-Tae Kim and David Seddon stable supplies of resources and raw materials. The loss of Asian colonies after World War II as suppliers of raw materials and as markets for Japanese products contributed to the geographical bias of Japan’s foreign aid towards the Asian region.12 Like Japan, Korea relied heavily on foreign trade as the principal engine of economic growth in the 1970s and 1980s (trade as a proportion of total GNP varied between 56 and 68 percent between 1977 and 1987), and it will continue to remain a critical factor for its sustained development: “the evidence suggests that none of the Great Powers, whatever their stage of development, even had anywhere near as high a dependence on trade as did Korea.”13 Furthermore, Korea’s exports were heavily concentrated in a few industrial markets, making Korea externally vulnerable to protectionism. So, in an attempt to diversify its export markets and to reduce its dependence on existing major trading partners (such as the United States), Korea began to target developing countries as potential markets. Korean FDI in developing countries (in Asia in particular) increased from 46 percent of total FDI in 1987 to 52 percent in 1992.14 The export promotion strategy of Korea (a country with scant resources) has led its economy to be heavily dependent upon developing countries for the raw materials needed for the production of export goods and domestic consumption. For the ten major raw materials, imports from developing countries comprised more than 80 percent of total imports throughout the period from 1970 to 1985.15 With the growth of the national economy and rising national income levels in the future, greater priority is expected to be given to the promotion of economic cooperation with developing countries, in order to secure the raw materials required for both export and domestic consumption purposes. It was recognized at the beginning of the 1990s that the Korean economy’s ability to restructure itself in response to changes in the economy at home, and to shifts in competitiveness abroad, would be a key determinant of Korea’s future success. Developing positive relationships with developing countries would be an integral part of this process: with increased moves towards regional economic blocs and inevitable competitive relationships with developed countries in various industrial sectors, the importance of economic cooperation with developing countries is expected to be ever-increasing. It is imperative to promote economic cooperation with developing countries because of increased needs; (1) to diversify foreign markets; (2) to facilitate industry restructuring by redirecting sunset industries losing international competitiveness to developing countries; (3) to secure stable supplies of resources and raw material such as oil, natural gas, etc.16 Korea’s explicit and implicit intention to use ODA as the tool for its own development in the context of its economic policies is well reflected in its use of the term “economic cooperation,” which (according to the Economic Planning Board’s (EPB) Handbook on External Economy, published in 1989) refers to all

Japan and the Republic of Korea 163 external economic exchange or relations but is, in practice, used interchangeably with “ODA.” This confusion is linked with Korea’s motives and objectives in providing “aid.” The term “economic cooperation” covers all efforts to promote economic relations with both developed and developing countries, and includes capital flows from developing countries (although the DAC definition excludes these from ODA). Indeed, the Korean government sometimes explicitly justifies its preference for “economic cooperation” over “ODA” as a latecomer “donor” country17; but this justification is being increasingly questioned. Unlike Japan, however, which has been subject to foreign criticism and pressures to improve both the quantity and quality of its ODA, ever since the first UNCTAD conference of 1964,18 Korean ODA has been generally acceptable, partly due to its status as a developing country. In the future, it is likely that it will be subject to more careful scrutiny. Certainly, Japan has long been criticized at home and abroad for the same confusion of national interest with development aid, which reflects the predominantly commercial motivation of Japan’s foreign aid in the past.19 Comparisons with Japan In fact, it is not just for its general approach to overseas aid but also for its structure of aid administration and procedures for implementation that lead to very specific comparisons with Japan. There are, furthermore, certain parallels in the national development experience of both countries that encourage a broader comparison, “Because Korea’s experience has paralleled Japan’s in many respects, discussion of the rise and transformation of the Korean economy is often cast in relation to the Japanese case.”20 As Song has observed: for most observers, the temptation to compare Korean and Japanese development is irresistible . . . there is an interesting coincidence: Korea was opened to foreign trade 23 years later than Japan, 1876 versus 1853. Similarly, Korea hosted the Olympics 24 years after they were held in Japan in 1964. And finally, in terms of major economic indicators many Korean economists say that Korea is also behind Japan by about 20 to 25 years.21 In many ways, Korea in the mid-1980s did resemble Japan in the mid-1960s in terms of a number of economic and social indicators;22 and this encouraged Korean policy-makers to believe that they should follow the path trodden by Japan. Many both outside and inside Korea believed that the country would emerge during the 1990s as a major global economic power, much as Japan had emerged during the 1970s. The government’s prime goals became: (1) to attain the status of an advanced country and (2) to establish the foundation for achieving unification. These goals were repeatedly stressed: “The Five-Year Plan for the New Economy, drawn up with a clear view aforesaid, is aiming at both entering the ranks of advanced countries and establishing the foundation for achieving unification” (Presidential Foreword to the Five-Year Plan). (As regards the latter,

164 Sang-Tae Kim and David Seddon with the end of the Cold War and the February 1992 Agreement of Reconciliation, Non-Aggression, and Exchanges and Cooperation between the two Koreas, unification became a more realistic possibility. A further step was achieved in June 2000, when the Presidents of North and South Korea held a historic meeting and summit talks in Pyongyang and issued “the South–North Joint Declaration” aimed at promoting mutual understanding, developing South–North relations and realizing peaceful reunification). A similar vision of national development obtained in Japan. For a century (after 1868), Japan’s prime national goal was the attainment of a high status among the leading world powers based on a growth-first strategy.23 In the postwar era, under the umbrella of security provided by the United States, Japan committed itself, despite its military defeat, to win the economic battle with the West. It is a widely held view that Japan’s foreign aid was subordinated to this end. As in postwar Japan,24 Korea’s ODA policy is overtly linked to the goal of Korea’s sustained economic growth and “internationalization.” The latter is regarded as the basis for international economic policy, and includes: (1) trade liberalization; (2) institutional reforms consistent with international norms; and (3) promotion of international economic activities such ODA, FDI and so on. ODA is expected to play a role as a type of catalyst to trade and investment, and at the same time to make them less risky. Developing countries are valued as markets or as potential markets, and as suppliers of resources and raw materials (See Figure 9.1).

National goal

Prosperity

Unification

▼

● ● ●

R&D Education and training Industrial restructuring, etc. ▲

▲

Liberalization of financial sector ▲

Internationalization of economic activities (trade, FDI, etc.) ▲ ▲

▲

▲ Changed Internal economic environment

Improving social equity

▲

▲

▲

▼

Expanding foreign markets

▲

Strengthening competitiveness

▲

Strategy

▼

External

Figure 9.1 ODA as a development tool.

ODA

Japan and the Republic of Korea 165 ODA structure and management According to Rix, who has analyzed the decision-making process of Japan’s ODA, the distinguishing feature of Japan’s aid structures has been the dominant influence on aid programs of three elements: (1) external (political, private sector) influences; (2) the administrative form; and (3) the pattern of financial control.25 External pressures Compared with, say, the President of the United States, the Japanese Prime Minister is not so influential in the aid process. But, given the Japanese diplomatic custom dictating that aid packages are presented generally at the time of state visits, the Prime Minister can exercise his influence on aid policy simply by deciding which countries are chosen for state visits.26 In Korea also, in recent years, it has become customary for the Korean President to make aid pledges on the occasions of state visits to developing countries and international summit meetings, but these pledges are usually already covered by the existing ODA spending plans. Strong presidential leadership notwithstanding, therefore, the President’s influence has not been so conspicuous in the aid policy-making process, largely because foreign aid has not been a major issue, domestically or diplomatically. Japanese politicians generally have shown little overt interest and had little public influence on ODA policy-making. Those who study Japan’s ODA policy have tended to focus on the bureaucrats’ role, on the grounds that ODA is not a major domestic political issue. But, given their keen interest in political fundraising, which stems from the tradition of Japan’s deep-rooted factional (habatsu) politics, it cannot be assumed that Japanese politicians’ interests are only influenced by election results. The contracts financed by ODA provide good opportunities for political fund-raising, and politicians certainly have interests and roles in the ODA policy-making process, even if these are not widely advertised.27 In Korea, however, the involvement of politicians and political parties has been almost negligible until now, since the volume of ODA has not really been large enough to attract attention. The Japanese private sector participates very actively in ODA implementation processes.28 In Korea, the EXIM bank adopts a system of limited international bidding aimed at selecting Korean firms,29 and EDCF loans were 100 percent tied to Korean firms as of the end of 1999.30 Therefore, even though information is limited on the influence of the private sector on EDCF loan projects, it is likely that Korean firms are active in identifying profitable projects and in persuading those concerned, on both the Korean and recipient sides, to link those projects to EDCF loans. However, this practice is not so evident in the cases of KOICA programs; there is not much room for the private sector to intervene in the invitation of trainees and the dispatch of experts and volunteers. Even in the case of the projecttype technical cooperation program, private sector influence is limited because small projects (under $1 million) account for nearly 90 percent of the total and only the equipment component of each project is usually contracted out. The DSP is the

166 Sang-Tae Kim and David Seddon only KOICA program in which the private sector is keenly interested, since the program is usually fully contracted out to private firms; despite this, however, its actual involvement is low. Korea’s ODA policy has been influenced, therefore, less by external pressures than by the administrative structures and the pattern of financial control. The structure of ODA administration The centralization of foreign aid administration is the prevailing pattern in most DAC members. Only Austria, France, Portugal, Spain, and Japan, apart from Korea, have a system involving multiple ministries and agencies. In general, countries which intend to play a pro-active and influential role establish integrated systems for the management and implementation of ODA programs, with specialists on each country and each economic sector.31 The ODA administrative structures and mechanisms of both Japan and Korea (whose ODA approach is reactive and donor-centered) are characterized by decentralization. Japan’s aid programs are administered by four main ministries and 17 other ministries and agencies.32 Korea’s ODA policy management involves four central ministries and two implementing entities (see Figure 9.2). The Korean government has been through several recent structural changes with a view to promoting “small but strong and efficient government.” The Board of Finance and Economy (BFE) came into being by merging the Economic Planning Board (EPB) and the Ministry of Finance (MOF) in December 1994. In February 1998, the BFE was divided into the Ministry of Finance and Economy (MFE), the Budget Office (BO), and the Planning and Budget Committee (PBC). In May 2000, the Ministry of Planning and Budget (MPB) was created by merging the BO and the PBC. Naturally, these changes influenced the decision-making structure and process of Korea’s ODA. The EPB was not directly responsible for ODA implementation, but in so far as ODA policy was managed within the overall context of Korea’s economic development, the EPB’s role was significant. The EPB, whose minister held the post of Deputy Prime Minister, was empowered to perform three key functions regarding Korea’s economic development: (1) development planning like Japan’s Economic Planning Agency (EPA); (2) coordination of economic policy; and (3) direct control of the allocation of financial resources (like the MOF in Japan). So the EPB dealt with ODA in the three-fold context of planning, coordination, and budget. Its policies tended to be strongly supported by such “think-tank” institutes as the Korea Development Institute (KDI) and the Korea Institute for International Economic Policy (KIEP), which operated through subscriptions from the EPB budget. EPB’s International Economic Policy and Coordination Office (IEPCO), whose head was at the assistant minister level, was responsible for drawing up its own overall ODA policy proposals. These usually served to indicate policy directions rather than dictate them. For example, in the case of grant aid and technical assistance (which came under the MOFA’s jurisdiction), the MOFA enjoyed an

Japan and the Republic of Korea 167 (a) Japan

Developing country government

Japanese mission abroad

MOFA

●

● ●

Foreign mission in Japan

EPA

MITI

Multilateral grant aid to the UN and its related organizations Bilateral grant aid Technical cooperation (JICA)

(b) Korea

Subscription to international financial institutions

Bilateral loan

Developing country government

Korean mission abroad

MOFAT

●

● ●

Multilateral grant aid to the UN and its related organizations Bilateral grant aid Technical cooperation (KOICA)

MOF

Foreign mission in Korea

MOCIE

MOST

Bilateral loan

MFE

Subscription to international financial institutions

Figure 9.2 Aid administration in Japan and Korea.

absolute discretionary power once the annual budget was allocated. Country distribution of the budget concerned was usually decided without consultations with other ministries. But the influence of the EPB should not be lightly regarded. Major policy changes, such as restructuring the ratio between bilateral and multilateral grants and concessional loans, technical and capital assistance, and so on, mapped out by the IEPCO could be effected by means of budget control, in close cooperation with the Budget Office of the EPB. The EPB also played an important role in decisions about bilateral concessional loans, because it participated in every inter-ministerial discussion of EDCF projects (the EDCF Management Council was chaired by the EPB’s minister).

168 Sang-Tae Kim and David Seddon The EPB’s pivotal role in the nation’s economic development affected its stance with regard to ODA policy. First, the EPB was likely to deal with the ODA issue in the context of national development. Second, its influence over aid policy through budget control gave it the ability to control ODA expansion. In fact, the EPB’s stated policy direction was “to expand Korea’s ODA to a level commensurable to its economic capacity” without specifying the target; but it was supportive of ODA expansion within national budget limits on a macro-level as far as ODA was regarded as a tool to achieve the goals of the Five-Year Development Plan. In December 1994, the EPB and the MOF were merged into the Board of Finance and Economy (BFE). The position of the BFE regarding ODA policy was generally the same as its predecessors. But while the relative importance of bilateral loans increased (the BFE dealt with these, like the former EPB, as well as also controlling EDCF loans), the relative importance of ODA as a whole was diminished as this vast institution juggled a wide range of domestic and foreign economic policies. The IEPCO (of the former EPB) was downgraded to an International Economic Bureau (IEB). Since the merger of the EPB and the MOF, no policy documents on ODA issues have emerged from their successors; their coordinating role has seldom been exercised; and intervention with respect to bilateral grants in particular has been very limited. In 1998, the BFE was divided into the MFE, the PBC, and the BO. The PBC, which took over budget policy from the BFE, was also responsible for financial and administrative reforms. The BFE’s budget allocation function was transferred to the BO. These reforms were part of a wider set of measures adopted to overcome the economic crisis at the end of 1997. In this context, the issue of ODA was not seriously considered by the new MFE, and it was the effectiveness and efficiency of ODA rather than ODA volume that was emphasized by the PBC. The EPB’s successors have failed to issue any ODA reports, being preoccupied by four structural reorganizations from 1995 to 2000 and with massive reform programs imposed by the IMF in the wake of Korea’s economic crisis. However, the MFE is certain to resume the publication of its own ODA White Paper in the near future, as the importance of “economic cooperation” (and ODA) increases. Like Japan’s MOFA, Korea’s MOFAT is responsible for bilateral grant aid, technical cooperation, and multilateral grant aid, along with the supervision of the grant aid implementing agency (KOICA). But there is a considerable difference between the two respective foreign ministries in terms of their actual role and influence in ODA policy management. The Economic Cooperation Bureau (ECB) of Japan’s MOFA, which was created in 1962, is the largest aid section of any of the ministries. It handles most aspects of foreign aid policy: loans, grants, technical cooperation, and multilateral aid. The MOFA officially convenes and chairs the four-ministry committee to make decisions to finance bilateral concessional loans. The MOFA is the official “window” for all Japanese aid business and derives its power from its broad authority and its overview of diplomatic relations.33 The same is not true of Korea’s MOFAT. The establishment of KOICA brought the MOFAT closer to the center of Korea’s aid bureaucracy, since KOICA handles the implementation of bilateral

Japan and the Republic of Korea 169 grant aid and technical cooperation which had been previously provided by at least eight different ministries. The end of the Cold War and the simultaneous entry of the North and South Koreas into the UN in 1991 changed the context of ODA policy; the “war of attrition” between the two Koreas now seems to be virtually at an end. These changed circumstances notwithstanding, the MOFAT has made no special effort to play a leading role in Korea’s ODA policy. Even though the MOFAT published a first report on Korea’s ODA in 1997, followed by a second one in 2000 (which refers to Korea’s overall ODA policy and the necessity of expanding it), it has done relatively little to develop a consensus on ODA policy within the government. There are several reasons for the MOFAT’s passive attitude. In the first place, the MOFAT has continued to regard ODA primarily from the viewpoint of foreign policy and to stick to short-term diplomatic advantages. The legacy of competition with the North still exists: “old attitudes die hard.” In the second place, since Korea’s ODA has played a relatively minor role in overall foreign policy, it is still seen as marginal, even though the MOFAT has been a strong supporter of ODA expansion as a diplomatic tool. But, as in the case of Japan in an earlier period,34 the United States and Europe are still regarded as more important politically than the developing countries. The MOFAT has tended to regard the International Economic Bureau as concerned with implementation rather than policy-making. The Development Cooperation Division, which is responsible for overall ODA policy and coordination on bilateral grants and cooperation with regional development organizations along with the supervision of KOICA, is understaffed, and the country distribution of bilateral grants has been heavily influenced by the opinions of regional bureaus. As a result, unlike its Japanese counterpart, Korea’s MOFAT is not equipped with a proper system for aid policymaking and management. Its aid section is not the largest, as it is in Japan, but just one section among those of other ministries concerned. As the importance of commercial considerations has increased, the MOFAT, which has an absolute discretionary power in allocating and implementing bilateral grants, has contributed to the recent trend of concentration towards Asia in the distribution of bilateral grants. But the MOFAT has not only failed to play a leading role in reflecting and coordinating the various interests and opinions of the relevant ministries which have vested interests in ODA business; it has also made little effort to articulate the official position of the government on ODA philosophy, principles, priority sectors and programs, and major development issues such as poverty, population, environment, good governance, women in development, etc. In February 1998, however, the MOFAT was reorganized, creating a separate Trade Office, whose function is similar to that of the United States Trade Representative Office. The International Economy Bureau responsible for ODA was placed under the Minister of the Trade Office. The chances are that commercial considerations will be more strongly emphasized in future ODA strategy than major development issues. In Japan, the Ministry of International Trade and Industry (MITI) was very influential in early aid policy. Behind MITI stands the Keidanren, the association

170 Sang-Tae Kim and David Seddon of Japanese big business groups which, in the past, contributed to the promotion of commercial consideration of Japan’s aid through tied aid. The MITI has also delegated authority (and provided funding) to JICA to implement feasibility studies in such fields as overseas development planning and natural resources development. The MITI publishes a White Paper on aid, Present Status and Problems of Japan’s Economic Cooperation (which appeared for the first time in 1958 and was the only full annual report on aid until the MOFA produced its own report on Japan’s Official Development Assistance in 1978). But, unlike its Japanese counterpart (MITI), Korea’s Ministry of Commerce, Industry and Energy (MOCIE) – the Ministry of Trade and Industry was reorganized as the Ministry of Commerce, Industry and Energy in February 1998 – has shown little interest in and had little influence on aid policy. None of Korea’s aid programs have been administered under the direct control of the MOCIE. This reflects the fact that political/diplomatic considerations have in the past been more influential than commercial ones. Now, however, the MOCIE participates in inter-ministry discussion to decide EDCF projects to be financed. With the recent trend towards greater commercial considerations in the allocation of Korea’s ODA, the MOCIE’s voice on aid policy is likely to be increasingly heard. Until the establishment of KOICA in 1991, most of Korea’s technical cooperation had been administered by the Ministry of Science and Technology (MOST), although the MFE had to be consulted with respect to EDCF loan projects. This is in marked contrast to the situation among Western “donors” as well as in Japan. It is explicable by the fact that Korea was mainly a recipient of foreign aid in 1960s and 1970s and the MOST was at that time responsible for dispatching Koreans for overseas training and education and for receiving foreign experts on a government-to-government basis. It was natural to give the MOST the additional role of administering technical cooperation to developing countries – and in any case, there was no other suitable institution. With the establishment of KOICA, the MOST’s influence has diminished, although KOICA is still required to implement its programs in close cooperation with MOST. KOICA was explicitly modeled on JICA. Both agencies (which are technically non-governmental entities) implement similar functions under the authority of their respective foreign ministries; each government’s foreign ministry provides guidance and receives reports on aid implementation. The two agencies’ aid programs are very similar. Although the original objective was to create an aid ministry (a Japanese version of USAID), JICA is effectively limited to the implementation of technical cooperation programs under the MOFA, due to the politics of competing bureaucratic interests.35 One consequence of this is the fact that Japan is probably the only country to produce two separate annual ODA White Papers; but Korea is expected to become another. Another result of bureaucratic competition over aid administration in Japan was, in the words of R.M. Orr, “the extremely large number of parachute staff” who came from the various ministries which had vested interests in aid decisions.36 Similar forces operated in the establishment of KOICA37; after taking over the aid programs of several different ministries, KOICA ended up with eight directorial posts occupied by officials from six ministries, with only three posts held by KOICA career staff.

Japan and the Republic of Korea 171 However, in certain crucial respects, Korea’s ODA mechanisms and decisionmaking structures are in remarkable contrast with those of Japan, for KOICA, in practice, enjoys considerable discretionary power in the allocation of its budget, while the distribution of JICA aid programs is considerably influenced by the ministries and agencies concerned. The Foreign Ministry, which in most “donor” countries is the nub of the aid administrative structure, is expected to act as the most outspoken supporter of the aid expansion since it is most sensitive to foreign demands and criticism. But the institutional standing of Korea’s MOFAT has not been matched by its influence until now. MOFAT’s main interest has been focused on the distribution of bilateral grants. On the other hand, the MFE and the MPB, mandated with responsibility for overall ODA policy and budget allocation, deal with ODA in the context of national economic development and commercial considerations. Both ministries have taken conservative and incremental approaches to ODA expansion and have given priority to bilateral loans over grants. Priority issues in sectoral and aid programs as well as global development issues have been largely ignored by the three key ministries. As a result, the MPB decides the overall volume of KOICA’s budget and allocation by aid programs, based on KOICA proposals, submitted through the MOFAT. The allocation by aid programs usually reflects KOICA’s proposals, since there are neither established guidelines nor particular external pressures to determine otherwise. The interests of other central ministries have not been conspicuous enough to influence aid policy and implementation. The Board of Executive Directors of KOICA comprises a chairman (the president of KOICA), three KOICA executive directors, and six directors-general (from the Prime Minister’s Office and the five ministries – the MOFAT, MFE, MST, the Ministry of Construction and Transport, and the Ministry of Labor – which have vested interests in KOICA programs). Since its establishment in 1991, most KOICA proposals have been passed unanimously. KOICA has been able, in practice, to exert considerable influence on Korea’s aid distribution by sector and program. The difference in decision-making practice between JICA and KOICA can be highlighted by the example of the development study program. As regards loans, Korea’s bilateral loan program seemed to follow the same path as Japan’s. When the EDCF was created in July 1987, the EXIM Bank of Korea was mandated with disbursing EDCF loans, under the control of the MOF, which also approved and supervised capital subscriptions to multilateral development banks. In Japan, also, the MOF is responsible for allocating funds to multilateral development banks; but rivalries between the different ministries led to the OECF being placed under a neutral and less powerful Economic Planning Agency. The decision-making procedure for EDCF (Korea) and OECF ( Japan) loans is similar, in that it involves a consensus among the ministries concerned. In Japan, each loan requires the approval of the four-ministry committee: In essence, the four ministry system operates not unlike the Security Council of the United Nations in which each of the permanent members retains veto

172 Sang-Tae Kim and David Seddon power. Even if the veto is not exercised, the possibility of exercising (or foregoing) a veto remains a means of influencing the shape of decisions.38 This mechanism also obtains for Korea’s EDCF loans. It is stipulated that the MOF should, after consultations with the ministers of EPB, MOFA, the Ministry of Trade and Industry, the Ministry of Science and Technology, and the competent ministry of the project in question, determine the selection of projects to be assisted. Projects whose importance was recognized by the MOF should be subject to the deliberation of the EDCF Management Council, consisting of 12 members (including eight ministers). The fact that EDCF loans have been implemented by the EXIM Bank under the supervision of the MOF had an obvious effect on overall ODA policy. The MOF is mainly concerned with domestic financial stability and the balance of payments; the EXIM Bank was established in July 1976 for the purpose of promoting foreign trade and investment, and facilitating the import of essential raw materials. Naturally, both the MOF and the Bank tended to be less concerned with development issues, and consequently gave highest priority to commercial considerations. JICA has had to depend upon MITI, the Ministry of Agriculture, Forestry and Fisheries, and other technically oriented ministries for most of its specialist manpower in implementing aid programs,39 mainly because Japanese industries have developed under the initiative of the government and public sectors.40 KOICA, by contrast, directly selects experts without any consultations with others.

Korean ODA in the 1990s: quantity and quality Patterns of ODA allocation Korea’s ODA in 1998 amounted to $182.7 million, having risen at an annual rate of 19.5 percent on a US dollar basis and 32.5 percent on a Korean currency basis over the eight years from 1991 to 1998. In 1999 it rose to $317.5 million – 5.5 times more than in 1991 ($57.5 million), due to an exceptional increase in subscriptions ($126 million) to the IBRD and IDA in 1999. DAC member countries whose ODA volumes were lower than that of Korea in 1999 included Greece, Ireland, Luxembourg, New Zealand, and Portugal. Nevertheless, Korea’s ODA/GDP ratio lags well behind international standards. The target for ODA as a percentage of GNP is set at 0.7 percent by the UN.41 In 1999, DAC member countries that met this target were Denmark, Netherlands, Norway, and Sweden. The DAC average was 0.24 percent, with the USA lowest at 0.1 percent of GNP. Korea’s ODA/GNP ratio ranged from 0.02 to 0.08 percent during 1991–9; in 2000 it was 0.04 percent. Korea’s per capita ODA contribution in 1999 amounted to $6.9, while those of DAC nations averaged $67.1. The relationship between bilateral and multilateral aid has varied considerably, with the former generally larger in recent years, except in 1999 (see Table 9.9).

Japan and the Republic of Korea 173 Table 9.9 Trend of Korea’s ODA, 1991–9 ($ million)

ODA Bilateral Grants Loans Multilateral Grants Subscription Others

1991

1992

1993

1994

1995

1996

1997

1998

1999

57.5 31.5 25.0 6.5 26.0 5.8 11.8 8.4

76.8 45.2 31.0 14.2 31.6 8.0 21.5 2.1

111.6 60.1 32.7 27.4 51.4 10.3 25.7 15.5

140.2 60.1 38.5 21.6 80.2 12.9 25.7 41.6

116.0 71.5 50.1 21.4 44.5 14.8 22.7 7.0

159.2 123.3 53.4 69.9 35.8 30.1 5.8 –

185.6 111.3 54.8 56.6 74.3 29.1 35.5 9.7

182.7 124.7 37.2 87.5 58.0 33.6 28.3 –3.9

317.5 131.4 39.0 92.4 186.1 67.7 129.5 –11.0

0.025 305.7

0.034 330.8

0.037 378.0

0.026 452.6

0.033 480.4

0.042 437.4

0.058 316.8

0.079 402.1

ODA/GNP(%) 0.020 GNP($ billion) 292.0

Source: From MOFAT (2000: 15).

KOICA increased its focus on the Asian region during the 1990s. Resources going to Asia increased from 29 percent in 1991 to 65 percent in 199942 while the share going to Africa declined, from 31 to 8 percent, and Latin America’s share was down from 22 to 9 percent. The establishment of diplomatic relations with China and Vietnam in 1992, and with Cambodia and Laos in 1996, contributed to this trend, with China and Vietnam emerging as the first- and second-largest beneficiaries respectively of KOICA programs. Korea’s economic crisis in late 1997 awakened the government and the people of Korea to its close economic interdependence with ASEAN member countries. The ASEAN Partnership Program, which involved inviting an additional 600 trainees from the region, was announced on the occasion of the ASEAN+1 (Korea) Summit Meeting in November 1999; and President Kim Dae-jung expressed his intention to expand Korean ODA to ASEAN at the ASEAN+1 Summit Meeting held in Singapore in November 2000. With respect to the allocation of Korea’s bilateral ODA as a whole, in 1999, the largest share (52 percent) went to other LICs, 26 percent to LMICs and 21 percent to LDCs (see Table 9.10). Out of 22 DAC member countries, 17 provided more than 90 percent of bilateral ODA in grant form to LDCs, on a 1998–9 average commitment basis. The proportion of Japanese bilateral ODA allocated to LDCs is also low (ranging from 11 to 15.5 percent from 1989 to 1998), compared to that of other DAC member countries,43 but, by contrast with Korea, the grant share has been above 90 percent since 1992.44 These figures are comparable with the composition of 1998–9 DAC member averages; however, the grant share of total bilateral aid to LDCs stood at 15 percent in 1999, which is the lowest level for any category: for LICs, 37 percent of bilateral aid was in grants; for LMICs, 25.5 percent, and for UMICs, 100 percent). This is far below the DAC recommendations of February 1978, stipulating that each “donor” was to extend ODA to the least-developed countries essentially in the form of grants.

174 Sang-Tae Kim and David Seddon Table 9.10 Distribution of bilateral ODA by income group, 1999

Korea (1999) grant share: (%) DAC (1998–9)

Total

LLDCs

LICs

LMICs

UMICs

HICs

100.0

21.0 (14.7) 29.3

52.2 (37.2) 33.6

26.4 (25.5) 29.9

0.59 (100.0) 5.1

–

100.0

2.1

Source: Revised from EXIM Bank of Korea (2001).

Assessing quality The DAC annual report compares ODA quality using the level of grant share, grant element, and tying status as yardsticks. With the exception of grant element, the quality of Korea’s ODA is very low in comparison with that of DAC member countries. Grant share means the percentage of grants including grant aid, technical cooperation, and contribution payments to international agencies. The grant share of Korea’s ODA in 1991–9 ranged from 34 to 56 percent with an average of 45 percent. The average grant share of total and bilateral ODA in 1998–9 recorded 36 percent and 30 percent respectively, while DAC averages were 81 percent and 73 percent. In terms of the annual average growth of ODA during 1991–8, bilateral grants recorded only 7 percent growth while bilateral concessional loans went up by 65 percent and multilateral assistance by 23 percent (see Table 9.11). The Korean government gives greater – and increasing – priority to loans in allocating its bilateral ODA (multilateral aid is usually structured in accordance with the established guidelines). This is for at least two reasons: first, it is easier to expand loans than grants – it is noticeable that grants were particularly affected by the economic crisis from the end of 1997 to 1999; and, second, the EDCF loans, which support recipient countries’ commodity imports and large development projects, are expected to increase business opportunities for Korean companies through tying conditions. Asia was the largest recipient region of bilateral loans through the EDCF during the period 1989 to 1999, with an average of 62 percent out of total disbursement.45 The trend has been one of increasing regional concentration; the loans are concentrated in a small number of countries by virtue of their economic linkage with Korea and capacity of repayment – only 24 countries have received EDCF loans since their establishment in 1987. Korea’s emphasis on Asia during the 1990s shows a pattern similar to Japan’s geographical focus on Asia in its earlier period of ODA: in the 1960s, almost all of Japan’s ODA went to Asia; even during the 1970s it was about three-quarters. The decline was gradual through the 1980s and early 1990s, reaching 54 percent in 1995. There is some evidence of an upward trend again in the second half of the 1990s.46 In the case of bilateral loans, it is difficult to discern the annual trend of distribution by income group since the annual number of recipient countries has been very limited. As of the end of 1999, 43 percent of bilateral loans went to the other LICs, followed by Romania, Poland and Hungary

Japan and the Republic of Korea 175 Table 9.11 Ratio of bilateral grants versus loans ($ million)

Grants (A) Loans Total (B) (A/B): %

1991

1992

1993

1994

1995

1996

1997

1998

1999

25.0 6.5 31.5 79.4

31.0 14.2 45.2 68.5

32.7 27.4 60.1 54.4

38.5 21.6 60.1 64.0

50.1 21.4 71.5 70.1

53.4 69.9 123.3 43.3

54.8 56.6 111.3 49.2

37.2 87.5 124.7 29.6

39.0 92.4 131.4 29.7

with 21.5 percent, LMICs with 17 percent, LDCs with 17 percent, and UMICs with 2 percent.47 The high proportion of bilateral loans in Korea’s ODA evokes comparisons with Japan. There has long been much international criticism of Japanese ODA on the grounds that it has been too reliant on bilateral loans in pursuit of Japan’s own economic interests. During the decade 1961–71, the share of Japanese bilateral loans relative to grants was generally over 60 percent48 and between 1977 and 1979 it averaged 72 percent; but it has been progressively declining. From 1986 to 1988, it averaged 56 percent, and from 1996 to 1998, 33 percent.49 The “grant element” is one measure of concessionality, or the “softness” of the terms under which ODA is provided. Korea’s average grant element during 1998– 9 was 63 percent, in comparison with 68 percent for DAC member countries. Tying status – which indicates how much of ODA must go to purchase the goods and services of the “donor” country or be used for a specific project, product, or sector – is another measure. In 1998 and 1999, the untied share of Korea’s bilateral ODA averaged only 0.8 percent, the partially untied 5.4 percent and the tied 93.8 percent. These figures are in sharp contrast with those of DAC members whose untied share averaged 83.8 percent. The Arrangement on Guidelines for Officially Supported Export Credits (OECD) limits the use of tied aid for projects that should be financed commercially. When Korea joined the OECD in December 1996, it was on condition that the ongoing 53 loan projects were exempted. Korea’s bilateral grants have been concentrated in education, health, public administration, and development planning, with the proportion going to “social infrastructure” varying between 64 and 82 percent in the 1990s; grants for production projects (agriculture, fisheries, industry and mining) accounted for a significant minority share.50 Korea’s grant aid was, in the main (82 percent), provided in the form of the provision of machinery and equipment. Cash grants (11 percent) were limited to emergencies such as disaster relief. Project aid occupied the smallest share (a meager 7.0 percent). Grant aid was fully tied except a small portion of cash grants since, in principle, machinery and equipment provided were purchased from Korean producers.51 Bilateral loans have tended to support projects in the fields of transport, telecommunications and energy; bilateral loans to the economic infrastructure sector have accounted for some 72 percent of total disbursement since the establishment of EDCF in 1987, the social infrastructure sector for about 20 percent.52

176 Sang-Tae Kim and David Seddon The principle that aid to LDCs should be provided on a grant basis has been emphasized repeatedly on various international occasions, and most “donors” are expected to provide grant aid to the less developed countries. Certainly, in 1992 at least, 34 LDCs together received the largest share (36.4 percent) of Korea’s grant aid. But, on average, the 68 LDCs and LICs received less than the 23 LMICs and UMICs.53 Between 1991 and 1999, LMICs and other LICs received 34 percent of bilateral grants each; LDCs accounted for only 23.5 percent of the total. There was, furthermore, considerable change during the period in the ratio of bilateral grants to income groups. In 1991, the largest share, 32.5 percent, went to LDCs; but it was down to 14 percent by 1999. What was allocated previously to LDCs went mainly to LICS and LMICs. In fact, the major recipient countries belong to these two groups. (In 1999, nine countries out of the top ten recipient countries, accounting for 62 percent of the total given, belonged to LICs and LMICs – six of these top ten were in Asia and they accounted for just over half (54 percent) of total disbursement (see Table 9.12).) Distribution by aid programs KOICA and JICA compared KOICA implements seven types of aid programs, including grant aid and the NGO support programs. For the purpose of comparison between KOICA and JICA, JICA’s aid programs can be classified into eight types; but, of these, three are not comparable to KOICA programs. While KOICA is fully responsible for implementing grant aid, JICA is only partially responsible for grant aid, through the disaster relief aid program, and the dispatch of experts to facilitate grant aid projects (which covers the preparation and follow-up phases of grant aid). KOICA’s grant aid is mainly implemented in the form of equipment and goods, Table 9.12 Distribution of bilateral grants by income group (%)

1991 1992 1993 1994 1995 1996 1997 1998 1999

Total

LDCs

LICs

LMICs

UMICs

HICs

CEES/NIS

Part II

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

32.5 32.7 30.2 27.3 25.6 23.0 20.6 16.9 13.9

27.0 21.1 24.7 33.7 34.4 35.3 32.5 32.3 53.7

28.6 33.9 36.5 29.8 30.4 34.2 39.0 43.5 27.5

7.2 7.4 4.0 3.6 2.8 3.3 3.7 2.3 2.3

– – 0.1 – – 3.9 3.7 4.5 2.0

4.1 4.6 4.3 5.1 6.4 3.9 3.7 4.5 2.0

0.6 0.4 0.2 0.4 0.5 0.3 0.5 0.5 0.7

Source: Revised from KOICA (2001: 56). Note Part II: More advanced developing countries and territories. In 1999, the Bahamas, Bermuda, Brunei, the Cayman Islands, Chinese Taipei, Cyprus, the Falkland Islands, Hong Kong (China), Israel, Kuwait, Qatar, Singapore and the United Arab Emirates belonged to this group (OECD, 2001a: 288).

