Japan's current economic and fiscal strains, added to changes in the domestic and international environment for aid, have provided a backdrop for an increasingly vigorous and broad-based debate by experts and other observers on issues in ODA reform. Efforts in ODA reform by the Japanese government have been undertaken on the basis of this ongoing debate.

In July 1998, at his first cabinet meeting, Prime Minister Keizo Obuchi instructed that steps should be taken to improve the transparency and efficiency of ODA. This was closely examined within the government based on debate in the various domestic arenas, and in November 1998, a Director General level meeting of the Ministerial Council on External Economic Cooperation (comprising government ministries and agencies involved in ODA activities) worked out an understanding on specific measures for this purpose.¹⁶

To improve transparency, this understanding called for (i) formulation of a medium-term policy on ODA to articulate a clear path for Japanese ODA over the next five years in terms of basic direction and priority issues and sectors¹⁷; (ii) country assistance programs that would clearly define the priority issues and sectors in individual recipient countries and provide guidelines for the project selection process¹⁸; and (iii) improved information disclosure in regard to the project bidding process. Additionally, for improved efficiency, it called for (i) the establishment of a system for effective and efficient collaboration and coordination of the entire government, and (ii) measures for promoting organic interaction among different types of aid.

In conjunction with these efforts at the government level, various consultative bodies and forums, including the National Diet, issued a set of valuable recommendations on ODA during 1998 and 1999.

First, January 1998 saw the release of the final report by the Council on ODA Reforms for the 21st Century, a consultative body to the minister for foreign affairs which comprised members from academia, the business community, the press, and various non-governmental organizations (NGOs). The report recommended strengthening the country assistance program approach as a means of ensuring more efficient and effective implementation of uniform and consistent ODA policies government-wide, and suggested that the government and the Japan International Cooperation Agency (JICA) review its internal structures to this end. In June, the Council on External Economic Cooperation, a consultative body to the prime minister, presented its own views on ODA reform to the prime minister in a report entitled Proposal for Further Promotion of Economic Cooperation in the Future.

In August 1999, the House of Councillors' Committee on Oversight of Administration adopted a "Resolution on Official Development Assistance" that called on the government to pursue a variety of measures aimed at garnering understanding and trust of Japan's ODA at home and abroad toward the 21st century, maintaining ODA transparency, and improving ODA efficiency, effectiveness and adequacy. To this end, it was recommended that the government formulate country assistance programs, prioritize aid programs and enhance links between them, reinforce its efforts to address environmental issues, expand levels of assistance for human resources development in recipient countries, find and hire more aid specialists, strengthen collaborative ties with NGOs, improve evaluation systems, and step up its activities in the arenas of publicity and disclosure.

July 1999, moreover, saw the Liberal Democratic Party Special Committee on External Economic Cooperation release a proposal entitled "Strategic Economic Cooperation for the 21st Century." Given Japan's current tight fiscal circumstances, the proposal recommended that the Ministry of Foreign Affairs (MoFA) be assigned a pivotal role in ODA administrative affairs and that Japan implement compassionate forms of aid which can be identified with Japan. Special emphasis was placed on the implementation of strategically oriented aid, responsible political participation, the strategic utilization of aid accomplishments and policies, and accountability to the public.

The government has worked to reflect these recommendations to the greatest possible extent in the Medium-Term Policy on ODA (explained in detail below) and other aid implementation. In April 1999, the OECD's Development Assistance Committee (DAC) surveyed¹⁹ Japanese ODA and commended the government's openness to views on the reform of ODA implementation mechanisms and means to ensure greater aid effectiveness. The survey report also indicates its expectation that the formulation of the medium-term policy and country assistance programs be based on the DAC's Development Partnership Strategy.

In June 1998, the Diet enacted the Basic Law on the Administrative Reform of the Central Government, setting out a clear direction for the reform of Japan's ODA implementation mechanisms. This piece of legislation also provided the basis for the July 1999 Law for the Establishment of the Ministry of Foreign Affairs, which assigned MoFA jurisdiction in three areas of ODA coordination in governmental agencies in addition to the economic cooperation-related affairs of foreign policy: the coordination of policy-making related to common ODA guidelines and policy-making and planning related to cooperation by means of the provision of ODA loans; and policy-making and planning related to technical cooperation. These legislative steps have effectively set the stage for the establishment of a new governmental framework for ODA implementation which is scheduled to take effect in the year 2001.

Additionally, April 1999 witnessed the passage of the Japan Bank for International Cooperation Law, which was designed to merge the Japan Export-Import Bank (JEXIM) and the Overseas Economic Cooperation Fund (OECF) into the Japan Bank for International Cooperation (JBIC). While the ODA (former OECF operation) and non-ODA (former JEXIM operation) accounts are kept separate, the merger, which took place in October 1999, integrates and thus better uses the information and expertise that these two institutions respectively had, and it is expected that the Bank will consequently implement more effective provision of ODA funding.

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