Official Development Assistance (ODA)

Critical Comments on the Ranking of Developed Countries Made by CGD, a US non-governmental think tank

On August 13th, Center for Global Development (CGD), a think tank based in Washington, DC, ranked developed countries by using its own index, "Commitment to Development Index". This index includes 7 policy areas: aid, trade, investment, migration, environment, security and technology. Based on this index, Japan is placed last among 21 developed countries for four years. Other G7 countries, which are major donors, are also ranked low. According to the CGD, "the index is intended to spark new debate about the effects of rich-country policies on developing countries." *1

By using its own method to measure aid effectiveness of each donor and publishing its results, it may be true that a think tank may be able to raise public interests on foreign aid. However, as discussed below, the "Commitment to Development Index (CDI)" used in this ranking has various problems and has not evaluated fairly developed countries' policies for international development.

Specific Problems of the Index

1. First of all, the criteria for selecting the seven components are not clear. Furthermore, the Index does not take into account different degrees of impact the seven components have on development, as it simply adds the scores from each area with an equal weight. This would mean, for instance, "aid" and "migration" are regarded as having equal effects on development. There is no particular consensuses in the Development Assistant Committee (DAC) of the Organization for Economic Cooperation and Development (OECD), a central organ for discussing aid policies among major donors, regarding the possible effect of migration or peace keeping operations on development. For instance, statistics are not collected in the DAC for activities related to receiving immigrants.
2. According to this Index, Japan is given low scores for such reasons as protection for importing agricultural products from developing countries, small size of aid as a share of GNI, low number of immigrants from developing countries, small contribution to environmental issues and global security.
   Each component for evaluation also suffers the problems listed below. It should therefore be pointed out that the aggregated scores for those components compiled in this Index cannot be based on objective criteria.
   
   
   • (1) Aid: Scores are calculated in a manner that undervalues the areas which Japan has comparative advantages and attaches high priority:
     
     
     • The role of Japan's ODA loans, which resulted in a great success particularly in Asia, is neglected.

       To start with, the reported amount of Japan's ODA is smaller than that in DAC statistics. Moreover, unlike the method adopted in DAC interest payments relating to loans are subtracted from net ODA figure in the calculation of the CDI. The amount of Japan's ODA (the second largest donor with gross disbursement of US$ 13.1 billion in 2004) is discounted below that of the Netherlands (6th donor with US$ 3.2 billion), and equal to that of Canada (8th donor with US$ 2 billion) since these countries scarcely provide loans.

     • Across-the-board discount is applied to assistance to countries with poor governance scores. As a result, Japan's assistance for reconstruction in Iraq and Afghanistan, which is at the top level in the world, is not duly taken into consideration.

       In the CDI assistance to Iraq is counted about one-tenth of assistance to Bhutan and one-fifth of El Salvador.

     • Japan's technical cooperation and grant aid for Grassroots Human Security are tailored to local needs, thus particularly well-appreciated in developing countries. In this Index, these types of assistance, however, is judged as low-quality aid, compared with large projects, on the ground that they "overburden recipient governments with administrative and reporting responsibilities *2."
     
     
     • Actual contribution to development in the past by each donor is not considered, while excessive emphasis is given to one particular indicator, namely the size of ODA as a share of GDP.
     
     As shown above, this Index neglects the strengths of Japanese aid, drawing on a certain value judgment.
   • (2) Trade: Far more emphasis is given to the negative impact of tariffs on agricultural products than that of subsidies on agricultural products ,even though the latter has similar trade-distorting effects. This places Japan considerably lower than European countries. Furthermore, Japan's cooperation to promote trade in developing countries (including support for improvement of infrastructure) --for example, the Development Initiative announced in December 2005-- is not reflected at all.
   • (3) Environment: The fact that Japan has been one of the most energy efficient countries in the world for many years is neglected: Japan is ranked low on the grounds of little improvement in reducing CO2 emissions.
   • (4) Security: While contribution to peacekeeping operations is used as an indicator, the Index takes no account of Japan's financial contribution to PKO activities, assistance to humanitarian and reconstruction activities in Iraq, or assistance for the fight against terrorism in Afghanistan (such as fuel-supplying activities by the Maritime Self-Defense Force vessels), both authorized by the UN Security Council resolutions. (Assistance for Iraqi reconstruction based on the UN Security Council resolutions is disregarded for the reason that it "reward[s] the United States, and , to a lesser extent, Britain[.] *3"
   • (5) The scores for other components, "investment" and "technology," has placed Japan in the middle rank. CGD favourably acknowledges the policies to promote research and development adopted by the Koizumi Administration. The components of "investment" and "technology", however, do not make much difference in results among developed countries.
3. The CDI does not reflect the fact that major developed countries (DAC members) take development challenges by making maximum use of their comparative advantages and by complementing one another through aid coordination. It is therefore inappropriate to compare and rank developed countries' policies toward developing countries on the basis of certain indicators, while disregarding such specific factors as the size, economic and social background of each country.

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• *1: See the website of CGD: http://cgdev.org/doc/cdi/2006/CDIPostcard2006.pdf (PDF)
• *2: See Roodman, The Commitment to Development Index: 2006 Edition, p. 9, which can be found at: http://cgdev.org/doc/cdi/2006/techdescript2006.pdf (PDF)
• *3: Ibid, p. 40
• *4: See the website of CGD: http://cgdev.org/doc/cdi/2006/CDIPostcard2006.pdf (PDF)