Japan and the Republic of Korea 177 but equipment provided by JICA is classified as technical cooperation, since it is linked with the dispatch of experts and volunteers, and with training programs. The equipment provision program, the grant aid study expedition program, and disaster relief aid are classified here as grant-aid-like programs comparable to KOICA’s grant aid. JICA also provides a development cooperation program, which is not covered by KOICA. This aims at furnishing funds under soft conditions to projects to be undertaken by Japan’s private enterprises in the developing countries, which will contribute to socio-economic development. The five programs the two agencies have in common are: invitation of trainees; dispatch of experts; dispatch of volunteers; development studies; and project-type cooperation. Since its establishment in 1991, the annual trend of distribution by aid program indicates that KOICA has continuously endeavored to establish a coherent and efficient system with a view to promoting the cost-effectiveness of its aid programs. The most conspicuous feature is that the share of grant aid sharply decreased from 69 percent in 1991 to 14 percent in 1999, while the share of the project-type cooperation jumped from 5.0 percent in 1991 to 38.9 percent in 1999. Korea’s grant aid had long been criticized for failing to contribute to the actual socioeconomic development of recipient countries, since it had been only provided in the form of equipment and goods on a request basis, without any effective means of “quality control” and monitoring. Project-type cooperation is implemented by combining various types of programs (e.g. the invitation of trainees, the dispatch of experts and volunteers, the supply of equipment, and the construction of facilities) comprehensively and systematically, from planning through implementation to follow-up measures and monitoring and evaluation over a period of several years. The share of the invitation of trainees and the dispatch of volunteer programs increased from 11 to 18 percent and from five to 15 percent respectively between 1991 and 1999. This trend reflects the efforts of the Korean government and KOICA to put greater emphasis on human resources development. These two programs are regarded as an effective means of achieving human resources development by transferring Korea’s development experience and technologies. Despite its importance as a means of technical cooperation, the share allocated to the dispatch of experts remains unchanged, mainly due to the difficulties of securing qualified experts equipped with expertise and proficiency in foreign languages. The recent distribution pattern of KOICA’s major aid programs is roughly similar to that of JICA, which has allocated the largest share of its budget to project-type technical cooperation and increased the share of the invitation of trainees and the dispatch of volunteers programs. One of the most striking differences between the two agencies can be found in the development studies program. For KOICA, it is the only program whose share has been decreasing since 1994. In the case of JICA the absolute share of the counterpart program has been relatively large, although recently it has declined. The reasons for such a marked difference can be found in the historical background and bureaucratic decision-making structure of their respective programs (see Table 9.14).

178 Sang-Tae Kim and David Seddon Table 9.13 Distribution of KOICA bilateral grants by aid programs (%) 91–9 1991 1992 1993 1994 1995 1996 1997 1998 1999 Total Trainee acceptance Expert dispatch KOV dispatch Development studies Grant aid Project-type cooperation NGOs support

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 13.7 10.6 11.1 11.6 13.2 9.6 10.7 10.1 13.4 9.0 12.2 4.6 8.4 8.4 7.9 7.0 0.3 7.1 12.8 13.7 28.9 68.8 59.4 38.5 33.5 27.6 1.0

5.0 –

13.0 14.6 12.8 16.0 17.8 10.1 8.6 7.5 11.0 8.5 11.2 15.6 14.3 16.0 14.7 9.2 4.1 5.7 5.4 5.0 25.3 25.0 23.8 10.0 13.9

3.8 15.2 22.8 29.4 30.4 34.3 40.7 38.9 – – – 1.9 1.7 1.5 0.8 1.2

Source: Revised from KOICA (2001: 332–5).

Table 9.14 Budget allocation of JICA aid programs (%)

Total

1977

1980

1985

1990

1995

2000

100.0

100.0

100.0

100.0

100.0

100.0

15.9 16.1 9.3 30.3 3.1 23.7 1.6

14.0 15.6 7.7 31.2 2.2 27.9 1.4

16.8 12.6 10.2 26.5 4.5 26.9 2.5

17.3 14.5 10.6 24.3 6.9 25.5 0.9

17.6 14.5 11.0 24.3 6.9 24.9 0.8

17.7 17.1 13.9 21.7 5.4 23.7 0.5

Trainee acceptance Expert dispatch JOCV dispatch Development studies Grant aid Project-type cooperation Development cooperation

Source: Revised from JICA (1986: 355; 1991: 186; 1996: 159).

Prospects for the future Priorities for ODA allocation There were indications from the early 1990s onwards that some policy-makers in Korea were contemplating an increase in ODA; but it was not agreed to what extent and how rapidly. A discussion paper drawn up in December 1990 by the EPB’s Office of Foreign International Policy Coordination, estimated that 0.2 percent of GNP was “the proper level” of Korea’s ODA.54 EPB officials recognized the difficulty of the task: whatever the “proper” levels of ODA suggested until now – 0.15 or 0.2 percent as may be – their common criterion is “That is what advanced countries are doing.” The limitation of this logic as the raison d’être for ODA expansion is quite obvious. Talking about ODA expansion in terms of “falling behind the level of the advanced countries” is not the only way of looking at the question.55 Such theoretical arguments for ODA expansion carried no force in reality since expansion was constrained by available domestic resources, which come mainly from the taxes paid by the public. According to the 1993–7 Five-Year Plan, GNP

Japan and the Republic of Korea 179 was projected to reach $561.6 billion by 1997. Supposing that the ratio of ODA/ GNP was to reach 0.15 percent, ODA would have to reach about $804 million by 1997; that would have implied an annual increase of about 65 percent during the Plan period (1993–7). Given that the expected annual average rate of increase for economic growth and revenue was 6.9 percent and 13–14 percent respectively, this would have proved an enormous challenge, involving reconciling ODA expansion with competing domestic policy interests. Even if the calculation was based on 0.1 percent of ODA/GNP, this rate is very high. Considering actual constraints such as the balance of payments, the balance between aid and other sectors, and so on, such a drastic increase in the scale of ODA would meet many practical difficulties.56 Discussions of ODA expansion also took place when the prospects for Korea’s economy were very good; as time passed, particularly after the “Asian crisis,” it became evident that the estimations of “the proper level” for Korean ODA were too ambitious. Today, the ODA/GNP ratio stands at about 0.05 percent. Rather abstract discussions of “the proper level” of Korea’s ODA, and the target year in which to reach it have been replaced by growing concerns about the proper timing of joining the DAC. For, even though there is no official DAC membership requirement, there is a prevailing belief among Korean government officials and researchers concerned that 0.1 percent of ODA relative to GNP is a minimum requirement. In this connection, the MOFAT produced an internal discussion paper in June 1999, aimed at increasing the ODA volume to 0.1 percent of GNP by 2004. In 2000, two research papers came to the same conclusions. This means that the ODA/GNP ratio should have increased by at least 0.01 percent in the 2000–4 period but, as Table 9.15 shows, such growth would be exceptional.57 Here, there are two more important factors, which also relate to the national division of the Korean peninsula, to be considered in relation to the issue of Korea’s ODA expansion. The share of Korea’s national defense expenses relative to GDP was 6 percent in the mid-1970s, 5.5 percent in the mid-1980s, and is still around 3 percent. This is considerably higher than in other DAC member countries (except the United States, which spent 3.2 percent on defense in 1998.58 Recently, Korea has been providing economic assistance to the North. Grants amounting to $301 million, which are not counted in Korea’s ODA, have been provided to North Korea during 1995–9. Given that Korea’s bilateral grants during the same period amounted to $234.5 million, the Korean government’s commitment to supporting reunification through national reconciliation will be a severe constraint on ODA expansion. The current modest rate of ODA expansion will continue unless there are major changes – such as huge current surpluses or intensified pressures on Korea – to increase its contributions. The Korean Table 9.15 Korea’s ODA/GNP ratio (%) 1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

0.02

0.03

0.03

0.04

0.03

0.03

0.04

0.06

0.08

0.05

180 Sang-Tae Kim and David Seddon government will attempt to increase the current low level of ODA and to try for DAC membership when ODA reaches around 0.01 percent of GNP, but there is no telling when this will occur. A common criticism of Korean bilateral aid, both inside and outside the government, is that a large number of countries tend to receive very small amounts of aid. Grant aid of a little over US$11 million was allocated among 109 countries in 1992. Technical assistance has also been small in volume, but large in terms of the number of recipients. In 1992, Korea received 461 trainees from 88 countries. With a budget of only $0.52 million, 47 experts were dispatched to 31 countries. This approach was the legacy of the confrontational situation with North Korea. Changed circumstances brought about recognition of the need for changes in aid policy. As a result, the issue of how to select priority countries came to the fore. Several economists produced suggestions, but their key variables tended to be highly “donor”-centered, with development considerations secondary and humanitarian concerns often not figuring at all. Rah and Song (1989), for example, selected growth potential, degree of self-help, foreign capital demand, capacity to repay foreign debt and potential for economic linkage to Korea; H. Kim (1990) focused on exports, imports, and foreign investment. H. Yoon’s approach (Yoon 1992) employed a wider range of variables – including economic potential (20 percent), exchange potential (20 percent), efficiency of resource allocation (10 percent), absorptive capacity of foreign aid (10 percent), degree of self-help (10 percent), and basic living standards (30 percent) – but, considering that his analysis was mainly intended to provide guidelines for bilateral grant aid, “donor” interest was still predominant. As a result, the potential recipient countries identified included high and upper middle-income developing countries, many of which were not regarded as candidates for grant aid by most “donors.” The EPB emphasized that, given limited domestic resources, Korean bilateral aid should be more concentrated in fewer countries. Its perception of foreign aid in the context of national economic planning, however, meant that commercial considerations dominated its criteria for aid allocation: “It is necessary to select and assist major recipient countries which are abundant in natural resources, are in the Asia-Pacific region, or (like China and Vietnam) show a deep commitment to introducing the market economy in a positive manner.”59 This position has been generally maintained by the EPB’s successor ministries – the MFE and the MPB – and has certainly been reflected in the allocation of bilateral loans. The MOFAT, however, which considers aid requests from developing countries, emphasizes the need to expand overall ODA volume, but is conservative as regards the issue of reducing the number of recipients. The result of the various bureaucratic priorities has been the gradual concentration of bilateral grants, in particular to a few priority countries, but there has been no sign of any decrease in the total number of ODA recipient countries (see Table 9.16). This is expected to continue for the time being. As the overall volume of grants has increased, so has aid volume per country which did not belong to priority group; but in 1999, when the volume of bilateral grants sharply dropped, the volume of grants per country of the non-priority group was reduced to a level lower than in 1991. This implies that economic

Japan and the Republic of Korea 181 Table 9.16 Share of bilateral grants to ten top priority countries ($ thousand)

Total Top ten recipients (% share) Others No. of recipients Aid volume per country (excluding top 10)

1991

1993

1995

1997

1999

15,742.5 4,639.4 (29.5) 11,103.1 120

20,314.5 7,469.3 (36.8) 12,845.2 133

33,570.7 14,979.6 (44.6) 18,591.1 137

41,439.5 18,126.5 (43.7) 23,313.0 138

29,248.2 18,508.5 (63.3) 10,739.7 128

100.9

104.4

146.4

182.1

91.0

Source: Revised from KOICA (2001: 340–1).

considerations are gaining more importance than diplomatic considerations. Also, the seven largest recipients of bilateral grants and six largest recipients of bilateral loans are in Asia – a region which now accounts for 65 percent of bilateral grants (1999) and 62 percent of bilateral loans. This reflects the importance of Asian countries in terms of wider economic cooperation. Asia accounted for 44 percent of Korea’s total trade volume in 1999, and 48 percent in 2000. Korea’s trade surplus from these regions ($15.4 billion in 1999, $10.8 billion in 2000) accounted for 64 percent of Korea’s total trade surplus in 1999 and for 92 percent in 2000. Contracts won in Asia and Oceania accounted for 48 percent and 62.5 percent of Korea’s total overseas contracts in 1999 and 2000 respectively. ASEAN has been an important partner in every field since its establishment in 1967. Korea has contributed more than $19 million to the ASEAN–Korea Special Cooperation Fund; Korea established a Full-Dialogue Partnership with ASEAN in 1991, and the annual ASEAN+3 (Korea, Japan, China) Summit Meeting has been formalized since 1997. In 1999, the ASEAN became Korea’s fourth-largest trading partner and investment destination. Korea, which seeks to play a leading role in Asia and in ASEAN in particular, is expected to continue to attach a key priority to this region in allocating its ODA. Restructuring ODA composition Like the Korean economy itself, which was experiencing rapid structural transformation, the 1990s saw the beginnings of an effort to restructure Korea’s ODA by aid types. EPB’s stated policy directions were as follows: to increase the share of bilateral aid substantially as against multilateral aid; to channel a larger proportion of bilateral aid through concessional loans than through grants; and to put a greater emphasis on technical cooperation than on grant aid.60 The EPB’s ODA policy discussion paper recommended targets for the restructuring of the composition of ODA by 1996 (see Table 9.17). Although multilateral aid is generally felt to be more neutral in aid allocation and consequently to be a more appropriate mechanism for development purposes than bilateral aid, the fact that political and economic considerations lead donors to prefer bilateral aid is well known.61 Korea also has come to prioritize bilateral aid, but it should be noted that its contribution through multilateral channels was to

182 Sang-Tae Kim and David Seddon Table 9.17 ODA restructuring targets (%) 1989–90 average 1. Bilateral aid 40.1 Grant aid 16.2 Technical cooperation 12.5 Loans 11.4 2. Multilateral aid 59.9 Total 100.0

Restructuring target (by 1996)

Japan (1987)

DAC average (1987)

70.0 10.0 20.0 40.0 30.0 100.0

70.0 18.0 11.0 41.0 30.0 100.0

72.0 35.0 21.0 16.0 28.0 100.0

Source: EPB (1990).

remain relatively high – the multilateral share of ODA of the DAC members as a whole declined from 28 percent in the mid-1980s to 26 percent by 1999.62 The reason why the budget authorities prefer concessional loans to grants is obvious. Budget constraints drive them to take a very prudent attitude towards the expansion of grants, and gratuitous aid without repayment obligations is not viewed as economically sound. The MOFAT’s demand for increased grants has always been faced with an insistence on more efficient use of grants by budget officials63; from 1998 onwards it has been a rule of the Ministry of Planning and Budget that KOICA should submit the recipient’s evaluation report on KOICA programs when requesting the annual budget, precisely with this in mind.64 There seem to be two main reasons for giving priority to technical cooperation over grant aid. For one thing, most Koreans are convinced that Korea, as one of the most successful postwar developing countries, can provide valuable first-hand development experience to developing countries, and that their technologies are more suitable to conditions of recipient countries than those of advanced countries. For another, budget constraints still play an important role. Financial grant aid does not seem to be regarded as a proper type of ODA. With the exception of 1999 (when special subscriptions amounting to $126 million were made to IBRD and IDA) the 1996–8 figures are roughly “on target,” although grant aid continues to take a larger share than technical cooperation, which has actually declined significantly as a percentage of total ODA (see Table 9.18). In the past, Korea’s grant aid was mainly provided in the form of the provision of equipment, without necessarily contributing to the sustainable development of recipient countries, and it was anticipated that technical cooperation would be given more emphasis. However, KOICA has responded by expanding the volume of the project-type cooperation within the category of grant aid rather than increasing the share of technical cooperation. The current allocation trend of Korea’s ODA is expected to remain little changed until Korea joins the DAC. ODA and “aid for development” In preparation for membership of the DAC, one of the important tasks is how to improve the quality of Korea’s ODA. Korea’s Official Development Assistance,

Japan and the Republic of Korea 183 Table 9.18 Composition of Korea’s ODA by aid types (%)

1. Bilateral aid Grant aid Technical cooperation Loan 2. Multilateral aid Total

Target

1996

1997

1998

1996–8 average

1999

70.0 10.0 20.0 40.0 30.0 100.0

77.5 23.2 10.4 43.9 22.5 100.0

60.0 20.1 9.4 30.5 40.0 100.0

68.3 12.6 7.8 47.9 31.7 100.0

68.6 18.6 9.2 40.8 31.4 100.0

41.4 7.7 4.6 29.1 58.6 100.0

published by the MOFAT in 1997, mentions the aim of increasing the grant share to 50 percent by the year of 2000 and the need to improve both the grant element and the tying status of EDCF loans.65 Some researchers from KOICA, KIEP, and the EXIM Bank have also referred to the need to improve Korea’s ODA quality, even though they have not indicated what they consider to be the “proper” level of quality or a target year.66 It is difficult to identify the official government position on this issue. As in the case of ODA expansion, the Korean government’s position seems to be that an application for DAC membership will be made when the quality of Korea’s ODA meets the DAC guidelines and reaches the standards of DAC member countries. This apparently pragmatic approach to the issue of “quality” reflects a continuing commitment to ODA as an element of “economic cooperation” and, as such, part of the program of national development. What is lacking is a clear and explicit philosophy with respect to aid as a tool for development. In extending ODA, the Korean government has lacked an official philosophy. There is no foreign aid legislation defining Korea’s aid philosophy or policies. In a sense, the government has had no imperative to enunciate its aid philosophy since Korea’s aid program (being small) was not a topic that generated public interest. Reports by the MOFAT and the EPB, which deal with ODA, briefly touch on these issues, but they are not based on a consensus among the ministries concerned, and some of the principles and approaches expressed in the reports are inconsistent and even contradict each other in the sense that each different ministry sees ODA issues from a different viewpoint linked to its own mandate. But both the EDCF and the KOICA laws state that the major purpose of respective aid programs and agencies is to contribute to the development of recipient countries. Contrary to what many people believe, surveys in advanced countries have shown that public support for foreign aid came from humanitarian rather than from national interest considerations.67 In Korea, Yoon-Yul Kim, the former UNDP advisory committee member, has argued that “the Korean model for international development cooperation should have as its prominent features a humanitarianism-motivated component.”68 Korea’s Development Assistance, coauthored by two Korean academics and published with the financial support of the UNDP, also stresses that, for any country, the primary motivation of economic aid should be the alleviation of poverty in developing countries.69

184 Sang-Tae Kim and David Seddon On the other hand, the Korean government’s position in providing ODA in reality appears to be that “nothing is gained by pretending to ignore that basic decisions regarding foreign assistance are made in a political context in which consideration of national interest must come to fore.”70 Domestic discussions about aid philosophy generally support the government’s pragmatic position.71 This is not strange, because most domestic discussions have been organized by governmentsupported entities and by the business sector, which tend to stress the immediate benefit and national interest in giving foreign aid, in order to foster public support. Public understanding about ODA will be an important prerequisite if Korea’s ODA is to increase as a proportion of its GNP. But it is always difficult for the general public to understand why ODA should be provided to other countries while a great number of people remain in conditions of poverty and unemployment at home. The results, however, of a 2000 public opinion survey on foreign aid, jointly conducted by KOICA and the monthly Joongang showed that 55 percent of respondents had heard of the term “foreign aid” and some 34 percent recognized the necessity to increase foreign aid. The survey results imply that public awareness of the importance of foreign aid is not yet strong enough. The Korean people, understandably, still retain a “developing country mentality” and do not always recognize that Korea has advanced to the stage where it can and should do something for others. Better understanding of the massive poverty problems facing the people of developing countries and the potential contribution Korea’s ODA could make to alleviate these problems would promote more positive public attitudes toward public expenditure on ODA. Public education is indispensable. At the same time, there is a need for government to recognize the broader political implications of Korea’s changing economic status in the region and in the world. As Harris has remarked: [T]he rapid economic growth in the region and the growing interdependence will also reflect, moreover, the growth in importance of what have traditionally been small players . . . consequently, even without reunification, Korea’s political and strategic significance will increase, as will that of Taiwan. Reunification of the two Korean would have an impact on regional relationships comparable to that of East Germany with West Germany.72 In this context, it is already being asked: “Should Korea content itself with the status similar to that of small Western European countries neighboring regional powers such as the United Kingdom and France?”73 It is certainly the Korean government’s stated goal to play its due part in the upcoming Asia-Pacific era; beyond that the Korean government aims to develop Korea into an advanced country that will play a leading role in the world arena. For these purposes, it is imperative for Korea to further contribute to the world community by expanding its ODA level in a real sense, not as a token gesture, commensurable to the role which it wishes to assume in world affairs. Korea’s current level of ODA/GNP (0.05 percent in 2000) is far less than that of any DAC countries and will have to change.

Japan and the Republic of Korea 185 ODA administration Major changes are also required in the structure and administration of ODA, if Korea is to become an effective provider of aid for development. Achieving greater integration According to JICA’s 1999 annual report, the 1999 budget of Japan’s ODA was allocated to 17 ministries and JICA was responsible for only 49.9 percent of Japan’s total technical cooperation programs.74 In the case of Korea, whose ODA is still at the infant stage, inter-ministerial discord over major ODA issues is not so critical, but some ministries such as the Ministry of Education, the Ministry of Science and Technology, and the Ministry of Information and Communication have now succeeded in securing budgets to implement their own cooperation programs with developing countries. Unless the current ODA administration system is improved through the development of a more coherent and integrated structure and system of administration, this trend towards the fragmentation of policies, activities, and linkages will continue as the international cooperation activities of each ministry increase in an increasingly globalized world. As has always been the case with Japan, the chances are that, in Korea also, ministries having vested interests will find themselves in conflict about many of the fundamentals of aid policy as the importance of Korea’s ODA in domestic and foreign policy increases. The issue of the relationship between EDCF loans and the DSP provided by KOICA is a case in point. Japan’s experience might prove salutary: “Complicating the decision making process is the fact that there exists almost no cooperation between JICA and OECF in the field,” one OECF official noted. “We get better cooperation with USAID than we do with JICA.” A JICA representative noted that USAID often advises JICA of OECF activities in the field.75 In 1998, out of 269 development study projects planned by JICA, only five were undertaken as part of OECF loans. It is a well-known fact that examples of development study projects directly linked to OECF loan projects are few. As part of strengthening the cooperation between the two “development” agencies, KOICA and the EXIM Bank of Korea concluded the Mutual Cooperation Agreement in July 1997, but the scope of actual cooperation between the two agencies is limited. In only two cases was KOICA’s development survey program directly linked to EDCF loan projects. Different accounting systems and guidelines for budget execution alone make the identification and implementation of joint projects between the two agencies more difficult. It is essential that there should be better coordination of policy and program and project implementation among the existing agencies and ministries. At present, there exists an “Economic Policy Coordination Meeting” chaired by the Deputy Prime Minister who concurrently holds the post of the Minister of Finance and Economy, which deals with all aspects of domestic and international economic policies, including ODA. However, the ODA issue has never been dealt with by the Meeting since the introduction of this system in June 1999. It is clearly unlikely that a single aid agency comparable to that of Western “donor” countries will

186 Sang-Tae Kim and David Seddon emerge in Korea for quite some time. But improvements could be made, and meetings, under the auspices of this Coordination Meeting, to discuss ODA policy should be held regularly. The need for a “leading” agency Korea’s approach to ODA is rooted in the perception of ODA as a means toward its own national economic development policy. As long as ODA policy is handled in the context of national development, the basic problem will remain unchanged. As part of an endeavor to give more space to an active and recipient-centered approach, ODA should probably be separated from domestic economic policy. In this connection, it is important for the Korean MOFA(T) to play its part – as its equivalent does in Japan. “In Japan, the MOFA’s Economic Cooperation Bureau is an institution comparable to the aid agencies of Western donors.”76 In fact, the MOFA(T) is the “official external window,” representing Korea’s ODA policy irrespective of domestic administrative bureaucratic structure, and is likely to be the strongest supporter of foreign aid as a separate endeavor, since it is the Foreign Ministry above all that is most conscious of the external pressures on Korea to play a more active role in addressing the massive problems of developing countries. To this end, any initiatives to support the position and policy orientation of the MOFA(T) should be strengthened. One such initiative is the development of “development research.” Increasingly, donors are emphasizing the crucial importance of this kind of activity. A recent White Paper on International Development produced by the British government says: Research is an important weapon in the fight against poverty. Without research, many development interventions would fail or be much less successful; and research has significant multiplier effects – solutions to the causes of poverty in one part of the developing world may well be replicable in another. The principle of shared knowledge is an important component of the partnerships, which are essential to development. The Government sees the continued investment in knowledge generation as a key element in achieving its aims and objectives for international development.77 Another important task facing Korea’s ODA before obtaining full membership of the DAC is to decide how to respond to major development issues such as poverty, population, environment, women in development, etc., based on clearly articulated approaches and policies. Japan’s experience has shown that one end result of a reactive and donor-centered approach in providing ODA is that research on development issues and country-specific needs tend to be ignored. Equally, in Korea, development research has been largely ignored by the government, aid agencies, and research institutes. There has been limited research and discussion regarding the “proper” level and distribution by country and aid types of ODA, but no effort been made to respond systematically to the major development issues of the day. KOICA (1999) is probably the only example, covering several major

Japan and the Republic of Korea 187 development issues (including poverty, population, participatory development and good governance, and women in development). KOICA has also produced research papers on several priority recipient countries, but these have not been used to formulate medium- to long-term country programs. In Korea, there are several government-supported and private institutes which undertake research on developing countries, but their main subjects of study are the history, politics, economy, and culture of those countries. There are no specialized institutes studying development and global issues facing developing countries. It is difficult to expect the EXIM Bank to fulfill a role in this respect, since EDCF loans are mainly provided on the basis of commercial linkages with Korea. As an example of possible interest, JICA established the Institute for International Cooperation (IFIC) in 1983, to strengthen its approach to technical cooperation as well as to improve the execution of JICA programs. IFIC is responsible for: recruitment of qualified Japanese experts for technical cooperation and the training of technical cooperation staff and leading officials of developing countries; research and study on technology transfers; research and study on country development strategies and sectoral issues; and the preparation and provision of information related to international cooperation. IFIC, as the only government-supported think-tank institute specializing in ODA issues in Japan, contributes to consolidating the position of JICA and the MOFA as legitimate representatives of Japan’s policy and practice with regard to ODA. It is an urgent task to strengthen KOICA’s research activities, so as to significantly contribute to improving the overall coherence, effectiveness, and efficiency of KOICA programs. A strengthened role for KOICA as the source of policy on major ODA issues, as well as the implementer of programs for the MOFAT, would also provide the basis for a more coherent and active policy constructed around the needs of the developing countries. The need for development expertise The Korean civil service, which has drawn heavily on the Japanese model and experience, does not cultivate aid specialists. For example, only those career diplomats who passed the Higher National Civil Service examinations are eligible to be promoted to high-ranking positions; and these are usually generalists who move among different bureaus and embassies. Even though the Ministry of Foreign Affairs and Trade introduced a new system aimed at cultivating specialists in each field in 2001, here again old customs are expected to die hard. In this connection, the active roles of aid agencies need to be further strengthened. Unfortunately, the aid agencies are often the first candidates for the ax as part of public sector reform measures; the number of KOICA staff, which peaked in 1995 at 254, was reduced to 170 by 2001. Considering the current situation – there are few development aid specialists in Korea – it is of capital importance to recruit and train staff members of aid agencies with a view to improving not only the effectiveness and efficiency of aid implementation but the scope and quality of development aid policy.

188 Sang-Tae Kim and David Seddon Despite widespread criticism of Japan’s aid structure and policies, much of Japan’s aid was considered to be effective. According to a statement made by MOFA in December 1989, based on a survey they conducted, 90 percent of Japan’s aid was considered to be effective.78 This implies that experts assigned to fields as planning and management personnel have been competent enough to implement aid programs successfully. The success or failure of aid implementation or projects depends on the capacity to plan and manage projects and on having experts equipped with specialized skills and know-how. KOICA has already experienced many difficulties in securing qualified experts equipped with specialized expertise and a proficiency in foreign languages. As Korea’s ODA expands, a severe shortage of aid agency workforce and field experts is anticipated. JICA’s IFIC recruits “life-work specialists” on a career basis and offers them training. The introduction of a similar system should be seriously contemplated in order to train experts to be placed overseas and a wide variety of personnel who could be participants in aid activities in both the public and the private sectors.

▲

Government of developing country or international organization ▲ ● Project identification ● Demand survey

▲ ▲

Demand survey Consultation

● ●

Policy making for aid

Budget allocation Supervision

●

Report

Korea International Cooperation Agency ▲ ● ●

▲

▲

Implementing grant aid and technical cooperation

Out-sourcing Supervision

●

Report

Commissioned agency Project implementation Source: MOFAT (2000: 44)

Figure 9.3 Operation system of bilateral grants.

▲

●

▲

●

Ministry of Foreign Affairs and Trade

▲

Related ministries ▲

Advice and recommendation

▲

●

Inter-ministry consultation

▲

▲

Korean Embassy or KOICA overseas office ▲

● ●

Consultation Information exchange

Japan and the Republic of Korea 189

Notes 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52

Han (1993a: 497–505). Lee (1993: 93). Sakong (1993); EPB (1992: 21); EPB (1993). OCED (1991: 125). MOFAT (2000: 38). Ji (1993: 53–4). Kim and Kim (1992: 38). EXIM Bank of Korea (2000a: 28–9). EXIM Bank of Korea (2000a: 31–2). EXIM Bank of Korea (2000a: 28–9). EPB (1989: 279–81). Brooks and Orr (1985: 323–4). Amsden (1989: 70); see also Sakong (1993: 227). EPB (1993: 153). Ministry of Foreign Affairs, Japan (MOFA) (1990: 32). EPB (1992: 291). Kim (1990: 12). White (1964: 16); Rix (1980: 11, 28–40), Orr (1990: 103–36). Muro (1988: 144–5). Song (1990: 2). Song (1990: 76–7). Ji (1991: 110). Hasegawa (1975: 7–13). Rix (1980: 22–5). Rix (1980: 84). Koppel and Orr (1993: 7). Kim (1993: 217–18). Orr (1990: 59–65). EXIM Bank (2001: 23b). EXIM Bank (2000c: 50–1). Cunningham (1974: 2–3). Chang, Fell, and Laird (1999: 29–42). Rix (1990: 85–90, 138–44); Orr (1990: 19–21, 39–45). Rix (1980: 90–91); Orr (1990: 41–2). Orr (1990: 49). Orr (1990: 49). Rix (1980: 49–80). Koppel and Orr (1993: 4). Rix (1980: 134–5, 198–9). IDJ (1988: 38–9). OECD (1999: 43–6). KOICA (2001: 336–7). OECD (2001: 235). MOFA (2000: 131). EXIM Bank of Korea (2000a: 38). Rix (1980: 34); MOFA (1992: 63); MOFA (2000: 126). EXIM Bank of Korea (2000a: 38a). Rix (1980: 32). Kim (1990: 47); MOFA (1997, 1998, 1999). KOICA (2001: 57). KOICA (1993b). EXIM Bank of Korea (2000a: 37).

190 Sang-Tae Kim and David Seddon 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78

KOICA (1993b). EPB (1990). D. Kang in KOICA (1993c). Ji (1993: 105–6). Lee, Kwon, and Anh (2000: 151–2); Chang (2000: 45–6). Board of Finance and Economy (1997: 163–4). EPB (1993: 21). EPB (1993: 17–21). Cunningham (1974: 1). OECD (2000: 178–9). D. Kang in KOICA (1993c: 28–9). Ministry of Planning and Budget, Korea (1998: 14). MOFAT (1997: 124–6). Chang (2000: 46–50); Lee et al. (2000: 152–3); Kwon (1999: 54). Mosley (1985: 375). Korea Herald (1992). Kim and Kim (1992: 53). Ohlin (1970: 24). Kim and Kim (1992: 54). Harris (1991: 260). Lee (1993: 195). JICA (2000a: 42–3). Orr (1990: 50). Muro (1988: 142). DfID (1997: 48). Koppel and Orr (1993: 7).

