(2) Receipt of Request, Survey Examination, Consideration and Review
Before arriving at a decision on extending an ODA loan, the required surveys are conducted and overall consideration given to the following aspects: the eligibility of the project, the economic and fiscal situation and economic development plans of the recipient country, the size and stage of development of the recipient country, the state of diplomatic relations between Japan and the recipient country, and Japan's fiscal circumstances.
(i) Examination and Consideration
Upon receiving a request for an ODA loan, the Ministry of Foreign Affairs collects all the necessary data and information to enable a full understanding of the details of the request. Taking project loans as an example, Japan provides loan assistance to projects that contribute to economic development and improvement of living standards in the recipient country. Prior to approval of the loan, therefore, a number of factors have to be examined. The following is a list of the significant points that must be confirmed for a project proposal.
(a) Relationship with ODA Charter: Of the four general charter principles on which ODA is furnished, consideration is given to the following questions that are relevant to the proposed implementation of each project: whether adequate consideration has been taken of environmental issues, whether there is a possibility of the funds being used for military purposes, and whether there is a possibility of an international dispute being triggered.
(b) The feasibility and maturity of the project, and benefits to be gained from the project.
(c) The development priority and importance of the proposed project in terms of the recipient country's economic development plans.
(d) Profitability: In many cases, projects involving ships, aircraft and the like will be highly profitable, and hence are not always eligible for financing with ODA loans.
(e) Feasibility of the project: The investigation of the feasibility of the project in terms of its technical, economic, and financial aspects is normally submitted to the Japanese government as a Feasibility Study Report (F/R). The submission of such a report is demanded whenever a project loan request is lodged with the government of Japan.
Once all the above points have been ticked off, a government survey team is dispatched to the recipient country for more detailed discussions on the proposal with the applicant government. Projects that are deemed to be promising at this stage are then subjected to a searching review by an OECF survey mission. The requirement for a government survey mission may be waived in circumstances where the number of proposals from a certain country is minimal and there is little need for a government-to-government dialog.
(ii) Review
The OECF dispatches a survey team to the requesting country to carry out a number of tasks: a macroeconomic analysis that comprises an assessment of the country's ability to meet its repayment obligations, a detailed economic and technical analysis of each project, discussions with relevant officials from the recipient country government (e.g., loan administrators, project implementation staff), and a field survey of the project site. The survey is carried out in accordance with international criteria accepted by bodies such as the OECD's DAC.
The wide-ranging survey begins with confirmation that the requested project is consistent with the country's development plan priorities and economic policies. Confirmation of feasibility and analysis of economic and social benefits are key considerations in project loans, while analysis of the adequacy of the coordination plan plays an important role in surveys of program-type loan applications. The survey team also calculates the ceiling for the loan and analyzes the macroeconomic effects of the proposed project. Consideration is also given to ensuring that the proposal conforms to guidelines and policies on the environment and women in development (WID) issued by the OECF in response to growing international interest in these issues: OECF Guidelines for Consideration of the Environment (revised July 1995), and OECF Policy for Consideration of Women in Development (WID) (May 1991).
(3) Government Approval of ODA Loans and Advance Notification
(i) Government Approval of ODA Loans (Interministerial Consultations)
When a project is found to be suitable for receipt of an ODA loan from the results of the survey conducted, the Ministry of Foreign Affairs normally makes a draft policy decision on the terms of the loan, including the type and value of the loan, interest rate, repayment term, as well as on other conditions. The Ministry of Foreign Affairs' draft policy is then discussed with officials in the Ministry of Finance, the Ministry of International Trade and Industry, and the Economic Planning Agency. Once agreement is reached, the policy is formally adopted by the Japanese government.
Each ministry or agency approaches the consultations from its own perspective. The Ministry of Finance takes the standpoint of the agency with jurisdiction for international development financial institutions and for government fiscal policy, the Economic Planning Agency's perspective is that of the body responsible for administering overall economic policy and the OECF, while the Ministry of International Trade and Industry approaches consultations from the standpoint of its jurisdiction over trade policy. MoFA plays a role in comprehensively coordinating the positions and views of each ministry and agency, applying a diplomatic perspective and working toward the unification of government policy.
(ii) Prior Notification
Once government policy has been finalized, the Ministry of Foreign Affairs notifies the recipient country government to that effect, in a format known as prior notification.
(4) Signing of Exchange of Notes
After agreement is substantially reached between the government of Japan and that of the recipient country on the details of the cooperation package, an Exchange of Notes (E/N) is concluded between the two governments. At this point, the direct involvement of the government comes to an end and responsibility for the project passes into the hands of the implementing agency, the OECF.
Issues that subsequently arise in the implementation phase are resolved by discussions as required between the government of Japan and the recipient country government or the implementing agency.
Long Listing
Long listing is a process with a medium and long-term perspective in which the Government of Japan is aiming to effectively and efficiently identify, formulate, and select ODA loan projects by linking a bilaterally-agreed list of candidate projects over a term of about five years with other aid schemes. The Government of Japan plans to adopt the practice of long listing wherever possible through discussions with developing country governments.