Official Development Assistance (ODA)
1. History of Official Development Assistance
(1) Forty-year History of Japan's Aid to Developing Countries
On October 6, 1954, Japan joined the Colombo Plan, and this marked a memorable start of Japan's government-to-government economic cooperation with developing countries. The Colombo Plan was launched in 1950 with the aim of facilitating economic and technical cooperation among the member countries of the British Commonwealth of Nations. Subsequently, recipient areas of its aid were expanded, and Japan extended technical assistance to Asian countries after joining it. The year 1954 was also a year in which Japan signed with Burma (now called Myanmar) a peace treaty and an agreement on reparations and economic cooperation and started paying reparations to that country. Following this, Japan started paying reparations to other Asian countries, which constituted the central aspects of Japan's economic foreign policy toward Asian countries until mid 1960s. The reparations were completed in 1976.
In 1958, Japan extended yen loans (ODA loan) to India, the first of its kind marking a starting point of Japan's economic cooperation in earnest. The payment of reparations and extension of yen loans Japan had made in those early years were aimed at promoting friendly relations with Asian countries.
As the economy of Japan grew stronger and its international status improved since the second half of the 1960s, its foreign aid expanded in scale and the form of its aid diversified. In addition to general grant aid started in 1969, Japan made steady efforts to improve tying status of ODA loans from the standpoint of efficient use of aid resources.
During this period, international concerns over lagging development of developing countries mounted, as underscored by the Pearson Report of 1969 and the Tinbergen Report of 1970. In 1969, the Development Assistance Committee (DAC) of the Organization for Economic Cooperation and Development (OECD) introduced the concept of Official Development Assistance (ODA), and in 1970, the General Assembly of the United Nations proposed donor countries to allocate 0.7% of their Gross National Product (GNP) to ODA. The first oil crisis erupted in 1973 hit the energy-scarce Japan hard and had an impact on its ODA with the result of increased aid distribution to Middle East countries since 1975.
Following the completion of the payment of reparations to the Philippines in 1976, Japan has announced five consecutive medium-term ODA targets covering the years from 1978 to date, under which it has increased its ODA step by step. During this period, Japan diversified its ODA in terms of aid sectors (Basic Human Needs (BHN) and human resources development in addition to economic infrastructure) and geographical distribution (Middle East, Africa, Latin America, and Pacific regions in addition to Asia).
As its ODA grew in magnitude and coverage, there has emerged in Japan toward the end of the 1970s a movement to redefine the philosophies and objectives of its ODA. And summing up the consensus view that had emerged from such debate, the Ministry of Foreign Affairs published in 1978 "The Current State of Economic Cooperation, and Its Outlook: The North-South Problem and Development Assistance." In that book, the Ministry pointed out the following two points as significance of Japan's economic cooperation.
- Japan can insure its security and prosperity only in a peaceful and stable world. One of the most appropriate means for Japan to contribute to the peace and stability of the world is assistance to developing countries.
- Japan is closely interdependent with developing countries since it is able to secure natural resources only through trade with those countries. Therefore, it is essential to maintain friendly relations with developing countries for Japan's economic growth.
In a publication "The philosophies of Economic Cooperation: Why Official Development Assistance?" issued in 1980, the Ministry stated that Japan's economic cooperation is guided by two motives: "humanitarian and moral considerations" and "the recognition of interdependence among nations. It defined Japan's aid philosophies based on Japan's own experience and conditions" (having a peace Constitution, being an economic power, economically highly dependent on other countries, having accomplished modernization and a non-Western country) combined with aid rationales commonly held by donor countries. It concluded that providing ODA is a cost for building an international environment to secure Japan's comprehensive security.
Such philosophies and objectives of Japan's ODA have been pronounced by Japan on various occasions. Recognizing changes in international situations in recent years, the Japanese government in 1991 announced 4 ODA guidelines of its economic assistance to developing countries. More specifically, the government made clear that it will pay full attention to the following four points in implementing its economic aid:
- the trends of the military expenditures of recipient countries,
- the trends of their development and production of mass destruction weapons and missiles,
- their export and import of arms, and
- their efforts for promoting democratization and introduction of market-oriented economy, and the situation regarding the securing of basic human rights and freedoms.
The 4 ODA guidelines were pronounced based on the recognition that after the end of the cold war, there have developed worldwide efforts in developing countries for the democratization of their political process and introduction of market economy system, and that the rising level of military spending and acquisition of mass destruction weapons by some developing countries are posing a serious threat to the peace and stability of the world as demonstrated by the eruption of the Gulf War. And the 4 ODA guidelines were aimed at implementing Japan's official development assistance in a way that it encourage their democratization efforts and at the same time discourage military buildup in the developing countries.
Incorporating the philosophies and objectives of Japan's foreign aid which have evolved over the years, the Cabinet adopted on June 30, 1992, Japan's Official Development Assistance Charter (ODA Charter). As basic philosophies of Japan's ODA, the ODA Charter lists (1) humanitarian considerations, (2) recognition of interdependence among nations of the international community, (3) environmental consideration, and (4) support for self-help efforts of recipient countries. And the ODA Charter also lists the four principles which include above-mentioned 4 ODA guidelines for the implementation of its ODA. These basic philosophies and principles reflect Japan's position in the community of nations, the experience of economic development it had undergone, and the experiences it has acquired in the course of aid giving to developing countries over the past 40 years. As such, they represent a product unique to Japan, while incorporating international trends on foreign aid. The Japanese government is trying to faithfully follow these principles as a norm governing the conduct of Japan's foreign aid.