Part II

Recipient viewpoints

10 Japanese aid to Pakistan Tahir Andrabi

Introduction Japan is the largest aid donor to Pakistan. Thus, a detailed analysis of the aid and technical assistance program is in order. Tables 10.1 and 10.2 highlight the importance of Japan to Pakistan as a donor, as a source of credit, and as a trading partner. Japanese direct foreign investment in Pakistan is also significant and is concentrated in the automobile, chemicals, textiles, and consumer durables sectors. Japan stopped all aid to the country in the aftermath of Pakistan’s nuclear detonation in 1998. It has insisted on Pakistan signing the Comprehensive Test Ban Treaty (CTBT) as a necessary condition for resumption of aid. The loss of Japanese aid is always cited as a major cost to Pakistan of not signing the CTBT. The Japanese stance is taken by people in Pakistan as a principled one and has not engendered any significant negative feelings. Japan has resumed some people-topeople aid and work in small projects in the social sector.

The Pakistan social, economic, and policymaking environment The macroeconomic environment of the Pakistan economy has been highly unstable in the decade of the 1990s. High budget deficits, low national savings rates, and chronic balance of payments problems have repeatedly plagued Pakistan. The largest sector of the economy, both in terms of output and employment, is agriculture and agriculturally related activities The economy is thus quite susceptible to commodity-price and weather-related shocks. As capital markets are not well developed, markets for trading future contracts do not exist. Crop insurance is also largely non-existent. This uncertain environment perpetually puts a large number of the population at serious economic risk. The export sector is largely dependent on cotton textiles and garments, but the manufacturing sector has never reached a level of competitiveness where it can penetrate international markets. Most foreign direct investment coming into Pakistan has been inward looking, and thus has been the source of strengthening an environment of domestic tariffs rather than being a conduit for the transfer of international technology and a springboard for future exports. The country has a low private savings rate. The government has not been able to mobilize resources in the form of taxes. Large segments of the economy

Japanese economic assistance to Pakistan % of total

4.17 25.17 54.79 11.42 33.34 33.71 22.37 41.30 0.14 0.82

Year

1990–1 1991–2 1992–3 1993–4 1994–5 1995–6 1996–7 1997–8 1998–9 1999–2000

314.10 273.30 172.10 223.20 301.10 193.40 154.20 97.10 276.30 122.40

Foreign economic assistance to Pakistan US$ million

Table 10.1 Japan’s ODA relationship to Pakistan

6.67 13.42 6.06 24.20 15.30 18.68 15.50 12.45 0.00 0.00

Japanese loans and credits to Pakistan % of total 2250.30 2311.00 1707.50 2339.30 2694.80 2477.30 1602.90 2008.20 1840.60 540.80

Loans and credits contracted to Pakistan US$ million 8.25 8.27 6.83 8.03 6.69 6.62 5.75 4.18 3.48 3.11

Pakistan exports to Japan % of total 138.20 171.70 177.03 205.50 251.20 294.75 325.30 373.16 390.34 443.68

Total Pakistan exports Pak Rs. billion

12.97 14.31 15.89 11.77 9.57 10.74 8.62 7.84 8.33 6.31

Pakistan imports from Japan % of total

171.10 229.90 258.60 258.20 320.90 397.60 465.00 436.30 466.00 533.80

Total Pakistan imports Pak Rs. billion

Japanese aid to Pakistan

195

Table 10.2 Pakistan’s outstanding external indebtedness, 2000 Country/Institution

US $

% of total

Total

23,834.4

100

Asian Development Bank Japan International Development Agency USA IBRD Germany France Australia Islamic countries China Austria Canada Italy Russia International Fund for Agricultural Development Netherlands Korea Switzerland Sweden UK Spain Belgium Nordic Investment Bank Norway Denmark Czechoslovakia Finland European Investment Bank Singapore International Finance Corporation

5,106.7 4,826.8 2,854.7 2,701.9 2,416.7 1,280.4 1,276.4 486.3 421.8 409 381.8 362.2 205.4 191.9 127.7 115.2 105.9 104.6 103.8 89.5 68.4 58.5 50.2 44.2 19 14.6 6.1 2.8 1.9 0

21.43 20.25 11.98 11.34 10.14 5.37 5.36 2.04 1.77 1.72 1.60 1.52 0.86 0.81 0.54 0.48 0.44 0.44 0.44 0.38 0.29 0.25 0.21 0.19 0.08 0.06 0.03 0.01 0.01 0.00

particularly at the retail level are undocumented. Implementing a reform measure such as the generalized sales tax has taken well over a decade and still does not cover the whole economy. As a result, the twin problem of fiscal deficits and balance of payments financing has become the major policy concern. During the Cold War, as a frontline state in the war in Afghanistan, Pakistan was a recipient of large concessionary capital inflows coming primarily from the United States. After the end of the Cold War, the government has been slow to undertake structural adjustment, and therefore has to rely on market-based capital flows to finance its balance of payments deficits, resulting in a debt burden that most view as unsustainable. Moreover, its transition to democracy at the end of the 1980s has been marred by frequent government changes, resulting in political instability, the return of military rule, and the suspension of the constitution. Finally, Pakistan detonated

196 Tahir Andrabi its own nuclear bomb in 1998, in response to nuclear testing in India. This resulted in massive sanctions imposed on Pakistan by Japan, the European Union, and the United States. The implications for aid (i) The severe shortage of discretionary funds has meant that government has had difficulties in fulfilling its own commitments to the aid projects and has had to renegotiate its terms of reference. (ii) A decade of political instability and infighting has eroded the institutional capacity of the bureaucracy to deliver large service-oriented projects effectively. The government launched an ambitious Social Action Program in the area of the social sector but has had to admit its failure in administering it after five years of inefficiency and waste. (iii) A history of low human resource development means that technical assistance is at a premium. However, good technical counterpart support in defining terms of reference for the project is not readily available.

Case studies Japanese aid and technical assistance to Pakistan Television Corporation (PTV) The development of a second educational television channel for the Pakistan Television Corporation is one of the most important examples of Japanese assistance to Pakistan. Pakistan Television Corporation is a public company wholly owned by the government of Pakistan. The corporation’s board of directors comprises 14 members with a full-time chairman under the Ministry of Information and Broadcasting. The executive head of the corporation is the managing director. PTV has five production centers, one in the federal capital and one in each of the four provincial capitals. Education is one of the ten divisions in PTV’s headquarters. Background of the project The government of Pakistan launched an ambitious five-year plan in 1988. Development of human resources was seen as a major objective for poverty alleviation as well as for achieving long-term economic growth. In education, emphasis was shifted from higher education to literacy and towards primary education. In addition, the government made a conscious effort to involve a strategy for mobilizing the public to participate in development activities at the grassroots level. The government was motivated by two factors in pursuing the development of educational television. First, the existing educational system and the physical infrastructure to deliver education in the country was a shambles. In the Pakistani

Japanese aid to Pakistan

197

constitution, education is a provincial subject. The federal government retains only oversight of the curriculum and has control over delivery of education only in the federal areas – a small part of the country. Any attempt at educational reform, however small, involves developing a consensus between the federal and the provincial governments. Second, illiteracy and the lack of an educational infrastructure in Pakistan is severest in the remote rural areas furthest away from the main cities. Developing an infrastructure and an effective delivery mechanism for education has always been a challenge that the government has not been able to meet adequately. Development of educational television was an attempt to develop a supplementary means of reaching the people. The final thing to keep in mind was that Pakistan is a multilingual society. All four provinces have their own languages and are quite distinct in their culture, especially further away from the larger cities. The government of Pakistan had never seriously attempted to develop textbooks and supporting material in the regional languages. Since most research also shows that children learn best in the language spoken in the home, the authorities needed to address this serious gap in learning. The use of educational television was seen as an important element in addressing all the above issues. PTV was a professional organization. It had a competent technical staff and had a history of developing large projects and executing them successfully. It had to defer to the government in terms of coverage of political news and censorship regarding norms of Islamic conduct. The Ministry of Information over the years had developed a comfortable working relationship with Pakistan Television Corporation. In light of the center–province turf wars, the educational television project was conceived under the Ministry of Information, and the federal Ministry of Education was considered only one of the user ministries. The design of the educational television channel needed a way to address the issue of multilingual programming given the constraints of limited broadcasting time over one channel. In 1989, the government of Pakistan started a feasibility report of the educational television project in cooperation with the Japanese government. The program was envisaged to be launched in two phases, but was later converted into three phases. The operationalization of the project was divided into the following plans: 1. 2. 3. 4. 5. 6.

Program Compilation Plan (PC-1) Studio Facilities Plan Building Plan Program Transmission Plan Rebroadcast Station Facilities Plan Overall Operation Plan.

The plans were given approval by the Executive Committee on the National Economic Council (ECNEC), the economic subcommittee of the federal cabinet.

198 Tahir Andrabi Work commenced on the first phase of the project in 1992. The second phase was approved by ECNEC in July 1995 at an estimated cost of Pak. Rs. 465.13 million, including Japanese grant-in-aid of Pak. Rs. 347.945 million for a period of two years. The second phase of the project envisaged the installation of 15 rebroadcast centers and the appropriate transmission-receiving equipment. By the year 2000, the second phase had been completed, and the Japanese grant fully utilized. The project was by and large very successful. It involved multiple drafts of the design and renegotiations of the government PC-1 document. The technical solution crafted by the Japanese consultants for the transmission of multilingual broadcasts to families in remote areas was sophisticated and elegant. The technical solution chosen was to use satellite transmission with terrestrial boosters, which would increase the coverage area to locations that were not covered by the satellite footprint. The construction of the studios and the equipment was done to international standards. The engineering staff of Pakistan Television Channel 2 consider this to be a flagship achievement for a Pakistan government organization. However, in the most crucial area the project failed to meet expectations. The daily broadcast target on completion of the project was set at ten hours. This comprised one hour of adult education programming from Allama Iqbal Open University, six hours of educational programs produced at the Islamabad Educational Television center together with four provincial ETV centers, 1.5 hours of purchased foreign programming and 1.5 hours of PTV rebroadcast programs. By 1999, total educational programming had reached only six hours as against the ten-hour target. There was minimal programming in the regional languages. This was important because the main rationale given in the feasibility report by the Japanese consultant for the technical design was the ability to broadcast multilingual transmissions. Moreover, starting in 1999, PTV decided to convert some of the channel’s time to commercial uses. PTV’s response to questioning on the lack of programming was that it was the duty of the user ministries such as Ministries of Health, Education, Women’s Division, etc. to commission programming for the channel. These ministries had not shown any interest or made any budgetary provisions since 1996. The Ministry of Information, the signatory to the agreement, therefore did not bear any liability for the lack of programming. This failure of programming to develop is also a testament to the failure of the Japanese technical cooperation agency’s mind-set. The feasibility document and the terms of agreement specify in great detail all possible specifications about hardware, technical equipment, and building codes. But it pays only cursory treatment to the development of programming. No separate binding agreements were signed with the user ministries as should have been done, nor was there any attempt to include private producers of programming in the discussion. This failure became all the more noticeable because PTV was moving towards the private production of programming in its commercial channel. The Japanese aid agencies were also silent when PTV was converting the channel to commercial uses, perhaps because this conversion was outside the original terms of reference of the project, and perhaps because of Japanese inaction,

Japanese aid to Pakistan

199

nuclear testing, and Japanese sanctions. The lack of leadership in providing soft support to a project is very telling and has resulted in reducing significantly the effect of the original engagement. Japanese aid and technical assistance to the Pakistan Literacy Commission This is an interesting case study, in that Japanese involvement in the project was limited. It involved a single consultant. Yet, it is important because it exemplifies both the strengths and the weaknesses of the Japanese approach. The government of Pakistan started this project because education was a provincial subject, and the federal government wanted to have a direct role in the provision of education without going through the provincial bureaucracies. The first government of Benazir Bhutto also wanted to have some educational initiative that the federal government directly controlled and could showcase to foreign visitors and donors as a sign of progressivism and innovation. She chose a dynamic advisor who launched what was then known as the Prime Minister’s Literacy Commission (PMLC). (Because of the subsequent military takeover, the organization’s name was changed to the Chief Executive’s Literacy Commission and then the Pakistan Literacy Commission.) At the same time, the government authorities in Pakistan were being severely criticized for a dismal performance in social sectors such as primary education, particularly for girls, health, water supply, and sanitation. UNICEF argued that the existing government delivery mechanisms for reaching poor girls were too rigid, bureaucratic, and expensive. It pushed the methodology of participatory development with the extensive involvement of grassroots community-based nongovernmental organizations (NGOs) in promoting access. The rise of the NGO as an alternative delivery mechanism for the failing state sector spread widely in the development community. While the NGO movement in Pakistan never achieved the scale that it achieved in Bangladesh or some other parts of the world, it was very influential in setting the terms of the debate about appropriate developmental policy in the social sectors. Its greatest success lay in establishing at the grassroots level that parents in even the most backward parts of Pakistan were willing to educate girls if the intervention was suitably crafted and was embedded in the local cultural environment. JICA, because of its mandate of dealing only with government organizations, was only a passive player in the debate. It never got around to funding any interesting pilot projects for educating girls in backward areas. Japanese involvement with PMLC can only be seen as a token effort – a compromise between partaking in the innovative loose and ill-defined world of non-formal education and yet following the constraint of working with the government. (A previous Japanese ambassador and his wife took some special interest in connecting some Japanese civic organizations with an NGO in northern Pakistan, but that was a one-off event that never became a pattern.) Shinji Tajima, the JICA consultant to PLC, was a real innovator and has left a

200 Tahir Andrabi lasting impression on the organization. This can be attributed more to the consultant’s personal skills and passions rather than his formal mandate. The people in PLC fondly referred to him as a Japanese “Pathan,” somebody who, once he had formed an opinion, would not be budged from it, even in the face of personal unpopularity. JICA had no direct influence or contact with the PLC. The current management did not even know the terms of reference for Shinji Tajima or of his successor. This is in some measure due to the turnover in the organization. But even people who had worked with Tajima directly did not really know what his mission was apart from providing technical assistance. Shinji Tajima produced some teachers’ aid kits that could be used for telling stories, and a textbook containing a compilation of readings. In addition, he was involved in demonstration projects on papermaking. These were distributed in the non-formal schools that were directly involved with the PLC. The kits and the book were of extremely high quality, but their distribution was limited because of the lack of initiative showed by the government in marketing the product. If this consultant had been involved with grassroots groups outside the government, he could have made a contribution that would have affected people on a much larger scale. Shinji Tajima wrote in the popular press, and he was a true ambassador of goodwill wherever he went. He contributed to this organization even though its head changed with every change of government and was always a political appointee. This consultant is a good example of inexpensive, small-scale technical assistance projects that work very well in the Pakistani environment of political uncertainty, governmental inefficiency, and local need. Contrast with the Asia Foundation For comparative purposes, the workings of the Asia Foundation, a non-profit foundation based in the United States with operations in many countries in Asia, will now be discussed. The foundation receives numerous grants from the US Agency for International Development (USAID) and follows its development agenda closely. The foundation is interesting to analyze because USAID had pulled out of Pakistan due to sanctions imposed upon the country by the Pressler amendment. However, there was an exception given in US law that allowed the giving of aid to non-governmental organizations working primarily in the social sector. The Asia Foundation is a stand-alone organization with an independent board of directors and regional offices which have a considerable degree of autonomy. The strategic thrust and the subject areas of the program of disbursement of funds are done at the foundation-wide level. However, the implementation of the program and choice of partners for disbursement of funds is done entirely at the country level. Within the organization, the program officers in the country organizations are selected carefully and are given autonomy in managing their portfolios of partners. The program officers are encouraged to develop

Japanese aid to Pakistan

201

relationships not only with the partner organizations but also within the broader industry at large. The program officers, who are all local nationals, are insulated from administrative and political issues emanating from dealings between the foundation, the country office, and USAID or other funding agencies. The program officers are offered subsequent on-the-job training in form of general seminars and courses. They are mostly from general backgrounds and do not necessarily have strong technical skills. They are trained to work as development professionals and are well versed in the professional and intellectual issues that arise in the larger profession. There is a great emphasis placed on networking by the program officers. In contrast, the Japanese are seen as primarily technical not development consultants (Tajima Shinji being the exception). They are not well versed in dealing with small grassroots organizations, which is the prevailing culture in the development community. Thus, in development forums, conferences, and civil society deliberations, the Japanese are largely missing from leadership positions. In spite of being the largest donors, the Japanese played no role in the debate on an alternative delivery mechanism of social services in Pakistan. In the Pakistani environment of a large number of government changes, the absence of Japanese relationships with the “permanent” players in the development scene is a tremendous gap. This is particularly surprising given the success of the Japanese in developing relationships with local manufacturing industry.

Main findings These finding and recommendations are based on the listed case studies as well as field interviews with: ● ●

●

heads of three NGOs who have received significant foreign funding; two Asian Development Bank consultants working with the Ministry of Finance; two senior officials of the government of Pakistan, Ministry of Finance.

The findings and recommendations are as follows: (i) The main strength of the Japanese lies in designing and managing large public infrastructure projects. Japanese technical consultants are considered to be of the highest quality, and their local counterparts are unanimous in praise of their technical skills, professionalism, and diligence. The consultants work better where there are clearly defined stakeholders, and when the local counterparts have well-defined objectives and there are no disagreements or ambiguities within the recipient team. When the above conditions are not met, the Japanese consultants do not get fully up to speed until they are clear on their local counterparts’ authority structure. (ii) The Japanese government aid projects are uniformly regarded as conservative. This is in large measure because of their insistence on dealing primarily

202 Tahir Andrabi with government-to-government projects. The Japanese are not seen as being involved in innovative projects. Their portfolio of small projects with nimble, civil-society-based groups is extremely limited. This conservatism has resulted in the Japanese not being able to position themselves as agents of progressive change in the country. While the technical skills of the consultants are praised, the Japanese are regarded as taking an over-technical view of projects, and thus have not been able to establish leadership in setting the terms of debate on governance and development. Japan has not been able to cultivate and nurture the leading development practitioners and thinkers engaged in economic and social reform in the country, many of whom undertake projects mainly outside the government. This is important because, in countries like Pakistan, the accountability of the government is very weak, and their ability to implement projects improving social welfare is considered quite limited. The Japanese are noticeably absent in their support of organizations involved in the advocacy of various public-interest causes. For instance, Japan is not considered a leader in the promotion of female education in the country, which most other donors consider their number one priority. (iii) Japan has launched some flagship projects in the social sector such as funding the Children’s Hospital of Islamabad and the educational television channel. Yet it does not get the public credit commensurate with the amount lent to Pakistan or given as a grant-in-aid. Perceptions of Japanese aid vary tremendously between people outside the government and those inside it. Officials in the Economic Affairs division responsible for monitoring foreign aid fully acknowledge the leading role played by Japan in supporting economic reform efforts. Commentators on economic reform, however, still invoke views promoted by the Anglo-Saxon-dominated media with a smattering of alternative models of development inspired by the Chinese. The Japanese model of development is seldom invoked. (iv) Japanese home ministries are intimately involved in the projects. While this helps in improving the quality of the technical advice, it overly hinders the consultants in their functioning on the ground. Japanese consultants have too little authority to approve changes in design and project specifications. Expost project monitoring is over-bureaucratic and is mainly concerned with filling in the right paperwork. Quite often, as long as the legalities of maintaining the project are being met, the monitors do not make an effort to get involved in the project in the operational phase. The local staff are also very tied in with the embassy and do not have the autonomy to build relationships that go beyond the narrow dictates of their own individual project.

11 Japanese aid to China A comparison of ODA from Japan and Europe Shaokui Feng

Since the 1980s, China has accepted official development assistance (ODA) from developed countries such as Japan, various European countries (including the European Union), Canada, and Australia. This has made important contributions to the economic and social development of China. This article, by comparing Japanese and European ODA to China, tries to analyze the features of Japan’s ODA, such as both the strong and weak points of Japan’s ODA to China and its effect, and puts forward suggestions for improvement. The discussion of these three aspects will include a general picture of Japan’s ODA to China, with the emphasis on the issue of technical cooperation.

Characteristics of Japan’s ODA to China Since 1991, the amount of ODA given by the Japanese government has occupied first place in the world for nine successive years, and the sum of capital in Japanese yen loans has reached approximately ¥1000 billion (1998 figures). In comparison with European and other donor countries, Japan’s ODA has the following major characteristics. First, Japanese yen loans requiring repayment of capital with interest occupy a relatively high percentage of the total sum of Japan’s ODA (34.1 percent in 1998). This type of loan is mainly used in the construction of economic infrastructure facilities such as highways, railways, bridges, ports, power stations, power transmission equipment, and irrigation systems. The European ODA to China is mainly grant aid, and spending on big projects of economic infrastructure is relatively small.1 Closely related to the first characteristic, Japan’s ODA has not only made positive contributions to the construction of economic infrastructure in the recipient countries, but has also played an important role in promoting economic cooperation between Japan and the recipient countries. For example, since Japan signed the first agreement to render yen loans to China in April 1980, the two countries have concluded a total of 258 loan agreements, amounting to a total sum of ¥2453.5 billion.2 Japan’s yen loans, energy loans and other aid have become important factors in supporting China–Japanese economic and cooperative relations, particularly trade, direct investment, and technological cooperation.

204 Shaokui Feng In comparison with the European and American countries, whose ODA is mainly devoted to grant aid (see Table 11.1), Japan’s grant aid only accounts for 39.6 percent of its ODA, far lower than the average level of 77.8 percent (an average for the years of 1996–7). Even so, the absolute volume of Japan’s grant aid is not small. For instance, grant aid to China up until 1997, rendered by Japan, Germany, Canada, and Australia, totaled $0.91 billion, $0.72 billion, $0.33 billion, and $0.26 billion respectively.3 The regional allocations of bilateral assistance to the recipient countries reflect the regional interests, foreign relations, and historical backgrounds of the donor countries. The recipient countries of Japan’s ODA are mainly spread through the Asian region, and the ratio of Japan’s ODA in Asia in its total ODA in 1970 reached as high as 98.2 percent. It dropped to 70.5 percent in 1980, and remained Table 11.1 Ratios of grant aid in the ODA of the developed countries (an average level of 1996 and 1997) Country

Percentage

Country

Percentage

Australia Iceland Luxembourg New Zealand Sweden Switzerland Netherlands Canada Britain Denmark Norway

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 98.9

United States Portugal Finland Belgium Italy Austria France Germany Spain Japan Average

98.8 98.6 97.6 96.6 94.3 92.2 84.1 80.5 74.7 39.6 77.8

Source: Ministry of Foreign Affairs, Japan (2000).

Table 11.2 Projects and amount of grant aid to China by foreign governments, 1997 Country

Number of projects

Total amount

Amount in $US billion

Japan Germany Canada Australia European Union Netherlands Norway Belgium Sweden New Zealand Luxembourg Total

84 114 70 80 31 8 5 30 5 13 2 416

¥100.355 billion DM1.07 billion Can $0.469 billion A $0.32 billion 0.23 billion ECUs D.Fl.0.06774 billion Kr.0.23 billion BF0.86 billion Kr.0.03364 billion NZ$40.1108 billion LF0.06 billion 2.64 billion

0.91 0.72 0.33 0.26 0.299 0.04234 0.3427 0.2761 0.00587 0.0072 0.00193 3.19

Source: Chinese Ministry of Foreign Trade and Economic Cooperation.

Japanese aid to China 205 at 62.4 percent in 1998, far exceeding the percentage of its ODA to Africa which was in second place in the regional allocations (see Table 11.3).4 The regional allocation of the recipient countries of Europe’s ODA has its own characteristics. France focuses its assistance on the French-speaking community, while Britain focuses its assistance on the British Commonwealth countries. Germany, in accordance with its ODA rationale, gives to recipient countries all over the world. Nevertheless, the importance attached to China’s Shandong province by Germany also reflects a role played by historic factors.5 In comparison with the euro, the exchange rate of the Japanese yen has fluctuated. The long-term trend of appreciation of the Japanese yen has worsened the debt burden of the recipient countries (the exchange rate of Japanese yen for US$1 rose from 360 in 1971 to 240 in 1979, to 120 in 1989, and once even reached 80 in 1995; it currently fluctuates around ¥120 to US$1), and this has, to a certain extent, offset the benefit of low interest on the soft yen loans. Proceeding from the basic aid philosophy of ODA, the fields of assistance, the spread of the recipient countries, and the contents of aid projects and their implementation, a further analysis on the differences between Japan’s and Europe’s ODA to China follows.

Guiding philosophy According to the Japanese institution in charge of ODA affairs, Japan’s ODA “is an important policy of Japan to strive for the promotion of world peace and prosperity. ODA plays a major role in maintaining international economic and social stability through assisting economic and social development of the developing countries.”6 This basic guiding philosophy is not much different from that of Europe. However, the difference between this and Europe’s ODA is that when Japan first provided ODA, the diplomatic essence of its ODA was an extension of the “war compensation diplomacy” pursued by Japan towards those Asian countries Table 11.3 Regional allocations of the recipient countries of Japan’s bilateral ODA Year

Asia

1970 1980 1990 1992 1993 1994 1995 1996 1997 1998

98.2 70.5 59.3 65.1 59.5 57.3 54.4 49.6 46.5 62.4

Middle and Near East

Africa

Central and South America

Oceania

Europe

Others

10.4 10.2 4.3 6.4 7.8 6.8 6.7 7.8 4.6

11.4 11.4 10.1 11.8 11.8 12.6 12.8 12.1 11.0

6.0 8.1 9.1 9.0 8.6 10.8 11.8 10.8 6.4

0.6 1.6 2.0 1.7 1.3 1.5 2.4 2.4 1.7

1.2 2.3 1.5 1.5 1.4 1.5 2.4 2.0 1.7

7.1 8.2 10.0 11.9 12.3 14.3 18.4 12.2

Source: Ministry of Foreign Affairs, Japan (2000).

206 Shaokui Feng which suffered from its aggression. For example, from 1955 to 1977, Japan paid total compensation of approximately US$1.5 billion to 11 Asian countries in the form of goods and labor, and this “compensation diplomacy” played the role of a “path-breaker” in exploring Japan’s economic cooperative relations with Southeast Asian countries.7 With the end of its “compensation diplomacy,” Japan immediately started its “ODA diplomacy” (starting first with the loans of Japanese yen to India and Pakistan in 1958), and took this as a new means for promoting its economic cooperation with Southeast Asian countries. In sum, ODA is an important policy means for Japan to conduct its economic diplomacy towards the developing countries in Asia. When China and Japan resumed diplomatic relations in 1972, China gave up its request for war reparations. When Japan began to provide China with ODA in 1980, both sides tacitly understood its linkage to the issue of China’s renunciation of war reparations. That is to say that the provision of Japan’s ODA to China is, to some extent, a kind of compensation for China’s renunciation of war reparations. Of course, as time goes by, the linkage between Japan’s ODA and the issue of war reparations is gradually fading. Nevertheless, when the author talked with a Japanese person who had worked in the field of trade for a long time, he was still saying: “Why aren’t some Japanese expressing thanks to China for its renunciation of war reparations when they criticize China for being ungrateful to Japan for its provision of ODA?” This shows that, in the hearts of those Japanese who are more familiar with China–Japanese relations, the linkage between Japan’s ODA to China and China’s renunciation of war reparations from Japan is still deeply recognized.

Allocation of Japan’s ODA to China Japan’s ODA to China covers different fields from that of Europe, and ranges from the construction of economic infrastructure to environmental protection and other items. Yen loan allocation From 1980 to 2000, Japan’s yen loans were mainly devoted to China’s five-year plans, with a focus on providing loans for major national projects. Therefore, the loan was provided for a period of five to six years (also called “a batch”), and so far four batches have been granted. The first batch (1979–84) of loans provided seven projects with ¥330.9 billion. The second batch (1984–9) provided 17 projects with ¥540 billion. The third batch (1996–2000) provided 52 projects with ¥809.9 billion, and the fourth batch was expected to provide ¥970 billion. After 2001, this pattern of “loan by batches” will be changed to “annual loans.” The first batch and the first half of the second batch of yen loans (1979–87) were mainly devoted to the construction of transportation infrastructure, in particular for transporting coal, with an emphasis on the construction of the port of Qinhuangdao and the railway connecting the port with Datong, the coal-producing

Japanese aid to China 207 site, and Beijing. The second half of the second batch and the third batch of the yen loans (1988–95) were devoted to the water supply, gas supply, communication facilities, and fertilizer plants in the major cities of Beijing, Tianjin, Xian, and Chongqing, and the construction of infrastructure in major economic development areas such as Shanghai’s Baoshan, Qingdao and Hainan Island, aside from continuing to provide loans for the transportation project. With the fourth batch of yen loans (1996–2000), special importance was given to environmental and agricultural development while continuing to support the construction of economic infrastructure. Grant aid 8 The foreign bilateral grant aid projects that China accepts cover many fields, such as agriculture, forestry, animal husbandry, transport, energy, communications, environmental protection, the innovation of industrial technology, personnel training, disaster relief, helping the poor, and research on system reform. These fields can be put into six categories: social development, agriculture, forestry, environmental protection, economic infrastructure, restructuring economic systems, and industry (see Table 11.4). The sum (the accumulated total up to 1997) spent on these six categories through Japan’s grant aid to China is as follows: $0.114 billion on social development, $0.12 billion on agriculture, $0.12 billion on environmental protection, $0.114 billion on economic infrastructure, $0.03184 billion on industry and nothing on restructuring the economic system. However, in 2000, Japan started to use the grant aid to invite students of the Party School of the Central Committee of the Chinese Communist Party to make inspection tours of Japan and investigate the operation of the Japanese market economy. This shows that Japan has started to attach importance to supporting China’s economic system reform through ODA. Table 11.4 Grant aid to China by foreign governments, 1997 ($ billion) Country

Japan Germany Canada Australia EU Netherlands Norway Belgium Sweden New Zealand Total

Agriculture Social System Industry development restructuring 0.12 0.27 0.05826 0.07979 0.23 0.0125

0.5 0.2 0.1 0.13 0.04665 0.0142

0.00117 0.00348 0.00395

0.01979 0.00239

$0.7

0.1 0.04083 0.00078 0.006 0.03427 0.00024

Environmental Infraprotection structure

0.03184 0.12 0.05714 0.1 0.01842 0.02393 0.00728 0.00112 0.015

0.114 0.002 0.12 0.01393 0.00565

0.00455

0.00185

0.00273 $1

$0.15

0.00051 $0.15

Source: Chinese Ministry of Foreign Trade and Economic Cooperation.

$0.26

$0.27

208 Shaokui Feng Among European countries, Germany can be taken as an example. The sum spent on the six categories through Germany’s grant aid to China is as follows: $0.27 billion on agriculture, $0.2 billion on social development, $0.1 billion on restructuring the economic system, $0.1 billion on environmental protection, $0.05713 on industry, and $0.002 billion on economic infrastructure. It shows that Europe attaches greater importance to supporting China’s agriculture and restructuring the economic system. For example, although the total sum of German grant aid to China is less than that of Japan, the sum of Germany’s aid to China’s agriculture is over twice that of Japan’s. Geographic distribution of ODA to China Up to now, Japan’s ODA projects in China, in particular the Japanese yen loan projects, are mainly distributed along China’s eastern coast, but since 2000, Japan’s ODA has begun to turn to the central and western regions of China. As Europe’s ODA to China is mainly in the form of grants, although many of its projects are also distributed along China’s eastern coastal areas, they are not as concentrated as Japan’s.

