2. The Overseas Economic Cooperation Fund (OECF)

    The Overseas Economic Cooperation Fund (OECF) is the implementing agency for loan aid furnished by the Japanese government. Founded in 1961, it is the Japanese government's development financing arm that extends low-interest, long-term funds to support the self-help efforts of developing countries. Since its establishment, the number of countries receiving yen loans has grown to reach 90 worldwide as of the end of March 1998.
    The OECF primarily furnishes loan funds directly to governments, provides finance to or subscribes capital in corporations undertaking projects in developing countries, and conducts related research activities. Since the function of furnishing direct loans to governments will be described later in more detail under each separate category, discussion here will be limited.
    Cooperation provided to the private sector is extended in the form of financing (loan of funds), and in the form of capital subscription (equity participation). The major beneficiaries of the OECF's financing activities include development projects (in industries such as agriculture, forestry and fisheries, and mining), experimental and preparatory surveys for development projects, and direct bridging finance arrangements.
    The financing ratio is normally 70% of the total funds required for the project. Base interest rates vary according to conditions at the time; as of the end of March 1998, the rate was 2.10% p.a. The repayment term will also vary in accordance with parameters such as the profitability of the project, but as a rule is set at a maximum of 20 years, with a five-year grace period. Provision of collateral or guarantees is required.
    Assistance is provided to private sector companies because economic growth in developing countries is not only dependent on direct aid from governments, but also derives from projects undertaken by the private sector in developing economies; that is, the benefits of economic development that arise from the transfer of capital, acquisition of foreign exchange, creation of employment opportunities, and the transfer of technology. However, many challenges confront businesses attempting to undertake projects in developing countries, not the least of which are the risks involved and low profitability. Project proposals may falter, due to the lack of funds available through loans from commercial banks. When such circumstances arise, the OECF's role is to provide funding cooperation to these projects.
    There are no particular restrictions on the industry categories in which the OECF can subscribe capital, but the projects concerned are generally those with particular significance in terms of economic cooperation in which the OECF's subscription plays a pump-priming role, in situations where the risk is too high for the private sector alone.
    The OECF's organization comprises nine departments, two offices and one research institute in Japan, and 16 overseas representative offices.

The Overseas Economic Cooperation Fund (OECF)
Headquarters:4-1, Otemachi 1-chome, Chiyoda-ku, Tokyo 100-0004, Japan
Telephone:81-3-3215-1304 (switchboard)
Telegraphy Abbreviation:COOPERATIONFUND
Telex:Call Number J 28430 J 28360, Answer Back Code: COOPFUND
Home Page:http://www.oecf.go.jp

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