(2) Accomplishments of 40 Years of ODA
The official development assistance which Japan has extended to developing countries during the past 40 years can be evaluated in various ways. This section reviews quantity and quality of Japan's ODA, and then makes an overall evaluation of its ODA activities undertaken, and the results achieved, in the Southeastdd Asian regions, the major recipients of its ODA.
As noted at the outset, Japan gave a total of $11,474 million in ODA in 1993, by far the largest among the donor countries of the world. The number of recipient countries and regions of Japan's official development assistance in 1993 topped 150 (154 in 1992), and of these, the number of countries for which Japan is the largest donor country stood at 28. (For 21 countries, Japan is the second largest donor country.) In addition to increases in the amount it provided, Japan sent a cumulative total of more than 38,000 Japan International Cooperation Agency (JICA) experts and a cumulative total of more than 13,000 members of Japan Overseas Cooperation Volunteers (JOCV), and received an average of 8,000 trainees each year from developing countries in support of their efforts for the development of human resources and nation building.
In addition, Japan has made a great contribution through international agencies, and its role in supporting many international agencies has been increasing in recent years. In 1993, for example, Japan was the largest contributor to Asian Development Bank (ADB), and United Nations Population Fund (UNFPA). Japan was the second largest contributor to the World Bank, United Nations Development Programme (UNDP), World Health Organization (WHO), and Office of the United Nations High Commissioner for Refugees (UNHCR).
In addition to increases in the amount of ODA, the quality of Japan's aid has also improved markedly. As a result of the efforts Japan has made to improve the ratio of united aid (the ratio of aid the use of which is not restricted to the purchase of goods and services from the donor country) since the latter half of 1960s, Japan's united ratio is now 83.3% in 1991, the fourth highest among the countries of the OECD's Development Assistance Committee (DAC). Where yen loans are concerned, the ratio of general untied aid has risen to 96.9% (in 1993). To be sure, the grant share of Japan's ODA (the share of grants in the total aid, or the ratio of grant aid, technical assistance, and contributions to international agencies to the total aid), averaged at 42.6% in 1991-92, is still low among the DAC members, but as the absolute amount of grants is large, the actual contribution Japan's grants makes for poverty alleviation and basic human needs (BHN) in developing countries is by no means small. Japan gave $6,529 million in grants (excluding those given to East European countries) in 1992, the second largest among the DAC countries, and $7,714 million in 1993, larger than the total amount of ODA ($6,847 million) given by Germany, the fourth largest donor among the DAC countries.
It is clear that the ODA provided to developing countries by Japan during the past 40 years has contributed profoundly to their economic development, particularly to that of Asian countries. Because of its close historical, geographical, and economic ties, major thrusts of Japan's ODA have been directed toward Asian countries, and its characteristics may be summed up in the following points.
- Approximately 60% of Japan's ODA has been directed to Asian countries, and the large part of it was allocated in the field of economic infrastructure, which helped improve the environment for investment by foreign capitals and utilize the vitality of the private sector.
- These aid projects were well timed to invite foreign direct investment to Asian countries and promote the development of their export industries.
- Increases in agricultural production have bolstered the economic development of East Asian countries, and Japan has extended large-scale aid projects in various forms for the development of their agriculture.
- In the area of human resources development which is one of the key ingredients underpinning the economic development of East Asian countries, Japan has put emphasis on aid for human resources development since the 1970s, and has extended active assistance for training their engineers and other technical personnel.
By combining with increases in skilled workers and managers brought about with the help of human resources development aid projects, the improved economic infrastructure financed by ODA loans has attracted direct investment from various countries to many East Asian countries, helping them achieve steady ecconomic growth in recent years. Japan's economic cooperation in these areas, together with its grant aid for the development of social infrastructure (eduction, public health, and sanitation), has generated multiplier effects to improve the living standard of local communities and narrow the regional disparity between city and rural areas. Needless to say, credit for the vigorous economic growth and the improvement of welfare emerged in those countries should be given to the self-help efforts these recipient countries have made, but the role played by Japan's ODA should not be underestimated.
It is not always possible to measure the exact effects which Japan's ODA has had on the economies of East Asian countries, but the following figures suggest the magnitude of effects Japan's ODA has had in Indonesia, for example. In that country, Japan's ODA loans financed the construction of power stations which generate 15% (1,994mw) of the nation's total power output, the construction and renovation of 12% (799km) of its railway systems, the construction of 15% (56km) of its toll roads, the construction of 60% of the intra-city communication transmission cable conduit system of Jakarta, and the construction of 54% of the city's water filtration facilities (9,600t/s). Japan's ODA loans extended to other countries to finance the construction and improvement of their economic and social infrastructures have had similarly impressive results and have contributed profoundly to their economic development (Chart 7).
In addition to the field of economic infrastructure, Japan has been implementing various aid projects for human resources development that constitutes the very foundation for economic growth. Up to 1993, Japan has accepted the total of 69,959 trainees from Asian countries, dispatched the total of 23,045 experts and 55,328 aid personnel in assistance missions to these countries (57.8%, 59.3%, and 57.6% of the total respectively). This fact demonstrates that Japan has made great efforts to contribute to the economic development through support for Asian countries' human resources development, placing a heavy emphasis on that region.
There are some recipient countries of Japan's ODA such as South Korea and Singapore which have achieved remarkable economic development, are graduating from Japan's ODA, and are starting economic aid to other developing countries on their own or jointly with Japan. And there are others, such as Indonesia and Thailand, which, while still receiving ODA from Japan, have made big strides in certain areas and are extending economic aid to other developing countries jointly with Japan. To the extent that foreign aid is intended to help its recipient countries to take off economically, these examples happily demonstrate that Japan's ODA has been achieving its objectives.