The implementation of project aid The dispatching of experts Generally speaking, the technical experts sent by European countries to China are professionals capable in solving practical technical problems, while Japan often prefers to send experts specialized in administration. The Chinese side wishes to see more technical experts sent to China so as to solve practical problems in the production process. Accepting personnel training The Europeans are more rigorous in their personnel training, and the Germans have a traditional superiority in the training of technicians. As far as the Japanese are concerned, there is a tendency to “put more emphasis on quantity than quality” in the training of technicians. For instance, the Chinese students accepted by the Japanese government to pursue graduate studies in Japan with the financial support of ODA mainly belong to two categories: those who study in governmental institutions or the institutions which have connections with the government; and those who study in the non-governmental enterprises through intermediate institutions such as Association for Overseas Technical Scholarship (AOTS), the peripheral organization of the Ministry of International Trade and Industry, OFCF, the peripheral organization of the Fishery Agency, and the Ministry of Labor’s “Study Program for Overseas Young People.” Of the two categories, the second one is more problematic. This is mainly because the Chinese students are treated as laborers in a number of enterprises,

Japanese aid to China 209 and they are used by Japanese non-governmental enterprises, small and mediumsized enterprises in particular, to solve the problem of labor shortage. The socalled “technical study” is in name only. In fact it is very natural for China and Japan to engage in the import and export of labor. However, if this is being confused with a technical study program supported by ODA, it may harm the image of Japan’s ODA. Perhaps the use of ODA to promote the exchange of labor services between China and Japan should not be forbidden, but those who go to Japan and provide technical services should have the opportunity to learn new technical skills, so as to implement the intention behind ODA. The Chinese students participating in the “technical training” should have the guarantee that they will actually acquire some technical knowledge during their stay in Japan. Japanese and European ODA practices There are some differences between the content of Japanese and European ODA projects, especially technical cooperation projects, as follows. Japan puts more emphasis on hardware, while European countries put more stress on software. An official from the Japanese External Trade Organization ( JETRO) once said: “For example, when helping China build a hospital, Japan would first think about the construction of the hospital building while the European countries would first consider sending good medical experts.” As for the scale of projects, Japan would pursue either large-scale or specific small projects, while European countries would attach importance to “medium-sized projects” or “small but significant” projects. In recent years, Japan has taken on a number of scattered small projects, such as spending some funds on building primary schools in poor regions, with a view to pursuing “visible ODA.” In the meantime, European countries helped China build the “China-European International Commerce College” (established in November 1994). This shows that the Europeans attach more importance to “mediumsized projects.” On many occasions, a medium-sized project may have better effects than a number of scattered small projects. For example, it would be better to concentrate on the building of a teachers’ training center than helping to build a number of scattered primary schools. For example, Germany’s assistance in helping Inner Mongolia implement the project of “China–German cooperative development of Inner Mongolia’s wind power and solar energy” reflects its guiding philosophy of “small but significant.” This project started implementation in 1990 (the executive unit of the Chinese side is the “Huhehaote Husbandry Machinery Research Institute”). Through an eightor nine-year effort, various kinds of electricity-generating systems of wind power, solar energy, and inter-complementary wind power/light energy were successfully designed and developed. These systems have not only been promoted and used in the pastoral areas and villages of Inner Mongolia, but also sold to Qinghai, Tibet, Hainan, and other places. Based on the success of this project, the executive unit

210 Shaokui Feng assisted the Inner Mongolia Autonomous Region in drafting the “Inner Mongolia Bright Program,” and it was approved by the State Planning Commission as the first sub-project of the “China Bright Program.” It attracted the attention of the World Bank, which resulted in the decision of the World Bank to provide GEF assistance and preferential loans to Inner Mongolia, Xinjiang, Gansu, and Qinghai for the building of 300,000–500,000 sets of light power systems or the intercomplementary systems of wind and light. This has made a great contribution towards solving the power supply shortage in China’s outlying regions. The Europeans have a much broader understanding of the concept of “technical cooperation” than the Japanese. For instance, the European Union carried out a “China–European higher education cooperative project” in 2000, and in 2001 approved the implementation the “China’s European studies” project (over 10 million euros). This means that Europe has added social sciences to the range of “technical cooperation.” Japanese technical cooperation with China is limited to “natural sciences and technology,” and the fact that the lead agency on the Chinese side coordinating the technical cooperation between the two countries is the Department of Natural Sciences and Technology has restrained ODA from being used to support China’s studies of social sciences. In comparison with Japan, European countries attach greater importance to accepting Chinese students to study abroad, and it has achieved better results. Japan should study how it can use ODA to expand and improve its accommodation, education, and training of Chinese students. At present, the knowledge of Chinese officials about Japan at both central and local government level does not match the close economic relations between the two countries. Therefore, it should be considered a matter of significance that Japan has since the year 2000 invited students of the Party School of the Central Committee of the Chinese Communist Party to make inspection tours of Japan. But, as a social sciences program, it needs improvement. For example, some Japanese experts believe that “it needs at least a one-month visit to really learn something, and visitors should endeavor to summarize their visit after returning to China and report their experiences to other students so as to enable the next group of visitors to have a more in-depth inspection tour of Japan.”9 On development studies Compared with Japan, European countries pay more attention to using the scientific and technical resources of the Chinese side in implementing their ODA technical cooperative projects, which enhances the work of development and research. During the above-mentioned China–German project for generating electricity from wind power and solar energy, for example, the scientific research results and the self-help efforts of the Huhehaote Husbandry Machinery Research Institute were fully used. If more attention is paid to the role of the Chinese scientific and technical workforce in the technical cooperation between China and Japan, it will be possible to achieve even better results. Taking the issue of survival rates of tree

Japanese aid to China 211 planting for example, experts of the Chinese Academy of Sciences have developed the gene mutation technique for tree and grass planting which enables plants to be drought-enduring, saline-tolerant, and pest-resistant. Furthermore, the Chinese Academy of Sciences has also developed a water-preserving technique which can effectively decrease the mortality of the seedlings by aerial sowing (one major reason for the seedlings dying is a lack of water when germinating). Therefore, better results can be achieved if importance is attached to the use of Chinese scientific and technical resources to strengthen research and development when ODA funds are used in afforestation projects. Helping non-governmental enterprises with ODA Compared with European countries, Japan has made tangible achievements and accumulated rich experience in helping Japanese non-governmental enterprises enter China with government funds. Nevertheless, an important subject on the future use of ODA should be how to expand its achievement and purposefully provide more effective assistance and support to the small and medium-sized enterprises that want to enter China. Over a long period of time, the former Japanese Ministry of International Trade and Industry has accumulated rich experience in supporting Japanese non-governmental enterprises, and Japan should apply these experiences in its overseas operations. For instance, one feasible approach is to use ODA to promote several small and medium-sized Japanese enterprises with technical expertise to jointly engage in technical cooperation with one of China’s economic and technological development zones. As far as the Japanese side is concerned, through cooperation with several small and medium-sized enterprises, the “public” activities of administration and management can be handled by the same lead agency, thus reducing indirect expenses on administration, financial management, and external contacts. As far as China is concerned, it is not easy to find cooperative partners, due to its vast territorial expanse. One short cut is to take the economic and technological development zones being established in various parts of China as the lead agencies.10 In principle, ODA should not be used to support a specific Chinese nongovernmental enterprise. The complication is that this will create a problem as to who will be responsible and pay the debt once the non-governmental enterprise receiving credit from the Japanese government goes bankrupt. However, new thinking may be found for ODA to be used to support Chinese non-governmental enterprises by supporting the construction of public facilities in the economic and technological zones, where these small and medium-sized enterprises are situated. China’s non-governmental enterprises are fast developing, and they are playing an important role in the development and formation of China’s system of a market economy. Therefore, supporting China’s non-governmental enterprises is in fact playing a role in supporting China’s reform and the building of a market economy system.

212 Shaokui Feng Other issues In China there exist so-called “projects decided by a strip of paper.” These are the projects that get started hurriedly in accordance with the will of some individual officials, without adequate feasibility studies. Compared with Europe’s ODA, there are more problems of “projects decided by a strip of paper” in Japan’s ODA projects. In order to prevent the recurrence of such projects, the Japanese side should change its approach of dealing only with officials, and should encourage exchanges with Chinese scientific and technological circles, thus broadening the channels of cooperation. (Taking the issue of afforestation, for instance, cooperation should be strengthened not only with the Ministry of Forestry, but also with the academies of sciences and local units.) In addition, the Chinese side would like the budget of the yen loans to be more transparent so as to minimize difficulties the Chinese management has in formulating plans. The Japanese side is expected to pay more attention to the opinions of the Chinese side concerning the specific operations (such as what equipment to buy). As a result of the relatively high percentage of yen loans in ODA, there is a problem over debt repayment which merits attention from both the Chinese and Japanese sides. For example, the actual users and beneficiaries of the construction projects (such as ports) approved by the former Ministry of Transport of the Chinese government are the local authorities, but when the time comes for repaying the debt, the local authorities often refuse to pay it, saying that the projects were approved by the central government, and in the end the debt is paid by central government. This has resulted in a reluctance on the part of the Ministry of Finance towards yen loans, in case it will be called upon to repay the debt. But this does not mean a decrease in the importance of yen loans to Chinese economic development (similar problems may emerge when developing the central and western regions of China). Although this is mainly a problem on the Chinese side, it also deserves the attention from the Japanese side. Impact of political and cultural factors on Japan’s ODA Compared with Europe’s ODA to China, Japan’s ODA is much more influenced by political factors. Conversely, it can be fully expected that the Japanese departments and officials in charge of ODA to China have worked harder and made additional efforts in overcoming the interference of political factors. In recent years, the following comments concerning Japan’s ODA to China have emerged in Japan: the accusation that “China neither publicizes nor feels grateful for Japan’s ODA.” In fact, it is not that China has not publicized Japan’s ODA. Chinese scholars have written books on ODA and have done research and made evaluations on Japan’s ODA.11 Nevertheless, there is really room for improvement in the Chinese media to help improve China–Japanese relations and to promote the friendly feelings of the two peoples through publicizing Japan’s ODA to China. Second, there has been the accusation that “China has used Japan’s ODA in its

Japanese aid to China 213 military build-up.” This kind of comment not only appears in the Japanese media, but also comes from the statements of some influential politicians. For instance, during the presidential election of the Liberal Democratic Party in late April 2001, Kamei Shizuka, one of the presidential candidates, publicly accused China of using Japan’s ODA in its military build-up, although he did not give any factual evidence. If people believe that Japan’s provision of ODA to China has enabled China to transfer the funds originally used for construction of infrastructure for military use, then it will only lead to the conclusion that the two sides should stop all economic exchanges. As the original purpose of China–Japanese economic exchanges was to benefit both sides, this result, if calculated in mathematical terms, will naturally enable both sides to “have surplus strength for military build-up.” Third, frictions between Japan and other Asian countries over historical issues has weakened the political impact of ODA. Germany’s ODA has played an important role in improving Germany’s image in the international community. Japan’s ODA, applied mainly in the Asian region, should have also played the role of improving Japan’s international image. However, the poor performance of the Japanese government in acknowledging history (such as the recent issue of the history textbooks) results in a much weakened political impact of Japanese ODA. Fourth, a tendency to linking ODA with trade friction has emerged. In 2001, Japan imposed a so-called “emergent import control” on China’s export of green Chinese onions and fresh mushrooms. This has led to the opinion inside Japan that ODA has helped China in its competition with Japan, and some people stand for a reconsideration of the practice of using ODA to develop the overseas production of commodities which can then be imported into Japan at a profit. If agricultural cooperation between China and Japan is affected because of the friction over agricultural products between the two countries, and this trade friction is even linked with ODA, it obviously goes counter to the objectives of ODA. This is because Chinese agricultural development is fundamentally for the purpose of solving the problem of feeding the 1.3 billion Chinese people who make up a quarter of the world’s population. A good solution to this problem not only serves the interest of China, but also has international significance. Fifth, ODA has been taken as an one-sided Japanese “favor” to China. First of all, it should be affirmed that Japan’s ODA has played a positive role in speeding up China’s modernization. However, Japan’s provision of ODA to China does not just benefit China; many of the projects benefit both China and Japan. For example, the construction of the coal ports in Qinhuangdao with ODA has enabled coal to be exported to Japan, and it is obviously of mutual benefit. Japan’s ODA has promoted China’s construction of infrastructure, and in the meantime it has supported Japanese non-governmental enterprises investing directly in China. Approximately 70 percent of enterprises with Japanese capital have made profits through their business in China. Also, helping China enhance environmental protection with Japan’s ODA contributes to the inseparable common environmental interests of both countries.

214 Shaokui Feng In the meantime, it should be affirmed that the agencies of the Japanese Foreign Ministry in charge of ODA affairs have made great efforts to helping the Japanese people have a proper understanding of ODA. Some Japanese experts and scholars have written books such as, ODA — For the Life of the Japanese People to explain to the Japanese public that Japanese provision of ODA abroad also benefits Japanese people.12 It is perhaps necessary to set up several projects under the name of ODA with the aim of promoting exchanges of views on this issue between the research institutes and news media of the two countries.

The strong and weak points of Japan’s ODA to China In comparison with European countries’ ODA to China, Japan’s ODA has its own unique strong points as well as weak points. Four issues will be discussed, and Japan has both strong and weak points in each of the four areas. Using ODA to promote its economic relations with recipient countries China and Japan are close neighbors separated only by a strip of water, and the economies of the two countries are of a strong complementary nature. This has resulted in great potential for Chinese–Japanese economic cooperation and has provided a huge platform for Japan to use ODA in promoting economic cooperation between the two countries. One important Japanese policy based on these advantages is to make the large Japanese yen loans an important component of its ODA to China, thus making the scale of Japan’s ODA much larger than that of the European countries, and making such achievements in using ODA to promote economic relations with the recipient country that the other countries’ ODA cannot possibly match. Nevertheless, Japan has shown an obvious weak point, compared with European countries, in using ODA to promote its economic relations with the recipient country: that is, the excessive sense of competition Japan holds towards Chinese economic growth which may affect Japan in continuing to use ODA to promote Japanese–Chinese economic cooperative relations. Does using ODA to help the other country necessarily mean creating a competitor? On this issue, obviously the European countries do not have the strong sense of competition with China that Japan does. It is because of this that some European countries have consistently attached importance to achieving a “win by both sides,” a result which benefits China and the donor countries through ODA, while some influential scholars and media in Japan are constantly making statements expressing their concern that China may become a strong competitor. Even the White Paper on Commercial Exchanges of 2001 published by the Japanese government advocates that the “rapid economic growth of China has become the latest threat to Japan.” This excessive sense of competition may become a serious psychological impediment that obstructs Japan from achieving a “win-win” result through its ODA to China, and leads to the emergence of the idea of reducing the sum of ODA to China and limiting the fields covered.

Japanese aid to China 215 Using ODA to promote economic and technological cooperation in the region of East Asia Unlike European countries’ ODA, Japan’s ODA can be taken as a means to promote the regional economic cooperation in East Asia where China and Japan belong. Over the past few decades, the achievements made by Japan in supporting East Asian countries in developing their economic infrastructure through ODA is in essence the basis for the formation of an “East Asian Economic Circle.” The next issue is how to promote the building of East Asian economic cooperation and finally attain the goal of the establishment of the “East Asian Economic Circle,” while continuing to use ODA to promote the development of East Asian economic infrastructure (including some transnational infrastructure). Since the second half of the 1990s, there has been a rapid increase in the numbers of regional or bilateral trade agreements in the world. The statistics of the home page of World Trade Organization (WTO) show that 214 regional trade agreements were reported to the General Agreement on Tariffs and Trade (GATT) and WTO by the end of 1999, and 134 of them are active. There is also the emergence of the North American Free Trade Area (NAFTA), a regional union which includes both developed and developing countries. Against this background, China, Japan, and South Korea have become the very rare “isolated island” countries that have not so far joined any regional economic cooperative regimes in the world. Over a long period of time, Japan’s ODA diplomacy has been in essence the bilateral diplomacy between two countries, which lacks the strategic thinking of regional diplomacy. How to combine ODA with the strengthening of Asian regional diplomacy should be an important subject for Japan. Enhancing regional cooperation in East Asia is also an important component of Japanese economic recovery. The Economic and Trade White Paper of 2001 suggests that Japan should “adopt the tactics of drawing support from the development of East Asian countries to reinvigorate its own economy.”13 If the Japanese government really adopts these tactics to “draw support from the development of East Asian countries,” it needs to make use of various means, including ODA, to promote regional economic and technological cooperation. Of course, it will not be a smooth process to achieve the “East Asian Economic Circle,” and it cannot rely solely on market mechanisms, because it needs the necessary adjustments to industrial structures in the countries concerned to promote the liberalization of trade and investment among East Asian countries. Although these adjustments accord with the fundamental direction of the economic development of various countries, some industries and laborers will suffer from short-term blows. Forces outside the market and the forces of governments are needed to make adjustments, and ODA is one of the effective non-market means to bring the cooperative potentials of the East Asian countries into full play. Perhaps there is a need to use ODA funds to engage in such studies: starting from the specific industrial fields, making analyses of the problems and obstacles each industry faces in the economic cooperation of the East Asian countries, and finding the effective methods to overcome these problems and obstacles.

216 Shaokui Feng Using ODA to promote the transfer of advanced technology Japan has successfully caught up with and surpassed European and American countries in industrialization, while China is still in the process of industrialization. This difference in their stages of development provides Japan with a huge base to use ODA to promote the Japanese provision of technology transfer to China. In fact, Japan’s ODA to China had made a very important contribution in promoting mature industrial production technology transfers to China. Especially since the 1980s, pushed by Japanese ODA and direct non-governmental investment, and based on the efforts of the Chinese industrial units concerned, the Chinese export industries have greatly raised their technological levels. One typical experience is that the credibility of Chinese products exported to Japan has risen in the minds of Japanese consumers. This has greatly promoted the export of Chinese products to various countries in the world. Nevertheless, there exist problems that cannot be overlooked in technical cooperation between China and Japan. Among Chinese technicians, many complain that the Japanese are taking more conservative attitudes to technological transfer, but they have fewer complaints about the Europeans. The European countries often connect ODA with the superior industries in their countries, and they are more forthcoming with technological transfer than Japan. For example, some Chinese experts who have participated in China–Japanese technical cooperative projects have stated that, “the guiding principle for Japanese technical cooperation with China is to transfer mature technology to China only,” and that “much of the technology brought to us is what we already have, and when the Chinese side asks the Japanese side to provide higher-level technology, they are reluctant to do so even if it is not such a difficult request. ” In short, although Japan makes an important contribution by transferring mature production techniques to China, it has been less forthcoming and relatively conservative in transferring advanced technology to China. Japan’s conservative attitude on the transfer of advanced technology contradicts its policy of emphasizing environmental protection. As the most advanced hightech information and new energy are environmentally friendly, they can help China overcome the drawbacks of wasting resources and environmental disruption caused by traditional industrialization. China’s progress in overcoming the drawbacks of its traditional industrialization will affect the environmental interests of Japan and the world at large. For instance, if China can widely use solar energy and battery-fueled cars at an early date, it will be conducive to China’s sustainable development and help improve the global environment.

Making ODA projects more suitable to China’s condition Japan is very close to China and there are frequent visits between the people of the two countries. Some Japanese research institutes have conducted in-depth studies on China. These help Japan make its ODA projects suit the actual situation in China. Generally speaking, most Japanese ODA projects suit China well, and this can be taken as a strong point in favor of Japanese ODA to China.

Japanese aid to China 217 However, on some occasions, the Japanese officials concerned often consider themselves knowledgeable about China, and therefore they are more likely to behave in an opinionated manner. European officials often consider themselves ignorant of China’s situation, and therefore they pay more attention to investigation and research work. For instance, the European Union ambassador often goes to the western part of China on an inspection tour, and as a result, he knows which local governments are capable of effective administration, and that helps make the correct aid policy. This comparison leads to the fact that the Japanese side, which should have a better knowledge of China, does not necessary act as wisely as the European or other assisting states in choosing aid projects. For example, Japan has invested a lot of money and effort in supporting China‘s afforestation, and in some cases, Japan is planting trees “as if there were no tomorrow,” but it does not give sufficient attention to the survival rates of the trees. Another example is Japanese assistance in building clean-burning furnaces in Chongqing. The local people cannot afford to use it, because it needs to be heated with heavy oil for ten hours, and therefore the cost is too high. In comparison, Australia has chosen some aid projects which suit China’s condition very well. For instance, after ascertaining that one of the thorniest problems for Hebei province is the shortage of water in the region of Beijing and Tianjin, they engaged in joint research to turn sweet potatoes into forage instead of corn. Because it takes less water to grow sweet potatoes than to grow corn, it is helpful both in developing animal husbandry and in relieving the shortage of water in this region.

Recommendations for Japan’s ODA Japan has achieved fruitful results over the past 20 years through ODA to China. The economic and social development of China and Japan needs the continuous expansion of Japanese ODA to China. Therefore, the writer ventures to put forward some new thinking and suggestions for improving Japan’s future ODA to China. The main results of Japanese ODA to China The results of Japanese ODA to China are closely linked with its own characteristics. First of all, these results are reflected in the achievements of the four rounds of Japanese yen loans totaling ¥453.5 billion. This is a unique result, and differs considerably from other countries’ ODA to China. An important contribution has been made to the construction of Chinese economic infrastructure. By 1998, 35 percent (approximately 4600 kilometers) of the total mileage of China’s electrified railways was completed with Japanese yen loans. Thirteen percent of China’s major ports (60 ports) were completed or are under construction with the help of Japanese yen loans. All these have contributed to raising the efficiency of China’s distribution network.14

218 Shaokui Feng Japanese ODA, which has focused on the provision of transportation and international trade infrastructure, has played a positive role in promoting trade between the two countries. Japanese ODA, through promoting the construction of economic infrastructure, has also made a contribution to the improvement of China’s investment environment and the promotion of Japanese non-governmental enterprises to invest in China. During the 20 years of Japan’s implementation of its ODA to China, the volume of China–Japan trade has increased nearly ten times (see Table 11.5), from $8.9 billion in 1980 to $83.2 billion in 2000. The accumulative total of Japan’s direct investment in China up to September 2000 reached $26.93 billion which is second place (see Table 11.6), after the United States, when compared with the investment in China by other foreign countries (Hong Kong and Macao are excluded). Especially after the beginning of the 1990s, there has been a positive, mutually promoting cycle of the growth of trade and direct investment, and Japan’s ODA to China has made an important contribution to this positive cycle. Table 11.5 Statistics of China–Japanese trade between 1980 and 2000 ($1 billion) Year

1980 1985 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000

China

Japan

Total

Export

Import

Total

Export

Import

89.08 164.40 165.99 202.50 253.80 390.33 478.9 574.7 600.6 608.1 579.0 661.7 831.7

39.93 56.10 90.11 102.19 116.78 157.79 215.7 284.7 308.7 318.2 296.9 324.0 416.5

49.15 108.30 75.88 100.32 136.82 232.53 263.2 290.0 291.8 289.9 282.1 337.7 415.1

94.01 189.59 181.82 228.08 289.02 378.38 462.45 578.5 624.4 638.5 569.8

50.78 124.77 61.29 85.93 119.49 172.73 186.80 219.3 218.9 217.9 200.9

43.23 64.82 120.53 142.15 169.53 205.65 275.65 359.2 405.5 420.7 368.9

855.2

303.5

551.8

Sources: Government of China (various years); Statistics Bureau (various years).

Table 11.6 Comparison of cumulative amount of direct investment in China by country and region, September 2000 (Unit: $1 billion, in rank order, according to the used amount of investment)

Number of cases Contracted amount Used amount

Hong Kong US and Macao

Japan

Taiwan Singapore South Korea

Britain

196,038 3,301.5 1,689.5

19,863 384.4 269.3

50,412 466.3 254.8

2,730 166.6 84.7

28,679 588.3 279.7

8,949 350.1 161.0

Sources: Government of China (various years); Statistics Bureau (various years).

14,488 177.7 94.8

Japanese aid to China 219 Japan’s grant loans to China and its technical cooperation with China, like European countries’ ODA, have made a positive contribution to China’s economic construction and social development. Significant results have also been achieved in helping the recipient units or local institutions with personnel training, technological progress, renewal of equipment, and improving administrative capability, thus creating good economic returns and positive social effects. Japan’s ODA to China’s agriculture has also made a positive contribution to the improvement of living standards and has helped farmers shake off poverty and build a better life in the agricultural regions. The core of grant aid is the “cultivation of the talented people.” Only by stressing the education and training of skilled personnel will grant aid become a “blood transfusion,” and go further to perform a “blood making” function (i.e. building indigenous economic capabilities) in the recipient countries. All the donor countries including Japan and the European countries attach great importance to the cultivation of talented personnel, and their ODA has not only played the role of a “blood transfusion,” but has also played the role, in varying degrees, of “blood making.” The new thinking and approach to promote future Japanese ODA to China The author believes that it is reasonable for Japan, after the economic recession of the 1990s, to make better use of ODA to do things that are beneficial both to the recipient countries and to itself, to promote economic cooperation with the recipient countries, and to continue to make neighboring Asian countries the major recipients of its ODA. In short, Japan’s ODA should contribute to invigorating the Asian economy, which includes Japan. It is in the interests of the world economy to help prevent the Japanese economy, the second-largest in the world, from sinking. As far as Japan’s ODA to China is concerned, the following three issues merit exploration: how to link ODA with China’s entry into the WTO, how to link ODA with the massive development of China’s western region, and how to link ODA with the global IT revolution. In a sense, all these three issues will mean a new stage for Japan’s ODA. Linking ODA with China’s entry into the WTO As far as China’s reform and development are concerned, a major significance of China’s entry into the WTO is to push the in-depth development of structural reform by making full use of the “external force” of opening up to the outside world and economic globalization. It is expected that after entering the WTO, Chinese enterprises will be confronted with intense and real international market competition. Therefore, China must speed up its genuine reform process. Japan was the first developed country to support China’s entry into the WTO. The study of the use of ODA in the future to enhance the support of Chinese economic restructuring and the reform of enterprises is an urgent issue. It is also a matter

220 Shaokui Feng which benefits both China and Japan, because Japan is considered the country, aside from China, that benefits most from China’s entry into the WTO.15 Linking ODA with the massive development of China’s western region In the past 20 years or so, China’s rapid economic growth has been achieved mainly through the development of the eastern region. In the next 20 years and beyond, China may achieve its sustained economic growth through developing the vast, and relatively backward, western region. This is where the difference lies between China and Japan, which is a narrow island country.16 Whether Japan’s ODA to China can continue to make a similar important contribution to the Chinese development of the western region as it did in the development of the eastern region, will decide whether Japan, which took part in China’s “first round of economic growth” centered on the eastern region, will participate in the process of China’s “second round of growth,” which includes both the eastern and western regions. In the meantime, the development of China’s western region should certainly be taken as “an issue of regional multinational cooperation.”17 The vast western region of China will not only be opened to the east through the eastern region of China, but will also be opened directly to the northwest and southwest of China. It will link Russia and central Asia in the east, and India, Pakistan, and the Indo-Chinese peninsula in the south, thus enabling China’s western region to become the “center and hub of the Eurasian Continental Bridge.” This means that Japanese participation in the Chinese development of the western region is participation in the construction of this “Eurasian Continental Bridge.” The current urgent issue for China’s development of the western region is still the construction of infrastructure such as railways, airports, communications, and energy. The construction of infrastructure in the interior of the western region can play the role of laying the groundwork for Japan and other industrialized countries to engage in direct investment and economic and trade activities in the western region. The Japanese scholar Morishima Michio once pointed out: “The investment return will be enormous if you put investment into developing the sleeping resources in the Chinese interior, building railways, reorganizing ports and getting the resources transported.”18 What merits attention is that the shift of emphasis of Japanese ODA towards the western region does not mean in any way the exclusion of the eastern region. As long as there are good projects beneficial to both Chinese and Japanese sides, they deserve support, whether in the eastern or the western region. Linking ODA with the global IT revolution The IT revolution is of great significance in promoting Chinese economic growth and social development, in pushing forward Chinese economic restructuring and the construction of a market economy regime, and even in promoting the process of Chinese democratization and political reform.

Japanese aid to China 221 To promote the Chinese IT revolution, the focal point of ODA should be on those fields where the market system cannot play a role, such as the construction of the infrastructure of electronic commerce, distance learning using internet technology (including hardware facilities such as the PC network required for distance learning),19 the construction of infrastructure of the information community such as Intellectual Telecommunication System (ITS), and urging China, Japan, and South Korea to initiate jointly the “standardization of Chinese characters” proposed by South Korean President Kim Dae Jung.20 The Japanese Ministry of International Trade and Industry (now called the Ministry of Economy and Industry) put forward in May 2000 “e-ASEAN” and “e-Asia” programs.21 It is necessary to use ODA to substantiate and carry out these programs.

Specific suggestions: a larger share of tied ODA for special projects Among the above-mentioned three fields, i.e. China’s entry into the WTO, the greater development of the western region, and the IT revolution, there exist some projects of special significance that need Japanese ODA. Keeping in mind both the necessity of looking after the interests of both the Chinese and the Japanese sides, and helping the Japanese economy out of its current difficulties, the two sides can adopt the approach of having an appropriate increase in the proportion of tied in ODA through consultations. Since the 1990s, the Japanese government has time and again used financial means to increase domestic public investment with a view to stimulating economic development, but a number of projects are in fact supported by “investment for its own sake,” and the economic results are very poor. It is in effect a waste of money. Japanese public finance situation is worsened by this practice, and these domestic financial difficulties become reasons to reduce ODA abroad. However, in order to result in a Japanese economic boom, it would be a better choice for the Japanese government to conduct high-efficiency investment abroad by increasing ODA rather than putting its public investment into low-efficiency investment domestically. Of course, this is conditional. The proportion of tied ODA should be increased for a limited number of special ODA projects. In the plan for the massive development of China’s western region, especially in the field of construction, there exist a number of these “special projects.” If the approach is taken to increase appropriately the proportion of Japan’s ODA devoted to Chinese development of the western region, it will increase Japanese exports, help the recovery of Japanese economic prosperity, and be conducive to the expansion of the process of building infrastructure in the western region. Therefore, adoption of the approach of “appropriately increasing the proportion of tied ODA limited only to the development of China’s western region” can achieve the “win-win” situation that benefits both sides and has a positive impact on the world economy. Generally speaking, the Chinese side, in the course of using Japanese ODA, is

222 Shaokui Feng reluctant to purchase relatively high-priced Japanese equipment, thus decreasing the proportion of tied Japanese ODA to China. The low proportion of tied aid becomes a practical reason for Japan to reduce ODA to China. However, proceeding from the special needs of China’s western region development, it is worth trying an ODA approach of purchasing around 20 percent of building materials and equipment at reasonable prices using tied Japanese ODA funds. Then all the Japanese enterprises, big, small or medium, will have a positive attitude. With the increasing improvement of the infrastructure in the central and western regions, more Japanese enterprises will be happy to engage in direct investment and other activities in the central and western regions of China. Nevertheless, an important prerequisite for the two sides to accept this “win-win scheme” is the improvement of general China–Japan relations. Only by having a friendly atmosphere can the two sides make a decision that not only takes their own interests into consideration, but also understands the other side’s practical difficulties. In the meantime, this should also have the understanding and support of the other OECD countries which are expecting the recovery of the Japanese economy. In short, there is a need to broaden the ODA approach and put forward even richer and more diverse ideas concerning the contents, forms, and scale of Japan’s ODA to China. It is appropriate to adopt the approach of “giving priority to projects and being more flexible with the total amount of the funds.”

Notes 1 For instance, Germany used ODA to help Shanghai and Guangzhou build subways, which provoked debates in the German parliament. 2 Japan Bank for International Cooperation (2000: 72–9). 3 Data from the Chinese Ministry of Foreign Trade and Economic Cooperation. 4 Ministry of Foreign Affairs, Japan (2000). 5 The author learned a lot from an exchange of views with Professor Zhou Hong of the Institute of European Studies, Chinese Academy of Social Sciences, on the characteristics of ODA of European countries, including Germany. 6 Japan Bank for International Cooperation (2000). 7 Shilong and Feng Shaokui (1996: 34). 8 From 1981 to 1983, China respectively signed agreements or protocols on bilateral development and cooperation with Australia, Canada, Germany, and Belgium, and it established aid and cooperation relations with the European Union and Japan under the mechanism of the bilateral mixed committee or annual conference. China also signed bilateral framework agreements on grant aid with the Netherlands, Norway, and New Zealand and it also had non-periodic development and cooperation relations with Sweden, Finland, and Luxembourg. 9 This is the common view shared by the author and the researchers of the Japanese Center of Economic Studies during their discussion. 10 In April 2001, the author had an in-depth discussion on this issue with Professor Hattori Kenji of Aichi University in Japan. 11 For instance, Jin Xide (2000). 12 Fuke (1999). 13 Yomiuri Shimbun, May 2, 2001. 14 Japanese International Cooperation Bank (2000). 15 In World Bank (1997), China in 2020, the World Bank calculated the amount of money

Japanese aid to China 223

16

17

18 19

20

21

the countries of the world will gain every year from China’s entry into the WTO. Taking 2005 for example, China will gain $83 billion. The amount of money other countries will gain from China’s entry will be as follows: $71 billion for the European Union, $38 billion for North America (the United States, Canada, and Mexico), and $61 billion for Japan. This means that China itself is the biggest beneficiary of its entry into the WTO, and Japan is the biggest beneficiary among all other countries. By making a rough calculation of the impact the changes in China’s customs tariffs on China– Japanese trade will have after China’s entry into the WTO, the prediction of the World Bank is persuasive. At an international seminar held in Kobe of Japan in November 2000, American Professor Ezra Vogel of Harvard University stated that the current Chinese development of the western area was very similar to the “program of reforming the Japanese archipelago” introduced in the early 1970s. At that time, after Japan achieved rapid economic growth mainly through developing the industrial zones along the coast of the Pacific Ocean, the country attempted to have another round of high economic growth through developing the relatively backward areas in Japan. Unfortunately, it came up against the oil crisis of 1973, which caused the failure of this program. This statement by Professor Vogel is indeed very interesting. But the writer believes that Japan may not have succeeded in achieving another round of high economic growth even if Japan had not come up against the oil crisis of 1973, because the Japanese islands are too small. Quoted from the speech given by Professor Shiukoku of the Japanese Municipal University of Nagoya at the Symposium on China–Japanese joint development of the western region (held in Chengdu, China). Michio Morishima (1999: 156). During Chinese President Jiang Zemin’s visit to Japan, China and Japan reached agreement on 33 cooperative projects, among them six projects concerned with information, but there was no mention of projects of distance learning. This is the proposal made by South Korean President Kim Dae Jung during his visit to Japan in October 1998. It is a very good proposal, but regretfully it has not so far received positive reactions from China and Japan. Japan Economic News, May 3, 2000.

12 Japanese aid to South and Southeast Asia A comparative analysis Haider A. Khan

Introduction Japan’s role in official development assistance is quite significant. Most of the increase in Japanese aid came in late 1980s. Between 1975 and 1989, the amount of ODA increased eight-fold in dollar terms. During the 1990s Japan also continued as a major donor in spite of the domestic economic slowdown. For example, in 1998 Japan’s total ODA was still US$10,731 billion approximately. In 1999, according to the OECD statistics the aid flow from Japan increased to $15.32 billion – an increase of 44 percent. At 1998 constant prices this amounted to $13.45 billion – still an increase of 26.4 percent in real terms.1 Much Japanese aid has historically been directed to Asia.2 As Yanagihara and Emig have pointed out, “This feature reflects not only geographic proximity, but also close historical, cultural, and economic relations, as well as Tokyo’s recognition of Asia as its logical sphere of responsibility in global burden-sharing.”3 Given the importance of Japanese aid overall, but especially in Asia, it is appropriate to ask how effective aid has been so far. The purpose of this chapter is to examine the question of Japanese aid effectiveness in a limited geographical context, namely for parts of South and Southeast Asia. Companion chapters in the same volume will look at other regions and sub-regions within Asia and elsewhere in the world. In this chapter, the available evidence at the macroeconomic level is reviewed to ascertain to what extent Japanese aid has promoted developmentrelated expenditures and projects in the South and Southeast Asian regions. Sections two and three will be devoted to these tasks. Some specific policy questions posed for this project in particular, will be addressed in section four. Since estimating the effectiveness of aid is a complex econometric exercise when done in a rigorous way, it seems best to motivate the discussion of this paper by using a hypothetical example.4 The example is constructed in two stages. A. Suppose a country receives one million dollars in foreign aid. For the moment we do not question the source of aid. All we are concerned about is how this aid is to be spent by the government which receives it. It might seem straightforward from the official budgetary documents in many LDCs that aid is spent on what economists call development expenditure – for roads, education, health, and, in some cases, plant and equipment. However,

Japanese aid to South and Southeast Asia 225 many studies have questioned this assumption. The type of policymaker becomes important. A developmentalist policymaker may allocate most of the $1 million received, allowance being made for institutional rigidities, uncertainty, and some human errors. However, what if the government is merely interested in bureaucratic expenditure? How much of the money will end up in the development budget? These questions point to the need to distinguish between developmental and statist policymakers. If aid is considered as a contribution to revenue in the budget, there is in this case an increase of $1 million in revenue. A fiscally conservative policymaker will not necessarily treat this as a windfall. On the other hand, a fiscally liberal (some might say irresponsible) policymaker may see this $1 million as net gain on the revenue side. In this case domestic revenue-raising efforts will be affected negatively. B.

