Official Development Assistance (ODA)
Chapter 4 ODA Schemes
1. Grant Aid
(1) General overview
Grant aid is the provision of funds without obliging the developing country recipients to repay them.
This type of aid is principally given to developing countries with relatively low per capita incomes. A specific country's eligibility for grant aid is determined after conducting needed surveys and taking its economic and social development situation, its development requirements, its bilateral relations with Japan, and the nature of the aid request into consideration. The standards of eligibility for interest-free loans from the International Development Association (IDA) are also among the criteria used when deciding a country's eligibility; in FY1999, countries whose per capita GNP in 1996 was $1,460 or less were considered eligible for grant aid. (The cut-off point for eligibility for grant aid for cultural activities, however, is a per capita GNP of $5,295 according to World Bank statistics.)
The sectors covered by grant aid are basically areas of low profitability, where loans would be difficult to obtain, and address such basic human needs (BHN) as medicinal and health care, hygiene and sanitation, water supply, primary and secondary education, environmental protection, rural and agricultural development, etc., as well as human resource development.
(2) Classification
1) General grant aid
Grant aid for general projects
Grant aid for general projects is grant aid in a wide variety of sectors. The relevant sectors are classified broadly as medical care and health, education and research, agriculture, improvement of living standards and the environment, and telecommunications and transportation. However, even in areas where primarily ODA loan assistance has been applicable, such as the construction of roads, bridges, ports, telecommunications, and other economic infrastructure, Japan is taking into account the deterioration of economic infrastructure in developing countries, especially in the LLDCs, in an effort to adjust the application of grant aid according to individual countries' circumstances, and as a result, the sectors to which general grant aid is applicable are diversifying.
Grant aid for debt relief
Grant aid for debt relief is given to developing countries that face a very severe debt repayment crisis; when they repay their debt on an ODA loan, a sum equivalent to part or all of the repayment is then returned as a grant aid. This arrangement began in 1978, when in view of the serious difficulties faced by many developing countries in repaying their debts, a resolution was adopted by the Trade and Development Board (TDB) of the United Nations Conference on Trade and Development (UNCTAD) urging aid donor countries to take steps to relieve the debts of these developing countries. Specifically, when the debts on yen loans agreed upon in FY1987 or before are repaid by any of the 20 LLDCs, an amount equivalent to the total principal plus interest is then provided as grant aid, and when the countries most seriously affected by the oil crisis (MSACs, of which there are six) repay their yen loans agreed in FY1977 or before, Japan donates a grant aid amount equivalent to the ﾒadjusted interest amountﾓ (the difference between the real accrued interest and the interest that would have accrued if a lower interest rate had been agreed). As of FY1998, Japan's grant aid for debt relief has been expanded for the five LLDCs which have already received debt relief grants (Uganda, Guinea, Tanzania, Malawi, and Mauritania) to cover the entire ODA loan debt incurred through exchange of notes(E/Ns) signed by these countries up to FY1997. In addition, Mali and Zambia too will now be eligible for similar grant aid in regard to the ODA loan debt incurred through the E/Ns they have signed between FY1988 and FY1997.
In another development as of FY1998, the IMF and the World Bank have set aside funds to provide grant assistance for those HIPCs (Heavily Indebted Poor Countries) which meet with certain criteria and have been recognized as lacking the capacity to meet their debt obligations. These countries will be furnished with an amount equivalent to the interest repayment for an initial 16 years, and after this grace period, with an amount equivalent to the total principal plus interest. Debt relief based on the Köln Debt Initiative (agreed at the Köln Summit in June 1999) will also be provided in the form of HIPC grant assistance.
Non-project grant aid for structural adjustment support
Non-project grant aid for structural adjustment support is used to assist developing countries whose economic difficulties are worsening-due to spiraling debts and growing deficits in their international balance of payments-to import supplies critically needed to carry out their economic structural adjustment policies under World Bank and IMF guidance. This aid is designed to give international balance of payments support and is expected to have prompt, short-term effects.
