The subsidy system for NGO projects (officially, "subsidies for nongovernmental organizations involved in international development assistance") is designed to subsidize part of the cost of the development assistance activities of Japanese NGOs in developing countries.

Compared to European and American NGOs, which have abundant experience and stable financial bases, Japanese NGOs, in general, are less experienced in the international aid field and have weak finances with which to achieve satisfactory aid activities. This resulted in growing hopes for government support for NGO activities, and led to the introduction of the NGO subsidy framework in FY1989.

1. Framework Overview and State of Implementation

The subsidy framework covers Japanese NGOs' aid activities in developing countries, such as health care, rural development, and human resources development. The subsidy budget supports part of the cost of NGO projects (construction costs, compensation for experts, travel costs, etc.). Subsidy applications from NGOs are screened by comprehensively MoFA for approval by examining the applicants capacity for project implementation, expectations of project benefits, the participation of local residents, and the sustainability of the project.

Starting with a ¥110 million budget for the scheme when it was launched in FY1989, the budget has increased steadily, reaching ¥976 million in FY1999. The coverage of the subsidy has also expanded from 23 projects in 13 countries and regions (by 15 NGOs) in FY1989 to 185 projects in 46 countries and regions (by 111 NGOs) in FY1998.

Health and medical care projects have been the areas most supported by the scheme with a constant ratio, close to 30 percent every year, followed by comprehensive regional development projects, an area added from FY1996. WID (Women in Development) projects and environmental conservation projects are also gradually increasing. Historical backgrounds and regional ties are reflected in the fact that Asian countries, such as Cambodia, the Philippines, Nepal, and Viet Nam, are the prior recipients of development assistance by Japanese NGOs. Around 60 percent of the subsidies in recent years have gone to projects in these countries. African countries are the next largest recipients with 10 to 20 percent of the subsidies. Cumulatively, from FY1989 through FY1998, around ¥4.757 million has been granted to 1,087 projects implemented by 198 NGOs in more than 70 countries and regions.

2. Project Diversification and Major Responses to New Challenges

In response to NGOs' requests for flexible use of the scheme, the Japanese government has worked to achieve improvements by expanding areas supported by the areas supported by the subsidies, the types of projects, and the items covered by project costs.

Where the areas supported by the scheme were restricted to six, including rural agricultural and fishing development projects, the above-mentioned international volunteer compensation scheme was added to the subsidy scheme in FY1994. Also added in the same year were seminar and training type projects for the transfer and diffusion of technology related to development and cooperation being provided by Japanese NGOs. WID (Women in Development) support projects were included in FY1995, extending subsidies for the establishment of WID-related facilities and the dispatch of experts to provide training in this area. In FY1996 comprehensive regional development projects were added, allowing applications for up to three projects within the same area or region to be made at any one time for facilitating and boosting the effectiveness of NGO activities.

In FY1999, new "NGO overseas training support" will be launched as part of the subsidies menu, backing NGO personnel training efforts in the field overseas or in overseas institutions.

Although the subsidy framework for NGO activities has taken root, budgeting for overall government subsidies is in a declining trend (Chart 7). Under these circumstances, a variety of government approaches, as mentioned above, is being taken to respond to diversifying NGO needs. The Japanese government recognizes that continued and diversified government support is still needed in a number of areas for the further development of a better environment for NGO activities.