We now introduce a further complication: aid may be given by bilateral or multilateral donors. In the first case, it may be another government, for instance, Japan. In the latter case, international organizations or a consortium of donors may be involved. The question to ask now is, given the type of policymaker, does the source of aid make any difference? How might public expenditures and revenues be affected?

One answer, of course, is that there is no difference. In this example, let us say that $750,000 went to the development expenditures in A above. It might turn out that regardless of the source this is what happens in step B also. However, this is not the only possibility. Roughly speaking there are two other broad possibilities. Either bilateral aid leads to more development expenditures than multilateral aid or vice versa. It is apparent now that we need a model that can distinguish both between types of policymakers and types of donors. We also need to do this in an institutional setting which is not too unrealistic. In this chapter, there is no formal model to evaluate aid effectiveness, but the criteria used conform to the discussion above. The appendix to this paper does contain a mathematical model formulated with the above requirements in mind in a bounded rationality setting. This can be used for further econometric assessment of the impact of Japanese aid. I will mention, where appropriate, some results from a limited number of countries on which some work has been done so far. In the next two sections I will briefly discuss the flow of Japanese aid to South and Southeast Asia respectively. Section four will be devoted to the question of aid effectiveness and further policy issues with the summary and conclusions following in section five. Section six is an appendix that outlines a mathematical model for analyzing and estimating the effects of foreign aid.

Japanese aid to South Asia According to the Asian Development Bank, the economic region of South Asia comprises Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, and Sri

226 Haider A. Khan Lanka. Together, these countries received almost $1.5 billion in 1998. This amounted to about 14 percent of the total aid disbursed by Japan for that year. There is wide variation in total aid received in absolute terms between the various recipients. In 1998, the range was from a low of $8.47 million for Bhutan to a high of $504.95 million to India. Generally, the size of aid varied consistently and almost proportionately with the size of the recipient country’s economy. However, Pakistan, which has a much smaller economy than India, received almost an equal amount of aid in 1998 – $491.54 million. Historically, Pakistan and India have been the two largest recipient countries, followed by Sri Lanka and Bangladesh, which shared distant third and fourth places between them. Small economies such as Bhutan or the Maldives have historically received smaller amounts, but almost all of the aid has been in the form of grants. A fraction of Japan’s aid to this region has come as technical cooperation grants. However, historically, the amounts have been quite modest. In 1998, for example, the total for the region as a whole was only $110.05 million. This amounted to just over 7 percent of the total Japanese aid received in the region. Even large countries like India and Pakistan consistently received very little in the way of technical cooperation grants. For example, India received only $20.51 million, or only 4 percent of the total aid received from Japan, as technical cooperation grants in 1998. Bangladesh was the country that received the largest amount in this category; but, even so, the actual amount was only $22.83 million. Before discussing the effectiveness of various categories of aid for this region, a comparison with Southeast Asia will be useful.

Japanese aid to Southeast Asia Southeast Asia as a region received more aid than South Asia in 1998. This also confirms a historical trend going back to the 1970s. In 1998, the total Japanese aid for the region was $2437.66 million – higher by about $1 billion than the aid flow to South Asia during the same year. One Southeast Asian country, Indonesia, was listed as the top Japanese aid recipient for 1999 by OECD sources. The total was $1749 million. Another Southeast Asian country, Thailand, ranked third after China, with a received aid flow of $953 million in 1999. For the same year, the Philippines and Vietnam were the fifth- and sixth-largest aid recipients respectively. Finally, another Southeast Asian country, Malaysia, took the tenth place with $235 million received in 1999. Thus, five countries in the region were among the top ten recipients of Japanese aid. This region has consistently been the major beneficiary of Japanese aid. Other than the entry of PRC in the list of major recipients nothing has happened to stem the flow. Technical cooperation grants have also been higher for this region than for South Asia. The total amount in 1998 was more than half a billion dollars or over 20 percent of the total. This compares favorably both absolutely and relatively with the corresponding figures for South Asia mentioned previously. Even small economies such as Laos or Cambodia received technical assistance grants that are

Japanese aid to South and Southeast Asia 227 comparable to those received by large South Asian recipients such as India or Bangladesh. In 1998 Cambodia received a total aid flow of $81.4 million, of which $23.05 million came as technical assistance. For the same year, Laos received $20.9 million in technical assistance grants out of a total amount of $85.57 million of Japanese aid to that country. Larger recipients like Indonesia and Thailand have routinely received technical assistance from Japan: between $100 and $200 million a year during the 1990s. For example, Indonesia received $203.67 million in 1995; Thailand received $147.46 million during the same year. Even wealthy countries such as Brunei and Singapore received technical assistance grants from Japan in the 1990s, albeit for much smaller sums. Among the developing countries in the region only Myanmar received a very small amount of aid and technical assistance relative to its needs. Thus Southeast Asia, along with China, is clearly Japan’s favorite region for channeling aid flows. Therefore, to a large extent, the overall effectiveness of total aid from Japan depends on whether aid has been effective in Southeast Asia. I now turn to an assessment of the effectiveness of Japanese aid.

Effects of Japanese aid and some policy issues In the late 1990s Japan announced a new approach to aid management, based on transparency and efficiency. Given this basic shift in aid philosophy, it is even more important now to assess the impact of the aid carefully. Ideally, a country-bycountry, sector-by-sector, and project-by-project study should be done, based on a uniform methodology. That ideal is not achievable at present, at least not in this chapter. In what follows the results from the macroeconomic impacts of Japanese vs. other donors’ aid are reported in two country studies – Bangladesh from South Asia and Indonesia from Southeast Asia. Answers to the following questions related to Japanese aid policy will be suggested, based on this author’s academic research, his experience as an economist at the Asian Development Bank, and as a consultant to various development organizations and Asian governments. These questions are: whether Japanese aid attaches central importance to promoting the self-help efforts of developing countries; focuses on building economic infrastructure; and emphasizes technology transfer in technical cooperation; whether request-based aid procedure ensures non-intervention in domestic political matters; whether ODA schemes and formulas are diverse enough; whether the decision-making system is overly centralized in Tokyo; and whether the decisionmaking process is drawn out in order to build consensus among stakeholders. I will also try to ascertain: the desirability of having Japanese government ministries select technical experts for overseas aid assignments; the effectiveness of emphasizing on-the-job-training (OJT) in technology transfer strategies; the degree to which project-based technical assistance is donor-driven in respect of identification, design, implementation and monitoring, and substantive areas of assistance; the merits and actual policy emphasis on various types of technical cooperation such as project vs. program formulas; the merits and actual policy emphasis on such efforts as the promotion of technology substitution, technology

228 Haider A. Khan transfer, and institution building; the quality and appropriateness of technical experts; and the quality and appropriateness of training techniques.

The macroeconomic impact: development vs. non-development expenditures – results from an econometric model The model is formally set out in the appendix. Roughly, it describes the behavior of policymakers according to their own type (e.g. whether they are developmentalist or not) and determines how much of the aid from various sources goes to either development or non-development expenditure. The model takes into account the potential effect of aid on development and non-development expenditure. The former types of expenditure include the public sector’s contribution to capital formation. Human as well as non-human capital are included. A third component of development expenditure is the government’s contribution to social and economic services, e.g. expenditure on health and general welfare. Nondevelopment expenditure is expenditure on state administration. These two types of government expenditure are financed by internal and external means. Domestic revenues include taxes, public enterprise surpluses, and borrowing. External assistance comes in the form of Japanese bilateral and other aid. Results from Bangladesh For the period, 1980 to 1999, Bangladesh received aid from both Japanese and other bilateral and multilateral sources. The model results show that on the whole Japanese bilateral aid was somewhat more effective in generating developmental expenditures than other aid. Indeed, it is striking that for both developmentalist and non-developmentalist types of policymakers, Japanese bilateral aid seems to have had a greater impact than other aid in almost every case of development expenditure. It is also interesting that approximately 25 to 31 percent of Japanese aid goes to development expenditure on the margin if the policymaker is non-developmentalist. On the other hand, the corresponding percentage of aid going to development expenditure, if the policymaker is developmentalist, is between 51 and 64 percent. Thus it would be appropriate to conclude that in terms of influencing development expenditure in Bangladesh, success for Japanese bilateral aid depends on the type of policymakers there are in Bangladesh; however, regardless of which type made policies in the last two decades, Japanese aid fared better than non-Japanese aid. In addition to revealing the influence of Japanese aid, the results also indicate that the type of policymaker really can make a difference. It also makes a difference in terms of financing development expenditure out of domestic revenue. For a non-developmental policymaker, rather dismally, the model implies that between 78 and 85 percent of domestic revenues may go to non-development expenditure when policymakers are able to tap foreign aid funds. What kind of policymakers made the decisions in Bangladesh regarding development? This is a particularly fascinating question, but it is hard to answer in

Japanese aid to South and Southeast Asia 229 a definitive fashion. Within the context of the model, the best guess one can make must use a great deal of reliable institutional history. On the whole, however, a picture of at least partial (but far from total) commitment to genuine development objectives emerges.5 It is also possible to offer some econometric evidence to corroborate the above characterization. Akaike information criterion or AIC is a model-selection criterion that can be applied to any model that can be estimated by the maximum likelihood method. One simply minimizes (2LogL)/n + 2k/n, where k is the number of parameters in the likelihood function L, and n is the number of observations. Particularly for a non-linear model, the AIC is a convenient econometric discriminator among different model specifications. It would seem that, by this criterion, during the period of observation statist concerns dominated the real fiscal agenda in Bangladesh. This, too, seems to be consistent with the institutional studies and my own informal observations. If the presence of aid pulls some money out of the domestic revenue for nondevelopment purposes, one has to be cautious about its overall effects. Only if the substitution effect is not too high (i.e. if aid does not completely replace development expenditure that would have been financed out of domestic revenues) will there be an incremental effect of aid on development expenditure. Under this scenario, also, Japanese bilateral aid turned out to be more effective. Results from Indonesia – development vs. non-development expenditure Just as in Bangladesh, it is striking that, for both developmentalist and nondevelopmentalist types of policymakers, Japanese bilateral aid seems to have had a greater impact than aid from the rest of the world on development expenditure types. In the presence of Japanese aid, approximately 26 to 39 percent of this aid goes to development expenditure on the margin if the policymaker is nondevelopmentalist. On the other hand, the corresponding percentage of aid going to development expenditure is between 67 and 53 percent if the policymaker is developmentalist. What kind of policymakers made the decisions in Indonesia regarding development? This is a particularly fascinating question, but is hard to answer in a definitive fashion. The best guess one can make must use a great deal of reliable institutional history. In the case of Indonesia this is largely unavailable. The books and articles written on this subject deal at best with particular episodes. On the whole, however, again, like Bangladesh, a picture of at least partial commitment to genuine development objectives emerges. This is also consistent with this author’s field research in Indonesia and collaboration with Indonesian and non-Indonesian academics and development practitioners on the subject. As in the case of Bangladesh, there is some econometric evidence to corroborate the above characterization. It would seem that by the previously mentioned Akaike information criterion at least, in Indonesia both developmental and statist concerns dominated the real fiscal agenda during this period. This, too, seems to be consistent with the institutional studies and my own informal observations.

230 Haider A. Khan

Some institutional and policy issues Turning now to the questions raised at the beginning of this section, it is clear in light of the above, that rigorous answers would require further data gathering and econometric estimation. For example, technical assistance could be distinguished from other forms of Japanese aid for model formulation and estimation. In fact, this looms as a major future task. For the moment, one has to rely on institutional knowledge and expert opinion to address the questions raised earlier. As far as promoting self-reliance is concerned, the results, as perceived by the policymakers in these two regions, seem to have been mixed. On the one hand, some technical projects, such as the capability for input–output matrix data generating for the BPS (Biro Pusat Statistik), the Indonesian Central Statistical Bureau, that was aided by the Institute for Developing Economies, have been a success. On the other hand, Indonesian experts express some misgivings about large-scale, especially infrastructural projects, where technological learning may not be taking place rapidly enough. Thus, while emphasis on infrastructural projects may be correct at the present stage of development in South and Southeast Asia, the transfer of technology and skills could be speeded up. Training of local personnel and use of local businesses and professionals whenever available would be an appropriate policy move. As far as intervention in the domestic policy formulation of the recipients and their domestic politics is concerned, the Asian policymakers generally compare Japan favorably to the United States. In their view, the United States has a history of using aid for political purposes, whereas Japan uses it for economic and, increasingly in recent years, for humanitarian purposes. At the same time, smaller European countries such as the Netherlands and the Scandinavian countries are perceived as being the fairest donors. In terms of the diversity of aid schemes and formulas, the recipients perceive a lack of transparency on the part of the Japanese government. In Bangladesh, several NGO representatives expressed a desire to see greater allocation and involvement of Japanese aid in health, education, and gender-related projects. Health-oriented efforts such as those by Shapla Neer (Citizen’s Committee in Japan for Overseas Support, an NGO) are greatly valued and appreciated. The environment is another area where there is a perceived need for greater funding than is currently the case. Remarks heard about the lack of transparency are echoed when the centralization of the Japanese aid decision-making procedure in Tokyo is mentioned. However, many South and Southeast Asian policymakers think that the other donors are also centralized and hamstrung by an aid bureaucracy that is largely unaware of recipient needs and unwilling to listen. I will now also try to ascertain: ●

the desirability of having Japanese government ministries select technical experts for overseas aid assignments;

Japanese aid to South and Southeast Asia 231 ●

●

●

●

● ●

the effectiveness of emphasizing on-the-job-training (OJT) in technology transfer strategies; the degree to which project-based technical assistance is donor-driven in the following respects: identification, design, implementation and monitoring, and substantive areas of assistance; the merits and actual policy emphasis on various types of technical cooperation such as project vs. program formulas; the merits and actual policy emphasis on such efforts as the promotion of technology substitution, technology transfer, and institution building; the quality and appropriateness of technical experts; the quality and appropriateness of training techniques.

On all of the above issues there is a surprising amount of unanimity among the Bangladeshi and Indonesian policymakers and other aid constituencies. In particular, they all agree that much Japanese aid is donor-driven, beginning with the identification of projects and programs. In their view, the design, implementation, and monitoring are also one-sided. In terms of the quality and appropriateness of technical experts, these show wide variations. Over time, the quality has improved. Also, as Japanese universities and training institutes pay more attention to the training of development professionals and devise improved curricula, the sought-after quality improvement seems to be taking place. Young Japanese who learn Asian languages and culture seem to be better appreciated, and are probably more effective than are those with simply advanced academic training from Western institutions without the cultural assets. While it is desirable to have these Japanese experts who have the requisite technical skills and cultural sensitivities, a sense of partnership with local experts seems to be missing. The ideal should, therefore, be a mix of rigorous technical training and cross-cultural sensitivity geared towards building a permanent partnership in development. Finally, the merits and actual policy emphasis on such efforts as the promotion of technology substitution, technology transfer, and institution building should be mentioned. Here, neither Japan nor any other donor gets high marks. At the same time, my own views, based on discussions in Asia, are that Japan, in spite of a history of aggression in Southeast Asia, is perceived as potentially more capable of accomplishing these goals. In South Asia, particularly India and Bangladesh, there is much goodwill among the policy elite and at the popular level towards Japan. Although the political history is complex, Subhash Bose and the Indian National Army were supported by Japan in their sincere and self-sacrificing revolutionary war for independence against British imperialism. Culturally, also, the links through Buddhism and other elements still find a warm echo in the hearts of the people even after so many centuries. If Japan shows a sincere commitment to transfer technology, helps build institutions of popular participation, and demonstrates a genuine interest in transferring skills in a credible way, it can easily establish itself as the most helpful donor in South and Southeast Asia.

232 Haider A. Khan

Conclusions In this chapter I have tried to survey the current state of Japanese aid giving and its impact on South and Southeast Asia. Clearly, Japan comes out ahead of many Western donors, particularly large ones such as the United States and the United Kingdom. However, other smaller Western donors are also looked on favorably by the recipients. But, in all cases, there seems to be a perception that local voices are not being heard, and that the manner of giving aid is more bureaucracy-tobureaucracy than people-to-people. Better training of technical personnel and more knowledge of the history, geography, and cultures of the recipients will be helpful. Language training should also be an integral part of this. There is a widespread perception that in its bid to catch up with the West, Japan lost its interest in the rest of Asia and its own deep cultural bonds. A refocusing on Asia in a deeper way may help Japan regain its own cultural balance as well. Another problem for Japan to avoid is to look too insistently on its own economic history to find policies for other Asian countries. As my Japanese colleagues, K. Ohio and K. Sakurai have pointed out: The conditions of Japan in those days and those facing the developing countries and the transitional economies today are different. If the conditions are different, the policies and directions that need to be pursued are not necessarily equivalent. These conditions not only include economic aspects, such as the international setting, developmental stage, levels of capital and labor force, human capacity and population, administrative capacity of the government, but also historical, cultural, social, and geographical conditions.6 It is to be hoped that by listening to such sage advice from within and outside Japan, and using its own historical experience as a partial guideline, Japanese aid policy in the future will be guided more fully by both impartial economic analysis and a political and cultural dialogue between Japan, on the one hand, and South and Southeast Asia, on the other.

Appendix: A bounded rationality model for econometric estimation of the impact of Japanese and other aid The asymmetric loss function model for allocation of foreign aid The policymakers minimize a loss function subject to expenditure constraints. In most general terms, the (quadratic-ratio) loss function, L, is given by α0 + ∑i (αi/2) (ij/ik)β, if j = *, then ik = i, if k = *, then ij = i, i = R, D, N, β ≥ 2.

(1)

Japanese aid to South and Southeast Asia 233 j and k are related in the following way: if j (respectively k) represents the indicator value (symbolized by *) then ik (respectively, ij ) equals i. i and j can be R, D, or N (domestic revenues, development expenditures and non-development expenditure, respectively). The simplest non-linear model which is also asymmetric and economically meaningful, is obtained when β = 2. Note that for exact fulfillment of the chosen indicator levels, L = α0 + (αR/2) + (αD/2) + (αN/2). The policymaker is making decisions on various categories of public expenditure. Each decision will reflect on her abilities, possibly her status, or even her job. In an uncertain environment, the best she can do is to reach the stated chosen indicator value. The loss function stated in equation (1) has the advantage of allowing for asymmetries in loss when the policymaker over- or undershoots the chosen indicator level. It also allows us to examine different assumptions about the “type” of the policymaker. For example, writing the loss function explicitly as a0 + (aD/2)(D*/D)2 + (aN/2)(N/N*)2 + (aR/2)(R/R*)2

(2)

illustrates a policymaker who is “developmentalist” in orientation; undershooting the development expenditure indicator value is worse than overshooting it. At the same time, the above policymaker is a “fiscal liberal,” since overshooting the revenue-raising indicator value is worse then undershooting. Such policymakers are not very worried about the emergence of an inflationary gap. These bureaucrats are also “non-statist” in that overshooting non-development expenditures is worse than undershooting. Statist bureaucrats who seek to maximize the resources that the state uses to reproduce itself would have loss functions that are asymmetric in exactly the opposite direction with regard to the composition of public expenditure. All in all, there are eight possible characterizations. Part of our problem is to explore which of these characterizations captures the behavior of policymakers “best” in an empirical setting. Given the type of policymaker, the decision-making problem can be described as the minimization of a specific form of equation (1). The economic and institutional constraint to which this minimization problem is subjected is the following: N + D = R + AB + A M The above, of course, is the accounting identity that expenditure equal receipts. To capture the distribution of foreign aid and domestic revenues into budgetary categories we instead write D = (1 – ρR)R + (1 – ρB)AB + (1 – ρM)AM

(3)

and N = ρRR + ρBAB + ρMAM

(4)

(1 – ρR), (1 – ρB), and (1 – ρM) are the fractions of domestically raised revenues,

234 Haider A. Khan bilateral aid and multilateral aid, respectively, allocated to government development expenditure. These two constraints reflect alternative uses of government revenues augmented by foreign assistance.7 The first constraint allows for the possibility that D can be financed partly by domestic revenues and partly by different sources of foreign aid. The second constraint assumes that domestically raised revenues, and foreign aid not used for development purposes, go towards non-development government expenditure. The model thus involves a trade-off between development and other spending by the government. It is a theoretical model of the implications of recipient preferences that can be used to determine the fiscal behavior of the government in the presence of foreign aid. Solving the constrained loss minimization problem leads to a set of non-linear simultaneous equations. The direction and extent of the impact of bilateral and multilateral foreign aid on N and D can be estimated econometrically with the help of these equations.

Notes 1 OECD (2001). 2 In 1998, Asia received US$5,372.03 million or slightly more than 50 percent of total aid disbursement by Japan. See Ministry of Foreign Affairs, Japan (2000). 3 Islam (1991: 18). 4 For econometric work on some countries in these regions see Gang and Khan (1991) and Khan and Hoshino (1992); also unpublished work by the same authors. The appendix contains a prototype model that can be used for future work in evaluating the effectiveness of Japanese aid. 5 This is also consistent with my own visits to Bangladesh and extensive conversations with Bangladeshi and other academics and development practitioners on the subject. Since I speak and read Bengali, it was easy for me to meet and talk with people from many different backgrounds. 6 Higashi Ajia no Kaihatsu Keizaigaku, translation in OECD (1999: 23). See also Ohno and Ohno (1998) and the contributions therein. 7 One would like the allocation of aid among budgetary categories to be the outcome of a utility maximizing problem. Incorporating fungibility into a decision-making problem as a sub-problem is extremely difficult. Use of a single budgetary constraint a priori assumes that aid is 100 percent fungible. While not directly addressing the fungibility issue, our approach does not a priori assume 100 percent fungibility; it does look at the allocation of aid among budgetary categories.

13 Japan’s ODA in the Pacific island states Sandra Tarte

Introduction The Pacific island countries, referred to as Oceania in Japan’s Official Development Assistance (ODA) reports, comprise a region of 14 independent and selfgoverning states. They are Papua New Guinea, the Solomon Islands, Vanuatu, Fiji, Tonga, Samoa, the Cook Islands, Niue, Nauru, Tuvalu, Kiribati, the Marshall Islands, the Federated States of Micronesia and Palau. Foreign aid, or ODA, plays a key role in the economies of almost all these countries. In a region marked by often extreme diversity, one common characteristic of most Pacific island economies is a heavy reliance on aid to finance development programs. The ratio of development assistance to GDP is around 20 percent for many countries. For a few states it is much higher (for example, Tuvalu has an aid to GDP ratio of 63 percent) (see Table 13.1). Aid finances the bulk of capital expenditure in Pacific island countries and has sustained high levels of funding in public sectors and in infrastructure Table 13.1 Pacific islands basic indicators

Cook Islands Fiji FSM Kiribati Marshall Islands Nauru Niue Palau PNG Samoa Solomon Islands Tonga Tuvalu Vanuatu

Population (1998) 000

Land area sq km

Exclusive economic zone 000 sq km

GDP per capita (1998) US$

16.5 797.8 114.1 85.1 61.1 11.5 2.1 18.5 4,149 174.8 417.6 98.0 11.0 182.5

237 18,272 701 811 181 21 259 488 462,243 2,935 28,330 747 26 12,190

1,830 1,290 2,978 3,550 2,131 320 390 629 3,120 120 1,340 700 900 680

3,339 2,110 1,800 1,180 1,540 8,000 1,600 3,289 1,278 1,020 750 1,690 1,480 1,270

Aid as percentage of GDP

2.4 37.4 18.6 49.3

20.6 14.4 16.0 63 18.1

Source: United Nations Development Program (1999); South Pacific Commission (1993).

236 Sandra Tarte development. As a result of ready access to aid, most island states have enjoyed relatively stable balance of payments positions. Aid is also a factor contributing to the favorable human development standards in the region. In the mid-1990s, however, it was observed that aid may have contributed to inefficiencies in the public sectors, allowing governments to postpone or avoid economic and financial adjustments.1 The late 1990s saw Pacific island countries adopt programs of economic, public sector, and governance reforms aimed at, amongst other things, improved public financial management. Such programs have been supported by development assistance from regional donors.2 Aid donors to the region fall into two categories: bilateral and multilateral. The bilateral donors in turn may be divided into two groups: those donors which are members of the Development Assistance Committee (DAC) of the Organization of Economic Cooperation and Development (OECD) and those which are not DAC member countries. The leading donors to the region belong to the first group and include Australia, Japan, the United States, New Zealand, the United Kingdom, and France (see Table 13.2). Donors belonging to the second group are less prominent. They include the People’s Republic of China, the Republic of Korea, and Taiwan. The principal multilateral donors to the region are the European Community, the Asian Development Bank, and the United Nations Development Program. ODA to the Pacific island countries mainly comprises technical assistance, capital grants, and soft loans. Grant aid is generally given “in kind” – as infrastructure, goods and services, technical expertise, and training. Most countries also receive small amounts of budget support. In the past, Papua New Guinea was the main anomaly in this regard, receiving most of its aid in the form of budget Table 13.2 Bilateral aid flows to Pacific island countries, 1997 and 1998 (latest comparative figures) (US$million) Australia

Japan

New Z

US

France

1997 1998 1997 1998 1997 1998 1997 1998 1997 1998 Cook Islands Fiji FSM Kiribati Marshall Islands Nauru Niue Palau PNG Samoa Solomon Islands Tonga Tuvalu Vanuatu

1.2 13.9 0.8 4.9 0.6 2.2

1.2 0.1 0.4 5.7 11.2 16.9 19.2 5.4 0.8 12.8 8.1 0.2 5.0 6.7 8.5 2.4 0.3 5.5 9.4 0.2 1.8 0.4 0.2 0.5 0.1 0.3 0.2 13.8 10.5 228.3 49.2 6.6 9.1 8.2 10.1 14.8 6.1 8.1 8.0 21.0 10.1 5.2 7.8 6.3 8.0 5.0 5.6 0.8 1.9 6.7 1.0 1.7 8.4 9.1 2.8 3.8 4.6

4.3 4.4 0.2 2.0 0.1

1.0 0.2 70.0 64.7 0.6 46.0 32.4

1.0

0.6

0.2 –0.1 0.4 0.1 7.6

0.1

3.4

5.6 4.5 4.3 1.6 4.4

Source: AusAID (2001: 79), Ministry of Foreign Affairs, Japan (1999).

24.0

87.3

1.0 1.0 1.0

0.7 0.8 0.6 0.7

0.6 0.3 8.1

Japan’s ODA in the Pacific island states 237 support from Australia. However, since the mid-1990s, Australia has moved progressively towards providing program and project aid to Papua New Guinea. The changeover from direct budget support to program aid was completed in 1999. The other exception to aid “in kind” is the financial transfers by the United States to its former Trust territories – the Marshall Islands, the Federated States of Micronesia, and Palau. While the bulk of aid to the region (about three-quarters) is provided on a bilateral basis to Pacific island governments, an increasing amount of aid is also being directed at Pacific island regional organizations. The main ones are the Pacific Islands Forum Secretariat, the University of the South Pacific, and the Secretariat of the Pacific Community. This aid includes extra budget support, as well as infrastructure and technical cooperation. The principal donors to the regional organizations are Australia, New Zealand, the European Community, Canada, and Britain.

Overview of Japan’s ODA to the Pacific islands Japan’s aid to the region began with a grant to Papua New Guinea in 1975. In the following five years Japan extended grants to Tonga, Samoa, the Solomon Islands, Fiji, Kiribati, and Tuvalu. Japan remained a relatively marginal aid donor to the Pacific islands until the mid-1980s, when it initiated a series of aid-doubling plans. Between 1984 and 1989, Japan’s grant aid to the region increased from ¥3805 million to ¥9281 million. In the 1990s its grant aid flows have stabilized at between ¥7000 and ¥8000 million per annum, while technical cooperation remains at around ¥4000 million per annum. 3 Japan is now the largest or second-largest bilateral donor to 11 countries in the region: Fiji, Kiribati, Nauru, Papua New Guinea, the Solomon Islands, the Federated States of Micronesia, the Marshall Islands, Palau, Tuvalu, and Samoa.4 It is also the largest external donor to the Pacific Islands Forum (not including Australia and New Zealand who are Forum members).5 Almost all Japan’s aid to the region is in the form of grants and technical cooperation. Only two countries, Papua New Guinea and Fiji, have received yen loans (Fiji received its first yen loan in 1997). The Japanese government’s rationale for this emphasis on grant aid is that small island economies have limited demand for large-scale infrastructure projects and limited capacity to service loans.6 Within the grant aid component, a significant feature has been the high proportion of fisheries grant aid. In the first ten years of Japan’s ODA to the region, 70 percent of total grant aid was allocated from the fisheries grant aid budget. Since then, Japan’s grant aid has diversified into the health, education, communications, and transport sectors. However, fisheries grant aid still dominates Japan’s aid to several Pacific island countries, including Kiribati, the Federated States of Micronesia, the Marshall Islands, Palau, and Tuvalu. Moreover, while the region has received a small share of Japan’s total bilateral aid (about 1 percent), it has received a comparatively large share of Japan’s fisheries grant aid (about 20 percent).7 The original motivation and rationale for Japan’s aid to the Pacific islands was

238 Sandra Tarte resource security and specifically securing access for its fishing fleets to the region’s tuna stocks. The declaration of 200-mile exclusive economic zones by Pacific island states in the 1970s enclosed some of the world’s, and Japan’s, most productive fishing grounds. Fisheries grant aid was the principal instrument for both securing fishing rights to the exclusive economic zones of the island states and contributing to their development. In the 1980s Japan also grew concerned about possible Soviet influence in the region, and in early 1987 the Japanese Foreign Minister visited Fiji and announced a major increase in Japan’s aid to the Pacific islands. This policy (known as the Kuranari Doctrine) was motivated by geopolitical considerations, as well as a desire to demonstrate support to the United States in assuming a greater share of the “security burden.”8 Overall, the Cold War encouraged high levels of aid to the region. Strategic concerns helped convince some donors to adopt quite innovative policies that responded to the demands of the island states. An example was the United States Fisheries Treaty with Certain Pacific Island States, concluded in 1987. This provides the region with about US$18 million per year, mostly in US government cash grants and fisheries-related technical assistance. This serves as payment for access to the economic zones of certain Pacific island states. The treaty aimed to counter Soviet inroads into the region, while securing fishing access for US tuna fleets. However, it put increased pressure on Japan to enter into a similar multilateral arrangement, which Japan resisted, preferring bilateral agreements. In order to counter these demands, Japan provided additional fisheries aid to the region, including enhancing its technical cooperation provided through the Overseas Fisheries Cooperation Foundation (OFCF). A regional OFCF office was opened in Fiji in 1990 to coordinate this assistance (see below). The end of the Cold War led to a shift in donor policies. For some traditional donors (such as Britain and the United States) there were less compelling reasons for providing aid to the region. This factor, as well as the rise of new priority areas for donors, led to a scaling back of some programs to the region. The United States announced the closure of its South Pacific aid office in 1994, while Britain narrowed the focus of its South Pacific aid to two sectors: education and good governance. US assistance was focused on its three former Trust territories (the Federated States of Micronesia, the Marshall Islands, and Palau, as well as the fisheries treaty), while the United Kingdom began to focus more on providing aid through the European Community and other multilateral channels.9 France was the only donor to significantly increase its South Pacific aid in the 1990s. Following the cessation of its nuclear testing program in 1996, France announced it would more than double its development cooperation to the region: from FF10.7 million to FF25 million. The post-Cold War era also saw a change in emphasis in the policies of major donors (such as Australia, New Zealand, Britain, and the Asian Development Bank) towards support for macroeconomic stabilization, structural adjustment, and public sector and governance reform. Japan’s aid to the Pacific islands in the 1990s was sustained at relatively high levels. These aid flows were motivated by a combination of commercial, resource, and political interests. In the latter category is Japan’s desire to demonstrate global

Japan’s ODA in the Pacific island states 239 leadership, especially in respect of development assistance and of representing Asia-Pacific interests in global forums (such as the G-8). In addition, Japan seeks to secure the support of Pacific island states in international forums (especially the United Nations), where the region forms a significant voting bloc. To enhance its influence in the region, Japan has provided increased financial support to the premier regional organization in the Pacific, the Pacific Islands Forum. It has also convened two Pacific island heads of government summits in Tokyo – in 1997 and in 2000. Japan’s resource interests in the Pacific mainly center on access to and utilization of resources (primarily fisheries and forests) and on environmental conservation. The region remains of paramount importance as a source of fresh tuna – supplying about one-third of Japan’s domestic market. Japan is the largest distant-water fishing nation in the region (and has bilateral fishing agreements with eight Pacific island countries). It is also a major importer of tuna from the region. For these reasons it has a strong interest in regional fisheries management and conservation regimes.