Moreover, when Japan provides non-project grants, the recipient government accrues counterpart funds which can be utilized for projects in economic and social development, as arranged in advance with the Japanese government.
As of FY1998, Japan has also established sector program grants for environmental and social development. These will allow the concentrated utilization of counterpart funds in sector-specific plans for social development and the resolution of environmental issues which recipient countries are pursuing.
Grant assistance for grassroots projects
Grant assistance for grassroots projects is a scheme of assistance in response to requests from developing countries' local public bodies, research and medical institutions, and NGOs and similar groups active in developing countries. It was difficult to deal with such small scale projects via grant aid arranged between central governments as it was done formerly. Grant assistance for grassroots projects is administered swiftly and appropriately by Japanese embassies and consulate-generals, whose staff are well acquainted with the economic and social conditions in each developing country, which allows Japan to respond better to the diversity of needs in developing countries.
2) Grant aid for fisheries
Grant aid for fisheries is intended to foster the development of fishing industries in developing countries. It provides funds for cooperation with such fisheries-related projects as fishing boats and equipment and the building of training facilities, training vessels, fishing port facilities, and fishery research laboratories.
3) Emergency grant aid
Disaster relief
Disaster relief is humanitarian financial aid given in emergencies to assist victims of natural disasters, refugees, and displaced persons fleeing civil wars or other disturbances overseas. In some cases, funds to carry out relief operations for the victims are given directly to the governments of affected countries; in other cases, they are given to the World Food Programme (WFP), the Office of the United Nations High Commissioner for Refugees (UNHCR), or other agencies of the United Nations, or to the Japanese Red Cross Society, the International Committee of the Red Cross (ICRC), or some other international aid-implementing organizations.
When a disaster strikes anywhere in the world, Japan attempts immediately to assess comprehensively the extent of the disaster and the need for Japanese aid based on information from local Japanese embassy staff or from international organizations or based on requests from the government of the stricken country or from international organizations. A decision is then made on what and how much should be given. Implementation of disaster relief is a matter of great urgency and, unlike procedures for other types of grant aid, it is decided and implemented via extremely simplified procedures.
Assistance for democratization
Since FY1995, this type of aid has been given to recipient governments or through international organizations in charge of implementing elections and consists of providing funds for ballot boxes, polling booths, ballot forms, etc., needed to ensure the success of programs to promote greater democracy in developing countries through elections.
Support for reconstruction and development
Since FY1996, Japan has lent support to reconstruction and development through financial aid to international organizations or through contributions to trust funds set up by or within international organizations. The object is to give countries striving to rebuild after a regional conflict has ended and peace has been restored a firm foothold on which to rebuild themselves in the interim period leading to stabilization of the domestic situation. This eventually permits normal bilateral ties of economic cooperation to be reestablished subsequently.
4) Cultural grant aid
Cultural grant aid began in FY1975 as part of Japan's international cooperation efforts in the field of cultural exchanges. In addition to concern for a society's economic development, concern has also grown over the maintenance and fostering of developing countries' and regions' unique cultures. Developing countries are making efforts to achieve balanced national development from a broader point of view, including cultural aspects; Japanese grant aid for cultural activities assists these efforts. Specifically, this aid provides funds needed to preserve and make good use of cultural assets and relics, to hold public exhibitions and performances related to cultural affairs, and to buy equipment and supplies to foster education and research in developing countries and regions. The maximum grant is set at ¥50 million per project.
5) Food aid
Food aid is given to developing countries facing imminent food shortages; it funds the purchase of wheat, rice, maize, and other staple grains. Japan's food aid is carried out under the Food Aid Convention obligating Japan to contribute at least 300,000 tons of food aid every year.
6) Aid for increased food production
Aid for increased food production is designed to assist developing countries striving to achieve food self-sufficiency to carry out their food production augmentation plans. It provides the financial assistance needed to purchase fertilizer, pesticides, farm machinery, and other agricultural equipment.