As we prepare to enter the new millennium, it is clear that humankind has achieved an unprecedented level of development during the second half of the 20th century.¹ Nonetheless, the human population on Earth today stands at 6 billion; of that total, 1.3 billion of our fellow humans still live in extreme poverty.² With the end of the cold war in the 1990s, many countries moved firmly toward democratization and made the transition to market-oriented economies. Some regions of the world, though, remain torn by conflicts and internal disputes that actually have their roots in poverty and under-development. To add to these problems, astonishing progress in information communications and economic liberalization have brought on a wave of globalization which has marginalized certain countries, exacerbating the gap between the rich and the poor.³ Further, the structural vulnerability of developing economies in the midst of economic liberalization has been brought into sharp focus by the recent economic and financial crisis that spread throughout much of Asia as of the summer of 1997.

In short, the issues that deserve the attention of ODA are wide-ranging. And yet, Japan continues to find itself heavily burdened by serious economic and fiscal strains. Opinion surveys have indicated that public support for the nation's ODA policies and programs, though not as high as it used to be, remains relatively high.⁴ At the same time, the Japanese people are clearly doubting the continued need for massive amounts of ODA when corporate collapses and restructuring are spurring unemployment at home. These circumstances seem to demand that the government do more to earn the public's understanding and support by improving the efficiency, effectiveness, and transparency of its ODA programs. In accordance with the above principles, the compilation and publication on August 10th, 1999 of the Medium-Term Policy on Official Development Assistance (hereafter referred to as the medium-term policy), aims at providing a clear and concrete path for Japanese ODA over the next five years.

The medium-term policy declares that, as the world second largest economy, Japan "shoulders the important responsibility" of contributing to sustainable social and economic development in developing countries. Additionally, the point is made that this is a role through which "Japan can win the confidence and appreciation of the international community," and that "ODA plays a very significant role in ensuring Japan's own stability and prosperity" by promoting "Japan's best interests, including the maintenance of peace."⁵ It should also be recalled that when Japan lay almost in ruins immediately after the last world war half a century ago, foreign aid helped Japan to rebuild and lay the foundations for the prosperity it enjoys today. (The Fourth Kurobe Dam (1958-81) and the Tomei and Meishin Expressways (1960-90), for example, were funded by loans from the World Bank.) The medium-term policy therefore underscores the necessity of earning public understanding and support for its ODA program and emphasizes the necessity of establishing proper accountability "vis-à-vis the Diet and the general public" and coordinating Japan's ODA program "with its foreign policies and with other important policies pertaining to the national interest." To foster stronger public understanding and support, the medium-term policy places specific emphasis on increasing "national involvement in, and visibility of Japanese aid," and on "efforts further utilizing Japan's experience, technology, and know-how, taking into consideration increased opportunities for Japanese businesses to participate in ODA projects and encouraging broad-based public participation in development cooperation through universities, think tanks, local governments, and NGOs."⁶

Thanks to the efforts and resourcefulness of its aid personnel, Japan has made full use of a diverse range of ODA instruments in establishing an accomplished ODA track record of in more than 150 developing countries worldwide. Many recipient countries and their citizens value that aid and have expressed sincere gratitude in response. Support from the developing world to Japan, in UN elections and a variety of other international fora results in part from daily cooperative relations between Japan, and these countries. It is important that Japan in the years ahead, pursue ODA projects with broad citizen participation and strive to heighten local awareness of its ODA projects in recipient countries. As part of the economic and technical cooperation provided to Latin America, Japan is also actively engaged in supporting the Japanese migrants and their descendants who have traditionally acted as bridges between Japan and Latin America. Examples of this include trainee intakes and other forms of human resources development, as well as migration financing programs.

Steady effort will be necessary to make progress in the arena of ODA reform. It should be borne in mind that it is "a fact that the original objectives of ODA projects are not always met and that certain improvements are necessary."⁷ "This is attributable, in part, to the inherent difficulty of undertaking ODA while working with countries with vastly differing histories, cultures, customs, laws and linguistic backgrounds." In emphasizing these issues, the medium-term policy urges that "special attention must be paid to ensure that vested interests do not emerge in aid-receiving sectors and recipient countries"⁸ and says that "whenever necessary, Japan will review its aid schemes, in light of changing conditions."⁹ In August 1999, several development survey personnel dispatched by JICA to the Kyrgyz Republic were abducted by armed groups. This incident demonstrated the necessity for all-out measures aimed at guaranteeing the safety of aid personnel on assignment abroad. Enlisting past shortcomings and failures as food for thought and working with the Japanese public to address the day-to-day challenges of development assistance can be expected to help Japan "maintain its vitality within the global community, continuing to enjoy harmonious development in the future and winning the confidence and appreciation of the international community."¹⁰ Based on this conviction, the Japanese government wishes to push forward with its ODA agenda.

In 1998, Japan disbursed bilateral aid totaling ¥1,126.4 billion, up 40.8 percent on the year before. In dollar terms, that total measured $8.606 billion, for a corresponding gain of 30.1 percent.¹¹ Emergency yen loans designed to assist Asia in overcoming its recent economic crisis accounted for most of that sizable year-on-year increase.¹² Conversely, disbursements of Japanese aid through multilateral institutions totaled ¥278.2 billion ($2.125 billion), down 18.5 percent from the preceding year. Total ODA disbursements accordingly came to ¥1,404.7 billion ($10.732 billion), up 23.5 percent on the ¥1,141.7 billion sum ($9.435 billion) recorded in 1997.

In terms of total ODA disbursed, Japan has been the world's top donor among the 21 DAC member countries for eight years in a row. Aid disbursements by DAC Members totaled $51.52 billion in 1998, for a 6.6 percent year-on-year increase (from $48.32 billion), reversing a five-year downtrend from 1993 through 1997. This upswing appears to be attributable chiefly to emergency financing disbursed by DAC countries and multilateral institutions to offset the impact of the recent economic crisis in Asia. DAC countries together disbursed an aid sum equivalent to 0.23 percent of their combined GNP. Individually, Japan disbursed a sum equivalent to 0.28 percent of GNP, for a DAC country ranking of 12th out of 21.¹³

The above-mentioned are the indices of aid in absolute amounts, but indices commonly used internationally for indicating aid provision conditions are the grant share and grant element. The grant share, which indicates the percentage of grants in overall Japanese ODA disbursements (on a commitment basis¹⁴), was 39.6 percent in 1996/97, thus ranking the lowest of the 21 DAC member-countries. The grant element- which indicates how lenient the terms and conditions of aid are by taking into account loans' interest rates, periods of redemption and other elements-was 78.6 percent in 1996/7, also ranking lowest out of the 21 DAC member-countries. The absolute amount of grant aid, whose average over 1995 and 1996 was calculated to enable an international comparison, however, was $7.23 billion, thus ranking second place among the 21 DAC member-countries after the United States and pointing to a substantial contribution by Japan.

Contrasting with the reversal of the downtrend in ODA funding, in 1998 total financial flows¹⁵ from the industrialized countries to the developing world measured $181.2 billion, a drop of 44.2 percent from $324.7 billion in 1997. Of the 1998 total, private sector funding accounted for $100.2 billion, down 58.7 percent from the $242.5 billion share it contributed in 1997. This drop in funding appears to be a reflection of the sharp drop in private-sector lending that followed the outbreak of Asia's economic crisis.

Note:

In order to allow international comparisons in the above tables, actual ODA figures for the ODA countries are used, excluding aid to Eastern Europe, etc.

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