Japan’s technical cooperation to the Pacific islands The Pacific islands receive around 2.7 percent of the total technical cooperation provided by the Japan International Cooperation Agency ( JICA). Japan’s technical cooperation to the Pacific islands is coordinated by regional JICA offices in Papua New Guinea, Fiji, and Samoa. The Fiji office, established in 1984, has by far the widest coverage. It is responsible for technical cooperation to Fiji, Tonga, Vanuatu, Tuvalu, Kiribati, Nauru, the Marshall Islands, the Federated States of Micronesia and Palau. This policy of using Fiji as a regional headquarters is not confined to Japan alone. A number of embassies and international organizations are based in Fiji, from where they cover a wider regional area. Major regional organizations are also based in Fiji, including the Pacific Islands Forum Secretariat, the University of the South Pacific, the South Pacific Applied Geoscience Commission, a large part of the Secretariat of the Pacific Community, and the Tourism Council of the South Pacific. Japan’s technical cooperation to the Pacific islands comprises the dispatch of volunteers, experts, and study teams to the region, the dispatch of trainees to Japan, and the provision of equipment. The largest component of the budget is absorbed by the JOVC volunteers, and this also includes the dispatch of senior volunteers. For a distribution of technical cooperation by country, see Table 13.3. In terms of sector coverage, most experts and study teams tend to be in the fisheries sector, while volunteers and trainees are more widely dispersed, though mainly in human resource development, public administration, public health, and social welfare.10 Although there have been some cases of project-type technical cooperation in the past, this is generally not provided to Pacific island countries. Project-type technical cooperation is seen as too much of a burden on small island states.11 Instead, there is an emphasis on smaller-scale and shorter-term projects, comprising

240 Sandra Tarte Table 13.3 Japan’s ODA flows to Pacific island countries covered by JICA Fiji office, 1999 (US$ million)

Fiji Tonga Vanuatu Tuvalu Kiribati Nauru Marshall Islands FSM Palau

T/C

Grants

Train

Expert

JOCV

SV

Equip

D/S

9.73 4.13 2.40 0.30 1.73 0.44 2.59 4.94 3.26

11.14 1.40 5.15 0.26 10.35 4.01 6.64 1.89 8.85

105 33 18 6 21 2 6 18 7

19 4 3 0 2 2 1 8 5

49 51 23 0 0 0 23 48 26

6 0 0 0 0 0 0 0 0

35.53 25.72 49.97 0 0.23 0 3.18 7.05 5.32

1 0 0 0 0 0 0 0 1

Source: JICA Office, Suva. Notes T/C = technical cooperation Train = trainees (number of persons) SV = senior volunteer (number of persons) Equip = equipment supply (million yen) D/S = development survey (number of projects)

individual experts, trainees, and equipment. As the 1999 JICA report states: “similar effects to those achieved by project-type technical cooperation are being aimed at using a combination of individual expert dispatch, acceptance of training participants and equipment supply schemes.”12 One example is the Fiji Health Promotion project, provided as a joint project with Australia. This included a combination of equipment supply, training, and dispatch of experts. Australia provided support for workshops, equipment, and research. Although the project was completed in 1998, it continues to receive support from Japan in the form of a senior volunteer. As a general rule, technical cooperation is treated administratively as a separate component of Japan’s grant aid program. However, technical cooperation may be provided in conjunction with grant aid projects. Volunteer engineers, working under the JOVC scheme, are sometimes involved in the design and implementation of grassroots grant aid, such as small bridges and crossings. Volunteers also help maintain equipment at hospitals provided as grant aid (for example, the pediatric unit at Fiji’s Colonial War Memorial Hospital). One area where technical cooperation is regularly provided in conjunction with grant aid is in the fisheries sector. This area benefits from two sources of technical cooperation – JICA and the OFCF. The OFCF, which is under the jurisdiction of the Japan Fisheries Agency in the Ministry of Agriculture, Forestry and Fisheries, disburses technical cooperation in the fisheries sector. The relationship between OFCF and the Fisheries Agency is similar to that between JICA and the Ministry of Foreign Affairs. However, the OFCF is more closely related to the private sector in Japan. It was originally formed in 1973 as a joint initiative by the Fisheries Agency and industry groups in Japan, to subsidize cooperation between Japan’s distant-water fishing fleets or

Japan’s ODA in the Pacific island states 241 trading companies and coastal states. Such cooperation includes soft loans for joint ventures between Japanese firms and coastal states, the dispatch of experts or instructors, receiving trainees in Japan, and equipment supply. Although it has global reach, the largest share of OFCF technical assistance is provided to the Pacific islands.13 In the region, collaboration between JICA and OFCF takes the form of regular meetings and information exchange between the Embassy of Japan in Fiji (where a Fisheries Agency official is posted), the JICA regional office, and the OFCF regional office. These meetings, however, only began in 1998. In addition, OFCF personnel help identify potential fisheries grant projects, undertake feasibility studies for cooperation, and evaluate the fisheries grant aid program for the Ministry of Foreign Affairs. In general, OFCF helps ensure that fisheries grants are provided in line with Fisheries Agency policy, which is to allocate such grants to those countries that have bilateral access agreements with Japan. OFCF and JICA collaborate in the provision of technical cooperation. When fisheries grant aid is provided for infrastructure (such as a fishermen’s training center or fisheries support stations), JICA may provide experts and send trainees to Japan, while OFCF may provide equipment and instructors. OFCF also coordinates and implements a region-wide project: technical rehabilitation and maintenance of fisheries facilities. This provides technical cooperation to ensure the maintenance of fisheries grant aid given by Japan. The OFCF technical cooperation to the Pacific islands amounts to about ¥1,000 million per annum, and is provided exclusively to those countries with which Japan has bilateral access agreements.

Positive and negative features, with comparison to other aid donors Sectoral coverage As noted above, there is a significant emphasis on the fisheries sector in Japan’s grant aid and technical cooperation to the Pacific islands. This is viewed positively by the recipient countries because the fisheries sector (coastal and off-shore) is important to the economic development of all the Pacific island states. Moreover, Japan has special technical expertise in this field, being a major fishing nation itself. Japan’s support for the fisheries sector is all the more important given the fact that other major donors do not normally target this area. As a senior Tongan official pointed out: “What we like about Japan is that they will give us things that other donors will not – such as fisheries research vessels.”14 Other donors that do provide aid to the fisheries sector emphasize different areas and different types of aid compared to Japan. Australia and New Zealand each contribute approximately one-third of the budget of the South Pacific Forum Fisheries Agency, as well as supporting its extra-budgetary activities.15 Neither Australia nor New Zealand provide fisheries aid on a bilateral basis. Indirect assistance to the fisheries sector is provided by Australia through its regional

242 Sandra Tarte patrol-boat scheme. Under this scheme, island states are provided with vessels to patrol their exclusive economic zones and guard against unlicensed fishing operations. Almost all of Canada’s aid to the region is channeled through the Canada–South Pacific Ocean Development Fund (C-SPOD). This is managed by the Pacific Islands Forum Secretariat and supports regional programs for the management of living ocean resources. These include the University of the South Pacific’s marine studies program and the work program of the South Pacific Forum Fisheries Agency. A negative aspect of the emphasis by Japan on fisheries aid is that many recipients perceive it to be tied to the access agreements that the Japanese fishing industry negotiates with island states. There is a broad perception that fisheries grant aid is provided only on condition that an access agreement is in place (some officials even believe that general grant aid may be linked to fisheries agreements). While some countries are concerned about this linkage, particularly countries that would like to receive fisheries aid but are “not eligible,” others feel such linkage is understandable and ensures mutually beneficial ties between Japan and the region. Moreover, some countries feel that the access agreements provide them with some leverage and bargaining power when negotiating with Japan on aid projects.16 Recommendation 1: Continue emphasis on the fisheries sector but urge delinking fisheries aid and access agreements so that countries who wish to receive such aid may do so regardless of fisheries agreements. It may be necessary to clarify Japan’s policy on provision of fisheries grant aid and technical cooperation to ensure misunderstandings do not arise on the part of recipients. The other major bilateral donor to the region, Australia, emphasizes economic and public sector reform in its aid program – both in its regional and bilateral programs. This reflects its own experience of implementing public sector reform and performance management in Australia over the past 15 years. Such experience has, according to one AUSAID official, “been put to good use in the Pacific.”17 This assistance (as examined below) often takes the form of advisors or consultants, technical experts and in-country training workshops. The emphasis is on institutional strengthening and policy-oriented aid projects. An example of such cooperation in Fiji is a A$7.5 million project for the reform of Fiji’s Ministry of Health. This aims to “assist Fiji to improve the delivery of health services through decentralization and the building of management capacity within the health sector.”18 Since 1997, Pacific island countries have formulated and implemented a regional economic reform agenda. In this context, countries have called for closer cooperation with aid donors and better coordination of assistance to support economic reform. They want greater use of consultative meetings that include all donors (development partners) in formulating aid programs and reforms.19 There is a perception among recipients that Japan has not taken an active enough role in the regional meetings where such policy issues have been debated

Japan’s ODA in the Pacific island states 243 and developed. This refers in particular to the Pacific Island Country/Development Partners meetings, convened by the Pacific Islands Forum Secretariat every year to promote dialogue on issues of mutual interest. In recent years the meetings have focused on how development partners or aid donors may assist island countries to address trade and other economic reforms. There is a view within the region that Japan does not understand the application of aid for policy reform and institutional strengthening. Moreover, the aid it provides in the form of goods, services and infrastructure is not always conducive to the goals of the regional reform agenda. Recommendation 2: Japan needs to take a more active interest in the Pacific Island Countries/Development Partners dialogues and be open to the provision of technical assistance to facilitate policy and institutional reform. Japan may be in a better position to target development problems in the region if it is fully engaged in debates about policy reform issues in the Pacific. Education and training are recognized by all donors, including Japan, as a major development priority for the region. In this context, aid donors are providing assistance to support education (both formal and non-formal). This takes the form of scholarships, curriculum development, teacher training, infrastructure development, and capacity building for education ministries. Japan’s assistance to the primary education sector is mainly in the form of school facilities and classroom equipment. Grant assistance, especially grassroots grants to rural schools, is effective in both improving education facilities for rural dwellers and enhancing Japan’s profile in recipient countries. In terms of tertiary education, Japan has supported infrastructure development at the University of the South Pacific. Two large projects are the facilities for the marine studies complex (provided as a fisheries grant project) and a telecommunications network linking the main campus in Fiji with mini campuses around the region (USPNet). Japan’s technical cooperation in the education sector includes volunteers and senior volunteers (for example, in Japanese-language training and in media technology at the university). There is also the broader area of educational cooperation through the trainee program in Japan that enhances and upgrades skills in various sectors. Unlike other major donors (including most recently Taiwan), Japan does not provide significant amounts of aid to fund scholarships. It provides a small number of scholarships under the Monbusho scheme for study in Japan.20 Other donors, however, emphasize scholarships for study within the region, as well as within the donor country. In providing educational assistance, an obvious constraint for Japan is the fact that English is the main medium of education in the region. Few Pacific islanders are conversant with the Japanese language. Language and cultural differences may therefore limit Japan’s assistance “on the ground” in such areas as curriculum development, as well as limiting the number of students able to study in Japan. There is a perception that students may do better when studying in their own environment. In addition, the relatively high costs of education and training in

244 Sandra Tarte Japan mean that such aid does not go as far as it would if provided within the region. Therefore, while the education and trainee component of Japan’s aid program is very beneficial, more could be achieved if trainee programs and scholarships were available “in-country” as well as in Japan. Recommendation 3: Given the importance of the education sector, technical cooperation to support education in the region should be enhanced. One way would be to provide scholarships to Pacific islanders to undertake studies at tertiary education centers in the region, in addition to Monbusho scholarships to study in Japan. More trainee programs could also be conducted within the region, including through regional organizations. Type of aid Japan provides roughly twice as much grant aid as technical assistance to Pacific island countries. This is due mainly to the fact that Japan provides large-scale infrastructure projects, which account for much of Japan’s aid to the region. The emphasis on large-scale infrastructure aid (which has a long tradition in Japan’s ODA) also explains Japan’s prominence as an aid donor in the Pacific. By contrast, other major donors (Australia, New Zealand, and Britain) provide most of their aid as small-scale projects and technical assistance. In this context, a significant proportion of aid goes to consultancies. For example, 17 percent of Britain’s technical assistance is allocated to consultancies. This may be a contentious issue among recipients, as the role of overseas consultants is not always considered to be “real” aid. As noted earlier, countries in the region rely on aid for much of their capital development. Japan’s assistance towards infrastructure development is thus of crucial importance. Recipients especially welcome projects that have a multipurpose role. For example, Japan has provided ships that serve as fishing, training, and transport vessels to Pacific island countries. A well-documented problem with infrastructure projects, however, is their sustainability.21 Projects such as hospitals or fisheries support stations usually include sophisticated equipment (sterilizers, air conditioners, ice plants, digital solar panels, etc.). These are not only expensive to operate but may also require delicate and careful handling. At the time of delivery of these projects, there is usually some training of local personnel to handle the equipment. But given the often high turnover of locals (the result being that the one trained person moves on to another position), as well as the need for specialized parts and equipment, more back-up is usually required. Some efforts have been made by Japan to meet the problem of maintenance of projects through technical cooperation. Of most significance is the OFCF project for the technical rehabilitation and maintenance of fisheries facilities. This provides ongoing support for fisheries projects in the form of experts, training, and equipment. In many areas, however, the full benefits of grant aid projects are not being realized because of the failure of equipment, lack of funds on the part of the

Japan’s ODA in the Pacific island states 245 recipient to support running costs and repairs, and lack of trained staff. It has been pointed out that the latter problem is due in part to the chronic shortage within the region of skilled personnel and the heavy demands on their time and skills. There is also a problem of high levels of emigration, with skilled people usually the first to leave. Therefore, Pacific islanders who undertake training in Japan may not transfer their skills on their return. Recommendation 4: It is necessary to consider innovative ways of enhancing the sustainability of grant aid projects through technical cooperation. For technology-intensive projects such as hospitals and other healthcare facilities, a similar regional approach to that successfully implemented by the OFCF for fisheries projects may be necessary. This would help ensure continued support in the form of training, equipment maintenance, and specialized skills transfer (using experts and/or volunteers and provision of equipment and spare parts). No donor wants to be tied to continuing support for, and maintenance of, projects. This goes against the philosophy of creating self-reliance through aid, as well as being a drain on aid resources. Future problems may be minimized by careful project design, to ensure untenable cost burdens will not be imposed on the recipient. However, where the recipient specifically requires sophisticated and expensive equipment or technology (as with the USPNet project described above), some flexibility may be necessary. In this context, it may be useful and costeffective to draw on the experiences and resources of other aid donors in the region. Recommendation 5: Japan should consider sharing the costs and burden of maintenance of grant aid projects with other aid donors. This may require some pooling of resources ( joint cooperation) or there may be three-way agreements, whereby the costs of maintenance and other inputs are shared between the recipient, the principal donor, and a secondary donor. One type of technical cooperation to the Pacific that has grown most rapidly in recent years is the senior volunteer. Other donors (for example, Australia) also dispatch such volunteers, although there is not a distinction drawn between regular volunteers and senior volunteers. The senior volunteer scheme is seen to have a number of advantages. Senior volunteers are regarded as more independent, adaptable, and effective. They are more mature and have more professional and life experience. While the cost of senior volunteers is higher than regular volunteers, they are recognized as being a “better investment.” Moreover, the scheme provides retirees in Japan with a meaningful way of contributing to Japan’s ODA. Given these positive features, it is important to ensure that the senior volunteer scheme maximizes its potential. This requires addressing some of the problems with the scheme that have been pointed out by recipients. One problem is the need

246 Sandra Tarte to match skills and expertise to the needs of the recipient organization. The role of the senior volunteer is similar to that of an expert who, in the course of his/her stay in a recipient country, transfers skills to a local counterpart. However, rather than needing an expert, organizations often need someone to carry out more mundane (yet specialized) tasks. There have been occasions where the senior volunteer is deemed “too senior” for the type of work that is required. The “age gap” between workers and the senior volunteer has also been pointed to as an occasional source of tension. In addition, it was suggested that the dispatch of senior volunteers tends to be more limited than regular volunteers, as the senior volunteers prefer urban centers rather than more isolated rural areas. Recommendation 6: Ensure that the recipient organization needs a senior volunteer (rather than a regular volunteer) and that the recipient is fully briefed on the qualifications and expertise of the volunteer being dispatched to their organization. This would require more consultation between the relevant embassy, JOVC in Tokyo, and the recipient government/organization.

Aid procedures The request-based system of Japan’s ODA is viewed positively by Pacific island countries. On the whole, Japan is seen to be a very responsive donor in meeting requests from island governments. Japan has also demonstrated some degree of flexibility in that it has adjusted its aid procedures to meet the special needs of the region. Examples include the grassroots grants (which are small-scale and approved by Japan’s overseas missions), the extra budget support to the Pacific Islands Forum Secretariat (despite Japan not being a member of the Forum), the provision of grant aid to countries that have a relatively high per capita GNP, and the collaboration with other donors in joint aid projects (namely Australia and New Zealand). Moreover, while Japan’s grant aid project cycle may be drawn out and complex, it is regarded as not as bad as some other donors (namely the European Community). Despite these positive aspects, there are a number of shortcomings in Japan’s aid procedures, compared to those of other donors. The first one relates to Japan’s limited diplomatic presence in the region. Despite being the largest or secondlargest bilateral donor to Pacific island states, Japan has only three full-scale missions that cover the fourteen countries.22 By comparison, Australia and New Zealand have missions throughout the region. These are able to regularly monitor aid projects and to have regular consultations with the recipient governments. For Japan, visits are made from a central office in the region or from Tokyo. This means contact is more intermittent and irregular. It also puts a heavy burden on JICA staff in the field, who must constantly travel between countries. Recommendation 7: Given the financial constraints on the Japanese aid budget at this time, it is not feasible to set up additional JICA field offices. However, in

Japan’s ODA in the Pacific island states 247 1991, a JICA Study Group recommended that “mobile support teams” be established and stationed in the region, equipped with budgets to undertake more regular field studies. They could also facilitate the maintenance of grant aid projects, as described above. It is recommended that this idea be revisited. While Japan has demonstrated some flexibility in adjusting aid procedures to meet the needs of Pacific island countries, it is still less flexible than other major donors. This has implications for successful aid donor collaboration. The main differences that have been observed between Japan and other donors are as follows: ●

●

●

●

Other donors are more flexible about amending the original project design document as implementation proceeds. On the other hand, Japan tends to stick rigidly to the original design, even if changes would mean that resources would be utilized more efficiently or the project’s aims addressed more effectively. While the aid personnel of other donors are given quite a lot of autonomy to make decisions in the field, Japanese aid officials generally are unable to make decisions or exercise their own initiative. All decisions must be referred to Tokyo. This hinders and slows down aid implementation. Other aid donors tend to have more cohesive operations, with close coordination and communication between the various arms of their aid bureaucracy. Japanese aid personnel, on the other hand, are locked into bureaucratic hierarchies that often preclude open and constructive exchanges between the various aid agencies and ministries in Tokyo. This lack of “horizontal coordination” tends to be replicated in the field. While other donors have a multifaceted approach to technology and skills transfer, including utilizing local knowledge and community-based education, Japan’s approach tends to be very linear: a Japanese expert and local counterpart. Japan does not have a strong grounding in providing “soft aid”: that is, aid with a high component of skills transfer and small-scale community-based activities. Recommendation 8: To deal with such problems it will be necessary to further streamline aid procedures in Tokyo and allow more autonomy to JICA operations in recipient countries. This is unlikely to occur without the necessary political will to implement reforms. However, Japan can (and has) learnt from other donors, and one way to promote greater flexibility with aid procedures would be to undertake more collaborative projects with other aid donors.

The most frequent criticism of Japan’s aid procedures from officials in Pacific island countries is the lack of sufficient input by recipients into the design of grant aid projects. As an official from Tuvalu observed: “Projects would be more sustainable if we take part in the design of the project from the beginning.”23 According to various Pacific island officials interviewed for this report, project design teams from Japan often ignore suggestions and advice from the island

248 Sandra Tarte governments, resulting in major shortcomings in the completed project. Given that it is the recipients who best understand their environment, and must live with the project that is being implemented, it makes a great deal of sense to include as much input as possible from them. This might also avoid some of the problems of sustainability often encountered. Recommendation 9: Architects and designers from recipient countries should work with Japan’s aid team in designing the projects (especially infrastructure), and that they be closely involved in and consulted on all stages of the construction and development of the project. Since 1989, Japan has gone outside its regular bilateral aid procedures to provide extra-budget support to the Pacific Islands Forum Secretariat. The annual provision of about US$600,000 has recently been supplemented by a US$1 million fund, coordinated by the Forum Secretariat, for “intellectual exchanges.” This fund was announced at the Pacific leaders’ summit in Tokyo in April 2000. Japan has also provided regional assistance through the United Nations Development Program. This includes a US$1 million project for the development of information technologies in the Pacific. Despite being the largest non-member donor to the Forum Secretariat, overall Japan is one of the smallest donors to regional programs and organizations in the Pacific.24 Japan’s support for regional programs is constrained by a policy of not providing aid to organizations of which Japan is not a member. It has gone outside this rule in the case of the Forum Secretariat, but this “irregularity” in terms of Japan’s aid system creates problems for the disbursement of funds. There are still no established procedures or guidelines governing how the annual funds are spent, leading to occasional disputes between Japan’s Ministry of Finance and Foreign Ministry on the one hand, and the Forum Secretariat on the other hand.25 Another constraint on Japan’s regional assistance (and bilateral assistance as well) is the policy of usually requiring grant aid funds to be spent in Japan and/or on Japanese goods and services. This limits the flexibility as to how the aid may be used. For example, it precludes supporting the appointment of non-Japanese nationals to regional organizations. This policy may also mean that aid funds do not go as far as they might if they are spent or invested outside Japan. Other donors tend to be more flexible in terms of how their aid is used by regional organizations, including funding positions in regional organizations. Recommendation 10: Consider formalizing aid procedures with the Forum Secretariat: for example, by concluding a Memorandum of Understanding. Also consider more flexible funding arrangements, such that funds to regional organizations do not necessarily have to be spent in Japan and/or on Japanese goods and services. In the case of the University of the South Pacific, which Japan has supported through grant aid projects and technical cooperation, Japan does not provide aid

Japan’s ODA in the Pacific island states 249 directly to the organization. Instead, it provides aid on a bilateral basis to the government hosting the university (usually Fiji, which hosts the main campus). The recipient government then hands over the new facilities to the university. Other donors, by contrast, give their aid directly to the university. The insistence that exchange-of-notes agreements must be signed with the host government and not with the university (the principal recipient) raises a number of problems. Among these is the fact that the university must rely on the host government to make the project a priority in its request to Japan. This cannot always be guaranteed and sometimes hold-ups occur. In addition there are legal issues regarding the ownership of the infrastructure and facilities provided by Japan. Recommendation 11: That Japan adjusts its aid procedures to provide grant aid and technical cooperation directly to the University of the South Pacific, as other donors do. In return, Japan could have representation on the university council (the university’s principal decision-making body), alongside other major donors. The emphasis on bilateral procedures in Japan’s ODA has a long tradition. It is also in line with recipient preference for bilateral as opposed to multilateral aid. The problem with multilateral aid is that it does not always benefit countries equally. On the other hand, Japan has recognized the need for a “comprehensive regional approach” to its aid to the Pacific islands.26 From a donor point of view there can be considerable advantages to providing aid through regional programs and organizations. These include reducing the burden on the aid administration in the donor country, avoiding duplication of donor effort, and overcoming some of the procedural rigidities inherent in bilateral programs. Australia, New Zealand, Britain, France, the United States, Taiwan, and China all allocate a significant share of their aid to regional projects and organizations. Recommendation 12: Japan should explore ways of providing more technical cooperation on a regional basis – either through assistance to regional organizations or as regional programs, perhaps managed by Japan in conjunction with other donors. Recipients Compared to other donors to the region, Japan does not concentrate its aid on any one country or group of countries. The bulk of Australia’s aid goes to Papua New Guinea, New Zealand focuses on Polynesian countries with which it has closest historical and cultural ties, the United States directs its assistance to its former trust territories in Micronesia, and Britain targets three countries within one regional program: Vanuatu, the Solomon Islands, and Kiribati. Japan’s aid is disbursed more evenly around the region. Moreover, it does not use per capita income to “discriminate” against certain countries on the grounds that they are “too wealthy.” Nor, unlike other donors, has it applied aid sanctions on countries to

250 Sandra Tarte express displeasure at certain political developments (for example, Fiji after it experienced military coups in 1987 and 2000). On the other hand, because of the emphasis on large-scale infrastructure projects, the flow of aid to recipient countries tends to fluctuate according to whether or not such a project is being implemented. When there is no large-scale project, the aid tends to dry up to a trickle. This results in a rather erratic aid pattern to the region, and corresponding uncertainty about what to expect from Japan on an annual basis. In addition, the distribution of grassroots grants tends to favor the larger countries in the region, and especially those where a JICA or JOVC office is located. Recommendation 13: Examine ways to enhance stability in aid flows – especially to smaller island countries with limited absorptive capacity for large-scale projects. These include Kiribati, Tuvalu, the Marshall Islands, the Federated States of Micronesia, and Palau. In the case of such countries, it may be necessary to consider providing more grassroots grants and technical cooperation (including for maintenance and support of grant aid projects). Basic aid philosophy All major donors espouse common goals and guiding principles for their aid programs to the Pacific islands. Donor policies all highlight the following: ● ● ● ● ●

the elimination or reduction of poverty sustainable development self-reliance/autonomous development human rights/human security the advancement of national interest and foreign policy objectives.

These similarities are not surprising given the fact that donors are guided to some extent by the policies of the Development Assistance Committee of the OECD. This ensures a level of uniformity in terms of their priorities and policy goals. At the same time, donors are influenced by their own unique national interests and foreign policy objectives. This translates into special aid philosophies and rationales for particular countries or regions. Australia and New Zealand both view the Pacific islands region as an integral part of their foreign and defense policies. Thus aid has developed as a tool for promoting security as well as development. Other donors (Britain, France, and the United States) continue to have special relations with parts of the Pacific region, based on historical political ties. This also informs their aid philosophy. In many respects, Britain, France, and the United States continue to play a political role in the region that is out of proportion to the level of aid they provide. Japan’s political role in the region has not reflected the high level of aid it gives to the island countries. It generally maintains a low political profile. This is often rationalized in terms of non-interference in the political affairs of the island states.

Japan’s ODA in the Pacific island states 251 In its aid philosophy, one theme that stands out in contrast to other donors is the idea of “self-help,” which is reflected in the request-based nature of Japanese aid and in an aversion to attaching political conditions to its aid. Interference through aid conditions is regarded as a threat to the sovereignty of recipient governments.27 Japan’s ODA Charter (the closest policy Japan has to political conditions) works more as a set of guidelines to be applied flexibly and pragmatically, rather than as an automatic and mandatory sanction. While this “hands-off” approach may be welcomed by recipient governments, it also creates the impression that Japan does not have any real concern for the region, or any real commitment to the countries other than through its own economic or political interests. There is a lingering perception that, for Japan, aid is very much a “two-way” process of reciprocal exchange. This is especially evident with fisheries aid. Japan is thus in the unusual situation of being a leading aid donor to almost all Pacific island countries, without a commensurate political role or influence. Admittedly, the region does not figure prominently on Japan’s foreign policy agenda. Nor is it a significant component of Japan’s aid program, unlike other leading donors, for whom the Pacific islands are the center of their aid program. But being a major donor to the region, Japan is in the position of being able to make a major difference to island countries, with very little change in the quantity of aid it provides. Recommendation 14: That Japan clarify its aid policies for the region by developing a basic policy document. It could also help publicize and explain its role in the region by publishing a regular newsletter – such as the Australian–Pacific newsletter produced by the Australian High Commission in Fiji. This could help enhance Japan’s status in the region and make more transparent its interests and goals. Such an initiative could also invite more public debate and discussion of Japan’s role in the region.

Notes 1 2 3 4 5 6 7 8 9 10 11 12 13

ESCAP (1996: 40). South Pacific Forum Secretariat (2000: 2). For the purposes of this study, grant aid is treated separately from technical cooperation. Ministry for Foreign Affairs, annual ODA reports, various issues. South Pacific Forum Secretariat (2000). Numata (1990: 8–12). This refers to the share of the total fisheries grant aid disbursed between 1973 and 1995. Tsusho sangysho (various issues). Tarte (1998). Department for International Development (1999). JICA, annual reports, various years. Interview, JICA Office, Suva, May 2001. JICA (1999: 93). Data from OFCF Fiji office; also Tarte (1998).

252 Sandra Tarte 14 Interview with official in Christchurch, New Zealand, April 2001. 15 The South Pacific Forum Fisheries Agency (FFA) is based in Honiara, Solomon Islands, and assists Pacific island countries in managing their fisheries resources (mainly tuna) within their 200-mile exclusive economic zones. Australia and New Zealand are members of the FFA. 16 Interviews with government officials from Papua New Guinea, Nauru, Fiji, Kiribati, the Solomon Islands, and the Marshall Islands, Christchurch, New Zealand, April 2001. 17 Interview, AusAID official, Suva office, April 2001. 18 AusAID (2001: 14). 19 South Pacific Forum Secretariat (1999: 2). 20 The different types of scholarships provided to the region under the Monbusho scheme are for research or postgraduate study, undergraduate study, the college of technology and professional training school study. 21 See, for example, Foundation for Advanced Information and Research (1993); JICA (1991b). 22 There are small JOVC offices located in the Solomon Islands, Vanuatu, and Tonga to coordinate the volunteer scheme in those countries. Since the crisis in the Solomon Islands, the office there has been closed temporarily. 23 Interview, Tuvalu High Commission, Suva, April 2001. 24 Figures provided by the Forum Secretariat, Suva. This refers to all South Pacific regional organizations. Japan falls behind ADB, FAO, UNDP, Australia, Canada, New Zealand, Britain, and the European Community. 25 Interview, Pacific Islands Forum Secretariat, Suva, April 2001. 26 JICA (1999: 90). 27 A recent discussion of this issue is in Iimura (2001: 44–55).

14 ODA from Japan and other donors in Thailand Anuman Leelasorn

This study and its findings will provide an overall picture of the development of Thailand–Japan technical cooperation, dividing the past 40 years of cooperation into two phases, namely, 1953–92, and 1993–2001. This brief review of technical cooperation will bring us up to the current status of Thailand’s technical cooperation with Japan and its relationship to Thailand’s National Social and Economic Development Plans, the main policy mechanism for guiding the country’s development. An evaluation of the extent to which Japanese aid has contributed to successive plan targets, and how effective a role it has played, will provide a standard for comparisons to other donors later in this chapter. The other donors to be discussed include multilateral donors such as the UNDP and major bilateral donors such as USAID and AusAID. At the end of the study, policy recommendations for Japanese ODA are presented to help Thailand meet its development needs in a changing domestic and regional context.

Overall Japanese technical assistance to Thailand and its outcome Forty years of development cooperation between Thailand and Japan have led to the attainment of important goals in human resource development. This achievement in technical cooperation has been due to effective coordination between the Department of Technical and Economic Cooperation (DTEC), the Office of the Prime Minister (the focal point for Thai technical cooperation with foreign countries), line implementing agencies, the Japan International Cooperation Agency ( JICA) Thailand Office, and the Japanese embassy in Thailand. In implementing technical cooperation in Thailand for the last 40 years, the Thai National Social and Economic Development Plans and the Thai government’s development policies have been coordinated with the Country Development Plans of the Ministry of Foreign Affairs of Japan, providing direction and guidelines for cooperation in each economic sector. 1953 to 1992 In the 30 years of cooperation with Japan prior to the end of grant capital assistance under Japan’s Grant Aid Scheme in Thailand in 1992, the United States was the

254 Anuman Leelasorn single largest provider of technical assistance to Thailand, and Japan ranked lower in this technical cooperation category. Japan’s volume of technical assistance to Thailand in this 30-year period rose to approximately $80 million (1922 million baht) by 1992. Including all forms of ODA, Japan was the largest individual donor country to Thailand in that year. Meanwhile, overall US aid to Thailand was decreasing and Thailand was graduated from the US grant aid program. The 30year period being reviewed roughly coincided with the first to sixth National Social and Economic Development Plans, which set the theme of industrial economic development (see Table 14.1).

Table 14.1 List of ongoing bilateral Thailand–Japan technical cooperation projects, 2001 Title PTTC: 16 projects 1 Productivity Development Project (Phase II)

2

3

Project on Testing and Inspection Technology Upgrading for Textile and Garment Products in Thailand The Project to Enhance the Capability of the Faculty of Engineering at Thammasat University (Follow-up)

4

Research Project for Higher Utilization of Forestry and Agricultural Plant Material in Thailand

5

Project on Strengthening of the National Institute for the Improvement of Working Conditions and Environment Research Center for Communications and Information Technology (RECCIT)

6

7

8

9

Project for Model Development of Comprehensive HIV/AIDS Prevention and Care in Thailand The Development of the Method of Urban Development in Thailand

The Project for Strengthening of National Institute of Health Capabilities for Research and Development on AIDS and Emerging Infectious Diseases 10 The Modernization of Water Management System Project 11 Pasture Seed Production Development Project in Northeast Thailand

Agency

Duration

Thailand Productivity Institute Department of Industrial Promotion Faculty of Engineering, Thammasat University Faculty of Agriculture, Kasetsart University Department of Social Welfare

Feb 18, 1999 – Feb 17, 2001

King Mongkut Institute of Technology, Ladkrabang Ministry of Public Health

Oct 1, 1997 – Sep 30, 2002

Mar 1, 1998 – Feb 28, 2001 Apr 1, 1999 – Mar 31, 2001

Aug 1, 1995 – 31 July, 2001

Jun 1, 1997 – May 31, 2002

Feb 1, 1998 – Jan 31, 2003

Department of Town and Country Planning Department of Medical Sciences

Jun 1, 1999 – May 31, 2003 Mar 1, 1999 – Feb 28, 2004

Royal Irrigation Department Department of Livestock

Apr 1, 1999 – Mar 31, 2004 Aug 14, 1999 – Aug 13, 2003

ODA from Japan and other donors in Thailand 255 Title 12 SIC– Tool and Mold Technology Development Project in the Kingdom of Thailand 13 The Reforestation and Extension Project in the Northeast of Thailand (Phase II) 14 Project on the Industrial Water Technology Institute (Phase II) 15 The Project for Development of Trauma Center Complex 16 The Project for the Asian Center of International Parasite Control Mini-project: 1 project 1 Rehabilitation Program, Development in the Sirindhorn Vocational Training School Development study: 4 projects 1 The Feasibility Study on Mangrove Revival and Extension Project in the Kingdom of Thailand 2 Feasibility Study Comprehensive of the Ngao Coal Basin 3 Study of the Master Plan for the Industrial Development in the Provincial Cluster of Nakorn Ratchasima, Surin, and Chaiyaphum 4 Integrated Plans for Development of Border Town Areas

Agency

Duration

Industrial Promotion Department Royal Forest Department Department of Industrial Works Khon Khen Provincial Hospital Faculty of Medical Science, Mahidol University

Nov 1, 1999 – Oct 31, 2004 Dec 13, 1999 – Dec 12, 2004 Jun 1, 2000 – May 31, 2005 Jul 1, 2000 – Jun 30, 2005 Mar 23, 2000 – Mar 22, 2005

Central Juvenile Court

Jan 27, 1999 – Jan 26, 2002

Royal Forest Department

Mar 2000 – Dec 2000

Department of Dec 1999 – Minerals Feb 2002 Office of Dec 1999 – Industrial Sep 2001 Economics Bureau of National Nov 1999 – Economic and May 2001 Social Development

Review of Thailand–Japan technical cooperation Technical assistance from Japan during the period under consideration facilitated the development of a broad range of basic infrastructure to enhance development in key sectors such as education and culture, primary healthcare, irrigation, fishery, livestock, farming, telecommunications, computers, and engineering. The level of technology transferred from Japan during this period was mainly at the basic to middle levels, which suited Thailand’s level of development in this period. The assistance provided by Japan was regarded as a major driving force for development in Thailand that compared favorably with domestic development inputs which were limited in terms of budget, qualified technical personnel, and domestic technology. In all, the provision of technical assistance was conducted in line with the direction set by the National Social and Economic Development Plans during that time. Direction and essence of Thailand–Japan technical cooperation One clear characteristic of technical assistance provided by Japan was the establishment of new and improved economic infrastructure, much of which was

256 Anuman Leelasorn financed under a grant aid scheme that mainly provided hardware project construction in line with Thai national development goals and served the mutual interests of Thailand and Japan. This economic infrastructure development focused on various national development initiatives such as: the Development Project of the Industrial Port on the Eastern Seaboard (assisted by Japan through a Development Study Scheme (DS) in 1982–3 with the Port Authority of Thailand); the Ubon Institute for Skill Development Project (assisted through a project-type technical cooperation scheme (PTTC) in the northeastern region in 1988–93 and 1997–2000; the construction of the Din Daeng Cultural Center in 1982. One of the successful and sustainable outputs which contributed to the improvement of basic infrastructure in the livestock development sector was the two-phase Project for the Establishment of the National Institute of Animal Health in 1989–93 and 1993– 8. The Livestock Development Department is now playing a major role in the research and development of effective remedies for animal diseases in Thailand and its neighboring countries, including the control of foot and mouth disease, which has afflicted the livestock industry in Europe. 1993 to 2001 In the 1993–2001 period, technical assistance from the Japanese government and other foreign donors shifted from serving as the main driving force to acting as a supplemental component in Thailand’s development. During the early 1990s, Thailand’s economic growth reached double digits, and it became a middleincome developing country, which put the country at a level of self-sustaining growth and development. Japanese bilateral cooperation to Thailand entered into a sunset phase, with a grant aid graduation procedure applied in step with other donors. Japan’s ODA yen loan program in Thailand, which grew more important in Japan’s overall ODA scheme for Thailand, became more clearly focused. As a result, Thailand is now adjusting itself to this new era of Japanese ODA policy towards Thailand. Direction and role In terms of role and effectiveness, assistance from Japan provided high industrial technology responding to the needs of Thailand. Most of the projects helped upgrade existing technology and provided new and sophisticated technology, notably environmental protection and natural resources conservation techniques to Thai line agencies and counterpart personnel. These have been implemented in line with the development strategy of the seventh (1992–6) National Social and Economic Development Plan, which put emphasis on industrial and economic development, while the eighth plan (1997–2001) has shifted the emphasis from growth to improvements in the quality of life, income distribution, the environment, and good governance. The decentralization in planning and the public participation in Thai development policy are national strategies supported by

ODA from Japan and other donors in Thailand 257 the present constitution, and have been adopted in Thai–Japanese technical cooperation including the promotion of good governance, a social safety net, etc. Cooperation with Japan has also addressed global development issues such as WID and HIV/AIDS, in addition to supporting and enhancing Thailand’s new role as an aid donor to neighboring countries in Indochina and other developing countries. Improvement in execution and approach of Thai–Japanese technical cooperation and coverage In the last three years of this period, Thailand and Japan jointly revitalized their technical cooperation by adopting a program to maximize aid efficiency and effectiveness. Japan’s new Country-Specific Program and Country Cooperation Plan for Thailand were included in the Thai–Japanese technical cooperation program. The need to strengthen the quality of Japanese ODA to Thailand led to the adoption by JICA of a country-specific program, which was jointly conceptualized and designed by the two countries. Since February 4, 1996 there has been an agreement to focus on five priority sectors: social development, rural development (agriculture and local administration), environmental protection, economic infrastructure, and regional cooperation. The two countries later initiated a new program in 2000 to improve efficiency and effectiveness in a more holistic way at the level of broader development issues. Recognizing that Thailand is in a difficult transition from being a developing economy to becoming a developed economy, there is a shared recognition of the need to upgrade Thai technology in various fields in accordance with the national development strategy to help revitalize the country’s economic performance. The emergence of new development problems, such as environmental and natural resource protection, urbanization, transparency of governmental administration, new communicable diseases facilitated by globalization (from neighboring countries in particular), calls for further assistance from Japan. Several Japanese-assisted projects have been implemented to strengthen the export capacity of Thailand, such as the Project on Testing and Inspection Technology Upgrading for Textile and Garment Products in Thailand during 1999–2004; an Automotive Fuel Research Project for Environmental Improvement in Thailand during 1996–9 by the Petroleum Authority of Thailand; and a Project for Productivity Development Center during 1994–9 by the Ministry of Industry. Adjustment of cooperation scheme As Thailand has advanced to the status of a middle-level developing country, the graduation from Japan’s ODA began with the termination of the grant aid scheme to Thailand in 1993, and has been accompanied by a decrease in the volume of assistance. This decrease also led to a change of assistance schemes to Thailand. The Individual Expert Dispatch Scheme has gained momentum, with a rise in the

258 Anuman Leelasorn numbers of individual Japanese experts being sent to Thailand, while the number of PTTC schemes has been declining. The main reasons for this change are the cuts of Japan’s ODA budget for Thailand of approximately 2–3 percent per year and the change of Japanese ODA policy to stress the transfer of software rather than hardware, which is the central component of PTTC projects. By the end of this period, approvals of PTTC projects to Thailand were at two to three projects a year, down from around four to five projects a year, and the number of Japanese dispatched individual experts had increased to around 100 per year from around 60 per year prior to 1993. Promotion of South–South cooperation The promotion of South–South cooperation has been promoted by Thailand and Japan for the last ten years via the implementation of regional cooperation. To initiate this program, Thailand and Japan signed the Record of Discussions on the Japan and Thailand Partnership Program ( JTPP) on August 1, 1994. The JTPP was based on development partnership and ownership as implementation strategies for Thailand and Japan to jointly assist Thailand’s neighboring countries and other developing countries. This was incorporated under the umbrella of Thailand’s existing South–South cooperation promotion program entitled the Thai International Cooperation Program, which aims to establish Thailand as a center of excellence in human resource development in the Indochina region. The cooperation modalities stipulated by the JTPP are: the third country training program (TCTP); the dispatch of Thai experts to other developing countries; and other new technical cooperation modalities. After five years of implementation, the JTPP successfully organized 21 TCTP courses, exceeding the initial program target of 15 courses, and the dispatch of Thai experts reached 35 cases.

Comparison of Japan’s ODA with that of other donors The characteristics that distinguish Japanese technical cooperation ODA in comparison with other donors will be discussed under the subheadings below. Basic philosophy of aid There are basically no major difference in the basic philosophy of Japanese aid to Thailand when compared with other donors, whether these be individual country donors or multilateral donors in the UN system. Japan and other donors share an aid philosophy based on humanitarian assistance to alleviate poverty and hardship through participatory cooperation with developing countries. This is reflected in the governing policy set by the Development Assistance Committee (DAC) of the OECD. The people-centered development approach set by the OECD that DAC member countries have approved has clearly also been incorporated into Japan’s ODA system. Even though Thailand has reached the stage of graduating from eligibility for grant technical cooperation, there are still various projects being

ODA from Japan and other donors in Thailand 259 implemented by Japan that clearly reflect the OECD policy in areas such as primary healthcare, education, and skills development. As with other donors, the promotion of partnership and ownership has been clearly adopted in the implementation of technical cooperation with Japan. These two principles of cooperation have been reflected in ODA administration by both JICA’s Thailand Office and the Department of Technical and Economic Cooperation throughout the project cycle by emphasizing the importance of Thai counterpart contributions in terms of budget, personnel, equipment, and facilities. At the implementation level, these principles have been applied using the project design matrix (PDM) approach, which is a common tool for the formulation and implementation of PTTC and development study projects. This is similar to other donors’ project formulation and planning techniques, which use logical frameworks such as the objectives-oriented project planning (ZOPP) and “strengths, weaknesses, opportunities, and threats” (SWOT) techniques to plan their cooperation projects with Thailand. Priority sectors and major recipients Japan’s technical cooperation with Thailand basically targets human resource development and institutional development in ways that are similar to what Thailand has been doing with other donors. The differences with respect to cooperation with Japan have to do with the quantitative scale of aid and the broad scope of coverage across development sectors. Japan is the largest foreign aid donor in Thailand. Some donors have graduated Thailand from ODA eligibility, while others have maintained limited assistance to specific sectors, such as the environmental cooperation carried out in Thailand with the Danish Cooperation for Environment and Development (DANCED) program. Most donors have greatly reduced their technical cooperation with Thailand. AusAID reduced its technical cooperation to a total of A$23 million for 2001, which covers democratization, public sector reform, capacity building for government agencies, the environment, and HIV/AIDS. These areas are also priority assistance sectors for Japan. The United States is selectively assisting Thailand only in narcotic prevention and suppression, with about $US5 million administered by the Narcotic Affairs Section of the US embassy in Thailand, and also through the joint Thai–US Kenan Institute Asia. The biggest achievement of Japan’s comprehensive cooperation has been the establishment of the eastern seaboard industrial development program in 1982, which was supported by at least five development study projects covering extensive areas of infrastructure, as well as the environment and socio-economic sectors. The five priority sectors that Thailand and Japan identified in a long-term technical cooperation agreement signed on February 4, 1993, entitled the Second Country Program for Technical Cooperation were: ● ●

the rural development sector the social development sector

260 Anuman Leelasorn ● ● ●

the economic infrastructure sector the environmental protection sector, and regional cooperation.

Thailand and Japan have been active cooperation partners in these five priority sectors, using a variety of aid schemes: 16 PTTC projects, five development study projects, and schemes for the dispatch of 300 Japanese experts to assist in project construction or operation, together with 100 Japanese individual experts, and 400 Thai training fellowships, are currently being implemented by Japan. It should be mentioned that Thailand’s Department of Technical and Economic Cooperation (DTEC) is a national focal point for technical cooperation with various foreign donors and has a clear policy and implementation plan to avoid the duplication of technical cooperation contributed by various donors, and the implementation of various projects by Japan and other donors has been arranged to assist and supplement each other. ODA schemes and the ODA implementation system Japan’s technical cooperation with Thailand is executed mostly by way of a schematic approach, while other donors use a flexible, recipient-needs-oriented approach. The major reason for this difference between the Japanese system and other donors’ systems is that Japanese ODA decision-making is made on a case-bycase basis, while other donors such as UNDP, DANCED, and others use a programming approach and program cycle to deal with development problems at sub-sector levels. To be fair, comprehensive approaches such as the programming approach have been used to a limited extent by Japan in directing ODA to Thailand, such as the enormous project established on Thailand’s eastern seaboard which started in 1982 and relied on a kind of holistic approach that coordinated various sub-projects. At present, in fact, the programming approach has been implemented on a trial basis with JICA and its Thai counterparts using the dispatch of individual experts to study development issues and recommend appropriate cooperation programs, such as the local empowerment program started in late 2000, which coordinates the use of different Japanese aid schemes. With its development advancing it to the higher ranks of developing countries, Thailand has been moving out of the ODA grant schemes in technical cooperation and has begun using yen loan ODA schemes which are similar to German KfW loans. During the past three years, a considerable effort has been made by the Ministry of Foreign Affairs of Japan to coordinate the yen loans of the Japan Bank of International Cooperation and JICA’s grant schemes. Japan’s ODA implementation system is basically the same as that of other donors. Project cycle management (PCM), which is Japan’s main ODA implementation system, is generally similar to that of other donors. For example, Japan and other donors share the same process of request/approval that is detailed by PCM at the initial formulation step by matching projects to the donor’s country assistance

ODA from Japan and other donors in Thailand 261 guideline and Thailand’s national development policy. The process of approval is slow, however, especially for PTTC schemes which can take between one and a half to two years. PDM, which has been adopted in the last five years, also identifies the needs and formulates work plans for PTTC schemes in similar ways. Importantly, through the PDM techniques, Japan and Thailand have entered a stage of fair participation in which both sides are able to reach agreements based on their mutual needs and interests. Implementation is also identical to other donors, relying on joint steering committees of Thais and their Japanese counterparts to supervise each project. Japan’s PTTC scheme includes evaluation as an integral part of the project work plan. There is an interim evaluation, followed by a final evaluation which occurs about six months before project completion. It is worth noting that built-in evaluation is rare for projects conducted by other donors; many donors even exclude evaluation from the project cycle. Other donors may believe that evaluation is properly left for their Thai counterparts to do, as DTEC has the ability to perform this function. Japan has a comprehensive PCM design in which Japan adds on an after-care (post-completion) phase for PTTC as necessary, while most other donors leave the sustainability of a project at risk by expecting Thai counterparts to deal with unanticipated issues. To maximize the effectiveness of technical assistance to Thailand, DTEC and JICA are now in the process of setting up a monitoring plan for other Japanese aid schemes such as the Grassroots Assistance Project (GAP), which assists Thailand at the grassroots level through Thai NGOs, and is handled by the Japanese Ministry of Foreign Affairs. This scheme is being monitored by DTEC because the Japanese embassy has inadequate personnel to monitor it. The implementation of the JICA individual expert scheme, which has about 110 short-term and long-term experts who are currently working with their Thai counterparts per year, also falls under the monitoring plan of DTEC to ensure the effectiveness and efficiency of the program. Organization and expert behavior influenced by Japanese culture and society It is important to mention that because Japan has an Oriental culture, to a great extent Thailand and Japan share common values and culture. Thailand has generally developed itself successfully, and has devised its own standard work practices to fit with the practices of international organizations and individuals. Both Japan and Thailand implement technical cooperation on equal terms and with mutual respect for each other. This is reinforced by the work of JICA and the Japanese embassy, as well as by individual Japanese experts who behave with respectful manners toward Thai dignitaries and culture. Thus there has been no sign that the organizations and experts of Thai agencies have been influenced by Japanese culture and society over the last ten years.

262 Anuman Leelasorn

Japanese methods of aid in comparison with other donors Bilateral cooperation Discussing the advantage and disadvantage of Japanese methods of implementing aid in comparison to other donors brings one to emphasize the execution of aid on a schematic basis. On the one hand, the schematic provision of technical cooperation can facilitate clear administration and procedures for the donor, since schematic administration clearly organizes the aid given by Japan, and specifies different procedures for each scheme. However, the disadvantage is that every single aid scheme requires different practices, procedures, and formats, and has caused difficulties especially for less-developed countries. The complexity of this system has created difficulties for Japanese aid recipients, even though Japan’s schematic approach facilitates its auditing, monitoring, and evaluation of ODA, and the attainment of quantitative goals. The schematic organization of technical cooperation by JICA interferes with comprehensive technical cooperation when it is necessary to tackle problems in a holistic manner using a program approach. JICA’s operations and practices are still governed by the schematic arrangement, which impedes coordination and integration among the divisions of JICA, because their preoccupation with implementing their own respective aid schemes prevents a comprehensive effort being made to accomplish broader development goals. However, this problem with schematic organization is now being addressed, as JICA realizes that schematic organization focuses action on the level of individual projects or issues, and produces limited results when the need is for a clear comprehensive picture of development in a wider area or sub-sector. JICA’s Thailand Office is now attempting to coordinate several schemes within one Thai development program to achieve the program’s objectives. At present, JICA’s Thailand Office is the pioneer in cooperating with Thailand to implement the program approach on a trial basis. Each program is a comprehensive integration of various JICA schemes to achieve the main objectives of programs such as the Program for the Development of Persons with Disabilities and the Program for Unemployment Reduction. The adoption of the project design matrix into project cycle management for JICA/PTTC projects has led to more effective implementation that is similar to other donors’ ZOPP or logical framework. The PDM formulated jointly by Thais and their Japanese counterparts enhances a sense of cooperative partnership as both sides can effectively interact with each other to solve their problems and achieve their mutual interests. Regional cooperation Technical cooperation between Thailand and Japan is in a transitional period, between being solely bilateral cooperation to the inclusion of regional cooperation, especially Thai–Japanese cooperation to extend technical assistance to Thailand’s neighboring countries and other developing countries. This regional cooperation,

ODA from Japan and other donors in Thailand 263 which has been adopted as a bilateral Thai–Japanese priority, was officially agreed to when both governments signed a Record of Discussion of JTPP, the first umbrella regional cooperation agreement between Thailand and a foreign donor. Thailand has cooperated with other donors in organizing technical assistance for other developing countries, and Third Country Training Programs (TCTPs) hosted by Thailand, but these initiatives are still quite small when compared with Japan’s TCTP under the JTPP, which involves organizing around 15 courses a year with 150–200 participants from various developing countries per year. Thailand’s limited accumulated experience in training others, and the inadequate management and administration skills of JICA in this new TCTP cooperation scheme, are now limiting the progress of regional cooperation between Thailand and Japan.

Effectiveness and reform of Japanese ODA As a conclusion, some comments on Japan’s ODA to Thailand will be offered in this final section. Technical cooperation from Japan generally yields a productive and constructive impact on Thai national development. The effectiveness of ODA can be seen from policy to implementation level in the participation and partnership of bilateral cooperation. At the policy level, Japan’s ODA to Thailand has been formulated based on a needs-based survey of the country which takes account of Thailand’s National Economic and Social Development Plans and has been practically reinforced by field need survey missions. At the global level, Japan’s Medium-Term Policy on ODA has been used as an overall guideline since August 10, 1999. JICA’s Country Assistance Plan for Thailand, a country-specific approach that was completed around August 2000, can give a clear direction to ODA activity in Thailand. On an ad hoc or short-term basis, Japan engages in policy dialogue to communicate major development issues to be promoted by Japan, to which recipient countries like Thailand can adjust and formulate development project proposals to attract Japan’s ODA. For example, the latest July 2001 Okinawa G-8 Summit, at which Japan pledged to assist in the eradication of major infectious diseases and the reduction of the digital divide, has led to initiatives now being adopted and formulated by technical cooperation programs and projects between JICA and Thai implementing agencies. To a great extent, this ODA policy dialogue practice produces transparency in ODA. At present, information technology plays a great role in promoting the effectiveness of Japan’s ODA by the provision of simple and user-friendly access to ODA information through the websites of the Ministry of Foreign Affairs and JICA, by which recipient countries can monitor ODA policy direction and make potential technical cooperation requests on development issues in which Japan is interested. The key to this success is a simple website with direct practical information, not the very comprehensive but over-complicated websites of some international organizations or other bilateral donors. Japan’s effort at ODA reform, in particular the case of JICA, which has been undergoing organizational reform since January 2000, has proceeded on the right

264 Anuman Leelasorn track, which is to assist developing countries using a country-specific approach and the adoption of a program approach. The reform of Japan ODA will not go any further, however, without active cooperation being given by Japanese line ministries. Japan’s ODA reform must be supported by Japanese line ministries in a comprehensive way. The ODA policy and plans of line ministries must be brought into line with the national ODA policy of the government. The improvement of JTPP At the regional cooperation level, Thailand and Japan have been cooperating successfully under the Japan Thailand Partnership Program ( JTPP) signed on August 1, 1997. The success of JTPP can be seen in the expansion of various cooperation modalities at the implementation level. For example, 21 third country training courses have been organized, a number that exceeded the JTPP’s target of 15 courses in 2000 (see Table 14.2). The program to dispatch Thai experts, which is another mode of Japan–Thailand technical cooperation, has resulted in the sending of 35 Thai experts, mostly to surrounding developing countries, and the operation of four PTTC projects in support of it.1 The latest development of JTPP is that Japan and Thailand are now in a process of drafting the JTPP II, to be used as a cooperation guideline for the next five years. Suggestions are made below for the improvement of JTPP. At the policy level, it seems that Japan is now executing ODA for regional cooperation on a single case-oriented or day-to-day approach without mid-term or long-term strategies. Past experience, however, revealed that implementation of ODA on a case-by-case basis could produce only a limited output. Therefore, the effort to formulate a medium-term comprehensive work plan at least in a general way for regional cooperation between Thailand and neighboring countries must be jointly made between Japan, Thailand, and Thailand’s neighbor countries. The clear goal, objectives, and technical cooperation activities must be transparently formulated in this regional cooperation plan. A regional conference involving Japan, Thailand, and cooperating developing countries must be set up as a means to promote understanding and broader cooperation. This will dispel suspicions of countries in the region rooted in historical factors regarding the motivations of Thai and Japanese cooperation. The improvement of TCTP The improvement of TCTP courses involving around 140 participants every year needs to be made by the adoption of a program approach with clear targets and objectives to meet the needs of participating developing countries, so that monitoring and evaluation can be done at sector or sub-sector levels, not at only the training course level. The situation is that the curriculum of ongoing TCTP courses covers subjects that are of limited use to some participants, because they do not have the prerequisite knowledge for attending the course, and lack the equipment in their countries to use what they learn. Without a program work plan,

Table 14.2 List of 21 third country training courses (TCTP), 1997–2001 Course title

Agency

1

Soil Management Techniques

2

Enhancing Women’s Role in Rural Development Irrigation System management for Sustainable Development Sustainable Highland Agriculture Development Diagnostic Technology and Control Measures for Major Livestock Water Supply Technology

International Agricultural 1994–8 Development Training Centre, Ministry of Agriculture and Cooperatives National Agricultural Extension and Training Center, Kasetsart University 1995–9 Royal Irrigation Department 1996–2000

3 4 5 6 7

8 9 10 11 12 13 14 15 16 17 18 19 20 21

Effective Countermeasures against Drug Offences and Advancement of Criminal Justice Administration Sustainable Agriculture Production in the Tropics for Cambodia, Laos and Vietnam Advanced Telecommunications Technology

Cooperation period/phase

Faculty of Agriculture, Chiang Mai University Department of Livestock

1997–2001

National Waterworks Technology Training Office of Narcotics Control Board

1997–2001

1997–2001

1997–2001

National Agricultural Extension 1995–9 and Training Center, Kasetsart University Faculty of Engineering, King 1998–2002 Mongkuts Institute of Technology, Ladkrabang Diploma Course in Dermatology Institute of Dermatology, 1999–2003 Department of Medical Services Master of Primary Health Care ASEAN Institute for Health 1998–2002 Management Development, Mahidol University Reforestation and Extension Royal Forest Department 1998–2000 Techniques for Lao Foresters Population and Reproductive Institute for Population and Social 1999–2003 Health Research Research, Mahidol University Freshwater Aquaculture Department of Fisheries 2000–4 EPI Management and Surveillance Activities of EPI Faculty of Nursing, Khon Khen 1999 Target Diseases University Strengthening of Food Sanitation Department of Medical Science and 2000–4 Office of Food and Drug Administration Clinical Laboratory for Faculty of Nursing, Khon Khen Oct 1 – Cambodian Laboratory University Mar 31, Technicians 2000 Economies in Transition for Mekong Institute, Khon Khen Jan 29 – Middle-level Managers University Mar 23, 2001 Tourism Planning and Mekong Institute, Khon Khen Oct 30 – Management in a Market University Nov 24, Economy 2000 Parasite Control Faculty of Medicine, Mahidol To be University specified Sustainable Road Development Department of Highways To be for the Greater Mekong specified Subregion (GMS)

EPI = Expanded Program on Immunization.

266 Anuman Leelasorn those countries will continue to send participants to a training course that ends up being a budget expense to Japan and Thailand that is hard to justify. In addition, available schemes of dispatch for Japanese experts and the dispatch of Thai experts under JTPP can enhance the effectiveness of the TCTP course. Both can do needed surveys and identify the absorptive capacity of developing countries at the stage when TCTP courses are being formulated and designed. Thai and Japanese experts can follow TCTP graduates and provide aftercare, such as offering advice when difficulties and obstacles arise that are not covered by TCTP courses. Japanese experts can also recommend that the local JICA office supply suitable equipment and other necessary materials to the institutions of ex-participants in order to solve development problems. This aftercare could involve gathering information and giving feedback for the improvement of future training courses. A key obstacle confronting the TCTP scheme is the slow budget approval process in which Japan shares the cost of each TCTP course. The JICA budget system needs to be adjusted and localized to fit the regulations used in Thailand. For example, JICA provides counterpart funds only for lecturers who are not staff members of the training agency, while the Thai government makes a distinction between staff members who are the dedicated staff of the training program and those who work in other areas as functional experts that can be brought in and paid as external lecturers using JICA TCTP budget allocations. It is important to emphasize that cooperation partnership, which is the basic concept of the JTPP, should allow Thailand and Japan to adjust themselves to achieve their shared and mutual targets.

Note 1 PTTC regional projects are: (1) the Global Parasite Center at Mahidol University; (2) the Department of Social Welfare’s Asian and Pacific Center for Persons with Disabilities; (3) the Department of Livestock’s Japan–Thailand animal disease control for Thailand’s neighboring countries; (4) the SEED-Net project of Chulalongkorn University and the Asian University Network.

15 Conclusion David Arase

What are the distinguishing features of Japanese ODA that emerge from this volume? Japanese ODA seems to suffer from a lack of policy coherence (i.e. a tight focus on poverty alleviation), an unwieldy and overly complex system of policymaking and implementation, and a limited ability to tailor aid to the specific needs of diverse recipients. Taken as a whole, the following impression broken down by aid type and organizational characteristics may be gained. Grant aid administered by MOFA (general grant aid) tends to be of the capitalintensive project variety that focuses more on tertiary levels of need such as higher education, cultural centers, urban hospitals, and urban sanitation needs rather than programs at the primary level where the targeted impact on the underserved poor is greater. The technical cooperation program is complex, uneven in quality, and not well coordinated. The traditional aid schemes include the acceptance of trainees, the dispatch of experts, project-type technical cooperation, development studies, and volunteer corps service, but JICA implements only half of Japan’s technical cooperation with almost every other main ministry and agency in the Japanese government supervising its own special technical cooperation schemes. Loan aid administered by JBIC continues to play a large part in Japan’s ODA and tends to fund relatively large physical infrastructure and production-related projects, although initiatives in micro-lending have been a gradually expanding minor theme since the late 1980s. Control and coordination of this aid system is fragmented because the complicated Japanese implementation system lacks a central headquarters. The role of overall policy coordinator within the Japanese government has been given to MOFA very recently, but this does not mean a single actor sets policy, as is often the case among Western donors. MOFA still must manage a consensus among the many bureaucratic fiefdoms administering their own parts of ODA. This burdens Japanese ODA with many different actor expectations to satisfy, and this broad inclusion of bureaucratic agendas may in fact be the rationale for this system. Top policymakers tend to be career bureaucrats with loyalties outside the ODA agencies, and who possess general skills but little true expertise in either development theory or field operations, and they value bureaucratic negotiation and compromise. Aid experts are hired on a contract basis to carry out only limited activities, and work of a clerical nature takes up much of the time and energy of JICA and JBIC staff.

268 David Arase Japan’s ODA field staff lack visibility in target countries. MOFA, JICA, and JBIC usually maintain separate field offices, as do other Japanese government agencies implementing technical cooperation, and their activities are often uncoordinated. Due to the complexity of Japan’s aid procedures and the centralization of decision making in Tokyo, much field staff time is consumed in managing communications and paperwork with Tokyo. Also, field staff often lack the language and expertise appropriate to the needs of the recipient society. In addition, Japanese NGO involvement in aid is relatively limited, with less than 3 percent of the ODA budget currently devoted to NGO activities. This is unfortunate because greater NGO involvement could boost manpower and administrative capacity in the field. It is true that Japan’s aid-related NGO sector is relatively new and in general lacks the expertise found in Western countries, but the Japanese government could do more to nurture these NGOs with more favorable funding and less restrictive regulations. Part of the reason Japan’s ODA has been slow to change is the relatively light emphasis placed on systematic program evaluation that can serve as a mechanism for change. This absence may stem from the vertically segmented administrative system in which there is no clear center of authority and responsibility, as well as from a traditional attitude that after aid-project completion the recipient needs to make it a success. Japan is paying greater attention to sustainability issues today, however, as evidenced by new MOFA procedures to examine sustainability from the aid identification stage. But there may be more fundamental reasons for the persistence of the distinctive Japanese aid profile.

Why is Japan different? Japan’s aid philosophy With respect to philosophical issues, there seems to be an underlying Japanese assumption that development means the growth of industrial production and trade in a state-driven process that can be advanced through the construction of production-related projects and the acquisition of related technologies. This aid approach was briefly advocated by Japan in the early 1990s as an alternative to the prevailing Western neo-liberal consensus,1 and it seems to be reemerging today. In reaction to the thrust of the poverty-oriented MDGs and the direction emerging out of the Monterrey Conference, which called on donors to harmonize their ODA policies, the Japanese development economist Izumi Ohno recently stated: Now [all] donors are encouraged to harmonize or even completely unify their aid disbursement procedures . . . By sharp contrast, the East Asian development experience strongly affects the Japanese approach to development aid. Japan’s ODA intends to support the industrialization of latecomer countries and has the following features: Geographical concentration in Asia . . . High priority of infrastructure development . . . A broad aid menu, including loans.2

Conclusion

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This ODA profile may indeed be the natural product of Japan’s own successful experience with rapid industrialization and the success of the industrialization-asdevelopment approach in other East Asian countries. As such, it is worth examining the pros and cons of the issue. Japan believes in the importance of recipient self-help efforts, which Ohno expresses as follows: “Aid is neither charity nor the moral obligation of the rich. Aid should support self-help efforts of developing countries and contribute to fostering their national pride.”3 Associated with self-help are Japan’s request-based assistance principle and the use of loans in ODA. The request-based aid principle leaves it to the recipient government to formulate aid requests, and this is intended to respect the sovereignty of the recipient. Japan believes ODA loans are a part of self-help because grant aid can literally and figuratively be taken for granted, but the need to repay loans calls for fiscal discipline and a sustained effort that bars frivolous aid requests, from which a recipient can draw pride. Critics, however, note that formulating aid requests can be difficult for recipients with low capacity because the complexity of Japanese aid procedures makes information and transaction costs high relative to recipient resources, and this gap can be exploited by unscrupulous actors who advocate dubious proposals to benefit private interests. Another issue is that aid requests must be made by a national government, and this restriction can mean that local government or civil society needs unimportant to a governing regime can be overlooked. The passive request-based principle also makes it difficult for Japan to develop a proactive aid approach or to collaborate with a wide range of international, national, subnational, and civil society actors. With respect to loans, other donors avoid loan aid altogether because of the already excessive level of developing country indebtedness and the limited institutional capacity of poor countries to manage extended loan obligations. In other circumstances, where recipients are successfully industrializing and target projects are income-generating and therefore can sustain loan financing, the argument is that a sustainable and economically justifiable project should not qualify for ODA, and should seek other sources of financing. There is merit to the Japanese ODA philosophy to the extent that it is appropriate to the needs of the recipient. It is not inappropriate to focus on the growth of production in the developing world, even as one strives to alleviate poverty, protect the environment, and improve governance there. As with any donor preference, the real question is whether it is pushed in inappropriate circumstances for selfish or arbitrary reasons. In any case, it should be clear that Japan’s comparatively Asia-oriented, production-sector-oriented, and loan-dependent ODA profile stands in contrast to other donors, who give greatest weight to “soft” programs featuring technical cooperation and institution building targeting the poorest populations in line with the new MDGs. The distinctive and possibly diverging Japanese aid profile attracts attention because it strikes a dissonant chord in the global consensus on ODA.

270 David Arase Political interests In addition to philosophical considerations, there are domestically rooted political interests attached to the traditional Japanese ODA profile that may be illustrated by the following points. From its inception to the early 1990s, Japan’s ODA was criticized for being tied to procurement in Japan. Other things being equal, perhaps the majority of Japanese government officials would prefer to use Japanese contractors in bilateral ODA in order to identify the assistance clearly as coming from Japan, as well as to reap a return economic benefit. Japan’s grant and technical assistance has always been fully tied in principle for the reasons stated above, and has been able to sustain this position because the recipient incurs no burden as a result of this practice, but loan aid is a different matter. Japan has been willing to untie this area of assistance. Under international pressure, Japan reached a 100 percent untied status in loan assistance in 1996, which MOFA was glad to publicize widely, but recently, due to countervailing pressure from other bureaucratic actors and Japanese business desiring a greater share of aid contracts, tied aid loans have been reintroduced in small measure as explained below. MOFA’s own diplomatic needs also affect the ODA profile. MOFA’s desire to foster better political, economic, and cultural relations in Asia helps to explain the concentration of aid in this region. Also, its interest in using the grant project assistance it directly controls to strengthen bilateral ties may play a role in explaining why so much of it remains at the capital- and technology-intensive tertiary level. Recipient governments often value showcase hospitals, cultural centers, and higher education facilities as symbols of national progress that serve their political purposes, while, for MOFA, such high-profile projects symbolize a strong bilateral relationship and Japan’s identity as a technologically advanced society. Thus, to the extent ODA is used to promote Japan’s political relations with recipient governments, the ability to address soft aid agendas may be affected. In addition, as mentioned in the introduction, there are institutional factors inhibiting change. Japanese ODA is run by an entrenched bureaucratic system whose roots extend back to Japan’s postwar reparations program. The system features horizontal linkages between almost all main ministries and agencies, and downward linkages from this level to JICA, JBIC, and a number of smaller aidimplementing organizations. A crucial factor supporting this horizontally coordinated, but vertically segmented structure is the hegemonic rule of the conservative LDP, under which the system developed and which today lacks the political will to reform it. The result is the absence of any Diet legislation to authorize and define Japan’s ODA effort on a statutory basis. The often-referenced ODA Policy Charter, first created in 1992 and revised in 2003, serves as the legal basis for Japan’s ODA policy. This document is a cabinet order that reflects an agreement among the central bureaucracies on how they will manage the ODA program, and in effect it legitimizes the institutional status quo. In all likelihood, until legislation to set Japan’s ODA policy is proposed by the cabinet in the Diet, there will not be an opportunity for the opposition parties, NGOs, and the media, who desire radical reform of the system, to effect such a change.

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Recent reform measures in Japanese ODA What is the future of Japan as a major ODA contributor? The starting premise of this discussion is that barring the accession to power of a new reform-minded political elite willing to take Japan in a new direction, domestic factors will not allow Japan again to be the world’s leading ODA contributor. Japan remains a rich country, however, and can look forward to maintaining a number two position in absolute dollar spending for some years. The good fit of ODA into the constraints of Japan’s overall foreign policy suggests that ODA will remain a central focus in its diplomacy, although this may not mean an earnest embrace of the new ODA consensus articulated by the Millennium Declaration and the Monterrey Conference. Given the broader and deeper international consensus on the need to increase the quality and effectiveness of ODA, however, Japan at least will have to do something in this new direction if it hopes to get any appreciation for its ODA effort. To deal with domestic calls for spending cuts and greater government accountability, and to address international expectations embodied in the MDGs, Japan’s official policy line has taken some suggestive turns. The 1992 ODA Charter was a vague list of objectives that dedicated Japan’s ODA to improving human welfare, discouraging military development, encouraging environmentally sustainable development, and promoting democracy. Continuing domestic calls for reform and greater transparency, as well as the new Development Partnership Strategy on ODA, prompted MOFA to form the Council on ODA Reforms for the TwentyFirst Century in the mid-1990s. Its final report in 1998 set three main goals for Japanese ODA: demonstrating humanitarian concern for poverty alleviation, managing pressing global issues, and improving Japan’s “soft” contribution to security by spreading more of its ODA beyond Asia. This emphasis on compliance with poverty-focused international ODA norms continued in the 1999 MediumTerm ODA Policy Outline, which specifically referenced the OECD’s Development Partnership Strategy as a policy model, while noting stronger domestic demands for austerity, effectiveness, and accountability. It pledged Japan’s efforts to give more attention to poverty and social development using wider partnership strategies, along with new initiatives to help countries hurt by the Asian financial crisis, the highly indebted poor countries, and those needing conflict prevention or conflict recovery assistance. Subsequently, MOFA was rocked by domestic criticism of its ODA policy toward China and a scandal involving Diet member Muneo Suzuki skimming ODA project funds with the cooperation of some MOFA officials. In addition, the private sector was upset by the fact that Japanese business won only 19 percent of Japanese ODA contracts in 1999, due to the fact that Japan’s loan aid had become untied to comply with OECD norms. The Keidanren, which is the voice of the large-scale private sector in Japan, immediately issued an ODA policy proposal claiming that the (MOFA-dominated) process that produced the Medium-Term ODA Policy Outline “was not made open to the public, nor was the involvement of the private sector satisfactory.” The same document goes on to state: “The

272 David Arase Keidanren requests the Japanese government to effectively expand Japan-tied assistance that will be well received internationally . . . This type of assistance must be implemented . . . as the core of the [ODA] yen loan program.”4 The Keidanren call for tied aid was partially acknowledged when the 1999 New Miyazawa Initiative, which offered ¥600 billion in aid to help countries recover from the Asian financial crisis, set aside a portion for a tied ODA loan program. When Yoriko Kawaguchi, a former METI official, was appointed Foreign Minister in 2002 to spearhead reform in MOFA, she vowed to tackle ODA, but it was unclear what direction she would take. It was a critical moment insofar as the United States and the European Union were intent on boosting ODA spending after 9/11 as a counterstrategy to terrorism, and domestic calls for ODA reform were at a high pitch. Kawaguchi was in a relatively strong position to influence ODA policy, because MOFA bureaucrats were demoralized over a series of scandals and controversies, and as the MOFA head, she became the lead coordinator over the 12 other ministries and agencies playing roles in ODA policymaking, due to an administrative reform measure that took effect in 2001. She strongly rejected suggestions from a MOFA-sponsored study group on ODA that an independent agency take the leadership of Japan’s ODA. Instead, she took to tinkering with the existing system and, with respect to compliance with international ODA norms, she has been leading Japanese ODA in two different directions in order to please two different audiences. One direction was the reassertion of the Japanese government’s traditional view of ODA as a vehicle for promoting Japan’s national interests. To help meet METI, LDP, and private sector calls for using ODA more to help Japanese firms survive hard times, Kawaguchi broke with tradition, and in July 2002 appointed a METI official to head MOFA’s Economic Cooperation Bureau. This official, Hajime Furuta, who was responsible for designing the special tied ODA loan component in the New Miyazawa Initiative when he was director of METI’s Economic Cooperation Bureau, was strongly backed by the Keidanren and LDP politicians. His first accomplishment at MOFA was to introduce his partially tied ODA loan program idea (i.e. not more than 30 percent set aside for Japanese contract bidders) as a permanent ODA reform measure. This measure observes DAC rules, which allow tied aid loans if offered on very concessional terms, but it departs from the spirit of DAC’s approach to aid tying, which is to do away with it. This thrust was continued in 2003 when Kawaguchi revised the 1992 ODA Charter, that had justified Japan’s ODA effort in universalist terms of humanitarianism, peace, and democracy. A new emphasis on using ODA to serve Japan’s national interests in the revised Charter was clear in the one-sentence opening paragraph, which reads: “The objectives of Japan’s ODA are to contribute to the peace and development of the international community, and thereby to help ensure Japan’s own security and prosperity.”5 The revised Charter cites Japan’s desire to help the international community deal with a full range of global issues, but it emphasizes Japan’s need for secure access to resources, and its interest in closer economic partnership with Asian countries. In particular, it reaffirms Japan’s traditional emphasis on “self-help”; the provision of aid by Japanese

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enterprises; a geographical focus on Asia; a sector emphasis on physical infrastructure projects; and “coordination between Japan’s ODA and other official flows such as trade insurance and import export finance.”6 In marked contrast to the 1999 Medium-Term Policy Outline, which specifically committed Japan’s support to the 1996 Development Partnerships Strategy of the OECD, the revised ODA Charter of 2003 fails even to mention the Millennium Declaration or the MDGs in its rationale for giving aid. Thus the self-interested aims of Japan’s ODA, which previously were mostly implicit, became more explicit in the 2003 ODA Policy Charter. This change may on balance create greater transparency with regard to Japan’s real range of policy aims. What is of some concern, however, is that the failure of Japan to commit itself explicitly to the MDGs may be interpreted by some to be a weakening commitment to the global development effort, especially when this comes in tandem with declining ODA spending. MOFA’s 2004 ODA White Paper echoes the ODA Charter’s emphasis on serving Japan’s own needs. The new MediumTerm ODA Policy Outline, released in February 2005, does emphasize Japan’s efforts to support the MDGs, but it also emphasizes giving ODA based on East Asia’s development experience and Japan’s own interest in developing economic relationships. Thus the bifurcation in Japan’s ODA philosophy seems to be more clearly emerging (Government of Japan, 2005). It is safe to conclude that the Japanese government continues to view ODA as an area where major domestic stakeholders (in the government and private sector) have at least a partial claim over resources. This does not mean, however, that Japan will ignore international norms or avoid reform. Because international and domestic opinion relentlessly calls for more transparent and effective Japanese ODA, JICA is being used to deliver ODA that is more responsive to international norms and expectations, and JBIC is being used to continue a tradition of loan assistance that is responsive to Japan’s bilateral and Asian regional diplomatic needs as well as to its economic and commercial interests. JBIC was created in 1999 when the Overseas Economic Cooperation Fund (OECF) was amalgamated with the Japan Export Import Bank ( JEXIM). The OECF was created in 1961 to handle official loans and equity investment for resource development projects in the developing world, and it evolved into Japan’s main ODA loan agency. JEXIM’s origin predates OECF and it has handled official trade credits, trade and investment insurance, equity participation with Japanese firms in overseas projects, and other official forms of lending. JBIC now combines both ODA and non-ODA official lending under the supervision of the Ministry of Finance. In view of the apparent satisfaction of the Japanese government with the close association between ODA and non-ODA official lending, and the 2003 ODA Charter which reemphasizes the value of loan assistance in association with Japanese economic interests, JBIC seems to be emerging as the ODA-implementing agency more responsive to the narrower political, economic, and commercial interests of Japan. In contrast, MOFA and JICA have taken certain steps that should put Japanese grant and technical assistance more in tune with international expectations

274 David Arase regarding quality and end purpose. In 2003, MOFA reorganized its Economic Cooperation Bureau to enhance its ability to organize ODA policy on a country basis rather than by type of assistance (i.e. grant, technical, and loan). In addition, MOFA has pushed for regular meetings among ODA field staff of all Japanese ministries and agencies in recipient countries. These steps should improve recipient country focus, policy coordination, and policy coherence. In addition, JICA was freed from MOFA’s formal supervision in October 2003. MOFA will no longer have the authority to put its own officials in key positions to supervise detailed operations. In addition, a dynamic leader of JICA has been found in Sadako Ogata, who is an academic with a decade of experience as the UN High Commissioner for Refugees. She has set an ambitious reform agenda based more on humanitarian principles than on narrow concerns for national advantage, which will test the limits of JICA’s new independence. In particular, she is emphasizing the need for better and more effective field presence by passing decision making powers down to new regional centers and local field offices, and is shifting personnel from headquarters duties to field duties, so that half, instead of the current 30 percent, of the staff will be in the field. She is also sharpening the focus on poverty alleviation, NGO partnerships, and peace-building and postconflict recovery. Africa is an area of emphasis for JICA under her direction. Finally, she is pushing for more capacity building programs at the community level, and this will require the development of new technical cooperation schemes. It should be evident that the direction she is advocating clearly takes the MDGs to heart and deviates from the spirit of the new ODA Charter. If Ogata is successful in establishing this new role and identity for JICA, many of the criticisms voiced by the international community, including those in this volume, will be addressed, at least in the area of technical cooperation. This direction is not guaranteed, however, because JICA’s independent status is not as secure as it may appear. JICA’s head is still appointed by MOFA. (The choice of Ogata was forced on MOFA by a vocal JICA staff effort to recruit her and to avoid the traditional appointment of a retiring MOFA official.)7 The Japanese government led by MOFA will set JICA’s policy objectives every three to five years in a medium-term policy outline, and JICA also must submit a medium-term plan, annual plan, and annual budget to MOFA for general review and approval. The real test of JICA’s budding identity will be the freedom it will have in devising and funding new aid schemes, and the choice of Ogata’s successor. There is some advantage for the Japanese government to allow JICA to evolve along the lines being developed by Ogata. Japan’s ODA must deal with conflicting pressures generated by domestic interests, traditional foreign policy interests, and the preferences of the international development community. It would be politically expedient for Japan to have at least one part of its ODA program (i.e. technical cooperation) that can gain the respect and admiration of the international community, and thereby address the need (if only in part) for better quality and effectiveness in Japan’s ODA. Japan’s loan aid program administered by JBIC may best address the concerns of domestic economic actors. Finally, Japan’s grant aid program administered by MOFA can continue to support Japan’s bilateral and

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regional diplomacy. This institutionally tracked solution to the problem of reconciling the different political demands placed on Japan’s ODA may not be philosophically coherent or elegant in design, but it seems to be the direction Japan is taking in the new era of diminishing fiscal resources and scaled-back international leadership ambitions. Thus we see in this volume why Japan’s ODA attracts the attention of domestic and international observers of development assistance. Its ODA profile remains distinctive because domestic institutional factors create demands and pressures in Japan’s ODA that impede policy coherence. Other nations have been able to create focused and coherent ODA programs by creating cabinet-level agencies specifically charged with participating in the international ODA effort but, in Japan’s case, continuities in electoral politics, institutional inertia, and the need to use ODA to serve different agendas have prevented a true convergence with Western ODA norms and practices. It is worth noting that Japan’s focus on assistance to industrialization is particularly appreciated by some recipients, especially in Asia, and, as the chapter by Seddon and Kim indicates, that South Korea has consciously modeled its own new ODA program on that of Japan, and the same might be said about Taiwan. Also, as indicated in the chapter by Leelasorn, Thailand is collaborating with Japan in starting its own new ODA program and, as China becomes an ODA donor, it too may follow certain aspects of the Japanese aid system. Thus, in some respects, Japan may be emerging as an alternative or hybrid model of “Asian-style” ODA. The net result of this interplay of factors is that Japan is moving in incremental steps toward what seems to be an institutionally tracked aid system. It is addressing the call for more transparent and effective poverty alleviation with reform measures in MOFA and JICA. Meanwhile, its loan assistance administered by JBIC seems set to retain a traditional ODA emphasis on “self-help,” capital-intensive project assistance, association with Japan’s own economic and commercial interests, and an emphasis on Asia. This emerging bifurcated approach may be a politically expedient solution that may not fully satisfy anyone, but Japan’s hope is that it will mollify different critics who may find at least a part of Japan’s aid system addressing their own concerns. For the international ODA community, however, it remains to be seen how far JICA will be allowed to participate in the trend toward policy harmonization to achieve the aims articulated in the Millennium Development Goals.

Notes 1 2 3 4 5 6 7

Wade (1996). Ohno (2003: 5). Ohno (2003: 6). Keidanren (1999). Council of Overseas Economic Cooperation-Related Ministers (2003). Council of Overseas Economic Cooperation-Related Ministers (2003: 5). Asahi Shimbun (2003).

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288 Bibliography World Bank (1980) World Development Report 1980. New York: Oxford University Press. World Bank (1990) World Development Report 1990. New York: Oxford University Press. World Bank (1993) The East Asian Miracle: Economic Growth and Public Policy. Washington, DC: World Bank. World Bank, Operations Evaluation Department (1996) Lessons and Practices No. 7: Technical Assistance. Washington, DC: World Bank. World Bank (1997) China in 2020. Washington, DC: World Bank. World Bank (1998) Assessing Aid: What Works, What Doesn’t, and Why. New York: Oxford University Press. World Bank (2000a) World Development Report 2000/2001: Attacking Poverty. New York: Oxford University Press. World Bank and partner institutions (2000b) Can Africa Claim the 21st Century? Washington, DC: World Bank. World Bank (2000c) The World Bank Annual Report 2000. Washington, DC: World Bank. World Bank (2000d) “Country Assessment and IDA Allocations,” Washington, DC: World Bank. Available at http://www.worldbank.org/ida/idalloc.htm. World Bank (2001) Global Development Finance 2001. Washington, DC: World Bank. World Bank (2002) Globalization, Growth, and Poverty: Building an Inclusive World Economy, World Bank policy report. Washington, DC: World Bank. World Bank (2004) Partnerships in Development: Progress in the Fight against Poverty. Washington, DC: World Bank. Yasuba, Yasukichi and Kozo Yamamura, eds (1982) The Political Economy of Japan: The Domestic Transformation. Stanford, CA: Stanford University Press. Yasutomo, D. (1983) Japan and the Asian Development Bank. New York, Praeger. Yasutomo, D (1986) The Manner of Giving: Strategic Aid and Japanese Foreign Policy. Lexington, MA: Lexington Books. Yoon, H.J. (1992) Woorinara Jungbukaebalwonjo ey Kookbyul Chabyulhwa Jungchaek Bangan [On the Discriminative Approach to Korea’s ODA Allocation]. Seoul: KOICA. Young, H. (1991) One of Us: A Biography of Margaret Thatcher. London: Macmillan. Zivetz, L. et al. (1991) Doing Good: The Australian NGO Community. Sydney: Allen and Unwin.

Index

Note: Page numbers in bold refer to illustrations. accountability 11, 129 administrative systems 6, 10–11, 48, 74–5, 126–7, 129–31, 166, 167, 168, 169–70, 185; centralization of 166; fragmentation of 88, 93, 127, 128, 267; inhibiting change 270; reforms 128 Ady, P. 51 Africa: aid policy for 64, 69; ODA to 54, 87; see also South Africa; Tokyo International Conference on African Development aid philosophies 25–6, 53, 55, 68, 105, 205, 268, 269; historical background 117–20; self-help 105, 117, 251, 269 aid policies 134, 275; fragmented structure of 62; reforms of 72, 73, 74 anti-Japanese feelings 87 ASEAN-Japan Development Fund 63 Asia: favoured status region 77; see also South Asia; Southeast Asia Asia Foundation 200–1 Asian financial crisis: assistance to victims of 126 “Asian-style” ODA 275 AusAID 236; see also Australia Australia: administrative system 107–8, 109, 110, 114; aid policy 105, 107, 110; China, aid to 113; comparison with Japanese ODA 108, 109, 109–10; diplomatic benefits of aid 107; geographical distribution of aid 107; grant aid 107; Indonesia, aid to 107, 112; monitoring of aid 114; origins of ODA 104; Pacific Island countries, aid

to 242; Papua New Guinea, aid to 107, 111–12; sectoral emphasis 114; technical assistance 106, 108, 111; tied aid 107; transparency 108; Vietnam, aid to 113; see also AusAID Bangladesh: effectiveness of aid 228, 229, 230, 231 Beasley, W. 46 Beaudry-Somcynsky, M. 12 Benazir Bhutto 199 bilateral aid 5, 6, 7, 23, 56, 72; policy performance of recipient countries 32, 33, 34; see also grant aid; individual countries/regions; loan aid; technical cooperation Brandt Commission 66 Britain: administration of aid 74; Aid and Trade Provision 55, 56, 70; aid policies 42, 70; bilateral aid 56, 76; colonial civil servants 49, 50; commitment to aid 50–1; Commonwealth countries, aid to 60; consultancies 76; debt relief 58, 60, 76; expenditure on aid 56, 59, 70; free market forces to aid development 55; grant aid 59–60, 76; historical relationship with the developing world 41; humanitarian assistance 76; imperialism and aid 42, 43, 44; international relationships 57; linking trade to aid 41–2; low-income countries, aid to 60; ministries’ influence on policy 58; multilateral aid 59, 65, 72; national interests 41–2;

290

Index

negative value of private flows to developing countries 59; newly independent states, aid for 47; NGOs, importance of 71; ODA Scientific Units 56; Overseas Development Ministry 50, 51, 52; overseas experience of personnel 41; political conditionality applied to aid 66, 67; poverty alleviation 70, 71; reductions in aid 55, 56, 57; technical cooperation 49, 50, 60, 74, 76, 77; tied aid 55, 56; trade promotion in Japan 57; universities and research institutes 50; value for money in aid 55; Voluntary Service Overseas 49 British Council 56, 75 Brooks, W. 53 bureaucracy see administrative systems Bush, G. 66 business community see private sector Canada: business community, relations with 140–1; expenditure on aid 150, 151; foreign policy and aid 135; geographical distribution of aid 150; government departments’ involvement in aid 136; implementation of aid 137; local professionals, use of 138; NGOs, role of 138, 140; objectives of aid 134; sector-wide approaches 137; sectoral distribution of aid 150; study missions 144; technical cooperation 142, 143, 144, 145–7, 149–50 Canadian International Development Assistance (CIDA) 97; see also Canada career bureaucrats: lack of expertise in development theory 267 Castle, B. 50, 51 centralization of aid administration 166 centralized decision making 29, 37 Chalker, L. 58, 67 Chamberlain, J. 44 China: aid to 113, 203, 204, 217, 222; calls for an end to ODA 4; content of aid 209, 210; development research 210–11; direct investment in 218, 218; economic and cooperative relations with Japan 203, 214; exchange of labor services between China and Japan

208, 209; experts sent to 208; feasibility studies 212; geographical distribution of aid 208; grant aid 204, 207, 207, 208; IT revolution 220–21; knowledge of Japan 210; linking ODA with China’s entry into the WTO 219–20; loan aid 206–7, 212; nongovernmental enterprises 211; political and cultural factors, impact of 212–14; positive contributions of aid 217–19; renunciation of war reparations 206; suitability of projects 216, 217; technical cooperation 210, 216; tied aid 221, 222; trade between China and Japan 218, 218; trade friction with Japan 213; training of personnel 208, 209, 210; western region, development of 220, 221–2 Churchill, W. 44 CIDA 97; see also Canada clerical work 149, 267, 268 Colombo Plan 104 common pooling arrangements 30, 31; Japan unable to participate in 30–1 conservatism of aid projects 201–2, 216 cooperation with other donors 92, 138, 245 country-specific aid 29, 30, 36, 62, 73, 128, 135, 274 criticism of Japan’s aid policies 271–2; prompting reforms 70 cultivation of talented personnel 219 cultural barriers 91, 243 DAC see Development Assistance Committee delivery mechanisms 30–1 design of aid projects 247–8 developing countries: Japan’s relationship with 41; promotion of trade with 75; taking charge of own development 136, 138 development: concept of 25 Development Assistance Committee (DAC) (OECD) 159; infrastructure expenditure 27; Japanese compliance with DAC norms 6–7; Republic of Korea joining 179, 180; technical cooperation 35; total net outlays 3

Index development research 103, 186, 187, 210–11 diplomatic presence in aid areas 246 direct investment abroad 162, 193, 218, 218 directed credit strategy 63 donor-driven aid 231; ineffectiveness of 28–9 economic and commercial interests 13, 25 economic interdependence 53, 62 effectiveness of aid 1, 28, 37, 71, 84, 130, 131, 182, 183, 188, 224–5, 229, 230, 231; econometric model 232–4 Ensign, M. 10 environmental aid 93 evaluation of aid see effectiveness of aid exchange rate of yen: impact on debt burden of countries 205 expenditure on ODA 1, 3, 4, 62, 67, 123, 124; budget cuts 1; commitments 3; ODA/GNP ratio 6, 59; reductions in 72 experts: role of 100 Export-Import Bank of Korea 174 feasibility studies 78, 212 field staff 268; clerical work 268; initiative of 130, 131; lacking visibility in target countries 268; meetings 274; presence of 29, 127, 128, 130, 131, 274; uncoordinated activities 268 flexibility in aid procedures 246, 247 foreign policy interests 12–13 France: aid to Pacific Island countries 238 Furuta, H. 272 geographical distribution of ODA 7, 60, 124, 150, 204, 205, 205 Germany: aid to Inner Mongolia 209–10; role of ODA in improving international image 213 global perspective on aid 54 globalization 136 Gorbachev, M. 57 grant aid 5, 72; capital–intensive 267; less developed countries 176; policy performance of recipient countries 32, 33, 34; ratios of 204; tertiary levels of

291

need 267; see also individual countries/ regions Hanabusa, M. 10 Harris, S. 184 Hart, J. 55 Hasegawa, S. 9 Hata, T. 64 Heath, E. 54 Hoffmann, M. 10 Hook, S. 10 human development 26, 66, 76, 119 humanitarian assistance 76 Hurd, D. 66 IGBA 56 imperialism 42, 43, 44–6 imports from developing countries; encouragement of 75 income groups of aid recipients 7, 124, 124, 125, 173, 174, 174, 175, 176, 176 Independent Group on British Aid (IGBA) 56 Indonesia: aid to 107, 109, 112, 113; effectiveness of aid 229, 230, 231; geopolitical importance of 112 infrastructure expenditure 27, 28, 86; DAC average 27; extent of 92; prerequisite of growth 118–19 international ODA policies 7–9, 24, 123; need for Japan to converge with 12, 275 Japan: British trade promotion 57; demographic profile 4; economy 3, 4; sovereign debt rating 4 Japan Foundation 75 Japanese International Cooperation Agency (JICA): distribution of aid by programs 176, 177, 178; establishment of 49, 54; lack of bureaucratic autonomy 100; role of 76; understaffing 100; see also technical cooperation Ji, Y. 160 Katada, S. 10 Kawaguchi, Y. 272 Kennedy, J. F. 49

292

Index

Kim Dae Jung 173, 221 Kim, H. 180 Kim, S. 156 Kim, W. 156 Kimura, T. 53 KOICA 156; see also Republic of Korea Koizumi, J. 97 Korea International Cooperation Agency (KOICA) 156; see also Republic of Korea labor services: exchange of 208, 209 language barriers 91, 102, 243 Latin America: aid to 95, 97, 98, 99, 100; avoidance of political involvement 99; chronic violence 98; democratic development 101; economic motivations 96; experts with social and cultural research backgrounds 101; extent of aid 96; gender issues 101–2; historical background 96; international division of donor styles 102–3; language barriers 102; minority concerns 99; perceptions of Japanese ODA 96, 97; poor population 98; regional experience 102; research initiatives 103; squatter settlements 98; state-to-state endorsement of projects 97; strategic partnerships 97 loan aid 5, 72; extent of 91–2, 117, 125, 175; funding large projects 267; problems of 269; see also individual countries/regions local conditions: need to take account of 29 local organizations: relationships with 201 Loutfi, M. 9 Macmillan, H. 50 Major, J. 58, 65 Marris, R. 51 MDGs 8, 9, 273 Medium-Term Policy on ODA 26, 27, 73, 119, 120, 271 Michio, M. 220 Millenium Development Goals (MDGs) (UN) 8, 9 ministries: interests in ODA 135, 136, 142, 148, 202

Ministry of Foreign Affairs (MOFA) (Japan) 33, 204, 205, 236; credibility of 4–5 Mitterand, F. 66–7 Miyashita, A. 11 MOFA see Ministry of Foreign Affairs motives for ODA 12 multilateral aid 59, 67–8, 236; see also World Bank national interests 10, 42, 272, 273 non-governmental organizations (NGOs) 92, 139, 140; attitude of bureaucrats to 139; role of 11, 71, 131, 268 North Korea: economic assistance from Republic of Korea 179 ODA Charters 6, 11, 25, 26, 271; revision of 272–3 ODA Reform Council 119, 271 OECD see Organization for Economic Cooperation and Development Ogata, S. 274 Ohio, K. 232 Ohno, I. 268, 269 Organization for Economic Cooperation and Development (OECD) 3, 8, 26, 28, 129, 175; see also Development Assistance Committee Orr, R. 11, 53, 170 overseas experience of personnel 41 ownership of projects 29, 83 Ozawa, T. 47, 48 Pacific Island countries: aid to 237, 238, 239, 242, 249, 250, 251; bilateral aid 236, 236; cooperation between donors 245; design of aid projects 247–8; educational assistance 243–4; fisheries sector aid 237, 238, 240, 241, 242; flexibility of aid 246, 247; forms of assistance 236, 237; geographical distribution of aid 249–50; grant aid 237, 240; Japanese political role 250, 251; key role of aid in economies 235, 236; motives for aid 237, 238, 239; multilateral aid 236; ratio of aid to GDP 235, 235; regional assistance 237, 248, 249; regional economic

Index reform 242–3; regional fisheries management 239; senior volunteer scheme 245–6; sustainability of aid projects 244–5; technical cooperation 239, 240, 240, 241; University of the South Pacific 248–9; see also Papua New Guinea Pakistan: aid to 194, 196; economy 193, 195; educational television project 196–9; exports 194; external indebtedness 195; foreign direct investment in 193; imports 194; nuclear tests, effect of 193, 195–6; perceptions of Japanese aid 201–2 Pakistan Literacy Commission (PLC): Japanese assistance to 199–200 Papua New Guinea: aid to 107, 111–12 Park Chung Hee 154 partnership strategies 131; private sector 141–2; see also cooperation with other donors; non-governmental organizations peacekeeping operations 68–9 Pearson, L. 66 perceptions of Japanese ODA; Latin America 96, 97; Pakistan 201–2; South Asia 231; Southeast Asia 231; Sweden 81, 88–91 PLC see Pakistan Literacy Commission policy coherence 275 policy performance of recipient countries 31, 32, 37; recipients of bilateral aid 32, 33, 34; recipients of grant aid 32, 33, 34 policymakers: types of 225 political affairs of other states: noninterference in 99, 250, 251 political and strategic objectives 11, 25, 48–9, 54, 270; “compensation diplomacy” 206; increasing political and diplomatic influence through aid 63, 106–7; national security 62, 62; North–South relations 61; political conditionality 66, 67, 68 politicians: involvement in ODA 165 poverty 1, 2; concept of 24, 25; policies to alleviate 70, 119, 183 Prentice, R. 55 private sector: as aid lobby 48; criticism of

293

ODA policy 271–2; influence of 165; network of relationships 138; partnerships with 141–2 profile of aid 7 public support for ODA 5, 54 quality of aid see effectiveness of aid Rah, W. 180 Reagan, R. 57, 65 reflection of own society, aid as 91 reforms of ODA 70, 263–4, 271–5 regional assistance 237, 248, 249 regional cooperation 215, 258, 262–3, 264 Republic of Korea: administration of aid 166–72, 167, 185, 186, 187; aid policies 161, 164, 178, 179, 183, 184; aid programs 176, 177, 178; development research 186–7; economic assistance to North Korea 179; economic cooperation and aid 161, 162, 163; economic objectives of aid 180, 181; expenditure on aid 172, 179, 179, 180; foreign direct investment in developing countries 162; geographical distribution of aid 156, 156, 173, 174, 181; grant aid 156, 157, 174, 175, 175, 188; historical background to ODA 153–5; imports from developing countries 162; income groups of aid recipients 173, 174, 174, 175, 176, 176; joining DAC 179, 180; loan aid 160–1, 174; modeling ODA on Japanese experience 161; national development of 163, 164; numbers of recipients of aid 180, 181; political objectives 153, 157; politicians’ interests 165; President’s influence 165; private sector influence 165–6; public attitudes to aid 184; quality of aid 182, 183; as recipient of foreign aid 170; sectoral distribution of aid 175; specialists in development aid, need for 187, 188; status of 184; structure of aid 155, 156, 172, 173, 181, 182, 182, 183; technical cooperation 157–60; tied aid 174, 175 request-based system 29, 117–18, 123, 246, 269

294

Index

results-oriented aid 119 Rix, A. 10, 48, 61, 165 Rosebery, A. 44 Sakurai, K. 232 Sato, M. 69 scandals 271 sector-wide approaches (SWAPs) 30, 31, 85; Zambia’s health sector 31 sectoral distribution of ODA 7, 26, 27, 37, 124, 124, 150 Seers, D. 51 Seiko, K. 213 self-help philosophy 105, 117, 251, 269 Sen, A. 24 senior volunteer scheme 245–6 Shigeru, Y. 48 Short, C. 70 Söderberg, M. 10 soft aid 92 Song, B. 154, 163 Song, H. 180 Sonoda, N. 53 South Africa: relationship with 68 South Asia: aid to 225–6, 232; perceptions of Japanese aid 231; technical cooperation 226; see also Bangladesh; Pakistan South Pacific Commission 235 Southeast Asia: aid to 226–7, 232; industrialization strategy 63; perceptions of Japanese aid 231; technical cooperation 226–7; see also Indonesia; Thailand; Vietnam staffing 137 Streeten, P. 51 study missions 144 Subhash Bose 231 Suzuki, M. 271 SWAPs see sector-wide approaches Sweden: administration of aid 87; Africa, aid to 87; aid as a moral duty 85; aid as reflection of own society 91; aid policy 82, 86, 87; comparison with Japanese aid 85–8; country strategies 83; development cooperation agreements 83; evaluation of aid 84; expenditure on aid 83, 84; geographical distribution of aid 84; government

structures, supporting 84–5; implementing aid 82, 83; international training programs 87–8; NGOs, role of 84; ownership of projects 83; perceptions of Japanese aid 81, 88–91; poverty elimination objective 82; private sector development 88; public support for aid 83, 85, 86; sector-wide approaches 85; transparency 86; twinning 88 Tajima, S. 199–200, 201 technical cooperation 34, 37, 49, 56, 108, 114, 118, 123, 148, 149, 267; clerical work 149; country-specific policies 36; DAC recommendations 35; developing countries’ attention to 144–5; effectiveness of 34, 35, 36, 144, 145, 148, 231; extent of 35, 76, 77, 78,142; feasibility studies 78; geographical distribution of 77, 143; human resource development 76; ministries’ involvement 142, 148; organization of 262; problems of 36; role of 106, 120; senior volunteer scheme 245–6; technology transfer 86; tied aid 126; types of 77, 142, 143; see also individual countrie/regions; Japanese International Cooperation Agency Thailand: aid philosophy 258, 259; aid policy 256–7; common values and culture with Japan 261; effectiveness of technical cooperation 263; regional cooperation 258, 264; regional technical cooperation 262–3; role as aid donor 257, 258, 263; status as middle-level developing country 257–8; technical cooperation 253–4, 254–5, 255–6, 257, 259, 260–1; technical cooperation agreement 259–60; third country training courses 264, 265, 266 Thatcher, M. 55, 57, 58, 65 tied aid 37, 56, 175, 270, 272; capitalintensive packages 118; efforts to untie 4; extent of 36; reduction of 72; value of 36 Tokyo International Conference on African Development 126

Index trade interests and ODA 9, 10, 47, 48; promotion of trade with developing countries 75 transparency 86, 108, 230 Truman, H. 120 UNDP 66, 235 UNICEF 66 United Nations: Millenium Development Goals 8, 9; targets of aid expenditure 172 United Nations Development Program (UNDP) 66, 235 United Nations International Children’s Emergency Fund (UNICEF) 66 United States: administrative system 128, 129, 129–31; “aid fatigue” 121; aid philosophy 120–2; aid policies 122, 122, 123, 128; bilateral aid 125; Congress, role of 121, 128, 129; evaluation of aid 130, 131; expenditure on aid 123, 125; field presence 128, 130, 131; foreign policy interests 120–1, 124; geographical distribution of aid 124, 125; grant aid 126; income groups of aid recipients 124, 125; loan aid 125; Pacific Island countries, aid to 238; sectoral distribution of aid 124, 125; technical assistance 123, 125

295

Vietnam: aid to 113 volunteer programs 49 Wade, R. 64 war reparations 47, 205, 206; China’s renunciation of 206; reparation agreements 48, 118 White, J. 9 Wilson, H. 47, 55 World Bank 23, 32, 33; aid philosophy 25; comparison with Japanese aid strategies 63–4; conception of poverty 24; delivery of aid 28; field staff presence 29; human development 26, 66; infrastructure allocations 26; Inner Mongolia, aid to 210; regulations preventing mixing of money 30; sectoral allocations of aid 26, 27; technical assistance 34–5; total lending 23 Yasuba 61 Yasutomo, D. 11, 53, 54, 62 Yoon, H. 180 Young, H. 57 Zambia: health sector 31 Zenko, S. 62 Zhang, G. 10